The new China tort law and beyond..

My belief in the subject matter of the last piece was further vindicated, thanks to what I found (and did not find) during recent explorations in and on China. The revival of Tort in India and its emergence in China will, together, create the largest playfield in the space of everything to do with health, in the times to come.

The new China tort law needs to be viewed in the sweeping social and legal changes since the great revolution that brought an end to the Maoist era and the slow evolution of a capitalist society, says Richard H. Murray (Chairman of the Geneva Association Liability Regimes Programme) in his paper “The Social and Insurance Implications of the New China Tort Law”.

Under Chairman Mao, there had been no concept of private property. Consequently there had been no need for property insurance. Similarly, there had been no recognition of private rights, and so no need for product liability. There was no property and casualty insurance industry. Much has changed in the succeeding decades, with the formalization of tort liability as the most recent development, he adds.

The China tort law is more focused on the injury and resulting loss than on causal event or behaviour. It blends the relative ease of recovery found in civil law with the unlimited potential for recovery found in common law. It is designed as a mechanism to combine broad protection of businesses and individuals with the capacity to act as a private sector regulator.

While use of the law is growing slowly, it is in place while the growth of a massive middle class with costlier claims is developing. It is an anticipatory provision to deal with emerging social conditions and the effects on Chinese society of an internet linked world in which compensation for injury is becoming universal expectation.

The relatively under-developed legal profession and untrained judiciary are consistent with the law’s objectives. Those conditions foster flexibility of outcomes, with Chinese judges functioning in a manner similar to US juries, says Richard Murray in his paper.

During a recent visit to attend the 2013 China International Conference on Insurance and Risk Management, I did take the opportunity to ask several academics present about this development. There was very little forthcoming. The concept of Tort still sounded alien. Interestingly, what came out quite vividly were some facets of the rapidly changing society. One look at the itinerary and you will find some presentations like:

• “Protect Institution” or “Protect Elderly”? A Discussion about the Choice of Risk Transfer Technology for Endowment Service Institution
• Welfare effects of compulsory liability insurance
• The Liability Risk Pressure on Pension Institutions and Release Route Analysis in the Population Aging context
• A Countermeasure Research on Doctor-Patient Disputes and Medical Malpractice Insurance – Aspects of Local Policies and Regulations

Liability seems to be getting into the consciousness and the context can often be potential liability arising from the needs of old and elderly. Healthcare cannot be too far apart.

Quite coincidentally on my way to the host city Kunming, I was reading this story on China’s drug pricing crackdown! The WSJ report said that China signaled a tough new stance on healthcare as it unveiled a litany of bribery and misconduct allegations against a leading multinational. A move, it said, that could presage a broader crackdown in a lucrative market for pharmaceutical and medical companies.

The report highlights that health care is a fast growing business in China, where increasingly affluent consumers demand better care and the government is under public pressure to widen a skimpy social safety net. China’s health-care spend is poised to triple to $ 1 trillion by 2020 according to McKinsey & Co. Sales of pharmaceuticals in China reached $82 billion in 2012, up 18.2% from a year earlier according to Business Monitor International.

Industry insiders say, according to WSJ, that China’s health-care sector is mired in systemic corruption. Many medical companies operate through intermediaries to reach more corners of a diffuse market, while doctors often look to buffer low salaries with perks. ­­­The seeds therefore seem to be already embedded in a fertile soil and the early triggers are visible, too!