In late 2005 China adopted a largely rewritten Company Law that radically increased the role of courts. This study, based on a review of more than 1000 Company Law-related disputes reported between 1992 and 2008 and extensive interactions with PRC officials and sitting judges, evaluates how the Shanghai People’s Court system has fared over 15 years in corporate law adjudication. Although the Shanghai People’s Courts show generally increasing technical competence and even intimations of political independence, their path toward institutional autonomy is inconsistent. Through 2006, the Shanghai Court system demonstrated significantly increased autonomy. After 2006 and enactment of the new Company Law, a new, if partial, limitation on institutional autonomy seems to be at work, as the Shanghai People’s Courts refused to accept or adjudicate claims explicitly permitted in the revised 2006 statute but not yet elaborated in Supreme People’s Court Regulation. This reaction is perverse, as the same Courts had liberally adjudicated the same claims before 2006 without any statutory or Supreme People’s Court Regulatory authorization. That strange dynamic illustrates the bureaucratic embeddedness of the People’s Courts in China’s modified authoritarian system and how such entrenchment can divert or constrain the progressive autonomy won by the same Courts in the formal legal system. The conclusions have positive and negative aspects. On the positive side, there is significant momentum toward ever-increasing competence and autonomy of the People’s Courts in Shanghai, at least for the application of corporate and commercial law. On the negative side, a familiar paradox may be at work: with formal substantive law and institutional “modernization” promised and even partially delivered alongside equally apparent failures in the exercise of judicial autonomy, the result may be to de-legitimize the very institutions offered by the state and ruling Party as twin pillars of “modern” governance and “rule of law".


Business Organizations Law | International Law

Date of this Version

January 2010