China Esquire

I knew I would see a story about the legal ramifications about the Sanlu milk formula scandal sooner or later.  The Christian Science Monitor finally wrote up an interesting article today entitled “ What China’s tainted milk may not bring: lawsuits.“  ( h/t to CDT)  Of course, part of me didn’t like the title already since most everyone knows that I am pro-litigation and pro-lawsuit as an effective means of enforcement by private parties.  (At least, that’s true in America)

But I find the article interesting:

Li Fangping, a prominent human rights lawyer, is busy organizing victims of the poisoned infant formula scandal rocking China and offering pro bono help. But he is not planning to sue Sanlu, the formula manufacturer – not yet.

A case that in the United States would attract swarms of lawyers eyeing the prospect of millions of dollars in damages is primarily a political, not legal, issue in China.

For reasons to do with China’s still-developing law and its authoritarian political system, lawyers are treading carefully around the Sanlu incident, in which four babies have died and nearly 53,000 suffered kidney problems after drinking adulterated powdered milk.

Well, I am sure that part of it also has to do with the fact that lawyers who get on the bad side of the government don’t end up doing too well.  Imprisonment and harassment by the government come to mind.  In America, you may get death threats, but very rarely will anyone actually act on it.  And of course, you even more rarely have the U.S. government breathing down your neck.

That being said, I have to admire Mr. Li for organizing people and then offering to help them out without cost.  Pro bono work is an admirable thing, and for him and other lawyers to offer it in China is truly a good and decent thing to do.

The government is seeking to forestall legal repercussions by pledging free medical care for all babies affected by the tainted milk. Mr. Li is holding his fire until he sees how fully that pledge is kept.

“We are still waiting to see how the government’s compensation policy works,” he says. “If consumers accept it there will be no need for a lawsuit” against Sanlu.

Instead, Li and more than 70 other lawyers offering their help gratis are concentrating on cases where hospitals are not abiding by the Health Ministry’s public promise that treatment will be free. They are advising the parents of victims about the practicalities of claiming compensation from the government for the expenses they incur in treating their babies.

This is a very interesting thought here.  Why have lawsuits when you can have the government step in and make sure that plaintiffs are made whole?  (okay, it’s arguable that the plaintiffs aren’t made whole because they aren’t compensated for pain and suffering, but I don’t want to go there in this part of my post)

People in America have been clamoring for “tort reform” for years.  I get these obnoxious emails from David Lovett about the need to cap medical malpractice awards and “protect” physicians.  That’s such a crock.  (licensed physicians who are repeat offenders just shouldn’t be allowed to practice without supervision or other restrictions…  and if someone is dumb enough to insure them, then they have to pay.  Period.)  But is capping damages the most just thing to do?  I don’t think so.  So here’s a thought for President Bush (and I don’t agree with his assessment): if you want to have true tort reform, then perhaps the government should foot the bill wherever possible.  Interesting thought in my mind.

I don’t think the Chinese government’s method of compensation is all that fair in terms of pain and suffering (and time and nuisance value) by just paying all treatment fees.  But it is great in terms of promoting social stability and trying to quell the unrest.  What’s the downside?  Ultimately, such an action likely will encourage would-be offenders to continue to market garbage products.  And of course, true justice isn’t really served.  The government ends up shielding the companies at the cost of damaged parties.

The central government has promised to pay all the medical costs arising from the scandal, the extent of which is still being discovered: On Sunday a Hong Kong hospital reported the first case outside mainland China of a child found with kidney stones after drinking tainted milk.

“If their children recover, and the government has paid for their healthcare, how can they sue Sanlu?” asks Liu Renwen, a legal scholar at the China Academy of Social Sciences. “I don’t think many will try.”

I think its quite easy actually.  But until lawyers are willing to do it, it won’t happen.  Perhaps thats why the Chinese government knows that lawyers can be agents of reform/change if they don’t work with them…

The 1986 principles of Chinese tort law do not allow citizens to claim damages for moral or spiritual suffering – what US lawyers call “pain and suffering” – only material damages to compensate for medical bills, for example.

That is changing, however, and Chinese courts are increasingly granting moral damages. Four years ago two families from the province of Anhui won damages from another infant formula manufacturer whose substandard milk powder was blamed for their babies’ malnutrition.

“Damages are so low in China that companies can get away with it,” says Dan Harris, partner in the Seattle law firm HarrisMoure, which specializes in Chinese business law. “Why bother to recall if only 20 people are going to sue you and win $20,000 each?”

I agree with Dan here, and I continue to believe that Chinese courts need to start allowing greater damages.  It is more just.  And it will encourage the use of the legal system.  The downside to that?  It allows for less social “harmony” if you open up the courts for everyone to use freely.  (and yes, there will also be freeloaders, that’s always a downside)  I’ve talked about damages before and don’t think I need to elaborate too much… it’s pretty intuitive.

Li, as he contemplates the possibility of a lawsuit against Sanlu, says that because “this case has become politicized, it is unclear whether it can be resolved through a legal process.

“The government is trying to ensure social stability, and they do not want to see all the victims’ parents to gather together, so they probably will not allow a class action suit,” he expects.

“Individuals should be able to sue companies,” Li argues, but in the interest of social stability “the government just takes money out of the national budget” to compensate victims of scandals such as the Sanlu incident.

That’s exactly the problem.  Lawsuits are supposed to be the arena to address disputes without being political.  (At least, they are in America, though there is room for debate when an issue is extremely political)  China’s courts aren’t capable of doing that it seems.  But that’s the goal China should shoot for: unbiased courts where things are done by the rule of law, and not rule of party.

Another consideration is this: what is the cost of social stability?  I argue that it’s going to be the health and safety of your constituents because Sanlu isn’t an isolated incident.  It will happen again.  And again the government will step in to remedy the situation.  To me, that’s not ideal.

But, I must admit, it does seem like a working solution in the short run…

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