Consumer Jurisdiction and Choice of Law Rules in European and Chinese Private International Law

Abstract

This article compares consumer jurisdiction and choice of law issues in China and the EU. It aims to answer the following questions. What is the notion of consumer? Are farmers, package travel tourists and timeshare tourists consumers? Are dual-purpose contracts consumer contracts? Is a consumer jurisdiction rule needed in China and if yes, under what ground and with what conditions? Is choice of court agreement in consumer contracts valid? How to limit the exercise of party autonomy and what role mandatory provisions may play? Shall consumer contract and tort claims be subject to the same applicable law? Based on a comparative analysis with European law, this article concludes that to improve cross-border consumer protection, China should reform its law to include package travel contracts and timeshare contracts into consumer contracts and determine the nature of dual-purpose contracts pursuant to their primary purpose. Moreover, the current limitation on party autonomy should be lifted by providing freedom to both parties and relying on mandatory provisions as a safety valve. The consumer choice of law rule and its interaction with the general contract choice of law and tort choice of law rule needs to be reexamined.

1. Introduction

Due to the developing digital technology, business-to-consumer e-commerce has become a new normal, resulting in the increase of cross-border disputes over consumer contracts. Consumers are traditionally regarded as weaker parties in terms of information asymmetry and bargaining power compared to business operators. Transnational disputes exacerbate this disadvantageous position of consumers. Because of the high cost of international civil litigation, small-value consumer complaints are usually settled within internal after-sale services or the trader's internal complaint processes. ¹ Private international law, which is meant to facilitate civil procedural mechanisms, has a limited role in redressing consumers’ grievance and improving access to justice with regard to small value disputes in business-to-consumer e-commerce. ² However, it may be an exaggeration to simply conclude that private international law is irrelevant in consumer dispute resolution. ³ The internal dispute resolution with limited supervision from a neutral authority may lead to a result that harms consumers’ access to justice and is incompatible with rule of law. Consumers may wish to be heard in courts, especially when substantial amounts of money are involved. ⁴ The consumer-friendly private international law should be there to protect consumer's access to court when in need.

China and the EU are the second- and third-largest economies with the world's highest purchasing power parity. Therefore, the Chinese and European consumer law might have a greater impact on other countries whose businesses target their consumer market. In European and Chinese private international law, actor sequitur forum rei is the general jurisdiction rule, which means that an individual should be sued in the court of the place where he is domiciled. ⁵ If the general jurisdiction rule applies to consumer claims, a consumer has to file a lawsuit against a business in the jurisdiction of the business's domicile. ⁶ This may derogate the consumer's access to court, especially when the expensive costs of long-distance litigation far exceed the small amount of money involved in the dispute. ⁷ The businesses may preserve their advantage of the choice of the forum through the pre-drafted standardized terms by selecting the place of the business's domicile as the forum. ⁸ This leads to the question of whether a choice of court or choice of law clause in a consumer contract is valid. The consumers should be granted an option to initiate an action against a business in a forum the location of which is to their convenience. ⁹ The same applies to the choice of law issues over consumer contracts.

This article compares the notion of consumer as well as its material scope in Chinese and European private international law, followed by the analysis of consumer jurisdiction and choice of law rules. In particular, what are the convergences and divergences of jurisdiction and applicable law rules in these two legal systems? What are the common challenges in terms of the protection of consumers in consumer concurrent claims? How to improve consumer jurisdiction and choice of law rules in China? The EU is selected as the comparator because it plays a pioneering role in the field of consumer protection. The European experience may thus shed light on how to improve Chinese consumer protection rules. Furthermore, given the increasing globalization and digitalization, consumers’ cross-border access to justice is a common challenge around the world. A comparative study of consumer rules in China and the EU may offer references to deal with cross-border consumer disputes in a wider sense.

In summary, the purpose of this article is three-fold. First, it provides a general introduction and comparison of the European and Chinese legal regimes concerning the protection of consumers. Second, based on a comparative analysis with the European legal regime, it tentatively puts forward suggestions to improve the existing legal regime in China concerning consumer protection in private international law. Third, the comparative result of consumer rules in China and the EU may encourage further discussions in other countries facing similar problems.

2. The Notion of Consumer in China and the EU

The characterization of a contract as a consumer contract is the first step before resorting to jurisdiction and applicable law rules over consumer contracts. The question of who is a consumer determines the personal scope of consumer protective rules. For instance, whether a legal person can be classified as a consumer? In order to classify a person as a consumer, the following question is what factors or criteria are relevant to such classification? For instance, are the expertise or knowledge of a person, the frequency of the activity, the fact that a person is making profits and other factors relevant?

A. How to Determine Whether a Person is a Consumer?

In the European context, consumer protection is sometimes seen as a natural extension of the welfare state. ¹⁰ The common European definition of consumer explicitly focuses on natural persons only. ¹¹ Meanwhile, the EU concept was widened to take into account vulnerable consumers in certain circumstances. ¹² Article 6(1) Rome I Regulation defines a consumer contract as a contract concluded by a natural person for a purpose that can be considered outside his trade or profession. Accordingly, a consumer is a natural person acting outside his trade or profession. The European notion of consumer is a negative definition, as a consumer is defined by the nature of the activity not being related to that person's business, trade or profession. ¹³ Such a negative definition is also used in the Brussels Ibis Regulation and other EU directives. ¹⁴ The two elements, namely, ‘a natural person’ and ‘outside his trade or profession’ are essential for determining who is qualified as a consumer. The wording ‘a natural person’ indicates that ‘a legal person’, such as a company, a small and medium-sized enterprise or a consumer association, is excluded. The exceptional protection offered to consumers is out of the concern that a consumer is deemed economically weaker and less experienced in legal matters than the other party to the contract. ¹⁵ The CJEU has, indeed, continuously and consistently interpreted the term ‘consumer’ as ‘a private and final consumer’ ¹⁶ who is not engaged in trade or professional activities, which indicate that only ‘physical, natural persons’ ¹⁷ are covered. The interpretation of the second element ‘outside his trade or profession’ is more complicated. The CJEU construed in Francesco Benincasa v. Dentalkit Srl that the notion of consumer contract only covers contracts concluded ‘independently of any trade or professional activity’ and ‘for the purposes of satisfying an individual's own needs in terms of private consumption’. ¹⁸

By contrast, the notion of consumer under Article 2 of the Chinese Consumer Protection Law is a positive definition, since it positively defines a consumer through limiting coverage to daily consumption needs. The term ‘daily consumption needs’ in China is comparable to the phrase ‘outside of his trade or profession’ in the EU. Article 2 does not specify whether a consumer is merely limited to a natural person, whether a legal person can be regarded as a consumer, and what ‘daily consumption needs’ means. The unclear definition of consumer in Chinese substantive law gives rise to the questions of who the consumer is and what is the material scope of consumer choice of law rules in Chinese private international law.

Although some domestic regulations expressly include legal persons as consumers in substantive law, in terms of the notion of consumer in private international law, Chinese case law shows that only natural persons are considered as consumers and thus granted favourable choice of law rules of Article 42 Chinese Conflict of Laws Act. As to the key element of daily consumption test, more explanation can be seen in judicial practice. In SUN Yinshan v. Nanjing Auchan Supermarket Co, Ltd Jiangning Store which involves the question of whether a consumer activist who acts for economic gain can be considered as a consumer, ¹⁹ the court explained that as long as the use of goods or acceptance of services is for the needs of personal and family life, rather than for the needs of production and business activities or professional activities, it should be classified as a consumer ‘for the needs of daily consumption’ and thus falls within the scope of the Consumer Protection Law. This judgement construes the daily consumption test both from a positive side and a negative side. The positive interpretation of the test of ‘daily consumption needs’ is for personal, family or household needs, which is comparable to the CJEU's interpretation of ‘for the purposes of satisfying an individual's own needs in terms of private consumption’ in Francesco Benincasa v. Dentalkit Srl. The negative interpretation of ‘daily consumption needs’ test is not for the needs of production and business activities or professional activities, which is comparable to the European notion of ‘outside his trade or profession’. Although ‘daily consumption needs’ under Chinese law seem to be literally different from ‘outside his trade or profession’ under the EU law, the case law in China and the EU may imply that there are more similarities than differences. Since both China and the EU employ negative and positive interpretations to define a consumer, it is worth considering whether China and the EU should combine negative and positive definitions of consumer.

As to whether the purchase of exceptional or luxury products can be considered as ‘daily consumption’ or ‘outside of his trade or profession’, both the European and Chinese case law indicates that the determination of whether a person is a consumer does not depend on the price that person paid for acquiring goods or services. ²⁰ The fact that a person may have special expertise or get economic gain is also irrelevant for disqualifying a person as a consumer both in China ²¹ and the EU. ²² This means private investors or consumer activists, even with economic gain or having certain expertise, are still protected as consumers in China and the EU with favourable choice of law rules.

B. Farmers as Consumers?

Chinese legal notion of a consumer is special for explicitly including agricultural workers or farmers as consumers. ²³ In Chen Zhongdong v. Poettinger Landtechnik GmbH, et al., a Chinese farmer who sued a Chinese company and an Austrian company because of a defective agricultural machinery was protected as a consumer. ²⁴ This is quite different from the European approach. In Gruber v. BayWa AG, ²⁵ Gruber, an Austrian farmer, concluded a contract with BayWa AG, a German firm, on the delivery of tiles. These tiles were used to replace the roof tiles of his farm building, slightly over 60% of the area was for residential purpose. When concluding the contract, the farmer did not expressly state that the building was mainly used for private or business purposes. The farmer later found out that the tiles were defective and brought a lawsuit in an Austrian court against the German company. The German company contested the jurisdiction ground of the Austrian court. The referred question was whether the status of ‘consumer’ whose purposes were partly private in a contract under Article 13 Brussels Convention (current Article 17 Brussels Ibis Regulation) was qualified as a consumer contract. The answer to this question determines whether the Austrian court had jurisdiction.

If the Chinese notion of consumer is used in Gruber v. BayWa AG, such a question would not be raised since a farmer is protected as a consumer under Article 62 of the Chinese Consumer Protection Law. Likewise, if the European notion of consumer is used in Chen Zhongdong v. Poettinger Landtechnik GmbH, et al., the farmer who bought agricultural machinery may not be protected as a consumer. As a result, a Chinese farmer who bought products from EU businesses is protected as a consumer, whereas an EU farmer who bought products from Chinese businesses is not protected as a consumer. Although Chinese law is more favourable to consumers by including farmers, this difference could increase legal uncertainty and unpredictability when consumer disputes involve Chinese consumers and European businesses or vice versa. Why do China and the EU differ on the consumer status of farmers? This might be because farmers are considered to be in a more disadvantaged position in China where the rural economy is less developed and the income gap is bigger than that in the EU.

The inclusion of agricultural workers in the notion of consumer also mirrors the approach of covering certain categories of small or micro business operators as consumers in China. ²⁶ In this sense, the notion of consumer in Chinese private international law is broader than that in the EU and thus more favourable to consumers. Would this difference affect the further recognition and enforcement of judgements involving farmers in these two legal regimes? It might be. For instance, if a case involves a Chinese farmer and a European business, the judgement reached under Chinese law would define the farmer as a consumer, which would be contrary to European law. If a Chinese court exercises jurisdiction over a dispute between a Chinese farmer and a European business on the ground that the farmer is a consumer. Whether this jurisdiction ground would be recognized in the EU would be under question.

C. The Nature of Dual-Purpose Contracts: The Primary Purpose Test?

The classification of a mixed contract or dual-purpose contract in which a person concludes a contract partly for private purpose and partly for professional purpose is very contentious both in China and in the EU. The consumer status of a person is not absolute but relative. A natural person can act as a consumer in one situation and as a professional in another situation. ²⁷ What is the legal status of a person if he acts partly for private purposes and partly for professional purposes? Does a person lose his consumer status in a dual-purpose context if the contract involves professional purpose, and if so, to what extent the professional purpose would disqualify a person's consumer status?

In Gu Weilong v. Xi'an Defang Investment Co., Ltd., ²⁸ a Chinese tourist joined a business inspection tour to Japan organized by a Chinese company. During the visit, some activities arranged by the company were for business purposes and some for private purposes. The first-instance court held that the contract was in essence a travel contract, whilst the second-instance court viewed it as a service contract. The courts did not agree on the nature of the mixed contract. ²⁹ However, both courts concluded that the primary purpose of the contract determined the nature of the contract. The primary purpose criterion was also adopted in Zhu Kaili et al v Guangzhou Baiyun District Fluent Education Training Centre. ³⁰ It involves a multiparty contract in which the four plaintiffs had different purposes when concluding the same contract with the same defendants. The parties differed on whether the contract should be classified as a service contract or package travel contract. It thus gave rise to the question of the classification of a multiparty contract in which different parties pursue different purposes. Should the contract be examined as a whole or separated among parties based on different purposes? The court analyzed that the main purpose of the contract was for the performance of one plaintiff (Zhu Kaili) on the stage. The other three plaintiffs, as family members, only concluded a contract with the defendant based on such precondition. The accessory purpose of the contract between the defendant and the three plaintiffs was subject to the main purpose of the contract between the plaintiff Zhu Kaili. Since Zhu Kaili's purpose was decisive, the contract was classified as a service contract. The primary purpose rather than the accessory purpose of the contract determines the nature of a multiparty contract.

Whether the Chinese legislature will adopt the primary purpose criterion applied in judicial practice in the future remains a question. It is advisable to adopt the primary purpose criterion when defining the notion of consumer in private international law. Moreover, it is also in line with provisions in several international instruments, such as Article 3 of the UN Guidelines for Consumer Protection, Article 5(2) of the 2019 HCCH Judgements Convention and Article 2(1)(a) of the 2005 Hague Convention on Choice of Court Agreements, which adopt the primary purpose criterion. Specifically, a consumer is defined as a natural person acting primarily for personal, family or household purposes. The wording ‘primarily’ means that a dual-purpose contract will be classified as a consumer contract if its primary purpose is private.

The 2019 HCCH Judgements Convention aims to facilitate the effective international circulation of judgements in civil or commercial matters by clarifying whether and to what extent a judgement will be recognized and enforced in another jurisdiction. Article 5(2) of the Convention provides special rules on consumer contracts. If a dual-purpose contract is classified as a consumer contract, it will be governed by Article 5(2). Otherwise, it will be subject to general rules for judgement circulation. China signed the 2019 HCCH Judgements Convention but has not ratify it yet. Although it has no binding force in China, given its global influence, it may still provide some guidance on the notion of consumer and the classification of dual-purpose contracts. Notably, with the EU's accession and Ukraine's ratification, the 2019 HCCH Judgements Convention entered into force on 1 September 2023. The EU's accession will bind all EU Member States (except Denmark), which means that the 2019 HCCH Judgements Convention will have binding force in those EU Member States. Meanwhile, the phase ‘regardless of the domicile of the other party’ in Article 18(1) Brussels Ibis Regulation almost grants universal jurisdiction over foreign businesses that have targeted the EU consumers. The inconsistency in the classification of dual-purpose contracts within the EU might cause problems regarding recognition and enforcement of judgements involving a third country, such as China. Therefore, the discussion of the legal nature of a dual-purpose contract or the notion of consumer in general contributes to a challenge that needs to be addressed internationally.

As to the classification of dual-purpose contracts, the CJEU held in Gruber v. BayWa AG that the fact that the private element is predominant is irrelevant, as long as the proportion of the professional usage is not negligible. ³¹ It is not relevant for the private purpose to be predominant, ³² as long as the professional element reaches a non-negligible extent. ³³ Consequently, a dual-purpose contract is not a consumer contract even if the private purpose is predominant, provided that the professional purpose is not negligible. In Milivojević v. Raiffeisenbank, the CJEU took the view that a person can be considered as a consumer only if the link between that contract and the professional activity is so marginal and negligible that it appears clearly that the contract was concluded essentially for private purposes. ³⁴ The change of the choice of the wording that limits private purpose from ‘predominantly’ to ‘essentially’ shows the adoption of a less restrictive construction of the notion of consumer. Such consumer-friendly approach is even more apparent in Schrems v. Facebook Ireland, the CJEU concluded that a user of social media services may rely on his status as a consumer only if the predominately non-professional use of those services, for which a person initially concluded a contract, has not subsequently become predominately professional. ³⁵ This means if the predominant purpose of a contract is private, the contract should be classified as a consumer contract, even if the professional purpose is non-negligible. Despite this, the primary purpose criterion adopted in Chinese judicial practice is more consumer-friendly than the European tests. Hence, more dual-purpose contracts will be classified as consumer contracts in China than in the EU. Additionally, the test in Zhu Kaili et al v. Guangzhou Baiyun District Fluent Education Training Centre is particularly important because it was based on multiparty litigation, which may constitute a useful supplement to the European tests.

Some EU consumer directives have adopted a broader interpretation of dual-purpose contracts. Recital 17 of the Consumer Rights Directive specifically prescribes that a dual-purpose contract is a consumer contract if the trade purpose is ‘so limited as not to be predominant’ in the overall context of the contract. A similar definition is provided in Recital 18 of the Consumer ADR Directive and Recital 13 of the Consumer ODR Regulation. Under this non-predominant criterion, even if the professional purpose is not negligible, a dual-purpose contract could be qualified as a consumer contract, provided that the professional purpose is not predominant. This non-predominant criterion conflicts with the non-negligible criterion in Gruber judgement.

Adopting a coherent and consistent notion of consumer is a challenge both in China and the EU, as well as in many other jurisdictions. ³⁶ The adoption of an identical definition of consumer is not realistic, but a more harmonized concept of consumer is beneficial for both European and Chinese consumers in this increasingly digitalized and globalized world. Having considered these interregional and international definitions of consumer, the notion of consumer in Article 42 of the 2010 Chinese Conflict of Laws Act (or Article 2 of the Consumer Protection Law) and Article 6(1) Rome I Regulation may combine the positive definition and negative definition by defining a consumer as ‘a natural person who, acting outside his or her trade or profession, concludes a contract with another person, acting within his or her trade or profession, primarily for the purpose of private, household, family consumption’.

3. The Material Scope of Consumer Conflict Rules in China and the EU

Under European private international law, not all consumer contracts are protected with favourable choice-of-law rules. Article 6(4) Rome I Regulation explicitly excludes several types of consumer contracts from the material scope. However, package travel contracts and timeshare contracts, as an exception of transport contracts and contracts relating to immovable properties, are explicitly protected as consumer contracts under Article 6(4)(b) and Article 6(4)(c) Rome I, respectively. By contrast, Article 42 Chinese Conflict of Laws Act does not specify the material scope of consumer contracts. It is unclear whether package travel contracts and timeshare contracts are protected as consumer contracts in China. These differences raise the question of whether package travel contracts and timeshare contracts should be included in the material scope of consumer choice of law rules in China.

A. The Lack of Interaction Between the Chinese Conflict of Laws Act and the Chinese Tourism Law

Under Article 3(2) of the European Package Travel Directive, ³⁷ ‘package’ refers to ‘a combination of at least two different types of travel services for the purpose of the same trip or holiday’. Article 6(4)(b) Rome I Regulation expressly refers to the notion of package travel within the meaning of the Package Travel Directive. Although Article 17(3) Brussels Ibis Regulation does not expressly refer to the Package Travel Directive, it also governs package travel contracts. The slight difference in these two provisions can be overlooked, since the substantive scope and the provisions of these two Regulations should be consistent. ³⁸

Unlike the EU law, Article 111(3) of the Chinese Tourism Law defines a package travel contract as ‘a contract where the travel agency arranges the tour in advance, provides by itself or through its performance assistant two or more tourism services including transport, accommodation, catering, sightseeing, tour guide or tour lead and tourists make an inclusive payment of the travel expenses’.

Meanwhile, Article 42 Chinese Conflict of Laws Act does not explicitly refer to the notion of package travel in Article 111(3) of the Chinese Tourism Law. Thus, whether protective consumer conflict rules in Article 42 Chinese Conflict of Laws Act apply to package travel contracts is questionable. Moreover, Article 111 of the Chinese Tourism Law has not defined the notion of timeshare contract. Article 6(4)(c) Rome I Regulation explicitly includes timeshare contracts into the material scope of consumer contracts. In this regard, European consumer rules are more favourable to consumers than Chinese rules, as Chinese timeshare tourists are not protected under favourable consumer rules in China.

B. Package Travel Contracts and Timeshare Contracts as Innominate Contracts

In Chinese judicial practice, package travel contracts ³⁹ and timeshare contracts ⁴⁰ are merely protected as general contracts under Article 41 Chinese Conflict of Laws Act. Under the Chinese Civil Code, package travel contracts and timeshare contracts are nameless contracts, innominate cntracts or atypical contracts, instead of consumer contracts. These innominate contracts cannot be classified under a particular name or type. Considering the fast development of technology and digital economy, foreign businesses can easily target Chinese tourists. However, Chinese tourists are not granted favourable consumer choice of law rules under Article 42 of the Chinese Conflict of Laws Act. It widens the gap between Chinese private international law and European private international law in terms of the material scope of favourable consumer choice of law rules. To bridge the gap, it is necessary for the Chinese Tourism Law to provide a definition of timeshare contract. In light of the European approach, it is advisable for Article 42 Chinese Conflict of Laws Act to explicitly refer to the notion of package travel contracts set forth in Article 111(3) of the Chinese Tourism Law and expressly include timeshare contracts into the material scope of consumer choice of law rules. For instance, Article 42 Chinese Conflict of Laws Act should explicitly state that ‘this article shall apply to a contract relating to package travel within the meaning of Article 111(3) of the Chinese Tourism Law on package travel’. Meanwhile, a specific definition of timeshare contract is needed in China before timeshare contracts can be included in the material scope of favourable consumer conflict rules in Article 42 Chinese Conflict of Laws Act. By doing so, package travel tourists and timeshare tourists in China may enjoy jurisdictional advantages as consumers and be protected by their home law or a more favourable foreign law.

4. Jurisdiction Rules Over Consumer Contracts in China and the EU

Under the Brussels Ibis Regulation, a consumer may bring proceedings against a business either before the courts of the country where the business is domiciled or, regardless of the domicile of the business, in the courts of the place where the consumer is domiciled. ⁴¹ Therefore, a consumer domiciled in an EU Member State could file a lawsuit in that Member State against a foreign service provider domiciled outside of the EU. By contrast, the business may only bring proceedings against a consumer before the courts of the place where the consumer is domiciled. ⁴² Moreover, the consumer and the business can only reach a choice of court agreement after the dispute has arisen. ⁴³ Compared to the European approach, the Chinese approach is less consumer-friendly due to the lack of protective jurisdiction rules. Instead, Chinese courts’ competence to hear a foreign-related consumer dispute shall be based on the general jurisdiction rules under the Chinese Civil Procedure Law.

A. The Validity of Jurisdiction Clause in a Consumer Contract

Most consumer contracts are standard contracts pre-drafted by the business. A business may refrain consumers from taking legal action in their domiciles by including a choice of court clause which designates courts other than the consumer's home fora. The European Union does not completely forbid standard jurisdiction clauses in consumer contracts, as long as they do not violate the fairness principle. ⁴⁴ In Ryanair DAC v. DelayFix, the CJEU held that if the forum selection clause in a contract has resulted in a serious imbalance between the rights and obligations of the two parties and harmed the interests of consumers’ benefit, it shall be invalid. ⁴⁵ Under Article 19(1) Brussels Ibis Regulation, the jurisdiction clause of a consumer contract reached before the dispute arises is invalid.

Chinese law remains silent on the validity of jurisdiction clauses in consumer contracts concluded before the dispute arises. Notably, the Standing Committee of the National People's Congress of China issued the Civil Procedure Law of the People's Republic of China (amendment draft) on 30 December 2022. The second paragraph of Article 280 of the Chinese Civil Procedure Law (amendment draft) expressly addresses the validity of choice of court agreement in consumer contracts, which reads that:

Where a business operator uses standard terms to sign a jurisdiction agreement with consumers but fails to perform the obligation of informing or explaining in a reasonable manner, consumers may claim that the terms do not become the content of the contract. If it is obviously inconvenient for a consumer to file a lawsuit under the jurisdiction agreement, the consumer may claim that the clause is invalid.

This provision puts restrictions on the choice of court agreement inserted in standard terms. A business operator has the obligation to inform or reasonably explain the jurisdictional standard clauses to the consumer. Failing that, the consumer may claim the jurisdiction clause does not constitute part of the consumer contract. This restriction imposes a procedural obligation on the business operator and thus protects consumers. However, if the jurisdiction clause disfavours the consumer, is it still valid as long as the business operator has fulfilled the obligation of reasonable explanation? The second paragraph of Article 280 thus further provides that if the court designated by the jurisdiction clause is obviously inconvenient for the consumer, the consumer may claim that the jurisdiction clause is invalid. The restriction imposes a substantive obligation on the business operator to ensure the fairness of the choice of court clause. Business operators are thus prevented from adding jurisdiction clauses to the detriment of consumers in advance. In other words, this proposal emphasizes the fairness of a choice of court clause in consumer contracts both in procedure and in substance. ⁴⁶

B. The Domicile of the Parties

The consumer jurisdiction rules under Articles 17–19 of the Brussels Ibis Regulation take the consumer's domicile as the primary connecting factor or jurisdiction ground. In China, Article 31 of the Draft Model Law of Chinese Private International Law (6th draft) expressly states that consumer contracts are subject to the jurisdiction of the courts where the consumer is domiciled or is habitually domiciled. This provision was not adopted in the final text of the Chinese Conflict of Laws Act. However, Article 280 of the Chinese Civil Procedure Law (amendment draft) has proposed a protective consumer jurisdiction rule, which states that:

a consumer's lawsuit against a business operator or a branch of a business operator whose domicile is not within the territory of the People's Republic of China, if the domicile of the consumer is within the territory of the People's Republic of China, it may be subject to the jurisdiction of the people's court of the consumer's domicile.

This provision enables the consumer domiciled in China to sue a foreign business operator, which has neither domicile nor branch in China before Chinese courts (the consumer's home court). Although it does not specify the conditions for the courts of the consumer's domicile to hear the case, once adopted, it will establish a consumer jurisdiction rule for the first time in Chinese Civil Procedure Law since its enactment in 1990.

Article 280 of the Chinese Civil Procedure Law (amendment draft) only mentions the branch of a business operator without further clarification. In this manner, even if a business's branch is not within the territory of China, the courts of the consumer's domicile in China may still have jurisdiction as long as the consumer is domiciled in China. This provision does not specify under what conditions the consumer's home courts may have jurisdiction over a business operator whose branch is not in China. The vagueness may increase legal uncertainty or derogate the function of this provision. By contrast, Article 17(2) Brussels Ibis Regulation states that ‘where a consumer enters into a contract with a party who is not domiciled in a Member State but has a branch, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that Member State’. Although the Chinese Civil Procedure Law does not employ the same term used in Article 17(2) Brussels Ibis Regulation, the term ‘representative office’ in Article 272 of the 2021 Civil Procedure Law is comparable to the term ‘branch’ or ‘agency’. Despite this, it remains a question whether the term ‘representative office’ could be interpreted broadly to include the branch, agency or other establishments of a defendant.

C. Conditions to Apply Consumer Jurisdiction Rules

Although Article 280 of the Chinese Civil Procedure Law (amendment draft) creates a consumer jurisdiction rule, it does not specify the conditions for application. While Article 17 of Brussels Ibis Regulations and Article 42 of the Chinese Conflict of Laws Act adopt the targeting or distargeting test, it is unclear whether Article 280 of the Chinese Civil Procedure Law (amendment draft) requires the same. Or are there other prerequisites for applying consumer jurisdiction rules in China?

Articles 17–19 Brussels Ibis Regulation and Article 6 Rome I Regulation shall be applied if the business has targeted the consumer's habitual residence and the contract falls within the scope of such activities. As to what constitutes the targeting activity, the criteria have been given by the CJEU in Pammer case. ⁴⁷ This targeting test aims to protect the reasonable expectation of the business party. A similar test is stipulated in Article 42 Chinese Conflict of Laws Act while it focuses on the negative consequences of not meeting the targeting test. Namely, if the business does not engage in relevant commercial activities in the country of consumer's habitual residence, the law of the country of consumer's habitual residence shall not apply. It does not require a causal link specifically. In this regard, Chinese choice of law rule is more consumer-friendly. The consumer does not have to prove that the conclusion of the contract falls within the business's targeting activities. Article 42 applies as long as the business has targeted the consumer's habitual residence. This distargeting test ensures that a business without an intention to solicit consumers from a particular state will not be subject to the law of that state. However, Article 42 does not further specify the notion of non-engagement of commercial activities or the dis-targeting test. The lack of criteria might also leave the consumer choice of law rules in Article 42 underusing.

5. Consumer Choice of Law Rules in China and the EU

Under Article 42 of the Chinese Conflict of Laws Act, a consumer contract in principle is governed by the law of the consumer's habitual residence, unless the consumer chooses the law of the place where the goods or services are provided, or the business operator does not engage in relevant business activities at the habitual residence of the consumer. Only the consumer can choose the applicable law unilaterally while the business operator has no right to choose the applicable law. Meanwhile, the material scope of chosen law is confined to the law of the country of consumer's habitual residence and the law of the place of the provision of goods or services. If the business operator has not engaged in relevant commercial activities in the consumer's habitual residence, the law of the provision of goods or services applies as a default rule, instead of the law designated under general contract choice of law rules in Article 41 of the Chinese Conflict of Laws Act.

In European private international law, a consumer contract is also governed by the law of the consumer's habitual residence under Article 6(1) Rome I Regulation. The application of the law of consumer's habitual residence can be applied if the targeting test is fulfilled, namely, the business has pursued commercial or professional activities in or has directed such activities to the country of the consumer's habitual residence. Under Article 6(2) Rome I, the consumer and the business may reach a choice of law agreement. Party autonomy over the choice of law of consumer contracts is restricted both in China and the EU while in different manners. The differences between Chinese and EU law give rise to the following questions. Whether bilateral party autonomy should be allowed in China, and if so, how to limit the exercise of bilateral party autonomy? Whether the material scope of chosen law on consumer contracts should be expanded? Which law applies if the business operator does not engage in relevant commercial activities in the country of the consumer's habitual residence?

A. Party Autonomy in Consumer Choice of Law Rules in China and the EU

First of all, there are three degrees to limit the exercise of party autonomy: first, party autonomy is forbidden completely; second, party autonomy is partly restricted; third, full party autonomy is granted to the parties. ⁴⁸ When it comes to the second type of limited party autonomy, it can be done by limiting the subjects with the right to choose, the methods of choice, the material scope of choice and the timing of choice. Besides, limited party autonomy and complete party autonomy are subject to public policy and mandatory provisions. Article 42 Chinese Conflict of Laws Act and Article 6(2) Rome I Regulation partly restrict the exercise of party autonomy. Article 42 Chinese Conflict of Laws Act limits the subjects with the right to choose and the material scope of choice. Article 6(2) Rome I Regulation does not limit the subjects with the right to choose or the material scope of choice. The exercise of party autonomy is restricted by mandatory provisions.

Under Article 6(2) Rome I, the parties may choose the law applicable to the consumer contract, as long as the chosen law does not deprive the consumer of the protection afforded by the mandatory provisions otherwise applicable. In this way, the Rome I Regulation offers the consumer double protection with a more favourable law approach. ⁴⁹ Under Article 42 Chinese Conflict of Laws Act, the consumer can unilaterally choose the applicable law. Compared with Chinese consumer choice of law rules, the EU law does not deprive the business's right to choose the law through party autonomy. Moreover, the material scope of the chosen law under Article 6(2) Rome I is not confined to the law of the consumer's habitual residence and the law of the place of the provision of goods and services. Notwithstanding this, the chosen law is subject to mandatory provisions of the law of the consumer's habitual residence under Article 6(2) Rome I. By contrast, mandatory provisions are not explicitly stated in Article 42 Chinese Conflict of Laws Act. In this sense, consumer choice of law in Article 6 Rome I Regulation is more favourable to consumers than that in Article 42 Chinese Conflict of Laws Act.

B. Interaction Between Consumer and Contract Choice of Law Rules

When the targeting test is not met, the general contract choice of law rules applies under Article 6(3) Rome I Regulation. In that case, Article 42 Chinese Conflict of Laws Act still applies, which designates the law of the country where the goods or services are provided as a default rule. Such differences give rise to the question of whether the law of the provision of goods or services always has the closest connection with the consumer dispute in the context of distargeting activities under Article 42 Chinese Conflict of Laws Act.

1. Interplay between Article 6(3) and Articles 3–4 of Rome I regulation

Article 6(3) of Rome I Regulation expressly states that if the requirements set forth in Article 6(1) Rome I are not fulfilled, the law applicable to a consumer contract is to be determined pursuant to the general contract choice of law rules provided in Articles 3 and 4 of Rome I Regulation. The application of general conflict rules may lead to the application of the law of the country of the seller's or service provider's habitual residence, ⁵⁰ the law of the country of the habitual residence of the party whose performance best reflects the characteristic of the contract, ⁵¹ the law of the country which is manifestly more closely connected with the contract, ⁵² or the law of the country which has the closest connection with the contract. ⁵³ In this sense, European consumers are protected by a wider range of laws than Chinese consumers when the business does not engage in relevant commercial activities in the country of the consumer's habitual residence.

When determining the country which has the closest connection with a contract, the place of performance of the contract has to be taken into account. ⁵⁴ Although the place of performance (where the seller delivered goods or service provider rendered services) is an indicative factor, it has no longer served as the ultimate default rule for determining the applicable contract law since the Rome Convention. ⁵⁵ In the Rome I Regulation, only Article 8(2) still regards the place of performance of the employee contract as a decisive connecting factor. ⁵⁶ The connecting factor of the place of performance of the contract is merely indirectly adopted in Articles 5(1)–(2) and Article 12(2) in a subordinate manner. ⁵⁷

2. Lack of interaction between Article 41 and Article 42 of the Chinese Conflict of Laws Act

There is no interaction between Article 41 and Article 42 of the Chinese Conflict of Laws Act. If the targeting test is not fulfilled, Chinese consumers are still subject to one single law within the framework of consumer choice of law rules in Article 42 Chinese Conflict of Laws Act. However, the place of the provision of goods or services, which is presumed to have the closest connection with the consumer contract, is not always the place which has the closest connection with the contract or the dispute. In other words, such default rule may turn out to be against the consumer's reasonable expectation and less favourable in some circumstances, especially considering the increasingly complicated consumer transactions in the digital age. If the business does not target the consumer's habitual residence, it is more reasonable to determine the applicable law of a consumer contract in accordance with general contract choice of law rules.

If the targeting test is not fulfilled under Article 6 Rome I Regulation, European consumers are subject to general contract choice of law rules which may lead to the application of different laws. It seems that, from a comparative law perspective, it is more reasonable to subject consumer contracts to general contract choice of law rules in Article 41 Chinese Conflict of Laws Act, instead of applying the law of the performance of the contract strictly as a secondary default rule under Article 42 Chinese Conflict of Laws Act. Such a default rule does not necessarily protect consumers’ substantive rights. In some cases, it may even be unpredictable or detrimental to consumers, provided that the law of the provision of goods or services has no relevant substantive laws or provides a much lower level of protection than that otherwise applicable law. As a result, applying the law of the country where the goods and services are provided may deprive the consumer of being protected by a better law.

In order to create an interaction between consumer choice of law rules and contract choice of law rules within the Chinese Conflict of Laws Act, a possible proposal to amend Article 42 Chinese Conflict of Laws Act would be as follows: Provided that the business does not engage in relevant commercial or soliciting activities, the law applicable to the consumer contract will be determined by contract choice of law rules in Article 41 Chinese Conflict of Laws Act.

3. Bilateral party autonomy limited by mandatory provisions

Party autonomy is one of the cornerstones of the Rome I Regulation. ⁵⁸ As a basic principle, the parties’ freedom to choose applicable law to their contract is the very fundament of the Rome I Regulation. ⁵⁹ Under Article 6(2) Rome I Regulation, the consumer and the business can freely choose the applicable law and thus bilateral party autonomy is allowed. Article 6(2) Rome I further confines the exercise of bilateral party autonomy with mandatory provisions of the law of the consumer's habitual residence. Therefore, the parties’ choice of law shall provide the same or higher level of consumer protection than that in the consumer's home state. ⁶⁰ A comparison between the chosen law and the mandatory rules of the consumer's country of habitual residence is required. ⁶¹ China adopts a different approach towards consumer protection by granting the consumers the unilateral right to choose the applicable law and confines the chosen law to only the law of the consumer's habitual residence and the law of the country of the provision of goods or services. Such limitation certainly enhances legal certainty but may undermine legal flexibility. Such differences raise the question of whether party autonomy should be allowed in China? Whether more flexible connecting factors are in need? Whether the material scope of chosen law on consumer contracts should be expanded?

Consumers, without the guidance of professional lawyers, are usually in a blind state, (more likely) not knowing which law is more favourable. ⁶² In particular, when faced with the guidance of business party or standard contracts, whether the so-called agreement by the consumer party can really reflect the consumer's true intention or help consumers to realize their interests? ⁶³ Probably not. That is why the business's right to choose applicable law is deprived. Article 42 of Chinese Conflict of Laws Act prevents a business from unilaterally choosing the law of a country which has no connection with the contract and provides the lowest level of protection to consumers. ⁶⁴ The objective of Article 42 of Chinese Conflict of Laws Act is not to provide the most favourable law, or the best law, to consumers, but to make sure that consumers are not deprived with the protection he or she should have been enjoyed in the absence of choice-of-law agreement pre-drafted by the business party.

Articles 6 and 8 Rome I Regulation on consumer contract and employee contract adopt bilateral party autonomy and allow the parties to choose the applicable law. Meanwhile, the parties’ choice is subject to the mandatory minimum standards established by the law that would be applicable in the absence of choice. ⁶⁵ The model of Articles 6 and 8 Rome I Regulation has inspired legislators across the globe in dealing with consumer and employment contracts. ⁶⁶ If the Chinese law also allows the business operator to choose the applicable law, mandatory provisions are necessary safety valve to protect consumers. If the chosen law conflicts with the mandatory provisions in the country of the consumer's habitual residence, the chosen law is wholly or partly inapplicable. ⁶⁷ With an expanded material scope of chosen law under bilateral party autonomy, if the parties choose a more favourable law other than that of the law of the consumer's habitual residence or the law of the country of the provision of goods or services, the more favourable law chosen by the parties shall apply. ⁶⁸

The application of mandatory provisions is not only one method of choice of law rule but also reflects a doctrine according to which a country intervenes in the exercise of party autonomy by the parties. ⁶⁹ Some substantive provisions tend to provide more protection to the weaker contracting parties in order to strike a balance of the interests of both parties, which constitute protective mandatory provisions or semi-overriding mandatory provisions. ⁷⁰ In fact, mandatory provisions have played a role in protecting employees under the Chinese Conflict of Laws Act. ⁷¹ However, the provisions on protecting consumers are not included in the material scope of mandatory provisions under Article 10 of the SPC Judicial Interpretation of the Conflict of Laws Act. This is debatable, since consumers, as the weaker contracting party, deserve similar protection as employees by mandatory provisions in Chinese private international law. The exercise of party autonomy cannot evade certain mandatory provisions on consumer protection. ⁷² Thus, it is crucial to include consumer protection in the material scope of mandatory provisions in Article 10 of the SPC Judicial Interpretation of the Conflict of Laws Act. The mandatory provisions could serve as an instrument to confine the exercise of bilateral party autonomy. To this end, it is necessary to separate mandatory provisions from overriding mandatory provisions first. Excluded consumers or consumer contracts regulated under general contract conflict rules might still be subject to overriding mandatory provisions.

4. Choice of law rules over consumer concurrent claims in China and the EU

Consumer concurrent liability may arise when a consumer purchases a defective product and sues the seller for bearing product liability. Consumer concurrent liability may also arise when a consumer receives services and gets injured due to the negligence or improper performance of the service provider. When it comes to package travel services, a tourist who was injured during the performance of a package travel contract may sue the service provider based on contract liability or tort liability. Regarding the law applicable to tort liability, under Article 44 Chinese Conflict of Laws Act, the general tort conflicts rule of lex loci delicti commissi is subject to the law chosen by the parties and the law of the common habitual residence of the parties. Similarly, under Article 4 Rome II, the general rule lex loci damini in Article 4(1) is subject to two exceptions, namely, the law chosen by the parties under Article 14(1) and the law of the common habitual residence of the parties under Article 4(2). However, as an escape clause, Article 4(3) Rome II Regulation additionally designates the law of the country with which the tort/delict is manifestly more closely connected. Such difference gives rise to the question would it be better to integrate the closest connection principle into the tort choice of law rules as escape mechanism in China?

Traditionally, tort is primarily defined as a non-contractual issue. The contractual issue cannot qualify as tortious, vice versa. ⁷³ This mutual exclusivity argument believes contract and tort, or non-contract, are construed as strict alternatives. ⁷⁴ Although a claim in contract and a claim in tort can concur, there would be two claims at stake instead of a single one. ⁷⁵ Nevertheless, there are issues of characterization in the twilight zone between contract and tort. ⁷⁶ The overlap between tort and contract makes such strict dualism skeptical, particularly when a close connection is established between tortious and contractual claims because of the same fact. Article 4(3) Rome II Regulation has envisaged concurrent liability by establishing the ‘manifestly more closely connection’ test. Such test is brought up as a general exception clause, with the aim to bring a degree of flexibility for the court while applying the law in an individual case. ⁷⁷ Specifically, if it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than the country in which the damage occurs or the country of the common habitual residence of the parties, the law of that country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract. ⁷⁸

The manifestly closer connection doctrine would most likely lead to the law applicable to the pre-existing contract also applies to the tort that is based on, or in relation to the contract, although Articles 4(3) Rome II Regulation do not explicitly say so. ⁷⁹ Where the tort arises from a breach of contract or is closely connected with a contract, the accessory determination of applicable law under Article 4(3) Rome II Regulation may lead to the application of the contractual applicable law. ⁸⁰ If such contract is a consumer contract, the more favourable law approach in Article 6(2) Rome I Regulation applies by virtue of the closer connection test. If the same law applies to both contract and tort in a given case, the difference in characterization does not matter at the level of substantive law. ⁸¹ This would lessen the importance of the characterization of a rule as contractual or non-contractual and could help avoid the tricky question of which law is applicable to concurrent liability between contractual and non-contractual claims. ⁸² In this sense, it can also enhance legal certainty and predictability.

The tort choice of law rules in Article 44 Chinese Conflict of Laws Act does not take into consideration the pre-existing (contractual) relationship between the victim and the tortfeasor. When the breach of contract also constitutes tort liability, it might be reasonable to extend the contractual choice of law to concurring tort claims. In this regard, since the closest connection principle has become a general principle in Chinese private international law, the integration of the closest connection principle into Article 44 of Chinese Conflict of Laws Act merely reflects such principle. It can be done by establishing an escape clause to apply the law of the country which has a manifestly closer connection with the tort, just like that in Article 4(3) Rome II Regulation. The pre-existing relationship between the parties may constitute a manifestly closer connection, of which a contract can be given as an example. If the pre-existing relationship is a consumer contract, the mandatory provisions of the law of the consumer's habitual residence should not be derogated in concurring tort claims.

6. Concluding Remarks

The notion of consumer differs in Chinese and European private international law with regard to whether consumers are limited to only natural persons, whether farmers, package travel tourists and timeshare tourists are protected as consumers, as well as whether dual-purpose contracts are consumer contracts. In order to improve consumer protection in China, it is essential to define the ‘consumer contract’ under Article 42 Chinese Conflict of Laws Act and also include package travel contracts and timeshare contracts into its material scope. To this end, the interaction between the Chinese Conflict of Laws Act and substantive laws, such as the Chinese Consumer Protection Law and Chinese Tourism Law, needs to be established. A specific definition of timeshare contract is needed. As for the legal nature of dual-purpose contracts, the CJEU interpreted it strictly in Gruber on the basis of non-negligible criterion, but the Schrems and Milivojevi judgements may show some kind of deviation towards a broad interpretation. Chinese courts tend to adopt a broader interpretation than the EU by examining the primary purpose of the contract. This primary purpose criterion is in line with international conventions, such as Article 3 of the UN Guidelines for Consumer Protection, Article 5(2) of the 2019 HCCH Judgements Convention and Article 2(1)(a) of the 2005 Hague Convention on Choice of Court Agreements. By combining the negative defintion in Article 6(1) Rome I Regulation and positive definition in Article 2 of the Chinese Consumer Protection Law, a consumer in Article 42 Chinese Conflict of Laws Act may be defined as ‘a natural person who, acting outside his or her trade or profession, concludes a contract with another person, acting within his or her trade or profession, primarily for the purpose of private, household, family consumption’.

Meanwhile, it is crucial to establish a consumer jurisdiction rule in China. Article 280 of the Chinese Civil Procedure Law (amendment draft) which proposes a protective consumer jurisdiction rule is a good start. However, in comparison with Articles 17–19 Brussels Ibis Regulation, it needs to specify under what conditions shall the courts of the consumer's domicile have jurisdiction. The second paragraph of Article 280 expressly addresses the validity of choice of court agreement in consumer contracts, according to which the business operator has the obligation to inform or explain reasonably to the consumer about the jurisdiction clause inserted in standard terms, failing that, the consumer may claim the jurisdiction clause does not constitute part of the consumer contract. Furthermore, even if a business reasonably informs or explains the jurisdiction clause to the consumer, such clause is still invalid provided that it is obviously inconvenient for the consumer. Consumers are protected from business operators in bad faith both procedurally and substantively. This proposal is beneficial to consumers in foreign-related litigation. Adopting it would be a big step forward in Chinese private international law over consumer protection.

The exercise of party autonomy is limited under Article 6 Rome I Regulation and Article 42 of the Chinese Conflict of Laws Act. The difference is that the European approach allows both parties to choose the applicable law and the chosen law is only subject to mandatory provisions of the law of consumer's habitual residence. The Chinese approach only allows consumers to choose applicable law unilaterally between the law of their habitual residence or the law where the goods or services are provided. In this regard, it is necessary to expand the material scope of the choice to include the laws connected to the dispute. Alternatively, in light of Article 6(2) Rome I Regulation, it is advisable to embrace bilateral party autonomy in Article 42 Chinese Conflict of Laws Act and confine the chosen law with mandatory provisions of the consumer's habitual residence. To this end, the boundary between mandatory and overriding mandatory rules under Article 4 of the Chinese Conflict of Laws Act needs to be clarified. Provisions on consumer protection, just like those on employee contracts, may be considered as mandatory provisions set forth in Article 10 of the SPC Judicial Interpretation of the Conflicts Act. For excluded consumer contracts, Article 6(3) Rome I Regulation creates an interaction between consumer choice of law rules and contract choice of law rules. It is, therefore, advised that if the business operator does not engage in commercial activities in the consumer's habitual residence, the law applicable to a consumer contract shall be determined under general contract choice of law rules in Article 41 Chinese Conflict of Laws Act, instead of applying the law of the provision of goods or services without any exception under Article 42. To this end, Article 42 Chinese Conflict of Laws Act could establish an interaction between consumer choice of law rules and contract choice of law rules like that in Article 6(3) Rome I Regulation. A possible proposal would be: Provided that the business does not engage in relevant commercial or soliciting activities, the law applicable to the consumer contract will be determined by contract choice of law rules in Article 41 Chinese Conflict of Laws Act.

In terms of consumer concurrent claims, the current tort choice of law rule in Article 44 Chinese Conflict of Laws Act does not interact with consumer choice of law rules. Article 4(3) Rome II Regulation establishes an escape clause to apply the law which has a manifestly closer connection with the tort, of which the pre-existing contractual relationship, including consumer relationship, between the victim and the tortfeasor is an example. The accessory determination of applicable law under the closer connection test may lead to the contractual applicable law. Thus, the same law applies to consumer concurrent claims, regardless of the cause of action brought by the claimant. When the breach of contract also constitutes tort liability, it might be reasonable to extend the contractual choice of law to concurring tort claims. In this regard, Article 44 Chinese Conflict of Laws Act could integrate the closest connection principle as an escape clause.

However, it remains a question to what extent and when China can make an amendment as suggested with regard to consumer jurisdiction and choice of law rules. These suggestions are merely academic proposals for legislators to take into consideration for future legal reform. Even if the proposals are adopted, some issues still require ongoing discussion due to the complexity of real-life transactions and the fast development of technology. In a broader context, this comparative study of consumer rules in China and the EU is meaningful in the sense that it may provide inspiration and guidance for other countries facing similar questions and challenges.