Little is known about the substance, nature and procedure of the early Chinese law. Thsis is lamentable as it is generally accepted that the Chinese legal tradition is one of the oldest enduring legal systems of the world. To address this lacuna, available records and literature on the earliest known Chinese dynasties — the Xia Dynasty (夏, c. 2000–1600 B.C.) and the Shang Dynastry (商, c. 1600–1100 B.C.) — are surveyed, with the goal to cautiously and judiciously explore the social and legal life of the earliest of the Chinese civilizations. Given that penal law (punishment) constituted the essence of early imperial Chinese law, the important legal principles and practices with regard to the criminal and penal laws of that time are identified and explained, and its legal development from approximately 2000 to 1000 B.C. outlined. Particular attention is paid in the analysis and discussion of this article to two early relics from the Chinese legal tradition — the Five Punishment (五刑), and respect for filia piety (孝). Despite the fact that so little is known about the early Chinese criminal and penal laws, it is shown in this article that these two relics from the early of Xia and Shang Dynasties have had a lasting influence on the subsequent development of Chinese law, not only in the imperial times, but also tothis day.
It is generally accepted that the Chinese legal tradition is "the longest of any enduring political system in the world, [and it] rivals that of Roman Law in [both] its historical importance and lasting influence". Yet, what we know about the substance, nature, and procedure of early Chinese Law (referring to the laws of the Xia Dynasty (夏, c. 2000–1600 B.C.) and the Shang Dynasty (商, c. 1600–1100 B.C.), remains sparse and must be inferred from the available records of later dynasties. Another difficulty in tracing the legal-historical development of Chinese law lies in the reckoning of ancient Chinese dates and identifying some semblance of an initiation or dawn of an organized legal system. For the earliest dynasties in Chinese history, regard is usually had to the History of the Former Han Dynasty (汉书) by Ban Gu (班固, 32–92 A.D.), and the Annals of the Bamboo Books (竹书纪年) "found in a tomb in 280 or 281 A.D., and believed to have been compiled in the feudal state of Wei (魏, 403–225 B.C.) early in the third century B.C." Both sources ascribed the beginnings of Chinese civilization to the third millennium B.C., and absent any system of periodization or eponymate, relied upon the number of years a local ruler had reigned, as well as cosmological events like eclipses, to relate epoch change. While there are many discrepancies in the timelines recorded in these early sources, especially with regard to the earliest dynasties in Chinese history, a sufficient documentary basis exists to cautiously and judiciously explore the social and legal life of the earliest of Chinese civilizations.
At first, the idea of law that developed in China was primarily for state regulatory control, and initially covered only "those matters necessary to protect or promote state interests, and focused, to a large extent, on the signaling of state punishment". This state punishment had at aim to maintain social harmony, order relationships, and observe rituals (礼, li), and subsequently developed into the modern criminal and penal system that exists in China today. Important, however, is that penalties were the essence of the early imperial Chinese law, as the early imperial Chinese law lacked, initially at least, "any notion of a private ordering by law, and only included rules relating to property, contracts, commercial transactions, and familial relationships for as far as it served state interests".
This was also reflected in the language of law; the most important Chinese characters for law were xing (刑), referring to physical punishment, and fa (法) meaning law.
"The former was originally derived from a graphic character meaning 'knife' and referred to the practice of corporal punishment. The latter referred to a pattern, or model, of practice. […] Both xing and fa were confined to the domain of human legal practice. The former referred to particular kinds of criminal penalty and the latter to a particular name given to a current pattern of practice".
These two characters clearly illustrate the original, imperial, and penal notions of law in China, aimed at controlling and modelling behavior through sanction/criminal penalty and for social harmony.
Recognizing the fraughtness of any attempt to definitively and accurately identify the early roots of Chinese criminal law and tracing its development, this article makes a modest but important contribution: In surveying the available records and literature on the earliest known Chinese dynasties — the Xia Dynasty and the Shang Dynasty — this article offers readers an induction to the rich and complex history of Chinese law; important legal principles and practices with regard to criminal and penal law in the earliest known Chinese dynasties are identified, and their endurance and lasting influence on the development of Chinese criminal law are traced. The goal ultimately is not to devise a historical record of the dawn of the Chinese legal system, but rather to begin to understand its heritage.
Part II of this article focuses on the Xia Dynasty and specifically the Yu Punishments (禹刑) and the early prison system established in ancient China. The Shang Dynasty is discussed in Part III of the article, and the focus in this part is on the Tang Punishments (汤刑) and specific penalties that applied during this period in Chinese history. Based on this legal-historical overview, two early relics from the Chinese legal tradition — the Five Punishments (五刑), and respect for filial piety (孝) — are then considered in Part IV, with the conclusion in Part V briefly highlighting the continued importance of the lingering remnants of early Chinese laws and practices to this day.
In December 1978, the Third Plenary Session of the 11th Central Committee of the Communist Party of China heralded a big change by deciding to open up the People's Republic of China ("China"). In 2018, China was the world's second largest economy measured by gross domestic product at current U.S. dollars. On the way, China abandoned planned economy and turned towards market driven economy, labelled as "socialist economic system" or "socialist market econom" (see art. 6, para. 1 and art. 15, para. 1 Constitution ). Hence, market mechanisms (the price mechanism in particular) became more and more important for the allocation and coordination of labor, capital and resources.
The term "marke" describes a concept where goods and services are exchanged on the basis of individual transactions or, put differently, on the basis of contractual relationships. As Ronald H. Coase elucidated in his distinguished article The Nature of the Firm, the application of the price mechanism entails costs. Firms are established because they can reduce production costs by integrating certain transactions. According to Stephen M. Bainbridge, the decisive element of the Coasean model of the firm is the centralized decision-making. The decision-maker is vested with authority, directs the utilization of inputs and thereby reduces the (coordination) costs inherent in team production. The reason why the coordination of team activities requires authority lies in the fact that team members do not have identical interests and/or identical information. Authority thus increases the efficiency of group coordination (i.e., decision-making) and information processing. A centralized decision-maker with unlimited authority, however, is not responsible to anyone; there is no need for the centralized decision-maker to consider the interests of any other member. This calls for corrective measures, i.e., for a system which holds decision-makers responsible (or accountable) for their actions. Authority and responsibility are thus antithetical; an increase in authority implies a decrease in responsibility. Maximum responsibility leads to a shift of the decision-making power from the centralized decision-maker to the ones to whom he is responsible. Maximum responsibility therefore deprives the firm of its original purpose, i.e., the reduction of production costs through an efficient decision-making process. Consequently, the right balance between authority and responsibility has to be found.
In many jurisdictions, a corporation's supreme authority is typically vested in the board of directors or an equivalent centralized corporate authority. It is the corporate law's task to provide a framework for an efficient decision-making system. For this purpose, the U.S. corporate law developed the so-called business judgment rule which balances authority and responsibility. The business judgment rule is based on the economic theory of efficiency, as will be discussed later on, and has become a widely recognized legal institution implemented by numerous jurisdictions.
China's economic transformation cleared the way for the emergence of enterprises in the sense of the Coasean theory of the firm. In order to be competitive, especially in today's integrated world economy, Chinese firms need to incorporate a decision-making process whose efficiency at least matches its foreign counterparts. The question thus arises whether such a system is in process and how China's Company Law balances authority and responsibility. This paper focuses on the statutory business judgment rule yet unknown to the Company Law. Scholars suggest that the business judgment rule is neither recognized by the Chinese courts, nor is the Company Law ready for a legal transplant of the business judgment rule.
However, while the business judgment rule has not gone unnoticed among scholars of Chinese Company Law, no in-depth review seems to have been conducted on the subject so far. It is therefore the purpose of this paper to establish a thorough understanding of the relevant aspects of the Company Law relating to the business judgment rule and to analyze what role the business judgment rule already plays in practice as far as joint stock limited companies ("Stock Companies"; art. 76 et seqq. Company Law) are concerned. In fact, this paper suggests that the business judgment rule fits well into the Chinese Company Law's DNA and, contrary to the aforementioned scholarly opinions, has already received some judicial recognition. Codifying the business judgment rule would not only help establish a uniform understanding of the rule but also enhance the statutory corporate governance framework of Stock Companies. The analysis focuses exclusively on the Stock Company with its typically broad owner base where the need for protecting the centralized decision-maker's discretionary powers is especially high. Due to the confines of this paper, the discourse concentrates uniquely on members of the Stock Company's board of directors and board of supervisors without taking into account the role of officers or managers (cf. art. 113, para. 1 and art. 216, no. 1 Company Law).
As the business judgment rule arbitrates the tensions between authority and responsibility, Part II discusses the economic aspects of centralized decision-making. It not only highlights the importance of protecting the centralized decision-maker's discretionary powers but also offers a unique explanation in this regard. Part III presents the "ideal model" of the business judgment rule developed by the case law of the U.S. state of Delaware. Part IV sheds light on the organizational structure of Stock Companies under the Company Law, the allocation of the decision-making power and the duties of the directors and supervisors. Part V introduces the legal framework for the review of business decisions and argues that the business judgment rule has already been recognized by Chinese courts. The question whether it is feasible to introduce a statutory business judgment rule into the Company Law is subject to the discourse under Part VI. The discussion looks at two foreign jurisdictions having transplanted the business judgment rule and analyzes four main aspects which might speak against the introduction of a statutory business judgment rule into the Company Law. Finally, Part VII concludes the analysis.
