Contemporary Lex Mercatoria in China

Abstract

Notwithstanding the negative effects arising from global economic recession, E-commerce transactions in China has increased steadily. Meanwhile, the legal system still lacks specific regulations concerning consumer protection of distance contracts. Nevertheless, the distance consumer market in China is well self-regulated, due to its reliance on a version of the Lex Mercatoria. This article will discuss the detail of the modern Lex Mercatoria that has developed in China, and draw conclusions on its future. The first aspect is “right of withdrawal” which has been adapted from the European Union’s legal system. Another aspect is “escrow” which Chinese is known as “third-party payment method”. This has been borrowed from the common legal system. The former is a self redress mechanism whereby the consumer can protect whereby the consumer can protect himself during the purchasing process; the latter is a mechanism for security of payment. These two legal concepts do not operate in isolate. On the contrary, they cooperatively break through the difficulty that can occur in practice, when the trader fails to reimburse the consumer. Even though the EU Directives require the trader to return all payments when the right of withdrawal id exercised by the consumer, repayment is frequently withheld or delayed. This approach enrolls escrow to solve the problem, by returning the payment via an escrow holder, which is a credit-neutral third party. The combination of these two concepts makes up the hybrid approach of modern Lex Mercatoria in China. The paper will concludes that increased protection for distance consumer protection in China will be advanced by the use of this Lex Mercatoria and led to further development of relevant legislation.