How to determine the compensation standard for personal injury suffered by foreigners traveling in China? Wang Jingzhan, a lawyer from Bozhuan Law Firm in Tianjin, answers this question through a case study

Brief of the case

 Li Daoqiang (who became a U.S. citizen during the trial), his wife Wang Lixue (a U.S. permanent resident) and their children Li Jiajia (a U.S. citizen) and Li Dundun (a U.S. citizen) have long lived in New York, USA. Wang Digu and Zhou Lihua are Wang Lixue’s parents. They live in Tianjin and are retired.On August 18, 2009, Wang Lixuan, on behalf of Li Daoqiang, Li Daoqiang’s father Li Wenjieh and Li Jiajia, signed the “Domestic Tour Group Contract” with Tianjin Guangjun Travel Agency Co., LTD. (hereinafter referred to as Tianjin Guangjun Travel Agency) to travel to South China

  On August 29 of the same year, Wang Lixue and other three people were in a bus accident during the travel process, Wang Lixue died, and Li Daoqiang, Li Wenjue and Li Jiajia were injured to different degrees. The driver of the tour bus was found to be fully responsible. Li Daoqiang paid funeral expenses for his wife’s funeral, and spent money such as accommodation, transportation, food and beverage, communication fees, notary fees, and suffered from loss of work. Li Daoqiang, Li Jiajia, Li Dundun, Wang Digu, Zhou Lihua filed a lawsuit, requesting the court to order Guangjun Travel Agency to bear the liability for breach of contract and compensate for the loss of RMB 18,296 061.50.

The Verdict 

  The court of first instance held that the Guangjun Travel Agency violated its contractual obligations and should pay compensation for Wang Lixue’s death and related expenses. There is no basis for Li Daoqiang’s claim to pay death compensation and living expenses of dependents according to American living standards and wages. The death compensation shall be calculated according to the per capita disposable income standard of urban residents in Tianjin in 2010, and the living expenses of dependents shall be calculated according to the per capita consumption expenditure standard of urban residents in Tianjin in 2010. Guangjun Travel Agency should pay Li Jiajia and Li Dundun corresponding living expenses. Because Li Daoqiang and other plaintiffs sued for breach of contract, the claim for compensation for mental damage was not supported. Li Daoqiang and other plaintiffs spent transportation expenses, accommodation expenses, food and beverage expenses, notary fees, communication fees, Guangjun travel agency should be compensated. Li Daoqiang’s missed work expenses should be supported

  The court of first instance ruled that Guangjun Travel Agency paid the funeral expenses of Li Daoqiang and other five plaintiffs RMB 13,956, transportation expenses RMB 21,623.76, accommodation expenses, catering expenses, notary fees, communication expenses RMB 3,527.3, and death compensation RMB 485,860; In addition, the Guangjun travel agency was sentenced to pay Li Jiajia 57,967 yuan for living expenses, Li Dundun 91,091 yuan for living expenses, Li Daoqiang 46,897.37 yuan for lost work, and rejected other claims by Li Daoqiang and other  four  plaintiffs.

  Li Daoqiang and other plaintiffs refused to accept the appeal.

  The court of second instance held that the case was a tourism contract dispute with foreign-related factors. The law of the People’s Republic of China shall be the applicable law. Regarding the calculation standard of the amount of damages involved, Wang Lixue was killed by a traffic accident due to travel, and Guangjun Travel Agency should pay compensation. Li Daoqiang, Li Jiajia, and Li Dundun claim that the calculation of death compensation and maintenance fees according to the New York standard of the United States has no legal basis, but considering that Li Daoqiang, Li Jiajia, and Li Dundun actually live in New York of the United States and other factors, the death compensation and related maintenance costs involved should be doubled on the basis of Tianjin standard as appropriate. The Court of second instance ruled that the Guangjun Travel Agency should pay the compensation for the death of Li Daoqiang, Li Jiajia, Li Dundun, Wang Digu and Zhou Lihua RMB 971,720 yuan, the Guangjun Travel Agency should pay the living expenses of Li Jiajia RMB 115,934 yuan and Li Dundun RMB 182,182 yuan, and the other judgments should be upheld.

Legal analysis.

  This case is a typical case of personal damage caused by travel agencies. However, compared with the general tourism contract cases, because Wang Lixue, Li Daoqiang, Li Jiajia, Li Dundun and other victims are foreigners or overseas Chinese, this case has foreign factors and has its particularity.

 1 The applicable law in this case

• The selection of an invalid law cannot be regarded as a valid selection of the applicable law

Determining the applicable law is the first step in foreign-related civil cases, and it is also the focus of the dispute between the parties in this case. Although the two parties have not made a general agreement or supplementary agreement on the applicable law, the two parties do have a separate agreement on the law applicable in the event of a traffic accident, namely, Article 6 of the《 Domestic Tour Group Contract.》. The article stipulates that disputes should be handled in accordance with the《 Road Traffic Management Regulations 》and the《 Road Traffic Accident Handling Measures》. However, the above two regulations have been repealed for the《 Implementation Regulations of the Road Traffic Safety Law》, so whether it is still possible to determine that the parties have selected the applicable law in advance according to the provisions of this article? According to the authoritative professor of private international law, the parties can only choose the current legal system of a certain country, and cannot make the contract subject to the invalid legal system. This is also the common theory of China’s private international law theory and practice, so the parties in this case choose the invalid law, as the two parties have not made a choice on the applicable law, should be in accordance with the subjective connection point and objective connection point combined method to choose the applicable law. Since there is no subjective connection in this case, the law of the closest connection shall apply. In this regard, it is necessary to refer to the provisions of Article 5 (1) of the 《Provisions of the Supreme People’s Court in force at the time on Several Issues concerning the Application of Law in the Trial of Foreign-related Civil or Commercial Contract Disputes》, and determine the laws of the country or region most closely related to the contract according to the special nature of the contract and the essential characteristics of the contract best reflected by the obligations performed by a party. Since the contract in this case is signed in Tianjin, China, and the place where the service is provided in this case also takes place in China, and the place where the accident takes place is also located in China, China has the closest connection with the contract in this case, and Chinese law shall be taken as the applicable law

• Whether the provisions of the Law governing consumer contracts in the Law on the Application of Foreign Civil Relations should be applied

In the course of the trial, Li Daoqiang and other four parties also proposed that since the tourism contract is essentially a consumer contract, article 42 of the 《Law on the Application of Foreign Civil Relations 》(hereinafter referred to as the Law on the Application of Foreign Laws), “Law governing Consumer Contracts”, should be applied to the law of the consumer’s regular residence, that is, the law of the United States. Undoubtedly, tourism contract belongs to a kind of consumer contract, but we think that the above claim of Li Daoqiang et al is still not valid, for the following reasons: according to Article 42 of the Law on the 《Application of Foreign Laws》, if the operator does not engage in relevant business activities in the consumer’s habitual residence, the law of the place where the service is provided shall still apply. According to the opinions of the Fourth Court of the Supreme Court, the definition of “relevant business activities” focuses on the connection between the habitual residence of the consumer and the business activities of the operator, including whether the operator has registered a company in the place, whether it is a registered place of business, whether it is engaged in the provision of services and other acts in the place, whether it is a place to realize interests and other factors.
In this case, the location of Guangjun Travel Agency involved in the case, the place of contract signing and the place of benefit realization are all located in Tianjin, China, while the place of service provision is located in southern central China, which has no substantive connection with the United State swhere the habitual residence of Xie Daoqiang and others.
Moreover, after the second trial, it was found that Guangjun Travel Agency did not set up a company or agency to operate tourism business in the United States, and it only had business in arranging Chinese tourists to travel to the United States, but only entrusted local tourism agencies to deliver, which was an extremely accidental connection rather than a substantive connection, and was not a “relevant business activity” under the meaning of Article 42 of the Law on the Application of Foreign Laws. Not sufficient grounds to apply the law of the habitual residence of the consumer. To sum up, since Guangjun Travel Agency has not engaged in “relevant business activities” in the United States, the provisions of Article 42 of the Law on the applicable law of consumer contracts of the Law on the Application of Foreign Laws cannot be applied to this case.

• 2 Is Xie Daoqiang and other four parties exercising the right of breach of contract or the right of infringement?

 In this case, the traffic accident occurred during the performance of the tourism contract, and caused damage to the inherent interests of the victim, which belongs to the injury payment, constituting the right to claim competition and cooperation, the parties can choose one to file a lawsuit according to law, and shall not be changed after the hearing. The claim for breach of contract is significantly different from the claim for infringement. The most typical one is the scope of compensation. The claim for infringement covers the compensation for mental damage, while the claim for breach of contract does not. The choice of the right to claim for breach of contract or the right to claim for infringement belongs to the autonomy of the parties and should be decided by the parties. In this case, Li Daoqiang and other five parties still choose the right to claim for breach of contract to Sue despite the clear clarification of the court, which shows that they know or should know the effect of the two rights of claim, and they continue to claim compensation for mental damage, according to article 21 of the Provisions of the Supreme People’s Court on Several Issues concerning the Application of Law in the Trial of Tourism Dispute Cases, “Tourists file a lawsuit for breach of contract and claim compensation for mental damage.” The people’s court shall inform it of the action for infringement; If the tourist still insists on filing a lawsuit for breach of contract, the people’s court shall not support his claim of compensation for spiritual damage, and shall not support it according to law.

• 3 How should the standard of compensation in this case be determined?

 In terms of the compensation standards for death compensation and living expenses, Li Daoqiang and the other four parties argued that it should be handled in accordance with the provisions of Article 28 and 29 of the Supreme People’s Court’s Interpretation of Several Issues concerning the Application of Law in the Trial of Personal Damage Compensation Cases (hereinafter referred to as the Supreme People’s Court’s Interpretation of Personal Damage Compensation) and in combination with Article 30. However, we believe that, first of all, the words “rural” and “urban” appear in the text of the above three articles, and as we all know, the significant imbalance between rural and urban income in China is the basic feature of the legislation and practice of the damage compensation law in our country, and according to the viewpoint of the Supreme People’s Court, the Interpretation of Personal Injury Compensation does not involve the issue of personal injury of foreigners. It can be seen that the above three articles adjust the issue of differences in living standards between different regions within the territory of the People’s Republic of China, and do not cover cases where the domicile or habitual residence is in a foreign country.  In addition, Li Daoqiang and other four parties said that according to the average standards of the United States and Tianjin, or the application of Hong Kong standards, or at least the application of Guangdong Dongguan standards to calculate maintenance fees and compensation, because the law is not expressly stipulated, their reasons cannot be established.

So, should this case compensate Li Daoqiang and other four parties in accordance with domestic standards? Mr. Wang Jingzhan, a lawyer from Tianjin comment as follows:

First of all, as there is no explicit provision in the standard law of personal damage compensation for foreign parties, it is a loophole, and the judge should take appropriate measures to fill the loophole. If the domestic standard is fully applied, it will undoubtedly evade the responsibility of the judge, and the domestic compensation standard and the foreign party compensation standard are significantly different in amount, and can not be completely borrowed

Secondly, the compensation standard in this case involves the right to survival of the parties to a certain extent. The right to exis is second only to the right to life, and is the premise and foundation of the right to liberty and the right to property. As a signatory to the《 Universal Declaration of Human Rights 》and a member of the《 International Covenant on Economic, Social and Cultural Rights》, China has the international obligation to respect and protect the right to subsistence. Li Daoqiang and his kids  regular residence are located in New York, the United States, the local income and consumption level is nearly 14 times higher than Tianjin, Li Daoqiang in addition to maintain his own work, but also bear the cost of raising children alone in the future and Li Jiajia’s treatment costs, if completely according to domestic standards to compensate, can not protect Li Daoqiang and his kids’ life.

  Third, the full application of China’s standard compensation is not in line with the latest trends in the international civil and commercial field.  Article 11, paragraph 1, of the 2005 Hague Convention on the Choice of Court Agreement provides: “The right to refuse to recognize and enforce a judgment where the damages awarded, including punitive damages, are insufficient to compensate the parties for their actual loss or injury.” Although the Convention only regulates the recognition and enforcement of foreign judgments, it still represents the mainstream view of the international community to some extent and is worth our consideration.

Therefore, we believe that compensation standards should be appropriately raised on the basis of national standards. But how should it be improved? In the past domestic judicial practice, there are the following solutions:❶ In accordance with the limit of 800,000 yuan stipulated in Article 7 of the Provisions of the Supreme People’s Court on the Trial of Damage Compensation in Cases involving Foreign Personal Injury or Death at Sea (Trial) and other factors, foreign parties shall be compensated.
However, we believe that this provision is used to deal with “maritime compensation cases caused by the infringement of the life and health of the victim in the course of sea (including sea waters) and port operations”, and has a maximum limit provision, which is different from this case, and the two are not similar in the composition of the elements, and cannot be “applied by reference”.

❷ Three times the average living expenses in the place where the accident occurred. However, the typical cases in which this practice was applied occurred earlier, the basis for compensation was “average living expenses”, and the Personal Injury Compensation Interpretation no longer calculated compensation according to this standard, and the two are not comparable;❸ Comprehensive consideration of various factors, as appropriate to determine reasonable compensation standards. This scheme does not give rigid quantitative compensation standards, but emphasizes specific analysis of specific cases, while using various reference factors as a means of evaluation, relatively flexible.

   We are of the view that in the absence of explicit legal provisions, from the normative point of view, there is no fixed standard that can be applied across the board. In the present case, there was a view at trial that compensation should be awarded at three times the per capita disposable income and per capita consumption expenditure of Tianjin in 2010,However, the majority of opinions hold that the predictability of liability for breach of contract and the balance of interests of both parties should be considered, and the compensation limit of previous domestic personal injury cases should be dealt with; Taking into account the living standards of Li Daoqiang and his kids’  frequent residence factors, the consequences caused by the breach of contract, the degree of fault of Guangjun Travel Agency and its economic ability, the death compensation and related maintenance expenses should be doubled on the basis of Tianjin standard as appropriate.

The final verdict adopted the majority view. This treatment can not only protect the legitimate rights and interests of the injured party, punish the defaulting party, regulate the legal order of the tourism market, but also will not affect the equity function of the law, and help to achieve the unity of legal effect and social effect.

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