According to the legal framework established by PRC Civil Procedure Law, two primary collective redress mechanisms are available: the representative action and the public interest litigation.

Representative Action

The representative action system in China operates similarly to a class action in that it allows one plaintiff to represent a group of individuals who have suffered a similar prejudice or wrong. The claims of the individuals represented must raise identical or similar questions of law or fact for the action to be valid. Unlike Western class actions, China’s system does not have a class certification process. All plaintiffs who wish to be part of the action must register with the court (except for Special Representative Action – see below).

If the group of plaintiffs is determined at the outset of the legal action, it is known as a representative action with a fixed number of plaintiffs. These plaintiffs will select their representatives through internal coordination. If the action remains open for additional plaintiffs to join after filing, it is termed a representative action with an unfixed number of plaintiffs. The court handles the notification to potential plaintiffs and oversees the registration process. In this case, the court may also engage in discussions with the plaintiffs to determine who will act as the representative plaintiffs. Both fixed and unfixed number scenarios are categorized under ordinary representative actions.

In 2019, PRC Securities Law saw significant changes with the incorporation of a distinct collective litigation process, specifically aimed at safeguarding the interests of securities investors.

The revised law set up a unique system allowing certain organizations dedicated to investor protection to initiate legal proceedings on behalf of all investors who have suffered losses in the securities market. Securities investors are automatically included as plaintiffs in these actions, with the option to withdraw (opt-out) if they choose not to participate. This new mechanism mirrors the class action concept common in Western legal systems, adapting it to the context of securities investment disputes in China.

In 2020, the PRC Supreme Court issued detailed judicial opinions on the conduct of representative litigation in securities disputes. These opinions, known as the “Judicial Opinion on Securities Representative Actions,” clarify how both ordinary and Special Representative Actions should be conducted.

Public Interest Litigation

Unlike individual lawsuits, public interest litigation is initiated by entities that are not directly affected. These entities can be government bodies, such as the Procuratorate, or non-profit organizations. These entities act on behalf of a broader group or of the public, addressing wrongs that have a societal impact, such as environmental damage, consumer safety violations, data privacy breaches, and infringements on the rights of women and minors.

While public interest litigation is categorized as a form of civil litigation, its focus is on rectifying societal harms rather than compensating individual victims. It can be brought without needing permission from the affected individuals. Any monetary compensation awarded through these lawsuits typically does not go directly to the victims. Instead, it is allocated to initiatives aimed at enhancing social welfare.

The most common types of public interest litigation in China are environmental protection litigation and consumer rights litigation. For example, in October 2023, a report titled “Consumer Organizations Support the Work Norms of Collective Consumer Litigation” was released in Chongqing, China, in support of collective consumer litigation.

Ordinary Representative Action

A minimum of ten plaintiffs is necessary. When filing the complaint, the court must be provided with the names of all plaintiffs involved. Post-filing, additional victims who have experienced the same prejudice by reason of identical unlawful acts can become part of the lawsuit by registering with the court. The only prerequisites for the initiating plaintiffs are that they must have legal standing and meet the minimum number requirement.

Special Representative Action

It must be initiated by an investor protection institution designated by the Securities Law, such as the China Securities Investor Services Center, which operates under the country’s primary securities regulatory body. To proceed, this institution requires authorization from over 50 investors.

Public Interest Litigation

The People’s Procuratorate has the authority to initiate a public interest litigation on the basis of the national and social public interest when it discovers that national or social public interest is compromised, and no eligible entity has filed a lawsuit. For example, the People’s Procuratorate can initiate environmental public interest litigation. Additionally, according to Article 55 of the Civil Procedure Law of the People’s Republic of China, eligible social organizations can also initiate public interest litigation. For instance, a consumer protection association can file a public interest lawsuit.

Ordinary Representative Action

The competent Intermediate People’s Court at the domicile of the issuer shall have jurisdiction; if the lawsuit is brought against individuals / entities other than the issuer, the competent Intermediate People’s Court at the domicile of the Defendant shall have jurisdiction.

Special Representative Action

The Intermediate People’s Court or Special People’s Court of the place where the stock exchange or other national securities trading places approved by the State Council are located shall have jurisdiction. For instance, the Shanghai Financial Court shall have jurisdiction over Special Representative Action in relation to the Shanghai Stock Exchange, and the Shenzhen Intermediate People’s Court shall have jurisdiction over Special Representative Action in relation to the Shenzhen Stock Exchange.

There is an exception for designated jurisdiction. This situation arose in the Kangmei Pharmaceutical case. According to the “Regulations of the Supreme People’s Court on Several Issues Concerning Representative Litigation in Securities Disputes”, Special Representative Action is usually initiated by the Intermediate People’s Court or the location of the stock exchange where the securities concentrated transactions are located. Since Kangmei Pharmaceutical is a company listed on the Shanghai Stock Exchange, according to this provision, this case should have been transferred to the Shanghai Financial Court. However, in the Kangmei Pharmaceutical case, the Supreme People’s Court designated The Guangzhou Intermediate People’s Court to exercise jurisdiction, and the case will continue to be heard by the Guangzhou Intermediate People’s Court using Special Representative Action procedures as the first Special Representative Action case. This approach provides an important reference for jurisdictional issues in similar cases in the future.

Theoretically, there is no restriction on the civil cause of action of a class action if it meets the following conditions:

1. claims are based on identical subject matter and facts stemming from the same circumstances.
2. there are a minimum of ten plaintiffs.
3. the plaintiffs have submitted Prima facie

In special representative securities litigation, the additional requirements need to be met: an investor protection institution mandated by 50 or more qualified investors during the announced registration period can participate in legal actions as a representative.

The scope of Class Action is typically restricted to areas where there is a clear legal framework and public interest is involved, such as securities fraud, environmental damage, and consumer rights.

Securities Class Actions in China: Pre-2020 and Post-2020 Developments

Before the year 2020, the legal infrastructure for class actions, particularly in the context of securities litigation, was relatively underdeveloped in China, leading to a lower number of such legal actions. However, a significant shift occurred with the introduction of the 2020 PRC Securities Law. This legislation, along with the subsequent “Provisions on Issues of Representative Securities Litigation” and the “Notice on Investor Protection Institutions Participating in Special Representative Securities Litigation,” established a distinctive “Chinese approach” to securities class actions.

Statistics and Trends

According to available data, the period from 2001 to 2019 saw a mere 14 securities class action cases. However, the implementation of the new policies in 2020 led to a notable upsurge in such cases. From 2020 to 2024, Chinese courts presided over a total of 43 securities class-action cases. Remarkably, in the year 2022 alone, the number of cases heard by the courts reached 37.

In terms of volume, the past three years have witnessed an impressive surge in securities class action lawsuits, with the number reaching a record 472.

Public Interest Litigation: Rising Caseloads

The arena of public interest litigation has also exhibited a steady increase in caseloads. As per the “White Paper on Public Interest Litigation Procuratorial Work (2023)” released by the Supreme People’s Procuratorate, a total of 11,303 civil public interest litigation cases were filed by procuratorial authorities across the nation in 2023.

Environmental public interest litigation, in particular, has seen significant growth. A report from the Supreme People’s Court on the environmental resources trial work of the people’s courts reveals that from January 2013 to September 2023, courts concluded a total of 23,000 environmental public interest litigation cases initiated by various entities. Furthermore, the number of first-instance environmental resources cases accepted from 2013 to 2022 showed a substantial increase of 76.7% compared to the preceding five-year period.

This data underscores the evolving landscape of collective litigation in China, reflecting both the strengthening of legal frameworks and the increasing awareness and utilization of these mechanisms by plaintiffs seeking redress.

Securities Fraud and Misrepresentation: Information disclosure is an important bridge for communication between listed companies and investors. If there are false records, misleading statements or major omissions in the information provided by the company in financial reports, business operation plans, market prospects, etc., this will directly affect investors’ decision-making, causing investors to potentially suffer losses in securities transactions. This kind of risk was particularly obvious in the Kangmei Pharmaceutical case. The company misled investors and the market by inflating operating income, monetary funds, and other data, which eventually led to class action lawsuits by investors.

Insufficient internal control and compliance management: An enterprise’s internal control and compliance management are key to ensuring that the company’s operations are legal and compliant and to prevent risks. If a company’s internal control mechanism is weak and compliance management is not in place, it may cause the company to violate laws and regulations in its business activities, or adopt unfair means in market competition, leading to potential class action lawsuits. For example, in the Kangmei Pharmaceutical case, the company’s internal controls failed to effectively supervise operations and prevent financial fraud, which ultimately resulted in investor losses.

Market Manipulation Risks: Market manipulation is another area of concern for securities class action in China. The use of deceptive practices to artificially affect the price or trading volume of securities is a serious offense that can lead to regulatory action and class action lawsuits. As the Chinese market becomes more sophisticated and the regulatory framework more robust, companies involved in such practices face the risk of significant legal and financial repercussions.

Ordinary Representative Action (Opt-In Approach):

In this form of collective action, eligible claimants voluntarily elect representatives to act on their behalf. If the claimants are unable to agree on a representative, the court steps in to propose candidates, facilitating a negotiation process among the parties. Should the parties fail to reach a consensus, the court has the authority to appoint a representative from among the plaintiffs. Any party dissatisfied with the court-appointed representative has the option of initiating an individual lawsuit.

The judgment handed down in this litigation is legally binding on all registered participants. Non-participating eligible claimants are not bound by the judgment but may file a separate lawsuit.

Special Representative Action (Opt-Out Approach):

This approach is characterized by an “opt-out” mechanism, which is specifically designed to protect the litigation rights of a broad spectrum of investors, including small and medium-sized investors who might have suffered minor losses.

Under this system, all investors concerned are automatically included in the collective litigation, allowing them to benefit from the outcome without the need for active participation, a concept often referred to as “free riding.”

Ordinary Representative Action:

(1) Jurisdiction: The Competent Intermediate People’s Court at the domicile of the issuer will have jurisdiction; if the lawsuit is brought against individuals / entities other than the issuer, the competent Intermediate People’s Court at the domicile of the Defendant will have jurisdiction.

(2) Criteria:

1. The subject matter of the action is of the same category and the Claimant consists of more than 10 persons.
2. Two to five representatives are elected, in line with Article 12 of the PRC civil procedure law, and ascertained in the Statement of Claim.
3. The Claimant has submitted Prima facie evidence (e.g. the administrative sanction decision, the criminal judgment, the Defendant’s admission statement, the disciplinary sanction decision issued by the stock exchange or other national securities trading places approved by the State Council);
4. If the aforesaid criteria cannot be satisfied (e.g. less than 10 individual Claimants, lack of Prima facie evidence, etc.), the Claimant can still start legal proceedings, but the representative litigation regime cannot be applied.

Special Representative Action：

(1) Jurisdiction: The Intermediate People’s Court or Special People’s Court of the place where the stock exchange or other national securities trading places approved by the State Council.

(2) Criteria: Under the prosecution procedure of a Special Representative Action, some investors should first file a general representative lawsuit with the People’s Court. The People’s Court will make a rights registration announcement concerning the general representative lawsuit in accordance with the law. The period for such announcement is 30 days. During this period, other investors can authorize the insurance institution to act on their behalf. Once the number of authorized persons exceeds 50, the insurance institution will obtain the qualification of special representative and can act as a litigation representative in a Special Representative Action. A Special Representative Action is predicated on an Ordinary Representative Action. There must first be a general representative litigation within the rights registration announcement period before the investor protection agency can participate in it and initiate the relevant procedures for a Special Representative Action.

In China, the remedies available to claimants in a class action or collective redress proceedings, particularly in the context of securities litigation, are varied and include compensatory damages, and return of funds and interest.

For example, in the Kangmei Pharmaceutical case, all investors collectively received compensation amounting to approximately RMB 976.5 million in cash, about 141 million shares of stock, and approximately 70.7 million units of trust benefit rights. For the portion of investor losses below RMB 500,000, a one-time direct cash payment was made; for the portion exceeding RMB 500,000, compensation was made through three methods: cash settlement, debt-to-equity conversion, and trust rights. In the Zeda Easy Sino (Tianjin) Technology Co., Ltd. case, the claimants received a total compensation of over RMB 280 million.

In China, punitive or exemplary damages are not commonly awarded in civil litigation, including class actions or collective redress proceedings. The Chinese legal system primarily focuses on compensatory damages, which are intended to restore the injured party to the position they were in before the harm occurred. This approach is based on the principle of compensating for actual losses rather than punishing the wrongdoer.

However, there have been discussions around the introduction of punitive damages in certain contexts, particularly in public interest litigation. Public interest litigation is a mechanism that allows for the protection of public interests, such as environmental protection and consumer rights, through legal action.

There is no jury system in China.

In China, the measure of damages for class actions or collective redress proceedings is primarily based on compensatory principles, aiming to restore the injured parties to the position they were in before the prejudice occurred. The calculation of damages can vary depending on the nature of the claim and the specific circumstances of each case. The main factors critical in assessing the measure of damages include actual losses, loss of profit, statutory damages, reasonable expenses, interest, and disgorgement of profits.

The following key factors need to be specifically considered:

(a) Loss calculation: According to the “Several Provisions of the Supreme People’s Court on the Trial of Civil Compensation Cases Caused by Misrepresentations in the Securities Market”, basic losses include investment difference losses, commissions, stamp taxes and capital interest. The core issue is how the investment differential loss is calculated. This involves working out the difference between the average price of a security purchased and the average price of a security sold, multiplied by the number of securities held by the investor.

(b) Determination of average buying price: The average price for buying securities is the key to calculating losses. There are many calculation methods in practice, including the simple weighted average method, the simple arithmetic average method, the actual cost method and the moving weighted average method. Each method has its advantages and disadvantages, and the court will choose the applicable calculation method in a specific case based on the actual circumstances of that case.

(d) Disclosure date: The disclosure date is critical in securities class actions. It will be used to determine the plaintiff’s eligibility, calculate the losses, and establish the causal relationship between the plaintiff’s losses and the defendant’s behavior.

(e) Calculation of damages: Damages are generally based on actual losses, and there are various calculation standards, including actual loss compensation standards, return of illegal gains, restoration to the original status, and expected benefits calculation standards. The approach used by China in calculating losses involves using the average trading price over a period of time after the misrepresentations were revealed to determine losses.

(f) Damage analysis by professional institutions: The People’s Court can entrust a professional institution to verify the amount of investment losses and ensure the accuracy of the calculation.

Unless there is an arbitration clause/agreement between the parties, there are no obvious jurisdictional obstacles to class actions in China, and the laws specify which courts have jurisdiction over various types of class action.

There are no limits on the nationality or domicile of claimants in class actions or collective redress proceedings. As long as the claimant is a party with an interest and has the capacity to sue in China, they are considered an eligible plaintiff in the case.

International law will not impact the conduct of class actions or collective redress proceedings, as Chinese courts will only apply Chinese law to adjudicate cases within the territory of China.

Yes, China is in the process of establishing and improving a diversified dispute resolution mechanism for securities claims and class actions.

On December 26, 2023, the Shanghai Financial Court, by way of mediation, concluded the case of investors suing Zeda Easy Sino (Tianjin) Technology Co., Ltd. with a finding of liability for false securities statements. The China Securities Investor Services Center Limited, representing 7,195 eligible investors, received full compensation of more than RMB 280 million. Among them, the highest compensation received by a single investor was over RMB 5 million, with an average compensation of RMB 38,900 per person.

This case was the first special representative action involving a company listed on the Science and Technology Innovation Board in China and marked the first collective settlement of a securities class action in China.

Yes, China is currently trying to establish a judicial supervision mechanism for class actions. For example, in the Zeda Easy Sino (Tianjin) Technology Co., Ltd. case, after the case was mediated, the compensation funds were automatically distributed to the securities capital accounts of each plaintiff investor through the full-cycle compensation fund distribution mechanism established between the Shanghai Financial Court and the Shanghai Branch of China Securities Depository and Clearing Corporation Limited. This mechanism aims to ensure the safe, efficient, and convenient realization of the investors’ legal rights and interests.

In China, the interaction between class actions or collective redress proceedings and regulatory enforcement findings is a complex process that involves both the judicial system and the relevant regulatory authorities.

When regulatory enforcement findings are involved, the same typically precede the initiation of class actions or collective redress proceedings. Regulatory authorities, such as those overseeing competition or financial markets, have the mandate to investigate and enforce compliance with laws and regulations within their respective domains.

Once a regulatory authority has determined that there has been a violation of the law, it may impose penalties or sanctions on the offending party. These findings can serve as a key basis for individuals or groups of individuals seeking compensation for damages incurred as a result of the illegal acts.

This interaction typically unfolds as follows:

1. Regulatory Investigation and Findings: The regulatory authority conducts an investigation and, upon finding a violation, issues a decision or order that may include fines, cease-and-desist orders, or other remedies.
2. Awareness and Mobilization: The regulatory findings become public knowledge, which may prompt affected parties to seek legal redress. Consumer associations, law firms, or other groups may then mobilize to represent these parties in a collective action.
3. Initiation of Legal Proceedings: A representative action is filed in court, often citing the regulatory findings as evidence of the wrongdoing and the basis for the claim for damages.
4. Judicial Review: The court reviews the merits of the case, taking into account the regulatory findings. The court may give significant weight to the regulatory authority’s decision, as it is based on an official investigation and established legal standards.
5. Settlement or Adjudication: The case may be settled out of court with the involvement of the regulatory authority, or it may proceed to adjudication. The court’s decision or the settlement agreement may incorporate the regulatory findings and determine the appropriate compensation for the affected parties.
6. Enforcement and Compliance: Once a judgment or settlement is reached, it must be enforced. Regulatory authorities may play a role in ensuring compliance with the court’s orders or settlement terms, particularly in cases where their regulatory mandate overlaps with the subject matter of the dispute.

It is important to note that while regulatory enforcement findings can provide a strong foundation for class actions or collective redress proceedings, nowadays they are not a prerequisite anymore. Affected parties can still initiate legal action based on their own evidence and arguments, independent of any regulatory enforcement actions.

Overall, the interaction between class actions or collective redress proceedings and regulatory enforcement findings in China is designed to complement each other, with regulatory authorities playing a crucial role in identifying and addressing violations, and the judicial system providing a forum for affected parties to seek and obtain compensation. This collaborative approach helps to maintain a fair and orderly market environment, protect consumer rights, and uphold the rule of law.

In China, while the concept of ESG (Environmental, Social, and Governance) is increasingly gaining attention, the legal landscape for class actions or collective redress proceedings specifically focused on ESG matters is still in the early stages of development. However, there have been instances where litigation related to ESG issues has taken place, and the legal framework is evolving to address these concerns more explicitly.

ESG-related claims in China, when they do occur, are often framed in the context of existing legal frameworks, such as environmental protection laws, consumer rights laws, and corporate responsibility regulations. These claims might be approached as follow:

1. Environmental Claims: With growing awareness of environmental issues, there have been cases where companies have faced legal action based on the grounds of pollution or other environmental damages. These claims may be brought by affected individuals, communities, or environmental NGOs, alleging that a company’s operations have caused harm to the environment, leading to negative impacts on public health, property, or ecological systems. The claims may seek compensation for damages, as well as require the company to take remedial action to address the environmental harm. For example, in September 2016, the Environmental Research Institute of Friends of Nature in Chaoyang District, Beijing, filed an environmental public interest lawsuit against the State Grid Gansu Electric Power Company, demanding that the Gansu Electric Power Company stop harming the environment and pay compensation for environmental damage. The judicial force in this case plays an indispensable role in safeguarding the environmental rule of law and climate justice.
2. Social Claims: Social issues encompass a wide range of concerns, including labor rights, product safety, and public health. Collective actions may be initiated by consumers who have been harmed by defective products, by workers alleging unsafe working conditions or unfair labor practices, or by other stakeholders seeking to uphold social responsibility standards. These claims may focus on the company’s duty to ensure product safety, fair labor practices, and adherence to social norms and legal obligations.
3. Governance Claims: Governance-related claims in the context of ESG may involve allegations of poor corporate management, lack of transparency, or violations of ethical business practices. Shareholders or investor groups may bring such actions against a company’s management, alleging that their actions or omissions have resulted in financial losses or reputational harm. These claims may seek to enforce corporate governance standards and hold management accountable for their decisions.

In framing these claims, international ESG standards and guidelines may also be referred to, but they are not legally binding in China and serve more as a reference point for best practices.

It is important to note that the Chinese legal system is continuously adapting to the evolving landscape of ESG concerns. As societal and regulatory expectations around ESG issues continue to grow, it is likely that we will see an increase in litigation related to these matters, and the legal framework may further develop to provide more explicit avenues for collective redress in ESG cases.

As of now, there is no established practice of litigation funding for class actions in China, and any such arrangements would need to be carefully considered to ensure they do not conflict with existing legal and ethical standards. However, it is important to note that the legal landscape in China is continually evolving, and the approach to litigation funding may change over time as the country’s legal system adapts to new challenges and international trends.

In summary, while the prohibition of contingency fee arrangements in group litigation cases does not directly equate to a prohibition on litigation funding for class actions, it does indicate a preference for financial arrangements in legal proceedings that are transparent, arms-length, and free from conflicts of interest. Any development in the area of litigation funding would need to be aligned with the principles of the Chinese legal system and the ethical guidelines of the legal profession.

According to Article 12 of the Measures for the Administration of Lawyer Service Fees, “It is prohibited to charge contingency fees in criminal litigation cases, administrative litigation cases, state compensation cases and group litigation cases.” Therefore, it is prohibited to charge contingency fees in class action cases. This provision is intended to prevent lawyers from moral hazard that may arise from contingency fee arrangements and ensure the impartiality and professionalism of services provided by lawyers. At the same time, this is also designed to protect the rights and interests of the parties and avoid unreasonable cost burdens caused by contingency fee arrangements.

According to the Civil Procedure Law of the People’s Republic of China, the losing party in a lawsuit is generally required to bear the litigation costs, which include court fees and the reasonable expenses incurred by the winning party for the litigation.

However, in the context of securities representative actions in China, the Judicial Opinion on Securities Representative Actions, which was issued by the Supreme People’s Court, does indeed provide that reasonable attorney’s fees can be recoverable from the defendant. This is a significant development in China’s legal framework, as it acknowledges the importance of legal representation in complex litigation and seeks to ensure that the costs of such representation are not a disproportionate barrier to accessing justice.

The Judicial Opinion on Securities Representative Actions represents a significant step forward in China’s legal system, particularly in the area of securities litigation. It introduces a more structured approach to representative actions in securities disputes, allowing eligible investors to file collective lawsuits on behalf of a larger group of investors who have suffered losses due to alleged wrongful acts or omissions by issuers, controllers, or other relevant parties in the securities market.

Under this framework, the court is empowered to award reasonable attorney’s fees as part of the total damages to be paid by the defendant to the plaintiff(s). The specific amount of attorney’s fees that can be recovered is determined based on various factors, including the complexity of the case, the workload involved, the expertise required, and the prevailing market rates for similar legal services.

In China, the reform of class action or collective redress proceedings has been an area of significant development, particularly in the context of securities litigation. The introduction of the “Chinese version of collective litigation system” is a notable example of such reforms. Based on all of the above, the key proposals and features of these reforms include:

(1) Introduction of Special Representative Action System

With the implementation of the new Securities Law in 2020, China introduced a Special Representative Action system, often referred to as the “Chinese version of collective litigation system.” This system allows investor protection agencies to act as representatives in securities litigation on behalf of a large number of investors. The system operates on the principle of “explicit opt-out, implicit join,” meaning that all affected investors are automatically included in the lawsuit unless they explicitly choose to opt-out.

(2) Lowering the Cost of Litigation for Investors

The new system aims to reduce the cost of litigation for investors. Under the Special Representative Action system, the investor protection agency, which acts as the representative, does not require prepayment of case acceptance fees, and there is no need to provide security for property preservation. This measure significantly lowers the financial barrier for investors to participate in collective litigation.

(3) Enhancing Litigation Efficiency

By consolidating claims with similar issues, the Special Representative Action system aims to improve the efficiency of litigation. The system allows for a single set of proceedings to represent the interests of multiple investors, thereby streamlining the litigation process and reducing the burden of proof on individual investors.

(4) Expanding the Scope of Liability

The reform also proposes expanding the scope of liability in securities litigation. In addition to the company involved, the system allows for the inclusion of intermediary institutions and related responsible individuals as co-defendants, ensuring that investors have a broader range of entities from which they can seek compensation.

(5) Focusing on Investor Protection and Market Fairness

The Chinese version of collective litigation system is designed to focus more on investor protection and market fairness. Unlike the U.S. system, where collective litigation is often initiated by lawyers and can lead to high litigation costs and potential abuse, the Chinese system is initiated by investor protection agencies that do not aim for profit. The compensation obtained from a successful lawsuit is primarily returned to the investors, and there is a threshold of at least 50 authorizations required to initiate the litigation, which helps maintain market fairness.

(6) Addressing Potential Challenges

While the new system offers several advantages, it also faces potential challenges. For instance, there is concern about the “crowding out” effect, where the involvement of investor protection agencies might discourage other litigation institutions and individual investors from initiating lawsuits. Additionally, there are concerns about the selection of cases by the investor protection agencies and whether they can maintain absolute fairness and independence.

(7) Continuous Improvement and Adaptation

The implementation of the Special Representative Action system is an ongoing process, and it is expected that the system will continue to evolve and adapt to address any emerging issues and to better serve the needs of investors and the market.

These proposals and reforms reflect China’s commitment to strengthening its legal framework for securities litigation and enhancing the protection of investors’ rights. The aim is to create a more efficient, cost-effective, and fair system for resolving securities disputes, which in turn is expected to contribute to the overall health and development of the capital market.