The Rule Against Recovery of Pure Economic Loss in China: A Misconceived Doctrine

Abstract

Pure economic loss has been a frontier tort law issue both in Europe and the United States. There are two rules to follow: one would exclude pure economic loss from recovery; the other would allow it. It totally depends on the jurisdiction one is in. However, the mystery is that one cannot explain why cases often come out the same despite the difference in official rules. Even more so, when one looks at Chinese law, when a clear rule has not been worked out yet. Somehow, the risk compensation principle developed by professor James Gordley explains Chinese judicial practice coherently. Interestingly, Chinese judges would not have heard of Gordley's theory when they decided the cases and Gordley did not have Chinese law in mind when he developed the principle to explain the Western law. This article discovers and explains how the Aristotelian idea of commutative justice is an unstated principle that coincidentally explains the Chinese judicial practice.

Keywords: Pure Economic Loss, Chinese Civil Code, Risk Compensation, Commutative Justice