Why China Allows its Citizens to Sue the Government

Earlier this year I gave a talk to the students, available on the podcast section of the website, on Why China Allows its Citizens sue the Government. The talk focused on the growth of administrative litigation under the Administrative Litigation Law, in force since the early 1990s , under which citizens routinely sue and win cases against the Chinese government. To a lesser degree I talked about quasi-constitutional litigation (so-called because the Chinese Constitution is not formally justiciable) under which lawyers and judges invoke the Chinese Constitution in support of other legal claims that have a public law character.  Why would a dictatorship like China tolerate, and even encourage, such challenges to state action?

The basic story is one of principal and agent. A large, complex government like that of China has lots of lower level officials who may not follow the policies of higher levels of government and party. Allowing citizens to identify instances of malfeasance helps solve this agency problem for government.  Thus we should not think of Chinese administrative law as being primarily about the rights of citizens in a latent democracy. Instead we should think of it as part of a strategy of legitimation designed to perpetuate party rule.

The work ties into a broader project I have looking into the role of courts in dictatorships, represented in a recent volume I co-edited called Rule By Law: The Politics of Courts in Authoritarian Regimes (Cambridge, 2008). Authoritarian regimes come in lots of different shapes and sizes, with different levels of legitimacy and strategies of maintaining power. Consider for example the contrasting responses earlier this year to natural disasters in China and Myanmar. The Chinese response was quick and successful, while the paranoid Burmese junta refused to acknowledge that they needed serious help. The Chinese regime is clearly more responsive to its citizenry, even if it is far from a democracy. (By the way, University of Chicago has a number of scholars who work on authoritarian regimes, including Dan Slater in political science and Roger Myerson in economics.)

Some authoritarian regimes see fit to empower genuinely autonomous courts over some limited sphere of social and economic activity, and there seem to be a limited set of circumstances in which they do so: to promote economic growth by establishing credible commitments, to resolve agency problems among lower level officials, and that tricky concept of “legitimation”. The interesting thing is that, once adopted, the courts can constrain regimes in unanticipated ways. But they can also be punished for getting too far out of line. The Chinese court system, like many other institutions during this Olympic season, seems to be in a moment of retrenchment. Judges have been reminded of their duties to the Party, activist lawyers have been disbarred and arrested, and things seem to be clamping down. Longer term, however, I expect there will be lasting impact from even the limited empowerment of courts in China that we have witnessed to date.  

-- Tom Ginsburg

Comments

[Kimball Corson]

Speaking of being able to sue or not, consider this. Fannie Mae, Freddie Mac and the US banking system are still in big trouble because of that issue.

The Fed now allows Fannie Mae and Freddie Mac to borrow cheaply at the federal discount window, a new and the major part of the "bail out" program for the two. I think the government taking an equity interest in the two that would dilute existing shareholders, who have already been hammered, is not at all likely, partly because the government is not like a shareholder and doesn't want to run or control private companies.

But here is the real scary part.

If housing prices have much more downward adjustment to go, having only dropped 16% since their peak, when a 30% to 50% drop is required to get in them in line with the CPI and other key and relevant indices, then even many of FNM's and FRE's conventional mortgage loans and virtually most such loans owned by others become seriously at risk of default and write-off because those loans are non-recourse loans. Mortgagors can cut their losses, give up their houses and walk away from them without paying those loans or being liable for payment when the amount of their mortgage loans become much higher than the value of their houses. They can instead rent. Rents are relatively cheap. It is all very likely to happen. This is the real problem that isn't being talked about. We can face a major crash if this scenario plays out.

You read it here first and all by way of considering whether to allow suits or not.

[Kimball Corson]

Someone please tell me I am wrong here and clearly explain why. We don't need this prospective mess in our country.

[Kimball Corson]

I hear from a friend, who is a real estate lawyer, that not all conventional mortgage loans are non-recourse, just very many. It depends on applicable state law whether a deficiency judgment is permissible. Because of this many lenders now are insisting on mortgage insurance. Get that barn door closed now that the horse is gone. Too, some day might such insurers go bust facing a scenario like this. Should such insurance take the borrower or mortgagor off the hook in a broader number of states? What kind of solution in these circumstances is mortgage insurance?