ConocoPhillips Lawsuit Spotlights China Legal Shortfall
A new lawsuit filed in the US by Chinese fishermen seeking compensation from an oil spill nearly two years ago is exposing big shortcomings in China’s court system, undermining the nation’s efforts to build a world-class, independent judiciary. The suit against oil exploration giant ConocoPhillips (NYSE: COP) is also casting an embarrassing spotlight on the government ministry handling the case, whose refusal to arbitrate the matter has forced the fishermen to look to the US for justice. China’s court system has made great strides in recent years for handling business disputes, but it remains an unattractive venue for settling conflicts involving government entities like the Ministry of Agriculture, which has handled the ConocoPhillips case. Justice is still difficult to obtain for private individuals in such cases because government entities still wield strong influence and can exert pressure to get judgments in their favor.
The ConocoPhillips case splashed into the headlines last week when a group of 30 fishermen from Shandong province filed their claim in a court in the US state of Texas. (English article) The story dates back to 2011 when the spill occurred at an oil drilling operation jointly owned by ConocoPhillips and state-run exploration giant CNOOC (HKEx: 883; NYSE: CEO) in the Bohai Bay off northeast China.
The accident saw more than 500 cubic meters of oil and oil-soaked mud released into the sea, polluting a 6,200 square kilometer area. ConocoPhillips last year agreed to pay 1.1 billion yuan to clean up the mess and another 1 billion to compensate affected fishermen. The agricultural ministry later used the money to settle claims by fishermen in Hebei and Liaoning provinces, but refused to give money to the fishermen in Shandong.
It remains unclear why the ministry excluded the Shandong fishermen from compensation, and it’s quite possible there was a good reason for its decision. But the fact remains that the fishermen should have been encouraged to file their claim in a Chinese court, since the accident happened in Chinese waters and all the parties involved are Chinese except for ConocoPhillips. Instead, the fishermen’s decision to go to the US most likely reflects the fact that no Chinese lawyer would want to handle the case, knowing that the local courts would probably rule in the government’s favor.
China’s judiciary has made great strides in recent years in handling business disputes, boosting its credibility both at home and abroad as a fair arbiter of major conflicts. Its growing sophistication won kudos for the courts last year when they successfully mediated a major trademark dispute between Apple and a local company, and more recently when they dismissed a largely groundless anti-monopoly claim brought against Internet giant Tencent.
But this latest case involving ConocoPhillips shows there is still much work to be done, especially in cases involving government entities or parties with close government ties. China needs to actively encourage its judiciary to act independently in all cases, regardless of the parties involved, to ensure that everyone can get a fair trial. Otherwise it risks undermining the judiciary’s credibility over the long term, leaving the impression that politics and not justice is the system’s primary driver.
Bottom line: The seeking of justice in the US by Chinese fishermen suing ConocoPhillips underscores lack of independence by China’s judiciary.
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