On April 28, 2016, the PRC Administrative Law on Overseas NGOs’ Activities within China(《中华人民共和国非政府组织境内活动管理法》) (“Overseas NGOs Law”) was passed through the 20th meeting of the Standing Committee of the 12th National People's Congress. The Overseas NGOs Law will take effect on January 1, 2017. It is the first time that China has legislated on the administration, supervision and service assurance of overseas NGOs’ activities within China.
The Overseas NGOs Law regulates the main activities of not-for-profit and non-governmental social organizations that are legally established outside China, such as foundations, social groups, and think-tank institutions (“Overseas NGOs”) within China, from the perspective of registration and record-filing, requirements for activities, supervision and administration, and legal responsibilities. It will have a profound influence on the development of Overseas NGOs within China. This article will introduce the main elements of the Overseas NGOs Law and discuss several of its most important provisions.
I Ways Available for Overseas NGOs to Carry Out Activities in China
According to the Overseas NGOs Law, an Overseas NGO can carry out activities in China which are beneficial to the development of the social welfare in areas such as economics, education, science, culture, health, sport, environmental protection, poverty relief and disaster relief. There are two legal ways that an Overseas NGO can carry out such activities: by registering a representative office; or by carrying out temporary activities after filing records. Other than these two ways, no Overseas NGO can carry out or covertly carry out activities within China, or entrust or fund, or covertly entrust or fund, any parties that are within China to carry out activities within China.
1. Registration of a Representative Office
Overseas NGOs may apply to register and establish representative offices within China (“Representative Office”) to carry out activities. An Overseas NGO may possibly be allowed to register more than one Representative Office on the basis of operational scope, region of activity, and the actual needs for carrying out the Overseas NGO’s activities. A Representative Office does not have the status of a legal person; all the legal responsibilities of the Representative Office are taken on by the Overseas NGO that establishes it.
An Overseas NGO applying for registration of a Representative Office must satisfy the following requirements: being legally established outside China; being able to independently bear civil liability; having objectives and operational scope in its organizational charter that are beneficial to the development of social welfare; having existed and continuously carried out substantive activities outside China for two or more years; and fulfilling other requirements provided in other laws or administrative regulations. Like other social organizations registered within China (e.g. social groups or foundations), a Representative Office is under the dual administration of its “registration authority” and its “business supervisory authority”. The Ministry of Public Security or its local counterpart (“MPS”), on the one hand, and the relevant government departments and units at different levels, on the other hand, will be the “registration authority” and “business supervisory authority” of a Representative Office respectively.
Before the initiation of any registration procedures, an Overseas NGO must first determine its business supervisory authority. Currently, the Overseas NGOs Law does not specify the procedures for identifying a business supervisory authority, but it does provide that the MPS and other relevant authorities will formulate a “Catalogue of Business Supervisory Authorities” . This, together with the relevant supporting regulations and policies, is expected to provide clearer guidance for an Overseas NGO during the process of identifying the appropriate business supervisory authority and filing applications. For example, it will provide guidance on the time limit for the business supervisory authority to examine an application and make a decision.
After obtaining approval from the business supervisory authority, an Overseas NGO must then apply to the registration authority for the registration of a Representative Office. TheOverseas NGOs Law specifies the application materials that are to be submitted and the time limit for examination of the application for a Representative Office. However, even though the approval of the business supervisory authority has already been obtained, the registration authority has the right to re-examine a specific application and to organize an expert evaluation when necessary.
Compared with its second reading draft released by the Standing Committee of the National People's Congress in May 2015 for public comment (“Draft”), the final Overseas NGOs Law does not include the requirements that “the residing period of an Overseas NGO’s Representative Office shall not exceed five years” and “approval from the business supervisory authority and re-registration are required if activities still need continue upon the expiration of the period”. This means that the existence of an Overseas NGO’s Representative Office within China will not be subject to the limitation of a “residing period”, unless it has been de-registered under the statutory circumstances provided in Article 15 of the Overseas NGOs Law (e.g. the operation of the Overseas NGO is terminated or the Overseas NGO has de-registered its Representative Office voluntarily).
2. Approval and Record-filing for Temporary Activities
Unless it has registered a Representative Office in accordance with the laws, an Overseas NGO may only carry out “temporary activities” in cooperation with Chinese state departments, mass organizations, public institutions, or social organizations ("Chinese Partner Organizations"). Notably, neither commercial enterprises nor individuals are included in the scope of “Chinese Partner Organizations”.
Within fifteen days before any temporary activities are carried out, the Chinese Partner Organization must file records with the relevant registration authority in its domicile. The recorded information must include the cooperative agreements between the Chinese Partner Organization and the Overseas NGO and the name, purpose, geographic region, time period, and funding resources of the temporary activities. Before filing any such record, approvals from the relevant authorities also need to be obtained for the temporary activities in accordance with the laws. For any recorded temporary activities, the time period for the temporary activities must not exceed 1 year. Where it is necessary to extend the time period, a new record needs to be filed.
The registration authority has the right to examine the applications for carrying out temporary activities. To the extent that any temporary activities: violate laws; endanger national unity, security, or ethnic unity; harm national interests, societal public interest or others’ lawful rights and interests; involve the operation or funding of for-profit or political events; or constitute illegal activities involving the operation or funding of religious activities (“Prohibited Activities”), the registration authority may order the termination of the temporary activities.
II Requirements for Overseas NGOs’ Activities
1. Scope of Activities
Besides not being permitted to carry out Prohibited Activities within China, an Overseas NGO’s Representative Office must also carry out activities within the approved operational scope and geographic region. Since the Overseas NGOs Law does not prohibit an Overseas NGO from registering more than one Representative Office, it is possible for an Overseas NGO to carry out activities on a cross-region basis within China by ways of registering multiple Representative Offices in the future. As to an Overseas NGO carrying out temporary activities within China, the regional scope of its activities shall be consistent with what is recorded by the Chinese Partner Organization for such activities.
2. Funds for Activities
An Overseas NGO carrying out activities within China can use the following three types of funds: funds from lawful sources outside China; interest from banks within China; and other funds lawfully obtained within China. However, the Overseas NGOs Law does not provide any clear guidance as to the definition of “other funds lawfully obtained within China”. For example, while the Overseas NGOs Law specifically prohibits Overseas NGOs and their Representative Offices from conducting fund-raising activities within China, it does not include a restriction that “Overseas NGOs and their Representative Offices cannot accept donations within China”, the restriction which had been provided in Article 26 of the Draft. Whether this means Overseas NGOs and their Representative Offices are permitted to accept donations within China and whether such donations can be used as “other funds lawfully obtained within China” requires further explanation from the relevant authorities.
Fund accounts used for Overseas NGOs’ activities within China are subject to strict supervision and restrictions. Overseas NGOs can only transfer funds either through the recorded bank accounts of their Representative Offices or through the bank accounts of their Chinese Partner Organizations involved in the temporary activities .
An Overseas NGO’s Representative Office can hire working staff within China, and can also have one chief representative and no more than three representatives. At present, theOverseas NGOs Law deletes the limitation on the ratio between Chinese and overseas staff working in Overseas NGOs’ Representative Offices, and the restriction on working in more than one Representative Office, as had been provided in Article 35 of the Draft.
4. Member Recruitment
Unless otherwise provided by the State Council, neither Overseas NGOs’ Representative Offices nor Overseas NGOs carrying out temporary activities are permitted to recruit members within China. As to the circumstances under which Overseas NGOs can fit into the exception and be permitted to recruit members within China, clarification from the relevant authorities is required.
III Supervision and Administration on Overseas NGOs’ Activities
1. Recording-filing and Reporting System
Chinese government authorities supervise and administer the activities of Overseas NGOs within China through annual reporting systems. An Overseas NGO’s Representative Office must report an activity plan for the following year to the business supervisory authority, which includes information such as project implementation and use of funds, before December 31 of each year. That report must then be submitted to the registration authority for record-filing within ten days after the business supervisory authority has approved it. In addition, an Overseas NGO’s Representative Office shall also file an annual work report for the previous year to the business supervisory authority before January 31 each year; and report it to the registration authority before March 31 for annual inspections.
As to the temporary activities carried out by an Overseas NGO, the Chinese government authorities implement a “record-filing in advance plus reporting afterwards” system. In addition to the records filed with the registration authority in advance of the initiation of any activities, the Chinese Partner Organization must also send written reports to the registration authority to report matters, such as the status of activities and the use of funds, within thirty days after the termination of the temporary activities.
2. Supervisory Measures
Like other entities registered and operating within China, an Overseas NGO’s Representative Office must follow the general administrative requirements under China’s legal framework. In addition, the authorities in charge of national security, foreign affairs, finance, financial oversight, customs, tax, and foreign experts will also conduct administration of Overseas NGOs and their Representative Offices in accordance with their respective responsibilities.
Among others, the national anti-money-laundering authorities will conduct supervision and administration over the opening and use of bank accounts by Overseas NGOs’ Representative Offices, their Chinese Partner Organizations, and the entities and individuals in China who receive funds from overseas NGOs, for compliance with the legal requirements of anti-money-laundering and anti-financing-terrorism. In our understanding, the special anti-money-laundering provisions for Overseas NGOs provided in the Overseas NGOs Law are responsive to a situation where certain terrorism organizations use charitable organizations to conduct money-laundering activities and avoid sanction measures (currently, Overseas NGOs are not obligated to take any anti-money-laundering obligations under thePRC Anti-Money Laundering Law). This also means that the Representative Offices of Overseas NGOs will likely become the main supervised targets of Chinese financial oversight authorities for anti-money-laundering matters.
Besides performing their responsibilities as registration authorities, the MPS authorities at different levels are also responsible for taking measures against the law-breaking activities of Overseas NGOs and their Representative Offices. The investigation and punishment measures available to the MPS authorities include (without limitation): interviewing and questioning the responsible personnel of Overseas NGOs’ Representative Offices; examining and sealing materials; accessing Overseas NGOs’ offices and activity places within China; sealing and seizing places, facilities or assets involved in law-breaking activities; revoking registration certificates; prohibiting temporary activities; and warning or detaining directly responsible personnel. As to foreign personnel who violate the provisions of the Overseas NGOs Law, they can be subject to measures of the relevant authorities including being ordered to leave the territory of China within a specific period of time, being deported or expelled.
3. Five-year Prohibition Period and “Unwelcome List”
In the event that the activities of an Overseas NGO seriously violate the Overseas NGOs Law (including the carrying out of activities within China in ways not specifically permitted under the law, or if a Representative Office is ordered to de-register or has its registration certificate revoked, or if the Overseas NGO is ordered to terminate any temporary activities), the Overseas NGO will face the consequence of not being permitted to register a Representative Office or carry out temporary activities in China within five years.
As to Overseas NGOs falling into one of the circumstances listed in Article 47 of the Overseas NGOs Laws, the MPS authorities can include it in the “Unwelcome List” and prohibit it from registering a Representative Office or carrying out temporary activities within China forever. The activities prohibited by Article 47 include: inciting resistance to the implementation of laws; illegally obtaining state secrets; creating rumors, engaging in defamation, or the publication or dissemination of other harmful information that endangers state security or damages the national interest; engaging in or funding political activities; or illegally engaging in or funding religious activities; and other situations that endanger state security or damage the national or public interest.
The issuance of the Overseas NGOs Law finally enables Overseas NGOs’ activities within China to be regulated in accordance with the law. However, there are many practical issues in relation to the Overseas NGOs Law which require further detailed explanation and implementation guidance from the relevant authorities. Overseas NGOs already carrying out activities within China will need to expedite the adjustment of their organizational structures while at the same time conducting compliance checks on their existing activities during the transitional period before the Overseas NGOs Law takes effect on January 1, 2017.