The year 2013 was a very significant year for legal developments in China. It has seen several judicial milestones, as well as many important changes to laws and regulations that may have profound impact on the Chinese economy and society. As we begin the new year, it is worthwhile to step back and take a look at changes that occurred over the last 12 months that will affect China’s legal regime in 2014 and beyond. Without further ado, please find below our informal “countdown” of China’s top 10 most significant legal developments of 2013.
10. CIETAC Shanghai and Shenzhen Split From CIETAC Beijing
Due to disputes between the China International Economic and Trade Arbitration Commission in Beijing (CIETAC) and its Shanghai and Shenzhen Sub-Commissions, both the Sub-Commissions have ended their affiliation with CIETAC and rebranded themselves. The former Shanghai Sub-Commission is now the Shanghai International Economic and Trade Arbitration Commission1 and the former Shenzhen Sub- Commission is now the South China International Economic and Trade Arbitration Commission.2 The disputes, which were ongoing for more than a year, created some uncertainty regarding enforcement of contracts specifying CIETAC Shanghai or CIETAC Shenzhen as the agreed venue for dispute resolution.
The Supreme People’s Court issued a notice in September of 20133 in an effort to settle these disputes and has asked lower courts hearing any case involving claims relating to the CIETAC split to report to the Supreme People’s Court before rendering a decision. Going forward, however, contracting parties may elect for arbitration of disputes to be handled through the rebranded Shanghai or Shenzhen tribunal if so desired.
9. Chinese Law Firms Under Siege
In May of 2013, 11 securities firms and financial institutions, including Credit Suisse Securities and Merrill Lynch, filed claims against two elite Chinese firms, Jingtian & Gongcheng Attorneys at Law and Commerce & Finance Law Offices, at the Ontario Superior Court of Justice in Ontario, Canada, alleging negligence and breach of duty in connection with their handling of certain public offerings for Chinese companies. The plaintiffs are seeking hundreds of millions of dollars in damages. This ongoing case is one of the first instances in which well-established Chinese law firms have been subject to a significant lawsuit initiated by international clients. Separately, last year, several Chinese law firms were also subject to investigation and/or penalty by the China Securities Regulatory Commission for failing to perform sufficient due diligence in connection with IPOs they were handling.
8. China Relaxes One-Child Policy
In November of 2013, China announced that it would ease its family planning regulations, known in the West as the “one-child policy.” The new rules stipulate that couples will be allowed to have two children if either one of the parents was an only child themselves. Previously, most couples residing in cities were allowed to have a second child only if both parents were only children. It is believed that the new policy will help address demographic problems caused by China’s declining birth rate and may ultimately pave the way for further phasing out of China’s controversial family planning controls.
7. Enhanced Protections for Chinese Consumers
The amended Consumer Protection Law enacted last December4 focuses on protecting consumer rights and interests, with added regulations crafted in response to the recent boom in online shopping. For example, the new law allows e-shoppers to return purchased goods for a refund for any reason within seven days of an online transaction, though the customer must pay the return costs for the goods. Other changes include raising the standard compensation for fraudulent sales and imposing penalties for misuse of consumers’ personal information. These changes come as China’s government tries to steer the country towards increasing domestic consumption, as a means of fueling sustainable economic growth.
6. New Amendments to China’s Company Law
The most recent amendments to China’s Company Law were approved last December and will take effect in March 2014.5 The changes to the Company Law effected through these amendments include lowering registered capital requirements, shifting from a “paid-in” capital contribution regime to a “subscription” based regime, and simplification of various registration procedures. These amendments are a key part of the central government’s economic reform plan, which aims to lower thresholds for market access and to encourage individual entrepreneurship.
5. Crackdown on Chinese Bloggers
In China, people who post comments online that are deemed to be defamatory may now receive up to three years in prison if their statements are widely reposted. Bloggers may face criminal charges for defamation if the offending posts are either viewed by more than 5,000 internet users or “retweeted” more than 500 times, according to the latest judicial interpretation issued by the Supreme People’s Court and the Supreme People’s Procuratorate in September of 2013.6 In addition, according to the same judicial interpretation, anyone who causes serious public disruption by knowingly disseminating false information online may also face criminal charge. The new interpretation has been criticized as having a chilling effect on China's online communities, which have been used with increasing frequency as a platform for reporting suspected official malfeasance.
4. Labor Camps Abolished
China’s “re-education through labor” program was finally terminated according to a resolution adopted by the Standing Committee of the People’s Congress in December of 2013.7 The controversial regime had enabled the police to send people into labor camps for up to four years without any due process. The abolition of these camps is an important advance for the rule of law and human rights protection in China, though some critics charge that the new resolution does not go far enough in dismantling the tools used by the authorities to silence political dissent.
3. Chinese Courts to Publish Rulings Online
The public will have access to official rulings from courts at all levels beginning in 2014, according to an order issued by the Supreme People’s Court last November.8 However, the spectrum of cases subject to online publication requirements does not include cases involving national security issues, sensitive personal matters or juvenile delinquency. The new protocol is intended to improve the transparency and impartiality of the Chinese judicial system. Previously, rulings of the PRC courts were generally not available to the public.
2. China Launches Pilot-Free Trade Zone in Shanghai
The China (Shanghai) Pilot Free Trade Zone was launched in August of 2013, marking the beginning of a trial run for groundbreaking changes intended to free up cross-border commodity and capital flows in the world's second largest economy. The new free-trade zone covers an area of 28.78 square kilometers, integrating four existing bonded zones — Shanghai Waigaoqiao Free Trade Zone, Waigaoqiao Free Trade Logistics Park, Yangshan Free Trade Port Area and Pudong Airport Comprehensive Free Trade Zone. The establishment of the Shanghai free-trade zone has been widely hailed as a major step in the loosening of controls on China’s markets and currency.
1. Trial of Bo Xilai Takes Center Stage
In August of 2013, the Jinan Intermediate People's Court handled the trial of Bo Xilai, formerly one of the most powerful men in China and a member of the Central Politburo. The trial attracted worldwide attention and widespread media coverage as Bo mounted an impassioned defense. In an unprecedented display of transparency, the trial court issued almost real-time posts on Sina Weibo (China's equivalent to Twitter) during the trial, so that the public could follow developments. On September 22, 2013, the court found Bo guilty of corruption and abuse of power, stripped him of all his assets, and sentenced him to life imprisonment. Given Bo’s reactionary leanings and strong populist appeal, his trial and conviction marked an important victory for progressives within the Chinese Communist Party seeking to keep the country on its current track and avoid the possibility of another Cultural Revolution.