On 17 October 2020, the Standing Committee of the PRC National People’s Congress (“NPC”) passed the first PRC Biosecurity Law, which will become effective on 15 April 2021 (the “Biosecurity Law”). Notably, the Biosecurity Law was passed by the NPC’s Standing Committee less than a year from its first review, signifying China’s commitment to strengthening regulations for the biotechnology and life sciences industry in the midst of the COVID-19 pandemic.
The Biosecurity Law establishes a comprehensive legislative framework for the somewhat piecemeal pre-existing regulations in the following areas:
- epidemic control of infectious diseases for humans, animals and plants;
- research, development, and application of biotechnology;
- biosecurity management of pathogenic microbials laboratories;
- security management of human genetic resources and biological resources;
- countermeasures for microbial resistance; and
- prevention of bioterrorism and defending threats of biological weapons.
Israeli life sciences companies and investors looking into Chinese market should be prepared to navigate through the complex regulatory regime of Biosecurity Law.
Some of the highlights of the Biosecurity Law include:
- Strengthening regulations on the conduct of biotechnology research and development activities in China
Like elsewhere in the world, China is witnessing a rise in biopharma and the increasing demand of innovative biomedical technologies. The Biosecurity Law introduces an approval and recordal system for biotechnology research and development activities. Specifically, it classifies biotechnology research and development activities into high-risk, medium-risk and low-risk categories. The various risk categories are determined based on the risk of harm to public health, industry, agriculture and the ecosystem. Research and development of biotechnology that falls in the high-risk and medium-risk categories will need to be conducted by a legal entity in China that completes the relevant approval or recordal procedure. In other words, individuals such as principal investigators cannot conduct high-risk or medium-risk activities without approval from their associated institutions. We expect details of the approval and recordal requirements, as well as catalogues separating specific technologies into their appropriate risk category, will be jointly established by the responsible government authorities in due course.
- Aggravating the penalties for illegal conduct
The Biosecurity Law also establishes penalties for conducting prohibited biotechnology research, development, and application activities, including the confiscation of illegal gains, technical materials and other tools, equipment, and raw materials used for the illegal conduct, and the imposition of fines between RMB 1 million to RMB 10 million. Where the illegal gains exceed RMB 1 million, the fines shall be between 10 to 20 times of the illegal gains. Further, the Biosecurity Law imposes personal liabilities on the legal representative, principal or direct person in charge and other responsible personnel, including fines and a 10-year-to-possibly-permanent prohibition from engaging in biotechnology research, development and application activities.
The administrative penalty for some existing liabilities has also been increased under the Biosecurity Law. For example, the amount of fines is raised from 5 to 10 times of any illegal gains to 10 to 20 times of any illegal gains in cases where (1) a foreign entity or individual, or domestic entity established by or under the actual control of a foreign entity or individual, (2) collects or stores Chinese human genetic resources within China, or supplies Chinese human genetic resources outside of China, and (3) the illegal gains resulting from the aforementioned activities exceed RMB 1 million.
- Launching a management system for controlled essential equipment and special biological agents
The Biosecurity Law also establishes a retroactive management system for controlled essential equipment and special biological agents. Specifically, each entity is required to record with the relevant authority any purchase or import of controlled essential equipment and special biological agents. The first import of any high-risk biological agent by an entity will be subject to approval by the relevant government authority. Furthermore, individuals are now prohibited from purchasing or possessing controlled essential equipment or special biological agents. “Biological agent” is broadly defined as animals, plants, microbials, biotoxins and other biologically active substances. We expect detailed rules regarding controlled essential equipment and special biological agents will be promulgated in the future pursuant to the Biosecurity Law.
The release of the Biosecurity Law reflects China’s strategic positioning of biosecurity as part of its national security system. Notably, regulations for genetically modified organisms, which has been a sensitive topic in China, are not explicitly included in the Biosecurity Law. And although the fundamental principles for preventing invasion by foreign species and protecting biological resources (such as wild animals and plant genetic resources) are established by the Biosecurity Law, the detailed regulations for these subjects are yet to be promulgated. We will be keeping a close eye on further developments as the relevant governmental authorities provide more clarity going forward.