Extraordinary Time is No Excuse for Extra Judicial Partiality

Two camps of lawmakers are debating what role Chinese courts should play in China during this extraordinarily trying time.

One camp believe that the courts should remain neutral, irrespective of how the financial and economic crisis is impacting businesses, and that the courts should be the instruments of justice in China's market economy.

For example, lawmaker Peng Xuefeng, director of the All China Lawyers Association, believes that:

"Prudent handling of company owners suspected of breaking the law is not a good option to solve current disputes resulted from financial woes."

[Market economy was fundamentally] "an economy ruled by law" and the economic development in the long run especially needed an integral legal guarantee, ..., adding there was no place for sentiment in judicial organs.

Peng represents the group of lawmakers who are of the view that the courts should not be taking sides, should not in any way favor businesses and companies in violation of the law, despite the macro economic circumstances.  They essentially believe that the courts are there to enforce the law.  Period.  There is no need to venture beyond the bounds of the law and the facts as they relate to the law.  In a certain sense, these are the pure jurists.

On the other hand, the second camp, which includes the current President of the Supreme People's Court of China, believes that the courts should play a more constructive and active role in assisting defendant businesses  weather the economic storm so as to contribute to social stability in China.  Specifically, they believe that 

...courts at all levels should "prudently use such compulsory measures as sealing up, impounding or freezing assets of companies," and should "promptly offer judiciary advisories to help enterprises in operational difficulty tide over economic woes." 

In helping enterprises deal with the economic hard times, courts, as the second camp believe, should uphold the law, while at the same time soften the way the law is to be enforced.  For example, when it comes to freezing the assets or impounding equipments of businesses, the courts should take into consideration how many jobs will be lost, and what collateral social consequences of such enforcement actions would result.  

This debate is nothing new, and it represents the tough situation Chinese courts are in.  They are painfully dependent upon other administrative organs in the Chinese government; therefore, they must bend in the direction that the prevailing political wind is blowing.  If the country is in tough financial times, courts are expected to be soft on enterprises in violation of the law; if the country needs to strike down on piracy or IP infringements, courts should act accordingly.  Courts are always caught up in politics.

The debate also reveals the reality of the rule of law in China.  The rule of law serves a political purpose.  It should serve purpose whereby the courts dispenses justice ONLY, free of political tides.  

I believe the second camp of people are short-sighted.  They see only the short-term benefit of lenient law enforcement on the part of the courts, but they fail to see the long-term ill of a judicial system that obeys both the law and political leaders.  They see only the upside of courts taking a temporary pro-business stance, but they fail to see the consequence of the same courts taking a pro-labor/pro-consumer/pro-whatever stance under different circumstances.  What they need to see is the value of a judicial system with courts and judges that are neutral and bound by the law only.

 

The Case for Individual Bankruptcy in China (2)

Right after the earthquakes in 2008, I wrote a post advocating for China to establish a individual bankrupty system. In that post, I gave cultural, economic and legal reasons in favor of such a system, in addition to China's fairly new Enterprise Bankruptcy Law.

One Chinese lawmaker, Shi Ying, who is a deputy to the Chinese National People's Congress, submitted a bill to the NPC which is in session now. She is also calling for the the establishment of a personal bankruptcy system for victims of the earthquakes in Sichuan Province.

In an interview, she lamented the tough situations that some of the victims are in because they are still on the hook to pay their mortgages even though their houses/apartments have been demolished by the earthquakes.

She states:

"If there is a personal insolvency system, we can declare someone is bankruptcy according to a fixed standard. And the bank can take all his or her assets except minimal living necessities for the family, and the debt is thus cleared..."

I think she is right on. The earthquakes were an act of God, and it is unreasonable for them to carry the debt for something that ceased to exist. If they had got into financial trouble due to their own irresponsbile spending, they'd have a weaker argument for personal bankruptcy to discharge their debt. But, the situation is far from that. Allowing them to declare bankruptcy will truly be a relief and a second chance to start all over again.

In addition to personal benefits for the earthquake victims, allowing personal bankruptcy to this group of people could also serve as opportunity for China to test the waters, so to speak, in anticipation of a full-fledged system that can go countrywide. Testdriving economic and/or political programs and policies is not a new thing to the Chinese authorities. Look at what happened to Shenzhen, whose success has built the foundation for more special econmic zones to be established. Permitting earthquake victims to declare personal bankruptcy could potentially build a model for the rest of the country.

International Trade, WTO and China Human Rights

A few days after Secretary of State Hillary Clinton's hopeful and celebrated official visit to China, the U.S. State Department issued its annual report on China's human rights record.  In it, the U.S. criticises China for silencing dissent and oppressing ethnic minorities.  

Not to be outdone by the U.S., China hit back with its own Human Rights Record of the United States in 2008, enumerating a laundry list of rights violations committed by the United States government.

As a law student who wants to carve out a living by building a China-related law practice, I refuse to be drawn into this "p___ing contest."  However, that is not to say that human rights and law practice related to China are not related.  Quite on the contrary, I learned over the weekend that there is a correlation between the two.

During the UT International Law Journal China Law Symposium, Professor Patricia Hansen at the University of Texas Law School spoke about the connection between international trade, the WTO, and human rights, and the possible ramifications that this connection may have for China.  From a historical perspective, before China joined the WTO, the U.S. Congress had an annual review of China's human rights record in the 1990s, and thus a chance to publicly shame China before the Congress would grant China the coveted Most Favored Nation Status for the purpose of international trade.  In that sense, there was a direct correlation between China's behavior on human rights and carrots that the U.S. held on trade.  However, after China joined the WTO, the U.S., essentially, lost its only effective leverage to "whip" China into shape with respect to human rights because China did not agree nor did it commit to any provisions regarding human rights in its negotiations for the WTO membership.

Professor Hansen posits that the disconnect between international trade and human rights abuses/concerns extends beyond China.  Therefore, there should be an international solution that binds all players in international trade.  To reach that goal, Professor Hansen explained that trade policymakers have attempted the following two approaches: (1) weave human rights protection into the Doha Round; and (2) empower and implore the Appellate Body of the WTO to use human rights protection as a factor in deciding trade disputes.

However, problems exist for both approaches.  First, developing countries are unlikely to and have refused to agree to any kind of human rights protection provisions as envisioned by the developed countries because human rights is just another excuse for the latter to discriminate against the former and impose unreasonable demands.  Second, the Appellate Body of the WTO is fiercely textual in its application of the relevant law; and hence, absent textual authorization, it is unlikely to step beyond its commitment to the WTO agreements.  Given these hurdles, it seems that human rights protection and international trade do not really mesh well in the context of creating a binding obligation on trading nations in the WTO.

Professor Hansen does see hope on the horizon though in light of some incremental developments on this very subject.  First, international negotiations have resulted in a narrow exception to the strict prohibition of compulsory licensing of pharmaceutical technology (patents) by member countries.  Where there is a human health pandemic or disaster, member countries like Brazil and India are permitted to appropriate patents held by foreigners in order to protect the right to protect public health and access to medical treatment.  Second, in a  case regarding sea turtles decided by the WTo Appellate Body, the Court decided that laws implemented by the U.S. in protecting sea turtles to the detriment of other member countries are fully in compliance with the WTO rules and consistent with relevant WTO decisions.  Based on the above, access to medical treatment & the protection of public health as well the the protection seas turtle, both of which are beyond the traditional notions of human rights, might herald a new direction in linking trade with human rights protection.  [One might think that protecting human rights (however one interprets it) is arguably more important than the protection of endangered sea turtles even though it is also arguable that some sea turtles are more lovable than some humans.]

These developments led Professor Hansen to see the possibility that the Appellate Body might gradually read more human rights protection into trade disputes between nations where necessary and appropriate despite its strictly textual approach to interpreting the WTO rules.

I do think that human rights have a part to play in international trade and vice versa. Undoubtedly, China's entry to the WTO has resulted in dramatic changes in the Chinese society.  Millions of Chinese enjoy more material wealth, and the society has grown more open and integrated to the rest of the world.  More Chinese have the basic necessities to sustain their lives, and the government is growing more responsive to people's fundamental survival needs (public health, transportation in the countryside) (some might argue that this is not a result of the WTO, but I'd humbly submit that there is a connection.)

Because of the transformitive power of international trade to trading nations, human rights could certainly play a role in improving the lives of citizens of those nations.  However, in order to help developing nations stomach the idea of international standards on human rights, the following limitations might facilitate and/or accelerate the linking of the two:

1.  Integrate international customary law on human rights, rather than human rights standards set forth by the developed nations.  International customary law is already recognized and practiced by many nations, and it does not  impose additional, new obligations on developing nations. 

2. The WTO Appellate Body should require evidence of specific violations relevant to a trade dispute, rather than simply relying on allegations of general violations by a certain nation.  This requirement imposes a heavier burden of proof on the complaining nation, and it helps the Appellate Body to fashion appropriate and proportionate penalties for actual and specific violations of international human rights obligations. 

    

China Enacts Sweeping, Tough Food Safety Law

The Standing Committee of China's National People's Congress passed a brand new Food Safety Law on February 28, 2009, and the law is set to become effective on June 1, 2009.  Without having a chance to read it carefully, I have some preliminary comments as follows:

1.  It repeals its predecessor law--the PRC Food Safety Law (1995) in its entirety.  With food safety disasters occurring back-to-back, tainted milk, pig organs, rice, and everything one can think of, the Chinese society in general has been facing a battle of life and death with respect to food safety.  The legislature acted quickly to pass this brand now law.  It is noteworthy that the Standing Committee did not just fiddle with the old law and try to amend it; rather, it saw too many problems in the provisions of the law, and saw the self-evident proof of deficient enforcement.  This really shows the resolve to get food safety under control.  I think this resolve and the NPC's solution are laudable in light of the dire food safety situation of late.

2.  Since the predecessor law is repealed by this law, all the related regulations, measures, rules, guidelines, opinions, etc. pursuant to the old law are also repealed.  This is good news.  With so many ministries, departments, divisions all responsible for food safety, what ended up in reality was that nobody was effectively responsible for enforcing food safety and ensuring health and safety of the Chinese people, which caused collateral damage around the world.  Now, the situation might be a little better under the new law as explained in the following.

3.  Food Safety Commission .  The new law, Art. 4, authorizes the State Council to establish the Food Safety Commission, which , presumably, oversees and coordinates the entire food safety law enforcement.  I say "presumably" because the law itself does not clearly define the authority and limitation of the Commission.  As stated above, one of the lethal shortcomings of the prior Food Safety Law is that there was no centralized authority to be ultimately responsible, which in a sense created a  responsibility vacuum.  In order to remedy that problem and based on the Chinese governance model, creating one centralized entity, like the Food Safety Commission, is the solution to that problem.  Will it be THE solution?  Will it remedy the enormous food safety problems in China?  I don't know, but I surely hope it would before all Chinese people kill themselves by eating tainted whatever.

4.   The law is comprehensive.  In ten (10) Chapters and one hundred and four (104) articles, it encompasses special provisions on food safety risk assessment, food safety standards, food production, food inspection, food import & export, food safety disaster management, local supervision and management, and liability.  New areas of interest in this law include special attention to food additives, the creation of a food safety information database, civil and criminal liability.  The real teeth of the law are the private right of action.  Consumers can sue for damages, and exemplary damages up to ten (10) times of the actual damage.  Yes, ten (10) times.  See Art. 96.

5.  Will the corresponding regulations come out soon?  A pattern has been developing lately in the Chinese law making process.  The NPC passes important yet controversial laws, but implementing regulations come out very slowly.  This has happened to the Enterprise Bankruptcy Law and the Anti monopoly Law.  Will this happen to the Food Safety Law?  I hope not.  Food safety is unlike the initiation of bankruptcy proceedings, nor like administrative monopolistic behaviors, in that disasters can strike immediately on a very large scale if food safety is compromised.  Food safety cannot wait. 

For other comments on the new law, read this.

Measures for the Registration and Administration of Import and Export Technology Contracts

On February 1, 2009, the Minister for China's Ministry of Commerce signed into law the Measures for the Registration and Aministration of Import and Export Technology Contracts. (in Chinese) ("Technology Contract Measures")  This is a ministry level administrative regulation, and it will become effective on March 2, 2009.

To summarize, the Technology Contract Measures include the following important provisions:

1. Definition:

Technology contracts are defined as: patent assignment contracts, patent application assignment contracts, patent implementation contracts, trade secret contracts, technology service contracts, and any other contracts involving the import or export of technology.

[技术进出口合同包括专利权转让合同、专利申请权转让合同、专利实施许可合同、技术秘密许可合同、技术服务合同和含有技术进出口的其他合同。]

2. Content of the Registration Document:

a. Contract Serial Number: the regulation sets forth a standardized coding system to identify each technology contract within the purview of the Technology Contract Measures. [合同号]

b. Title of the Contract. [合同名称]

c. Provider of the Technology. [技术供方]

d. Receiver of the Technology. [技术受方]

e. User of the Technology. [技术使用方]

f. Summary of the Contract. [合同概况]

g. Monetary Amount in the Contract. [合同金额]

h. Method of Payment. [支付方式]

i. Term of the Contract. [合同有效期]

3. When to Register the Contract?  Within sixty (60) days from the date when the contract becomes effective. 

4. Where to Register?  There is a central on-line registration system designed by the Ministry of Commerce, just like the registration of commercial franchises.  The web address is: jsjckqy.fwmys.mofcom.gov.cn.  But, before the on-line registration, the local commerce bureaus have jurisdiction over the administration of contract registration.  Application materials, including a copy of the original contract, a copy of the contract translated into Chinese, documents evidencing the contracting parties respective authorities (to determine whether the contract is valid in the first place), must be submitted.

5. Filing Amendments. Any subsequent changes, amendments and or rescions of contracts must be timely filed.

6. Other Laws: Where foreign parties invest technology as capital in joint ventures or foreign-owned entities, other laws governing such investments apply.

 

 

"Inside the Meltdown"

Frontline (PBS) recently produced an in-depth documentary on the financial meltdown. It is an attempt at figuring out the root causes of the problems that led to the current economic crisis affecting the entire globe. It is well worth your time to watch it.

China International Law Symposium at UT (Austin)

The University of Texas International Law Journal will be hosting a China law related symposium on February 26, and 27, 2009.

Here is how it is described:

Entitled “China’s Emergence: Effects on Trade, Investment, and Regulatory Law,” this one-and-a-half day symposium will address the legal and policy implications related to China’s rise in political and economic power.

...

Opening remarks of the main body of the symposium will be at 9:00 a.m. on Friday, February 27. Expert panelists will be coming fro China, Hong Kong, and throughout the United States. They will be discuss challenges and opportunities related to China's economic and political rise through the lens of three primary topic areas--(1) Trade, (2) Investment, and (3) Regulatory law. Experts from both academic and practioner backgrounds will present. Official from MOFCOM, the Office of the U.S. Trade Representative, and the Department of Commerce will also present.

This program is free and open to the public. So if you don't want to obtain CLE credits, it is free. Free education is good. Free education in beautiful Austin, Texas on such interesting topics is even better. I plan to attend on February 27th. If you are going to be in Austin on that day, I'd like to meet.

For more information, please check here.