Newsletter | Keeping up with China: thoughts and legal updates November 2020

12 November, 2020

ECIJA’s China Desk Newsletter. Download PDF.

Content

Legislation roundup
Jurisprudence
Analysis
Legal opinion of the month

Legislation roundup

China’s Export Control Law published. It establishes a unified export control regime

On October 17, 2020, the Standing Committee of the PRC’s National People’s Congress approved the Export Control Law of the People’s Republic of China (ECL), which will come into effect on 1 December 2020. It is China’s first comprehensive and unified export control law, and introduces various control mechanisms that resemble certain aspects of the US export control regime. The ECL will likely have a wide impact on businesses involved in the trading of items subject to the export controls.

New Release: First Draft of Personal Information Protection Law

On October 21, 2020, the National People’s Congress (“NPC”), China’s top legislative body, released its first draft of the Personal Information Protection Law (the “Draft Law”) for public comment (official Chinese version available here). The period for public comment ends on November 19, 2020 and comments can be submitted through NPC’s official website.

As the country’s first comprehensive law in the area of personal information protection, the Draft Law aims to “protect the rights and interests of individuals,” “regulate personal information processing activities,” “safeguard the lawful and orderly flow of data,” and “facilitate reasonable use of personal information”.

Although bearing a resemblance to the European Union’s (“EU”) General Data Protection Regulation (“GDPR”) and other recent privacy legislation in major jurisdictions in some important areas, the Draft Law introduces a number of provisions that are consistent with recent trends in other Chinese laws in the areas of data and technology, such as the draft Data Security Law and the newly enacted Export Control Law. These include, for example, rules establishing extraterritoriality of the Draft Law and a “blacklist” that would restrict or prohibit listed foreign organizations from receiving personal information from China.

Changes in Trade Secrets’ Protection in China

On September 4, 2020, the Chinese State Administration for Market Regulation (SAMR) released a new set of proposed rules that may increase protections for trade secret holders. SAMR is now seeking comments on the draft rules.

The old rules were criticized for not going far enough. One issue with the existing trade secret regulations was that they limited protections to Chinese citizens. The new rules extend the protections to foreigners. The new provisions also provide more clear and broader definitions for “trade secrets,” “business information” and “commercial information.” Regarding infringement, the new provisions place the burden of proof on the defendant after the plaintiff makes out a prima facie case. This is designed to improve and streamline the enforcement scheme.

The changes may reflect China’s growth from a developing country to one of established economic expansion. China may finally be recognizing that its investments in education and innovation will require the protection of intellectual property rights in order for its economy to expand further.

China signs off on PRC Biosecurity Law

On 17 October 2020, the Standing Committee of the PRC National People’s Congress (“NPC”) passed the PRC Biosecurity law which will become effective on April 15, 2021 (the “Biosecurity law”).The Biosecurity law establishes a comprehensive legislative framework for the somewhat piecemealed pre-existing regulations in the following areas:

epidemic control of infectious diseases for humans, animals and plants
research, development, and application of biology technology
biosecurity management of pathogenic microbials laboratories
security management of human genetic resources and biological resources
countermeasures for microbial resistance
prevention of bioterrorism and defending threats of biological weapons

The highlights are that (i) strengthens regulations on the conduct of biotechnology research and development activities in China; (ii) it aggravates the penalties for illegal conducts and (iii) launches a management system for controlled essential equipment and special biological agents.

Announcement on Entry by Foreign Nationals Holding Valid Chinese Residence Permits of Three Categories

On 23 September 2020, the Ministry of Foreign Affairs and National Immigration Administration of the People’s Republic of China published the new entry measures for foreigners, and established: In view of the current COVID-19 situation and the need of epidemic prevention and control, adjustments are now made to the Announcement by the Ministry of Foreign Affairs and the National Immigration Administration on the Temporary Suspension of Entry by Foreign Nationals Holding Valid Chinese Visas or Residence Permits issued on 26 March 2020.

Effective from 0 a.m., 28 September 2020, foreign nationals holding valid Chinese residence permits for work, personal matters and reunion are allowed to enter China with no need for applying for new visas. If the above three categories of residence permits held by foreign nationals expired after 0 a.m., 28 March 2020, the holders may apply for relevant visas by presenting the expired residence permits and relevant materials to the Chinese embassies or consulates on the condition that the purpose of the holders’ visit to China remains unchanged. The above-mentioned personnel shall strictly abide by the Chinese regulations on epidemic prevention and control.

Other measures in the Announcement issued on March 26 will continue to be implemented. While ensuring effective epidemic control, the Chinese government will continue resuming people-to-people exchanges in a step-by-step and orderly manner.

Jurisprudence

Chinese Court Decision Reinforces Need for Clear and Precise Drafting of China-Related Arbitration Agreements

In a dispute between Hebei Zhongxing Automobile Manufacturing Co., Ltd. (HZAM), a Chinese company, and Automotive Gate FZCO (FZCO), a UAE company, the Shijiazhuang Intermediate People’s Court declared invalid two related arbitration agreements that provided for arbitration in accordance with the Arbitration Rules of the International Chamber of Commerce (ICC) and to be held “in China”.

The decision of the Shijiazhuang Intermediate People’s Court highlights the need for parties to draft clear and precise arbitration agreements that concern Chinese parties, a seat in China, Chinese law, or that may require enforcement in Mainland China. Contracting parties should state expressly and unambiguously basic elements of an arbitration agreement, including the seat of arbitration, the governing law of the arbitration agreement, the arbitral rules, and the administering institution. This is especially important because Chinese arbitration law does not follow the UNCITRAL Model Law and has certain differences that may lead to an arbitration agreement valid elsewhere to be declared invalid by a Chinese court.

Analysis

Factors to take into account regarding dumping and subsidies in the European Union for companies from third countries (China)

Anti-dumping measures

The EU applies the principle of free trade, which creates jobs and wealth. However, this freedom to trade can be disrupted when countries unfairly subsidize products or produce above demand and sell at reduced prices in other markets.

This makes it difficult for other companies to compete and could lead to the closure of national businesses and layoffs. To protect companies and workers, the EU has the option of using anti-dumping and anti-subsidy measures.

Dumping is the practice in trade used by companies to lower their prices in such a way as to distort trade and prevent fair competition between other producers and endanger domestic production in the European Union.

The principles governing the application of anti-dumping measures in the European Union are set out in Regulation (EU) 2016/1036 of the European Parliament and the Council.

The principles governing anti-dumping control are as follows:

Universality: The anti-dumping duty will be imposed on any dumped product causing injury in the Union by being released for free circulation.
Comparison: A product is dumped if the export price to the European Union in the ordinary course of trade is less than the price established for a like product in the country of export.
Origin: The country of export shall be the country of origin, or the intermediary, unless the products merely transit through the country or are not produced there, or where there is no comparable price for such products in that country (further qualification).
Identity: the like product means an identical product (which is alike in all respects), or alternatively, a product which has characteristics closely resembling those of the product under consideration, even if not identical.

Measures in the area of grants

A subsidy is a financial contribution, such as a grant or loan, generally paid by the government of a country outside the EU, which confers a benefit on a company or industry importing its products into the EU and which distorts competition on the EU market. To offset this distortion and to establish fair competition, the EU can impose so-called countervailing duties on such imports.

The legal measures applied by the European Union to combat state subsidies are set out in Regulation (EU) 2016/1037 on anti-subsidy measures.

The purpose of the Regulation is to lay down the European Union’s (EU) rules on defense against subsidized imports from countries outside the EU and the conditions for the application of countervailing measures, the main aspects of which are:

A countervailing duty is applied to counteract the injurious effects of subsidized imports and to restore fair competition. The duty is borne by the importer and collected by the customs authorities of the EU country concerned.
If an EU industry considers that imports of a product from a non-EU country are subsidized and are causing injury to the EU industry producing the same product, it can lodge a complaint with the European Commission.
If the complaint provides initial evidence of a subsidy or injury to the EU industry and a causal link between the subsidy and the injury, the Commission opens an anti-subsidy investigation.
The Commission may impose provisional countervailing duties pending further investigation.
Following the reinvestigation, the Commission may impose definitive measures within 13 months, normally for a period of five years.

Links to information sources in the EU

The European Union has extensive information available to any company in any country on its anti-dumping and anti-subsidy programs and measures. The main sources of information are the following:

Legal opinion of the month

Highlights and Perspectives on China’s Personal Information Protection Law Project

This content was powered by ECIJA’s joint venture with Grandall Law Firm

The draft of the Personal Information Protection Law (hereinafter referred to as the “draft ” was officially announced on October 21, 2020. As a law of great social interest, highly integrated in the development of technology and having a huge impact on the digital economy, the draft has attracted wide public attention and has raised debates among professionals. The provision of high fines “a fine of up to 50 million yuan or 5% of the previous year’s turnover”, as is the extraterritorial application of its provisions, the extension of individual rights, etc. This article will attempt to summarize only some of the highlights of the draft, and provide a preliminary overview of the law to analyze its impact on information protection compliance by companies, and will examine in more depth the key issues of the draft, such as the “informed consent” mechanism and the rights of individuals.

In order to read the full article, please download PDF.

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China Desk

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