The Wisdom behind the Selection of Chinese Institutions

Authored by Arthur Dong (dongxiao@anjielaw.com) and Darren Mayberry (darren.mayberry@anjielaw.comat AnJie Law Firm

As discussed in the first post in our series, the Chinese arbitration system has matured over the last several years. Foreign parties should favor arbitration clauses in their China deals. Even so, this brings us to yet another question. Should a dispute resolution clause for a China-centered contract select a China-based institution to host the arbitration? Or should a non-Chinese party instead take refuge with regional offshore powerhouse institutions?
 

Answers will of course vary according to the contemplated contract's particular circumstances. Nonetheless, Chinese arbitration institutions offer two clear advantages. Chinese courts will facilitate China's institutional interim measure requests. Also, Chinese institutions offer international service without the cost premium. We explore how these advantages each can impact a dispute. We book-end the advantages with reassurances that Chinese institutions offer truly international arbitration. 
 

Read more..

Introduction to a Series on International Arbitration in China Certainty in China Enforcement: a Response to China Law Blog

Authored by Arthur Dong (dongxiao@anjielaw.com) and Darren Mayberry (darren.mayberry@anjielaw.comat AnJie Law Firm

Early this year, Dan Harris of China Law Blog  directed his attention to the erstwhile arbitration versus litigation debate. Dan Harris's position, as of 2014, was that international arbitration was a bad idea when considering China-based enforcement. He seems to have softened his position since then, but without abandoning his priors. Logic and recent available statistics should favor international arbitration in China deals. This is the Introduction to five subsequent posts in a series which addresses the international arbitration process with a particular focus on China.
 
Dan Harris offered a guarded appraisal for international arbitration as a dispute resolution selection for US companies engaged in China deals:
 
Arbitration is usually not the best way to go when dealing with Chinese companies, but sometimes it is. 
 
Arbitration acts as the form of alternative dispute resolution most similar to litigation. Just as in litigation, representatives advocate the merits for its party. Just like a court judgment, it is a formal and adversarial process that results in a written decision. A tribunal sits as 'judges' and comes to a final decision. But the representatives may be lawyers from any jurisdiction (or not licensed at all). The members of the Tribunal also may be from the United States, Canada, China, or any other country. Unlike litigation, arbitration only rarely allows for appeals on the merits. Most importantly, arbitration removes jurisdiction from a national court and places it in the hands of an institutional arbitration commission.  And foreign arbitral awards experience routine enforcement, even in present-day China.

Read more...

 

 

Enterprises in Chinas Free Trade Zones Enter 2017 with New Options for Arbitration

Authored by Arthur Dong (dongxiao@anjielaw.com) and Darren Mayberry (darren.mayberry@anjielaw.comat AnJie Law Firm

The post Enterprises in China’s Free Trade Zones Enter 2017 with New Options for Arbitration appeared first on Kluwer Arbitration Blog.

On December 30, 2016, the Supreme People’s Court (“SPC”) issued a set of new Opinions.  It covers an array of matters relating to legal measures to expedite the development of Free Trade Zones. (Opinions on Providing Judicial Protection for the Construction of Pilot Free Trade Zones, December 30, 2016). Among other matters, the SPC sought to open the Free Trade Zones  to further options regarding alternative dispute resolution. Remarks made in Article 9 have effectively designated as Foreign Per Se any Wholly Foreign-Owned Enterprises which are registered in one of 11 current Free- Trade Zones. In three brief paragraphs, the SPC seems to have shifted the landscape for China-based arbitrations. The immediate practical significance of the Opinions may remain humble and limited. In time, the SPC’s Opinions may  permit increased deference and  jurisdictional purview to foreign tribunals. It also may serve as the  beginning of ad hoc arbitration in China.

Read More...

 

 

Telecommunication: MIIT Seeks Public Comments on Revised Administrative Measures for the Licensing of Telecommunication Business Operation

Recently the revised version of the Administrative Measures for the Licensing of Telecommunication Business Operation (Draft) (“the Draft”) was published by the Ministry of Industry and Information Technology (“MIIT”) for public comments.

Article 3 is new in the Draft, which provides that China will establish an integrated management platform for the telecommunication industry, to promote the online license application, approval and management, and the publication, inquiry and sharing of related information.

The Draft added a new provision in Article 5 and 6, providing that to apply for telecommunication business license “the company and its main management personnel are not on the List of Dishonest Telecommunication Business" (“the List”), which aims to strengthen the binding effect and guiding function of the industry credit mechanism encouraging business operators to be honest and value credibility. In accordance with this provision, companies will not be allowed to apply for telecommunication business license if it is on the List.

The Draft made significant modification to Article 36 and 37, which have replaced the Annual Inspection System by the Annual Report and Publication System. In the first quarter of each year, the telecommunication business operators shall report to the authority their whole-year operation performance, special matters, and how their network and information security mechanism was executed in the previous year.

Cryptography Law: OSCCA Seeks Public Comments on the Cryptography Law

Recently the Office of State Commercial Cryptography Administration (OSCCA) released the Cryptography Law of the People’s Republic of China (Draft for Public Comments) (“the Draft”). Highlights of the Draft are as follows:

  • Article 11 sets forth that commercial encryption products that are sold or used in business activities, as well as the provision of commercial encryption services are subject to approval of competent authority in accordance with relevant catalogues.
  • Article 12 provides that Critical information infrastructure shall be protected by the use of encryption according to the provisions of laws and regulations as well as the mandatory requirements of encryption-related national standards.
  • Article 15 provides that the government will strengthen the encryption security system, improve the encryption security management regulations, and consolidate the encryption security protection capabilities.
  • Article 17 provides that the government will fortify the encryption monitoring and authentication systems, and will work out encryption monitoring and authentication rules. Article 18 provides that the government will conduct categorized and hierarchical evaluation of the encryption security in critical information infrastructure.
  • Article 22 provides for government support to scientific and technological research on encryption, academic exchanges and the development of the encryption industry. The government will provide legal protection to encryption intellectual property rights to stimulate innovation of encryption technology.
  • Article 23, 24, 25, and 26 provide for regulations on the encryption industry from the perspective of standardization system, awards for encryption technology, development of encryption talent teams and encryption education and popularization.

Opinions Sought from Private Sector on Partial Design Protection

 In the Draft Fourth Amendments to the Chinese Patent Law released for public comment in end of 2015, SIPO proposes in Art. 2(4) that China should allow partial design to be patentable, which expands the scope of design patent from merely design of a product to partial design of a product. And according to the State Council’s 2017 Legislative Work Plan, revising the Draft Fourth Amendments to the Patent Law is a project to be completed within the year.

It came to our attention that an unofficial survey (at https://sojump.com/m/13469141.aspx?from=singlemessage&isappinstalled=0) was released on April 18, 2017 seeking opinions from private sector regarding protection of partial design and patent evaluation report. This survey is trying to see how introducing partial design to China will affect private businesses in protecting their micro innovation, and whether scope of eligible applicant and timing for applying for patent evaluation report should be changed from private perspective.

We will monitor the development closely and once the Fourth Amendments to the Patent Law is passed, we will be expecting more detailed rules regarding application requirements and scope of protection for partial design in implementation rules and examination guidelines.

Data Industry: 2017 Big Data Industry Summit held on March 28

China Academy of Information and Communications Technology (CAICT) and China Communications Standardization Association (CCSA) held 2017 Big Data Industry Summit on March 28 and 29 instructed by the Ministry of Industry and Information Technology of PRC.

During the summit experts reported on big data sharing, open and protection and other issues. “Big Data Industry Development Plan (2016-2020)” was expounded by the summit. Meanwhile, CAICT announced the results of data flow testing, trusted application store evaluation, big data product evaluation. China Telecom Co., Ltd. cloud computing branch (中国电信股份有限公司云计算分公司) and other six companies become the first batch companies which have passed the data flow testing. Other six companies’ products such as “360 mobile assistant “were awarded a trusted application store certificate.

Here are some highlights conveyed in the summit:

  1. Big data industry in China is currently based on the Cyber Security Law for the management requirements. There are no specific regulatory guidelines at present.
  2. CAICT has proposed a cross-border data flow assessment policy, covering elements such as size of the data, type of data, legal protection level in the receiving countries, and bilateral relations with such receiving countries.
  3. Data for key industries can be regularly assessed by the government to determine whether cross-border or conditional cross-border transfer is allowed.
  4. The principle of authorization includes the user's direct consent or indirect consent, and it is recommended that different assignments be classified and the authorization process should be clearly defined.
  5. It is recommended to provide clearer guidance in order to achieve the true data desensitization through a standard for data output patterns and data desensitization requirements. It is advisable to have an ex post supervision (instead of a pre-approval system) or third party evaluations and improve the corresponding standard mechanism. Meanwhile, it is recommended that there should be a corresponding emergency mechanism and a reasonable risk compensation mechanism.

 

Data and Information: Personal Information Protection Written in China's Civil Code

China’s NPC passed the General Provisions of the Civil Code on March. Highlights are as follows:

  • Article on personal information protection: There is a new article in the draft which provides legal protection on personal information stating that any organization or individual shall ensure that the collection of personal information should be in accordance with the law, and the personal information shall not be used, processed or transmitted, sold, offered or disclosed illegally. Violators should bear the compensation for losses and other civil liabilities.
  • An official recognition of privacy in the civil code again shows the emphasis on legislature in this area. This will build some foundation for private companies to use civil lawsuits to protect their privacy. Corporations need to be more vigilant about legal risks of personal information disclosure and related controversies, including in trading with third-party companies. In the Sina vs Maimai(脉脉) lawsuit, the Beijing Intellectual Property Court made a final verdict that Maimai should compensate Sina for obtaining Sina users’ personal information without Sina’s authorization. Sina was not sued by any of its users, but there remains such legal risk.

IP Enforcement: Premier Li Keqiang Stresses IP Administrative Reform Pilot

In his Government Work Report presented at the NPC in early March, Premier Li Keqiang stated that China is to initiate a comprehensive intellectual property administrative reform pilot to improve the existing mechanism for IP creation, protection and usage.

A guideline proposing IP administrative reform was released by the State Council in January this year. According to the guideline, a one-year pilot reform of IP rights protection will be carried out in regions jointly selected by the State Intellectual Property Office (SIPO), the State Administration for Industry and Commerce (SAIC) and the National Copyright Administration (NCA).

Under the current system, multiple government departments including SIPO, SAIC and NCA are involved in IP regulation, while at the local law enforcement level the responsibilities are also dispersed in different local agencies. Such mechanism has been proved inefficient and not strong enough to protect IP rights. To address this problem, the guideline introduces an integrated enforcement mechanism under the pilot program.

A Comparative Insight into China's Risk Oriented Solvency System

    Authored by Dr. Zhan Hao (zhanhao@anjielaw.com) and Sharif Hendry(sharifhendry@anjielaw.com) at AnJie Law Firm

As of today, the recently adopted ‘China Risk Oriented Solvency System’, also known as “C-ROSS”, is theonly regime by which a Mainland insurer’s capital adequacy is regulated. Following the implementation of China’s 13th Five-Year plan in 2016, the China Insurance Regulatory Commission (CIRC), as the industry’s sole regulator, published an outline of the plan, including several goals relating to the reformation, innovation and regulation of the insurance industry. This draws interesting comparisons with the overseas capital adequacy regimes of other major jurisdictions, notably with Solvency II in the EU. Both these reforms mark a fundamental shift towards a risk-based, market-oriented approach to estimating capital requirements, being geared as they are towards individual insurance entities, rather than the previous "one-model-fits-all" approach.  This is expected to lead to greater market efficiency in managing risk, and enhance consumer protection. For China, it marks a renewed focus on both volume and value for the domestic insurance sector, implicitly recognizing that better risk management includes all drivers of product profitability, including product terms and conditions, guarantees, pricing and underwriting . As a result, the transition towards fully implementing, supervising and enforcing the C-ROSS regime is already having far reaching repercussions.

Read More...