China Law Vision : China Insurance & Anti-Trust Lawyer : Dr. Zhan Hao : Grandall Legal Group : Anti-Monopoly & Competition Law : China Law Vision Blog

Last week, I received an email from an American attorney, whose client encountered some problems concerning their insurance policy, a policy purchased from two Chinese Insurance Companies. In his email, he informed me that after the occurrence of an accident which was suppose to be covered in the insurance policy, the Chinese Insurance Companies refused to compensate his client. The insurer and the insured had different understandings of the policy clause. He wanted to know whether his client could seek help from the CIRC and if so, how they should go about doing so in China. In his email, some provisions in the Guideline of the Management of the Insurance Company issued by CIRC were quoted to inform me the CIRC functioned similar to the SEC in the US. I informed him the CIRC could not help, his client should bring this case to court or if there is an arbitration clause in the policy, the dispute could be arbitrated in the arbitration commission agreed by the parties.

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Last week, the so-called first case of abuse of dominant market position (DMP) was heard by the Beijing First Middle-level court. This time, the famous Chinese search-engine Baidu was brought under the sword of China’s Anti-monopoly law (AML).

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1. The dilemma in the contractual cooperation between banks and insurance companies

Generally speaking, the mode of mixed operation is still under exploration and the driving force mainly originates from the spontaneous market.

The cooperation between banks and the insurance sector remains on the level of contractual agreement between insurance companies and banks. Such cooperation only involves certain activities in which banks conduct the following for insurance companies; charging insurance premiums, disbursing insurance amounts and selling insurance products.
 

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The first issue faced by SAIC (State Administration for Industry and Trade) is retaining an appropriate degree of manpower. According to the permission from State Council, SAIC has established a specific bureau to cope with monopoly behavior, though its manpower is far from adequate to deal with nationwide AML cases. Based on the provisions of the AML, SAIC may empower its subsidiaries at the provincial level in order to help resolve specific cases. This means SAIC can take advantage of nationwide resources under the present system. However, the question of how to prevent localism and how to guarantee strict compliance with the AML presents a challenging answer.

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Recently, in the Fifth High-Level Forum of China's Financial Reform, supervisory and regulatory officials from departments such as the CIRC, CSRC, CBRC, People's Bank of China and Ministry of Finance, indicated the CIRC and CBRC have reached consensus on a pilot investment project. The project will concern investment in the insurance industry by 4 large banks allowing for some breakthrough in the Mixed Management of Banking Industry in China.

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On March 4th 2009, attorney Zhou Ze filed a claim in Beijing Dongcheng District Court. He accused China Mobile and Beijing Mobile of abusing their dominant market position (DMP) and price discrimination. The court has accepted the case and the hearing will be in the near future. For China mobile, the largest domestic mobile phone operator and the world's largest operator by subscribers, it is the first time an Anti-monopoly suit has been brought against the company.

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When referring to the anti-monopoly authority in China, many first mention the Ministry of Commerce of the People's Republic of China (MOFCOM). However, based on the provisions of the Anti-monopoly Law of the PRC (AML) and the power allocated by the State Council, the State Administration for Industry and Commerce (SAIC) will play a primary role in AML enforcement.

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The following is an excerpt from a recent interview on China's Anti-monopoly law conducted with Dr. Zhan Hao. The interview below briefly analyzes some of his comments and questions concerning China's stride towards a form of competition law.

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With the rapid growth of the Chinese economy, international business between foreign companies and Chinese companies is commonplace. The presence of dispute is inevitable. Should a commercial dispute arise concerning international trade in China, there is enormous potential for complex legal problems to arise. For example, the party may suffer a large loss; and questions arise as to where in China the lawsuit should be brought and whether a judgment is binding. Parties need to know whether their rights will be protected. Arbitration presents itself as a practical alternative to the traditional mode of courts.

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Since the Ministry of Commerce (MOFCOM) promulgated its decision to block the acquisition of Huiyuan Juice Group by The Coca-Cola Company, the decision has been subject to tremendous criticism from trade lawyers and economists. Some have argued China appears willing to wield its Anti-monopoly Law to fend off foreign attempts at buying promising domestic firms (though Huiyuan was incorporated in the Cayman Islands), even when the resulting market concentration would not be excessive.

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According to the Administration of Stock Investments by Insurance Institutional Investors Tentative Procedures issued by the CIRC on December 24th 2004, institutional insurance investors may engage in or entrust a qualified institution to engage in the trading of stocks, convertible corporate bonds and a range of other securities.

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Last year, China Insurance Regulatory Commission (CIRC) promulgated the Guidelines on the Operation of the Board of Directors of Insurance Companies (hereafter refers to the Guidelines) whose provisions are, comparing with the Guiding Opinion on Regulating the Corporate Governance of Insurance Companies promulgated in 2006, more specific in many aspects such as the qualification of directors, the operation of directors board and its professional committee, secretary and assistant institutions of the directors board, corporate governance report, etc. The Guidelines, together with the Interim Measures for the regulation of Insurance Companies' Independent Directors and the Interim Measures for the regulation of Affiliate Transaction of Insurance Companies, composes the primary system of the board of directors of insurance companies.

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On January 7 2009 the Ministry of Commerce (Mofcom), in hope of receiving comments, published draft guidelines for the demarcation of the relevant market.

Lack of detailed guidelines for the demarcation of the relevant market is a primary criticism of the PRC Anti-monopoly Law (AML) and its enforcement. Relating to the definition of the relevant market, there has been a tremendous difference in opinion amongst Chinese experts, including legal consultants and economists. The gap between such opinions is far too wide for consolidation. Thus, the State Council has intentionally ignored the demarcation of the relevant market in regulations following the AML concerning notification of concentrations.
 

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On August 1, the Chinese Anti-monopoly Law (AML) was enforceable and four plaintiffs filed an anti-monopoly case in the No1 Intermediate People's Court of Beijing. Some members of the media and laymen cheered it as the first anti-monopoly private litigation in China.

The plaintiffs were four anti-counterfeiting companies who sued the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), an industry regulator. The original four plaintiffs were later joined by four other anti-counterfeiting Chinese companies from across the country . Claiming AQSIQ violated the AML, due to its efforts to popularize an online network.
 

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The settlement of Marine insurance disputes in China is unique and different from that in other countries in respect of jurisdiction, application of law and the mode of resolution.

The Application of Law in Marine Insurance Disputes

In respect of the application of substantive law. Marine insurance disputes mainly refer to The Insurance Law of the PRC and The Maritime Code of the PRC. The first is a general law and the second is a special law within the Chinese legal system. In other words, The Maritime Code of the PRC shall prevail if both laws are applied. The Contract Law of the PRC and The General Principles of Civil Law of the PRC may also be applied if neither the Insurance or Maritime law can be applied. The Maritime Code of the PRC and The Insurance Law of the PRC came into effect in 1993 and 1995 respectively. Both laws were created by reference to the relevant laws and legislation of foreign countries. In particular the relevant marine and insurance provisions of Britain, the USA and Germany, played a dominant role.
 

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Marine insurance also referred to as waterborne insurance is an agreement where one party undertakes the payment of premium and the other undertakes to indemnify the assured to the extent of all losses, damages and costs that arise from maritime peril and contingency; unless specified otherwise in the agreement. Marine insurance has become one of the most important forms of insurance and is one of the oldest forms of insurance policy which continues to develop from its original form. The long history, and its specialty focus make Marine insurance a relatively independent insurance system.

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Due to its dramatically quick development and tremendous prospects, the Chinese insurance market has attracted a huge flow of foreign investment, most of which focuses within insurance companies.

According to the Chinese commitment to WTO, the insurance industry is the first financial field to be opened to foreign investment. At the present time, as far as the establishment of a foreign-funded insurance company is concerned, some foreign investors are still puzzled by conundrums.
 

In the regulation of administration of foreign-funded insurance company, Article 8 stipulates the establishment requirements: "A foreign insurance company that applies for establishing a foreign-funded insurance company shall meet the following conditions:
 

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During the course of the draft of Insurance Law of PRC, the presence of an "Incontestability" clause has come under fierce debate.Last night, I received a call from a CIRC (China Insurance Regulatory Committee) official, who asked my opinion on the highly debated clause.

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