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China – Draft Amendments To Administrative Litigation Law: Slowly Moving Towards Greater Rights For Market Participants?

22 September 2014

 

Legal News & Analysis – Asia Pacific – China –  Dispute Resolution

 

Introduction


The People’s Republic of China Administrative Litigation Law (“ALL“) was enacted in 1990. Back then, it was seen as a ground-breaking development, as the law authorizes entities and individuals to bring lawsuits against administrative authorities and their personnel.


In 2013, the Standing Committee of the National People’s Congress – China’s legislative branch – decided to amend the ALL. The main aim of the revision seems to be to remove what is perceived to be a range of procedural obstacles that plaintiffs face when bringing administrative lawsuits. On 31 August 2014, the Standing Committee published its latest draft amendments to the ALL (“Draft“) and issued a call for comments from all interested parties. The deadline for comments is 20 September.


Key Focus Of The Proposed Amendments


The Draft aims to lower the burden on plaintiffs in various ways, for example:

 

  • Broadening the scope of administrative acts that could be challenged. The amendments propose to add new categories of actions relating to administrative acts, in particular decisions regarding ownership over, or rights to use, natural resources; expropriation of private property and corresponding compensation payments; abuse of administrative powers resulting in the elimination or restriction of competition; and unlawful demands for funding, disproportionate expenses or other unlawful obligations imposed upon individuals.
  • Adding a new ground on which to challenge administrative acts. The Draft expands the number of grounds on which plaintiffs can challenge an administrative act. In addition to the incorrect application of the law, procedural defects, insufficient evidence and so forth, the Draft also allows courts to examine whether the contested act is manifestly “improper.” This amendment would effectively bring the grounds for bringing administrative litigation into line with the administrative-internal review process under the People’s Republic of China Administrative Reconsideration Law.1
  • Extending the statute of limitation. The Draft allows plaintiffs to file an action up to six months after the point at which they had knowledge of a disputed administrative act. The current ALL only provides a three-month filing period unless otherwise provided under the law.
 

At the same time, the Draft seemingly aims to increase the defendant authorities’ compliance obligations and burden with respect to adverse court rulings. For example, the Draft allows “the public” to request “access” to final judicial rulings, though parts involving state secrets, trade secrets or personal data are to be redacted. The Draft also provides for a battery of measures for combatting non-compliance with judicial rulings:

 

  • If an authority fails to enforce a judicial decision within the indicated deadline, that authority’s chief is personally liable to a fine of RMB 50100 per day.2
  • The courts can publicize the administrative authority’s non-compliance.

 

Implications For The Intellectual Property Area


Administrative litigation plays an important role in the process of registering and enforcing intellectual property rights (“IPRs”). In particular, many of the key decisions involving patents are issued by courts in administrative litigation proceedings. For instance, for patent applications filed with the State Intellectual Property Office, an administrative-internal appeal process to the Patent Re-examination Board (“PRB“) is possible. Yet, if the patent applicant – or a third party – is not satisfied with the PRB decision, a formal administrative lawsuit before the courts can be instituted. Apart from patents, administrative litigation is also possible for other forms of IPR registrations, such as trademarks: decisions from the Trademark Review and Adjudication Board can also be appealed to the courts. Administrative litigation is finally also essential to the enforcement of IPRs, since IPR owners can request administrative authorities to handle infringement cases. The decisions issued by the authorities in such cases can likewise be appealed to the courts.


The Draft may make IPR-related administrative litigation simpler for plaintiffs. For example, suppose an IPR holder files a complaint against an IPR infringer with a
local administrative authority (such as the Administration for Industry and Commerce), but the complaint is rejected. If the complainant believes the authority’s decision was influenced by local industry pressure, the amended ALL would allow the complainant to submit the argument that the authority decision was manifestly improper.


Implications For The Antitrust Area


Administrative litigation is primarily important in the antitrust arena for two reasons. First, the People’s Republic of China Anti-Monopoly Law (“AML“) and other antitrust rules allow entities involved in administrative procedures to challenge the final decisions by the authority in question before the courts. Second, the AML not only prohibits anti-competitive practices by companies and other market players, but also by government authorities.


It is in this second area where the Draft brings about an important change relative to the current ALL: until now, the law was not clear as to whether a company or individual could challenge an administrative act that has negative effects on competition – often referred to as “administrative monopoly” conduct in China – directly before the courts, or if the act could only be challenged within the specific administrative-internal appeal processes that are widely perceived to lack teeth. The AML is not clear on the point, and the Beijing Intermediate People’s Court ducked the issue in a lawsuit filed against the General Administration of Quality Supervision and Quarantine on the day the AML came into force back in 2008.


Now, by explicitly including “administrative monopoly” conduct as a category subject to administrative litigation, the Draft strengthens the legal basis for bringing lawsuits against administrative authorities under the AML.


This proposed revision might need to be interpreted against the mandate by the Third Plenum of the 18th Congress of the Communist Party’s Central Committee to “further diminish all forms of administrative monopolies.” Even for foreign companies, the AML’s “administrative monopoly” provisions may become more important, as China grapples with structural reforms.


Conclusion


The Draft is issued for public comment against the backdrop of the somewhat tentative attempts to reform China’s incipient market economy and the (also tentative) attempt to strengthen the rule of law (in particular, by cutting the budgetary link between local courts and local governments). There remains much more to be done in this regard.


Administrative litigation allows market players, and other entities or individuals, to bring lawsuits against government authorities and other administrative actors. Strengthening the rights of plaintiffs challenging administrative conduct – as the Draft appears to aim for – would thus be a step into the right direction. Indeed, for both the IPR and antitrust fields, the Draft might mean progress, but only if the reforms are adequately enforced in practice.

 

End Notes:

 

1 Under the Administrative Reconsideration Law, the administrative reconsideration body has the power to examine whether the contested administrative act is manifestly “improper.” Under the current ALL, the court must not interfere with the administrative body’s decision as long as it is not unlawful.
2 Under the current ALL, the authority’s head cannot be held liable for the authority’s failure to enforce a court ruling. Under the Draft, the court can impose a fine upon the authority’s chief as an alternative measure to procure the enforcement of the ruling.

 

Hogan Lovells

 

For further information, please contact:


Adrian Emch, Partner, Hogan Lovells

adrian.emch@hoganlovells.com
 
Andrew McGinty, Partner, Hogan Lovells
andrew.mcginty@hoganlovells.com 

Zhen (Katie) Feng, Partner, Hogan Lovells
zhen.feng@hoganlovells.com

 

Terence Wong, Partner, Hogan Lovells

terence.wong@hoganlovells.com

 

Deanna Wong, Partner, Hogan Lovells

deanna.wong@hoganlovells.com

 

Rae Yan, Partner, Hogan Lovells

rae.yan@hoganlovells.com

 

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