USTR Report: Legal Framework

Sunday, December 24, 2006 2:48
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The last section of the 105 page report is devoted to China’s Legal Framework, and that is a sign of strength for all lawyers to me that only the lawyers were left in the room to wrap up.

Fortunately, they were brief and only required 3 pages to tell us that improvements have been made, but there is still room for improvement.

In conveying this message, they have separated their thoughts into 3 broad themes:

  • Transparency
  • Uniform Application of Laws
  • Judicial Review

Official JournalOne of the first things to be done following ascension was to designate a single journal that would present all revisions, deletions, and additions to China’s laws, regulations, and other measures.

Needless to say, with over 9000 revisions, additions, and deletions in the last 5 year that publication, had it come into existence, would have resembled a phone book. However, and it should not come as a surprise, that publication did not come into existence and it was only in March of 2006 that the government designated the MOFCOM Gazette as the publication which would be the publication of choice.

Until then, to learn about any changes, internet searches and phone calls to ministry have remained the norm.. and probably will be even after the GAzette’s operations are underway.

Public Comment – While reviewing over 2500 trade-related laws in the first year alone, and some 7500 since, China is supposed to (under WTO) provide a period prior to any changes where comments can be made. to date, there has been a spotty record where some laws have been granted extensive comment period, while others have had none.

With the USTR believing this period for public comment is critical to the transparent and fair process by which trade laws are constructed, they are sure to keep an eye on this in 2007

Enquiry Points – Another important part of being transparent is having established “points” where information can be obtained. Luckily, thanks to the compartmentalized nature of China’s government, companies have found this to be in place and many have found ministerial websites and agencies to be of assistance as well

Uniform Application of Laws:
China agree to establish an internal process to assess and ensure the fairness of regulations based on laws and information provided by companies. to do this a system of WTO departments and agencies was set up within the central, regional, and local governments.

However, while the infrastructure has been in place, often times (as reported in the previous sections) implementation and enforcement have been the concern.

Judicial Review:
To review laws, regulations, and other proceedings, China was to establish a judicial review process that was impartial and independent of the government.

this is a situation that the USTR still feels China has fallen behind as many of the judges have strong ties to the government and can be influenced by political, government, or business pressures… especially outside of the major cities.

Wrap Up:
The legal framework for China is a work in progress. Often times laws are passed with little or no input from external entities, enforcement is spotty, and other pressures can reduce the independence and effectiveness of those who are interpreting the laws.

In the future, and as commercial interests begin playing a larger role in the future policy decisions of China, the laws will be drawn up, commented on, and enforcement in a more efficient manner (and in a manner that protects the commercial interests of industry rather than the political interests of local officials). It will take time.. perhaps years, but improvements can already be seen in some areas, while other areas.. well are seen as still far behind.

What has not changed in the 5 years, is that companies need to rely on lawyers who understand the legal framework in China and how to operate within it to accomplish the tasks at hand.

This often means having both international and local firms working on your behalf to ensure that your needs are fully met. Luckily, in Shanghai there are nearly 100 foreign law firms like Allen & Overy, Baker & McKinsey, and Squire Dempsey to help.. and there are qualified and tested local firms like King and Wood, Fangda Partners, and others that can help.

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