China: The New PRC Legislation Law: The Emperor's New Clothes?

Last Updated: 12 June 2000

by Peter Corne, Consultant, Simmons and Simmons, Shanghai1

The PRC legal system has come a long way in a short period of time. Multifarious laws and regulations at different levels now plug many of the gaps that use to create so much uncertainty. The crucial issues today centre around inconsistencies in legislation and its interpretation, not least derived from the general vagueness that permeates central legislation which allows administrative bodies with relatively broad powers to reinterpret law in the form of rules, regulations and ad hoc interpretations.

The Legislation Law of the PRC, adopted on March 15 at this year’s latest session of the National People's Congress (the "Legislation Law") attempts to formalise the structure of the PRC legal system. It represents, on the one hand, a step forward by delineating the scope of lawmaking and rulemaking authority of legislative and administrative organs, and on the other formalises legislative process, particularly of the laws passed by the NPC and its standing committee. It also contains some useful provisions such as Article 84 which rules out the retrospective force of law unless special provision is made to this effect - vital, for example, in determining the extent of application of the new PRC Contract Law promulgated in 1999.

The Law is divided into six chapters which cover the following subjects:

a) Scope of Lawmaking Authority;

b) Legislative Process of the NPC;

c) Legislative Process of the NPC Standing Committee;

d) Interpretation of National Law;

e) Scope of Application and Filing; and

f) Other Provisions.

The Legislation Law is not as ambitious as the 1997 draft that was submitted for consideration by legal scholars. Not too surprisingly, it represents, in effect, a consolidation of previous practice without attempting to address the real structural deficiencies plaguing the PRC legal system. As in the case of many other laws that are the result of a process of negotiation between powerful interested parties, it represents a non-controversial compromise of sorts - and a victory for the status quo.

This article will briefly assess to what extent the Legislation Law addresses some of the issues that consistently threaten to undermine the integrity and legitimacy of the PRC legal system.

1. Dealing With Conflicts Between Enactments, and Illegality

The Legislation Law shares with many of its predecessors the problem of being long on substance and short on procedure. One of the proposals in the 1997 draft (see China Law and Practice, June 1997) - The creation of committees at various levels of people's congress and in the State Council, and the granting to citizens, social and party institutions, enterprises and other units of the right to apply to such committee for the invalidation or amendments of legislation – would have solved some of the procedural inadequacies. However, this provision was not included in the final version of the Law. In regard to the principles of review of inconsistent enactments, the Legislation Law generally restates what has already been introduced in other legislation. To an extent this is helpful, as for example, principles on what type of enactment prevails over another have been stated with some degree of certainty, as have the relevant body responsible for review of inconsistency or illegality. For example, in the case of inconsistency between a local regulation issued by a local people's congress ("local regulation") and an administrative rule issued by a State Council department ("departmental rule"), the Legislation Law clearly states that the State Council is responsible for formulating an opinion, and where it deems the departmental rule should apply, it should request the Standing Committee of the National People’s Congress to make a ruling. Or, where a departmental rule conflicts with a law, the National People’s Congress is empowered with the right to cancel or amend the offending rule according to the Legislation Law. An example is the provision in the State Administration of Industry and Commerce Certain Provisions Concerning the Prohibition Against the Infringement of Trade Secrets enacted in 1995 which seems to illegally expand the application of the provisions of the PRC Anti Unfair Competition Law of 1993 on commercial secret protection from "business operators" to employees, according to the Legislation Law. A further example is the State Council Supplementary Notice on Issues Concerning the Trial Implementation in Several Cities of State Owned Enterprise Bankruptcy and Merger and Reemployment of Staff and Workers of March 2 1997 which claims to override the priorities and rights of creditors expressed in the Civil Procedure Law of 1991, PRC Enterprise Bankruptcy Law of 1988 and PRC Security Law of 1995.2

No mechanism for application and no provision for the creation of a dedicated body within the National People’s Congress, State Council or any other body is however mentioned. One can only hope that the Legislation Law will provide the impetus for implementing legislation providing for the creation of such bodies in the near future. Otherwise, in practice, there will be no mechanism by which the principles on legislative consistency can be implemented by way of formal application. This situation is already acute because the people's courts lack the power to formally strike down inconsistent or illegal enactments. The best that they can do is to refrain from applying inappropriate departmental rules or rules issued by local people's governments pursuant to Article 52 of the Administrative Litigation Law of 1989. Administrative review bodies are in a slightly better position in this regard than the courts, as pursuant to Article 27 of the Administrative Review Law of 1999, they may, in the course of administrative reconsideration of a specific administrative act, ask the appropriate body to repeal an "Illegal" abstract administrative act which it has detected and on which the specific act is based. Repeal by way of application by an actual party to reconsideration is limited however to "other normative documents" below "rule" status according to Article 7 of the Administrative Review Law.

2. When is a Rule Not a Rule?

The threshold question of what constitutes 'law' in a broad sense in the PRC is a basic issue that the Legislation Law goes some way towards addressing, but not quite far enough. One of the most vexing questions is what constitutes a State Council departmental rule, or a local people's government rule. This is important as such rules can be referred to in court judgments according to Article 52 of the Administrative Litigation Law of 1989, and are thus the threshold of "law" in a broad sense. Article 62 of the Explanation of Various Issues Concerning the Implementation of the Administrative Litigation Law, issued by the Supreme People's Court in 08 March 2000 confusingly provides that courts can in addition to rules also cite legally valid "other normative documents" in their judgments. Where relevant law is vague, government documents that do not even constitute 'rules' (hereafter referred to as "other normative documents") are often relied upon by people's courts. Such 'other normative documents' are to this day indiscriminately issued by government departments and are applied with impunity as if they are law by the relevant government entity despite lacking legal status.

Articles 76 and 77 state that administrative rules shall be promulgated by an order signed by the person in charge of the agency and local rules by way of order signed by the provincial governor, autonomous region chairman, or city mayor. In addition, Articles 76 and 77 provide that administrative rules should be published in the State Council Bulletin and nationally circulated newspapers, and local rules shall be published on the bulletin of the local people's government and newspapers circulated in the local jurisdiction.

This is a step forward in that it does establish a basis for distinguishing rules from 'other normative documents' of lower status. Actual procedures for enactment of rules are however left to the State Council. This will further assist in distinguishing when an enactment has "legal" effect according to the Administrative Litigation Law.

The democratisation of rulemaking process would have been greatly assisted by a requirement that regulations and rules must be tabled before the relevant people's congress for approval before coming into effect. In this respect, the only opportunity for congresses to check upon local rules is submission post-promulgation to the relevant congress standing committee pursuant to Article 89. In the case of administrative rules, the only filing requirement is to the State Council and not to the NPC Standing Committee. An obligation in Article 58 for the State Council to consult relevant interest groups in the drafting of administrative regulations, incorporated by reference to any future drafting procedures issued by the State Council for departmental or local rules, also represents a step forward for the opening up and legitimisation of rulemaking procedures.

3. So Who is Responsible for Interpreting Law?

Rather sketchy provisions appear in Chapter 4 on NPC Standing Committee Interpretations of National Law. Such statutory interpretations have only been issued seven times since 1982, the most well known being the interpretation issued last year on the Hong Kong Basic Law. In fact, the Supreme People’s Court through its Gazette has unofficially assumed the role of interpreting national law.3 In the 1997 draft, the Supreme Court was limited to the role that was originally set out in the 1981 Resolution on the Interpretation of Law ("the Resolution") of only providing interpretations arising from application of the law to concrete cases. Apparently, the Supreme People’s Court wished to eliminate the right of interpretation granted to the Supreme People’s Procuratorate in the 1981 Resolution and avoid the situation of conflicting interpretations emanating from both bodies in respect of the Criminal Procedure Law. The Procuratorate countered with accusations that the Supreme People’s Court frequently exceeded its power of interpretation anyway. The result was a stalemate, the dropping of the article on judicial interpretation and the retention of the status quo.

4. Conclusion

As time slips by, the rectification of the fundamental weaknesses in the PRC legal system becomes increasingly more difficult. The Legislation Law represented a chance to address some of these structural defects, but ultimately merely endorsed the system that preceded it. As such it again demonstrated the triumph of compromise and of the status quo, and can be considered, by and large, as merely the "emperor’s new clothes."

Footnotes

1.This article also appears in the May edition of "China Law and Practice".

Peter Corne is author of an upcoming chapter in Juris Publishers’ loose lease series, "Doing Business in China" entitled "Creation and Application of Law", and authored the book "Foreign Investment in China: the Administrative Legal System" published by Hong Kong University Press.

2 See Donald Clarke, "State Council Notice Nullifies Statutory Rights of Creditors", East Asian Executive Reports, April 15, 1997.

3 See Nanping Liu, Judicial Interpretation in China, Sweet and Maxwell, 1997.

For further information, please contact us.

This article contains general information on the subject matter and shall not be relied upon for a specific case. Specialist advice should be sought with respect to any specific circumstances.

SIMMONS & SIMMONS - An International law firm

Hong Kong - London - Paris - Brussels - Lisbon - Milan - Rome - Abu Dhabi

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