The Standing Committee of the People's Congress of Shenzhen City has passed its new Regulations on the Shenzhen Court of International Arbitration ("SCIA") ("SCIA Regulations"), which took effect from 1 October 2020.
The SCIA Regulations reflect SCIA's responses to some long-standing issues in Chinese arbitral practice. It marks a significant step of SCIA towards aligning itself with international arbitration practice. Firstly, SCIA will adopt a corporate governance mechanism where a Board of Directors shall be constituted to undertake the decision-making and supervisory functions with respect to SCIA. At least one third of the Directors will be from outside of mainland China. Secondly, at least one third of SCIA's arbitrators shall come from outside of mainland China. Thirdly, ad hoc arbitration will be permitted in Shenzhen. Lastly, the parties are free to choose the seat and the governing law of arbitration. This potentially opens the door for purely domestic arbitrations to be conducted in accordance with a foreign law, but its exact scope will need to be tested before the Chinese courts.
On 19 September 2020, the Ministry of Commerce of the People's Republic of China ("MOFCOM") published the Regulations on Unreliable Entity List (不可靠实体清单规定, "UEL Regulations"), which took effect on the same day. Under the UEL Regulations, foreign entities (which include enterprises, other organisations or individuals) would be listed as "Unreliable Entities" if they (i) endanger China's national interests of sovereignty, security, or development, or (ii) suspend normal transactions with Chinese enterprises, other organisations or individuals in violation of normal market transaction principles or adopt discriminatory measures against Chinese companies, other organisations, or individuals in serious violation of their lawful rights. During the investigation, the foreign entity will have opportunities to state and defend its case.
If a foreign entity is included in the Unreliable Entity List, the publicly available decision will alert the public to the risks of conducting transactions with such an entity, and may (or may not) specify a time limit (grace period) for the foreign entity to rectify its actions. In addition, such a foreign entity may be subject to one or more of the following countermeasures:
- restrictions or prohibitions on engaging in China-related import and export;
- restrictions or prohibitions on investing in China;
- restrictions or prohibitions on the entry of its relevant personnel or transportation vehicles into China;
- restriction or cancellation of its relevant personnel's work permits, stay or residence in China;
- imposition of a fine; and/or
- any other necessary measures.
In its 20 September 2020 press release, MOFCOM highlighted that the UEL Regulations are not intended to shift the Chinese government's position of upholding multilateralism and the opening up and protection of legitimate interests of foreign investors. Rather, China is committed to further opening up and optimising the business environment. Nevertheless, foreign entities should pay attention to whether their conduct may violate the guidelines set forth in the UEL Regulations. PRC entities should also find out, prior to entering into any transaction, whether their foreign transaction counterparties are under investigation for inclusion or have been included in the Unreliable Entity List.
On 28 August 2020, the PRC Ministry of Commerce ("MOFCOM") and the PRC Ministry of Science and Technology jointly released the Amendment to the Catalogue of Technologies Prohibited or Restricted from Export of the PRC (中国禁止出口限制出口技术目录, the "Catalogue") ("2020 Amendment"). This is the first revision of the Catalogue in more than a decade, which had last been updated in 2008.
Compared with the 2008 version of the Catalogue, the 2020 Amendment involves 53 items, among which (i) four items prohibited from export and five items restricted from export have been deleted; (ii) the controlling points and technical parameters of 21 items have been revised; and (iii) most notably, 23 items restricted from export have been added. According to the Regulations on the Administration of the Import and Export of Technology of PRC (中华人民共和国技术进出口管理条例), the export of technologies that are restricted under the Catalogue will require governmental approvals and permits.
According to MOFCOM, the 2020 Amendment is aimed at (i) improving technology export management; (ii) promoting developments in science and technology; (iii) strengthening foreign economic and technological cooperation; and (iv) safeguarding China's national economic security.
While the long-term implications of the 2020 Amendment regarding technology and intellectual property transactions are yet to be assessed, it is widely believed that the issuance of the 2020 Amendment has already complicated ByteDance's potential sale or restructuring of its TikTok products outside China, as certain technologies of TikTok may be captured within the 23 newly-added restricted technology items in the 2020 Amendment. The 2020 Amendment to the Catalogue also signals China's intention to enhance the protection of its emerging technologies for both national security and strategic importance, especially during this special period with growing tensions between China and the United States over trade and technology.
On 3 July 2020, the Standing Committee of the People's Republic of China's ("PRC") National People's Congress released the first draft of the Data Security Law for public comments ("Draft Data Security Law") which was published following its first reading by the Standing Committee of the National People's Congress. The Draft Data Security Law consists of 51 articles that span seven chapters: General Provisions, Data Security and Development, Data Security System, Data Security Protection Obligations, Security and Release of Government Data, Legal Liabilities, and Miscellaneous.
It is worth noting that the Draft Data Security Law is intended to have broad applicability by way of the adoption of broad definitions of data and data activities and its extraterritorial effect. According to the Draft Data Security Law, data refers to any electronic or non-electronic record of information (Paragraph 1 of Article 3), and data activities refer to activities such as data collection, storage, processing, use, provision, transactions, or publication of data (Paragraph 2 of Article 3), both of which are broad enough to capture any form of data and data activities.
On the other hand, the Draft Data Security Law contains a number of provisions with extraterritorial reach and cross-border effect. The Draft Data Security Law is intended to be generally applicable to any data activities that take place in China (Paragraph 1 of Article 2); however, it also emphasises at the outset that any organisation or individual outside the territory of PRC will be held responsible for any of his data activities which harm the national security, public interests or legitimate rights and interests of the citizens and organisations of the PRC (Paragraph 2 of Article 2).
In addition, the Draft Data Security Law empowers the state to adopt countermeasures against countries that impose restrictive or discriminatory trade or investment safeguards in respect of data, technology of data development and use, and so on against China (Article 24). When foreign law enforcement agencies request access to data stored in China, the individual or entity concerned is required to first report to, and receive approval from, the relevant PRC government authorities before providing the requested data. However, where the PRC has concluded or entered into an international treaty or agreement with provisions on the access of foreign law enforcement agencies to domestic data, those provisions shall be followed (Article 33).
