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Impacts on foreigners and foreign companies

Document specifications

The Communique of the 19th Central Committee of the Communist Party of China, January 19, 2018.

Issuing institutions: The 19thCentral Committee of the CCP

Takeaway message: The ongoing creation of a national supervision system will have a profound impact on China’s legal system. In the upcoming constitutional amendment in March 2018, the National People’s Congress (NPC) will probably be endowed with a new supervisory function, which makes it necessary to create a “National Supervision Commission” to enforce this power. This organ will be nominally subordinate to the NPC, similar to the State Council, the Supreme People’s Court, and the Supreme People’s Procuratorate. It is delineated as a “superagency” that combines existing party and state inspection organs to exercise supervision of all public bureaucracies across the country. This means that CCP investigations, rules and disciplines, including certain measures of detention, will turn into state laws and become applicable to everyone who is found, for example, to be connected to a “corruption” case. This will also apply to foreign citizens and companies.

Background

At the 19th Party Congress, Xi Jinping highlighted the party’s plan of institutionalizing the anti-corruption campaign by deepening the national supervision system and building supervision commissions at the national and subnational level. In December 2017, the Standing Committee of the National People’s Congress (NPCSC) completed the process of soliciting public opinions on the second draft of the National Supervision Law. As a key step in the next stage, China’s legislature is supposed to deliberate some technical improvement of the existing bill. Backed by the party leadership, the National People’ Congress is expected to discuss and pass the law in March 2018.

In January 2016, the Central Committee of Discipline Inspection (CCDI) of the CCP published the Communique of the Sixth Plenary Session of the 18th CCDI of the CCP (中国共产党第十八届中央纪律检查委员会第六次全体会议公报). The CCDI plans to reach its target of retooling the Party’s disciplinary system by integrating the party’s supervision system and the state’s supervision system and by revising relevant intra-party regulations and the Administrative Supervision Law.

In October 2016, the Central Committee of the CCP convened its sixth plenary session and issued Pilot Plans on Launching the Reform of the National Supervision System in the City of Beijing and the Provinces of Shanxi and Zhejiang (关于在北京市、山西省、浙江省开展国家监察体制改革试点方案). The plan announced the establishment of a Central Small Leading Group on Deepening the Work of Pilot Reforms of the National Supervision System. The discipline inspection organs of the CCP are supposed to merge their offices into “supervision commissions,” new state organs with supervisory functions that are independent of the legislative, the executive, and the judicial branches.

Two months later, China’s rubberstamp legislature approved an identical document: Decision of the Standing Committee of the National People’s Congress on Launching the Work of Pilot Reform of the National Supervision System in the City of Beijing and the Provinces of Shanxi and Zhejiang (全国人民代表大会常务委员会关于在北京市、山西省、浙江省开展国家监察体制改革试点工作的决定). The decision allowed “supervision commissions” to take over the functions of the existing supervision departments, anticorruption bureaus and related offices of the people’s procuratorates. Thereby, the previous discipline inspection organs of the party turned into superagencies that jointly exercise the supervision functions of both the party and the state. A National Supervision Commission would be able to supervise all public bureaucracies across the country including those who are not part of the CCP structure.

The design of this new supervision system has been led by the CCDI. However, since the national supervision system involves the restructuring of state power, a constitutional amendment through the NPC is necessary. As the NPC is nominally China’s supreme organ according to the constitution, it is essential to clarify the relationship between the “National Supervision Commission” and the NPC. The CCP convened a plenary session in January 2018 to discuss a proposal of a constitutional amendment that, among others, serves to pave the way for a broad supervision system.

Challenges of the national supervision system

Via the National Supervision Law, the CCP wants to integrate its own supervision practices into the state system. Within one month of publishing the bill, the NPCSC received an unusually high number of 13,268 suggestions of improvement sent by 3,771 people. The changes proposed in the National Supervision Law are both significant and problematic.

1. Fundamental problems of constitutionality

The National Supervision Commission is supposed to be China’s “supreme supervision organ.” It is, thus, most likely to be established under the NPC. This means that this commission will turn into a fourth state power in addition to the State Council, the Supreme People’s Court, and the Supreme People’s Procuratorate. The existing thee organs are nominally subordinate to the NPC as the overarching state organ and report to the NPC at least on an annual basis. The commission is supposed to be situated on the same level and at the same time observes the work of state organs including NPC delegates, government officials, judges, and public prosecutors.

In practice, the proposed National Supervision Law will set up a completely new state architecture, which has been unchanged since the founding of the People’s Republic. It therefore requires a constitutional amendment before the bill can formally be passed.

2. Concerns of foreigners and foreign companies

As a result of its overarching supervision powers, the national supervision system might even constitute a threat to foreign citizens or companies doing business in China. If they are deemed to be involved in a “corruption” case related to bribing government officials or party cadres, they will be subject to the National Supervision Law. In this case, the following aspects would be of concern to individuals and companies:

First, the bill allows supervision agencies to collect evidence, but does not oblige them to adhere to a citizens’ right to the protection of communications secrets. Supervision agencies may circumvent such constitutional mandates, because courts in China are not allowed to invoke the constitution.

Second, the bill does not clearly define the authority of supervision agencies to “interrogate” those under investigation in a case of corruption or dereliction of duty. Neither the bill nor any other document specifies the place, the manner or the duration of such interrogation. This might result in inappropriate restriction of personal freedom. For example, the bill would allow a supervisory organ to detain a foreign businessman suspected of giving bribes to a cadre at a “designated location”, but fails to define what such a location is. Moreover, the duration of such detentions may amount to three months or even up to half a year, as the supervisory organs can determine the length according to the needs of the investigation. In a regular criminal case the legal prescription for the length of detainment is three or seven days and up to a maximum of one month.

Third, the bill allows supervision agencies to “retain” anyone “in custody” who is found to be involved in a corruption case or a case related to corruption or who may “hinder investigation.” The likelihood of misuse of power is very high. The most problematic issue is the lack of provision on access to lawyers for those who are held in custody. In some pilot areas, there are even explicit government rules banning lawyers’ involvement “during the investigation by supervisory organs.”

3. Concerns of foreign governments

Foreign governments may have concerns about certain aspects of international legal cooperation with China. The National Supervision Commission may take over a leading role in coordinating with foreign governments in areas such as anti-corruption law enforcement, extradition, judicial assistance, custody transfer of sentenced persons, asset recovery, and information exchanges. The commission may, for instance, request foreign governments to extradite Chinese citizens suspected of corruption, if extradition agreements between China and the involved country are in effect. There will be plenty of legal and political challenges for foreign governments when facing such requests from Chinese supervision agencies in the future.

Sources:

EN: Opinions on Creating Healthy Growth Environment for Entrepreneurs, Promoting Eminent Spirit of Entrepreneurship, and Giving Better Play to the Roles of Entrepreneurs (September 2017)

CN: 中国共产党第十九届中央委员会第二次全体会议公报