NPCSC Session Watch: Anti-Corruption, Judicial Reform, Stock Buybacks, Drug Approval & Patent Litigation (UPDATED)

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UPDATE (Oct. 22, 2018): According to the finalized agenda released on Monday, the State Council submitted for consideration a draft amendment to the Drug Administration Law [药品管理法] to codify the marketing authorization holder system (discussed below), among other changes. It appears that there will be an opportunity for public comments before this amendment passes.

In addition, the draft decision relating to patent litigation procedure (see below) is poised to authorize the Intellectual Property Division of the Supreme People’s Court (SPC) to hear (second-instance) appeals in all civil or administrative patent cases (other than those involving design patents) and certain other types of intellectual property cases involving technical expertise—thus bypassing provincial high courts. In other words, it looks like that the SPC’s IP Division will essentially act as China’s Federal Circuit. But whether the Division’s decisions are further reviewable is not clear at this point. As we said below, we expect the decision to pass this Friday, at which point we will have more information.

The Council of Chairmen decided on Monday (October 15) that the NPC Standing Committee (NPCSC) will hold a five-day session next week, from October 22 to 26. Absent any bill added at the last minute, the session is scheduled to review 12 legislative bills. Below is our usual rundown.

The draft amendment to the Criminal Procedure Law [刑事诉讼法] returns for a third, and most certainly final, round of review. As we have said before, the most controversial aspect of the amendment is the new trials in absentia procedures, which the second draft made applicable to “criminal cases of corruption and bribery” as well as to “serious criminal cases of endangering national security or terrorism” that meet certain criteria. Relatedly, the draft International Criminal Justice Assistance Law [国际刑事司法协助法], a law with a stated anti-corruption mission, returns for a second round of deliberation. It may pass next week but we expect at least another review.

Next, draft revisions to both the People’s Courts Organic Law [人民法院组织法] and the People’s Procuratorates Organic Law [人民检察院组织法] return for their third reading. The draft revisions seek to codify certain recent judicial reforms, in particular the judicial responsibility system [司法责任制], judge/procurator quota system [员额制], and job security safeguards. (See here for an analysis of the first draft of the People’s Court Organic Law revision.) We expect both to pass next week barring any particularly controversial new provisions.

There are three other bills (about which we know very little) returning for a second reading:

• draft Regulations on Fire and Rescue Ranks of Integrated Fire and Rescue Teams [综合性消防救援队伍消防救援衔条例]: will likely pass.
• draft amendment to the Rural Land Contracting Law [农村土地承包法]: will probably pass.
• draft Basic Healthcare and Health Promotion Law [基本医疗卫生与健康促进法]: at least one more round awaits.

Now on to new bills.

First, the State Council submitted a draft amendment to the Company Law [公司法], which is most certainly a new version of the draft on which the China Securities Regulatory Commission (CSRC) solicited public comments last month. The amendment (only) rewrites article 142 of the current Law to greatly relax restrictions on stock buybacks (also called share repurchases). It is said to bring China’s stock buyback rules more in line with those of major foreign markets. Given the limited scope of the amendment, we expect it to pass next week.

The State Council also requested an extension of two pilot reforms of China’s drug approval system, authorized by the NPCSC in November 2015 for three years. The first pilot tests a “marketing authorization holder” [上市许可持有人] system in a few provinces to incentivize innovations and reduce inefficiencies. Under current law, only companies with a drug manufacturing license may obtain a drug marketing authorization. To commercialize their inventions, therefore, drug researchers must either transfer them to such a company or invest in their own manufacturing facilities. By contrast, the pilot decouples marketing authorizations from manufacturing licenses, thereby allowing researchers themselves to apply for marketing authorizations. They then have the option of either manufacturing the drugs in-house (if they are so capable) or contracting with manufacturing companies. The second reform puts generic versions of drugs that are sold only abroad on a fast-tracked approval process. (These generics used to be treated as new drugs and thus subject to a lengthier process.) The reform also sets a higher standard for generics, requiring that they match the quality and efficacy of the corresponding brand names. We expect the NPCSC to approve the State Council’s request next week.

The State Council, lastly, submitted (presumably) minor amendments to the Wildlife Protection Law [野生动物保护法] and fourteen other as-yet unidentified laws. These laws will likely be updated to conform to the State Council reorganization plan approved earlier this year. We expect these amendments to pass next week.

Next, the Supreme People’s Court requested that the NPCSC adopt a Decision on Several Issues Concerning the Litigation Procedures for Patent and Other Cases [关于专利等案件诉讼程序若干问题的决定]. The Decision will likely prescribe procedural rules applicable solely to patent and certain other (presumably intellectual property) cases. It may, for instance, formally allow technical investigators [技术调查官] to participate in trials in intellectual property courts. We expect the NPCSC to approve the Decision at the upcoming session.

Finally, the Council of Chairmen submitted a draft revision to the Civil Servants Law [公务员法] (adopted in 2005, in effect since 2006). The revision (a top-priority project in this NPCSC’s five-year legislative plan) should in part codify a pilot reform of the civil service system (briefly discussed here) that was initiated almost two years ago. Interestingly, the revision was not submitted and drafted by the State Council as it should be under the legislative plan. We expect the revision to undergo the normal three-review process.

* * *

To recap, we expect the NPCSC to approve the following laws and decisions on October 26:

• an amendment to the Criminal Procedure Law;
• revised People’s Courts Organic Law;
• revised People’s Procuratorates Organic Law;
• Regulations on Fire and Rescue Ranks of Integrated Fire and Rescue Teams;
• an amendment to the Company Law;
• amendments to the Wildlife Protection Law and 14 other laws;
• a decision renewing pilot reforms of the drug approval system;
• a decision prescribing special procedural rules for patent and other cases.

Thanks to Taige Hu for research assistance.

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