NPCSC Session Watch: Securities Law Revision, Civil Code & Foreign Investment Law Implementation

The Council of Chairpersons met last Friday and decided to convene the 10th session of the 13th NPC Standing Committee (NPCSC) from April 20 to 23. The Council also approved the NPCSC’s 2019 legislative and oversight plans, which we expect to be released after the session. Per the Council’s decision, the NPCSC this month will review eight legislative bills. Below we take a brief look at each.

The State Council submitted the only new bill: amendments to nine laws to implement the Foreign Investment Law [外商投资法]. Of note, the Trademark Law [商标法] will be amended to provide for increased damages for trademark infringement. We expect the upcoming NPCSC session to approve those amendments, and will summarize each in the post-session roundup.

The session will review draft revisions to the Judges Law [法官法] and the Procurators Law [检察官法] for the third time. Because we expect both to pass this time, we will save our summaries of them for the post-session roundup.

The draft revision to the Securities Law [证券法] will also return for a third review. The draft will not be adopted later this month, because (as Caixin reported) it was submitted again mainly to avoid expiration under article 42 of the Legislation Law [立法法]. Under this article, a bill will expire if it is not reviewed again by the NPCSC for two years after a previous reading; the draft revision was last reviewed two years ago this month.

It could be years before the draft Securities Law revision eventually passes. The NPCSC has separately authorized the State Council to pilot a core scheme of the bill: a U.S.-style registration-based system for initial public offerings (IPOs). And the State Council has only recently announced plans to test such a system—by establishing a Sci–Tech Innovation Board [科创板] at the Shanghai Stock Exchange (see here for Reuters’ explainer of the new Board). The NPCSC’s authorization (already extended once) will expire at the end of February 2020. It will likely be extended again so that the piloted scheme could be refined before being enacted into law.

Although the NPCSC has yet to release the first two drafts of the bill for public comments, the first draft (dated April 2015) was leaked that month and can be viewed here (along with an explanation). For an overview of China’s evolving IPO regulatory scheme and for a discussion of the main features of the 2015 draft’s registration system, see Stuart R. Cohn & Yinzhi Miao, The Dragon and the Eagle: Reforming China’s Securities IPO Laws in the U.S. Model, Pros and Cons, 17 Wash. U. Global Stud. L. Rev. 327, 333–45 (2018). In essence, under that system, the securities regulator “will no longer be able to refuse or sit on the application of a company desiring an IPO. All companies that satisfy the IPO standards, as determined by the exchange to which they have applied, will be able to go forward with an IPO.” Id. at 343.

Next, the Part on Property [物权编] and the Part on Personality Rights [人格权编] of the draft Civil Code return for their second reading. Because we plan to write a separate post on the latter and have no expertise whatsoever in Chinese property law, for now we will just say that the NPCSC will review the two Parts again in December as part of a complete draft Civil Code. The Code is then scheduled to be adopted by the NPC three months later at its 2020 annual session.

Two pharmaceutical-related bills also return for their second reading: draft revision to the Drug Administration Law [药品管理法] and draft Vaccine Administration Law [疫苗管理法]. The first bill was introduced last October as an amendment, but has now become a revision—that is, a complete rewrite of the Drug Administration Law. The change could be stylistic only: the original amendment spanned 18 pages, describing in detail how the Law’s current text is to be altered; the NPCSC could have decided that it is simply more efficient to substitute a new text. Alternatively, the new draft could make more extensive changes to the current Law. We will find out which is the case later this month. Substantively, we have nothing intelligent to say about either bill. Both could be approved by the upcoming session, although we would not rule out the possibility of a third and final reading.

Thanks to Taige Hu for research assistance.


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