NPCSC Abolishes “Custody & Education” Detention System, Revises Securities Law & Approves Community Corrections Law, Civil Litigation Reform Pilot

The 13th NPC Standing Committee (NPCSC) concluded its fifteenth session on Saturday, December 28. It approved a batch of bills, most prominently a decision abolishing China’s decades-old extrajudicial detention system against prostitution. We will focus on this decision below, while briefly noting other bills it approved. Because the NPCSC (quite unusually) has yet to release the relevant legislative records, we had limited primary sources to rely upon when writing this post. We intend to update the discussion below when more sources become available.

Custody & Education Abolition

“Custody and education” (C&E) [收容教育] was a system of extrajudicial detention used against sex workers and their clients. It was governed by the NPCSC’s 1991 Decision on Strictly Prohibiting Prostitution and the Visiting of Prostitutes [关于严禁卖淫嫖娼的决定] and the State Council’s 1993 implementing measures. Article 4 of the 1991 Decision provided in relevant part:

With respect to persons who engage in prostitution or visiting of prostitutes, the public security organs [i.e., the police] in conjunction with the relevant departments may, in a centralized manner, force them to receive education in law and morality and to participate in productive labor, in order to rid them of the pernicious habits. The duration is between six months and two years. The specific measures are to be formulated by the State Council. . . .

Persons who engage in prostitution or visiting of prostitutes, without exception, are to be subjected to mandatory testing for sexually transmitted diseases. Those having sexual transmitted diseases are to receive mandatory treatment.

Last December, the NPCSC Legislative Affairs Commission recommended that C&E be abolished. It asserted that C&E system “had played a positive role in preserving public order, in educating and saving [detainees], and in hindering the spread of bad social moralities [不良社会风气]. But it also recognized that, as China’s society, economy, and legal system continue to develop, “circumstances have changed significantly,” “especially after the abolition of the reeducation-through-labor system in 2013.” It thus recommended that a bill to abolish C&E be submitted “in due course.”

Authorities had failed to act for about a year, however, until the State Council submitted such a bill earlier this month. On Saturday, the NPCSC approved the bill, deciding to repeal the two paragraphs quoted above and the C&E system they established. Per the decision, all C&E detainees were released on Sunday, December 29. The decision does also confirm the legality of all C&E decisions lawfully made prior to the system’s abolition.

Prostitution remains illegal in China after C&E’s abolition. Under the Public Security Administrative Penalties Law [治安管理处罚法], sex workers and their clients face a maximum penalty of 15 days’ administrative detention with a ¥5,000 fine (art. 66, para. 1). Other conduct, including organizing and coercing others into prostitution, may constitute criminal offenses and be subject to much heavier penalties (see Criminal Law arts. 358–362).

Securities Law Revision

The four-and-a-half-year legislative marathon to the revise the Securities Law [证券法] ended on Saturday. The central feature of the revised Law is its codification of a registration system for securities issuance, which limits the government’s authority to conduct merit review of proposed offerings and instead shifts the focus of regulatory oversight to reviewing companies’ information disclosure. Businesses have been applying to list on the Shanghai Securities Exchange’s STAR Market [科创板] under such a registration system since mid-2019, under an NPCSC authorization that is set to expire when the revised Law takes effect. Rather than require that companies applying for initial public offerings “have the ability to continuously profit” [具有持续盈利能力], the revised Law now simply requires that they “have the ability to continuously operate” [具有持续经营能力] (art. 12, para. 1, item 2). There is one caveat, however: the revised Law delegates to the State Council the power to determine the “specific scope and implementing steps” of the registration system (art. 9, para. 1). In other words, securities issuance will be governed by the old approval-based system until the State Council decides to switch to the new one.

To supplement the new registration system, the revised Law includes a new chapter on information disclosure (see Ch. V). It requires that any information disclosed be “true, accurate, complete, concise, and easy to understand, and not include any false or misleading statement or major omission” (art. 78, para. 3). Listed companies are required to file annual and semiannual reports (art. 79) and to promptly disclose any defined “major event” that may have a large impact on the price of their shares (art. 80).

The revised Law also debuts a civil securities litigation scheme that officials asserted “fits China’s specific situations.” Under China’s Civil Procedure Law [民事诉讼法], when numerous plaintiffs have a common claim, they can select a representative to litigate on their behalf (art. 53). If there are potentially many other similar plaintiffs, the court may publicly notify rightsholders to register with it (art. 54, para. 1). Whatever court ruling the representative achieves will bind all registered rightsholders (id. para. 2). Aside from essentially repeating these provisions, the revised Securities Law makes two innovations: it allows an Investor Protection Agency [投资者保护机构] to act as a representative if 50 or more investors so request, and to also register investors with the court (whose ruling will bind all registered investors)—unless an investor explicitly opts out (art. 95, para. 3).

Finally, the revised Law increases penalties for securities violations across the board. The revision will take effect on March 1, 2020.

Community Corrections Law

Under the new Community Corrections Law [社区矫正法], community corrections are a form of noncustodial sanctions imposed on four classes of persons: (1) those sentenced to controlled release [管制]; those receiving a suspended sentence; those paroled; and those temporarily serving their sentence outside prison or detention center, for medical or other reasons (art. 2). The substantive criteria for controlled release, suspended sentences, paroles, and temporary service of sentence outside prison are governed by the Criminal Law [刑法] and the Criminal Procedure Law [刑事诉讼法]. What the Community Corrections Law does is to spell out how community corrections are to be carried out for those convicts. The Law is thus mostly comprised of technical provisions on, among other matters, the decisionmaking process for community corrections, the management and education of community corrections participants, their release from community corrections, or the revocation of community corrections decisions. The Law will take effect on July 1, 2020.

Civil Litigation Pilot Reform

Upon the Supreme People’s Court’s request, the NPCSC decided to authorize the Court to conduct civil procedure reform in select courts for a period of two years. According to the Court’s explanation of its request, the overall goal of the reform is to channel civil suits of different degrees of complexity through different procedures to resolve disputes more efficiently. To this end, the pilot broadens the applicability of procedures whereby courts recognize the validity of mediation agreements; permits more disputes to be heard using the expedited, small-claims procedures [小额诉讼程序]; further shortens summary procedures [简易程序]; allows a single judge to hear certain first-instance cases and appeals; and authorizes civil litigation over the internet.

The immediate and basic-level courts in twenty major cities will participate in the pilot, as well as China’s three Intellectual Property Courts, three Internet Courts, and the Shanghai Financial Court. Seven provisions of the Civil Procedure Law will cease to apply in those courts during the pilot.

Very Briefly

On Saturday, the NPCSC also approved China’s first comprehensive healthcare law, the Basic Healthcare and Health Promotion Law [基本医疗卫生与健康促进法], effective June 1, 2020; comprehensive revisions to the Forest Law [森林法], effective July 1, 2020; and an amendment to the Law on the Protection of Investment by Taiwan Compatriots [台湾同胞投资保护法], effective January 1, 2020, to harmonize it with the Foreign Investment Law [外商投资法] that is set to enter into force on the same day.

Finally, the NPCSC decided that the NPC’s 2020 annual session will convene on March 5, 2020 and submitted a draft Civil Code [民法典] to that session for review.

The NPCSC is soliciting public comments on six other bills it reviewed last week. Please see this post for more information.

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