Ye Yu

Your business will be impacted by a new set of draft measures recently introduced in China. These measures mandate that all companies processing personal information within China must undergo regular compliance audits to ensure adherence to the country’s regulations on personal information protection. These audits will determine whether companies are compliant with the protection requirements outlined in the China Personal Information Protection Law (PIPL) and other relevant measures and regulations. Under these draft rules, companies have the option to either establish an internal department or engage a third party to conduct these audits. The auditors will assess whether the companies are in compliance with the PIPL and other related regulations, including those concerning cross-border personal information transfers. The auditing organization must ensure adherence to the new draft measures. The draft measures outline that companies processing personal information of over one million individuals are obligated to undergo an annual compliance audit. Other companies processing personal information need to conduct a compliance audit at least once every two years. Furthermore, the national and local cybersecurity departments, in collaboration with public security entities and other relevant bodies within China’s cabinet (the State Council), will create a recommended catalog of professional institutions capable of conducting compliance audits for personal information protection. This catalog will be updated annually, and companies are encouraged to select an agency from this list to perform the audits. In conclusion, the new draft measures in China mandate regular compliance audits for companies processing personal information. These audits are meant to ensure compliance with the country’s Personal Information Protection Law and related regulations. It’s essential for our client to understand these requirements and consider their implications for their business operations in China. We will keep you updated on the newest regulations or measures regarding to this new set of draft. If you need further information, please do not hesitate to contact our Asia team: Joost Vrancken Peeters and Ye Yu. 

China has recently decided to join the Hague Convention of 5 October 1961, also known as the Apostille Convention. The Chinese ambassador to the Netherlands submitted the accession on March 8, 2023. The Convention will come into force in China on November 7, 2023. What does this mean for you? In the past, if you wanted to have an official document issued in the Netherlands that you needed to use/be acknowledged in China, you typically needed to go through a lengthy process of notarization and legalization. For instance, to set up a company in China, among others you needed to provide a notarized and legalized extract of the Chamber of Commerce to verify the investor’s identity. The following steps had to be taken. First, you will need to have the document notarized by a public notary in the Netherlands. This ensures that the document is authentic and can be relied upon in legal proceedings. Secondly, the notarization should be verified by the district court before sending it to be authenticated by the Ministry of Foreign Affairs in the Netherlands. Once you have obtained the authentication from the Ministry, you will then need to have the document authenticated by the Chinese Embassy in the Netherlands for double authentication. Finally, it will be recognized as valid in China and can be used for the purpose it was intended. The whole process is rather costly and time-consuming. Once China joins the Apostille Convention, this traditional legalization process of official documents will be replaced by a single formality: an authentication certificate issued by the appointed authority where the public document was executed. For instance, if a Dutch company wants to use its company extract in China, it will need to obtain an apostille on the document. This means that the extract needs to be certified by the designated authority in the Netherlands and issued with an apostille certificate. The apostille certificate will verify the authenticity of the extract and makes it recognized as a legal document in China without the need for additional legalization. However, the applicability of the Convention in China depends on the definition of “public documents” under China’s domestic law. Only those documents falling under this definition will be recognized under the Convention. Therefore, it remains to be seen how China will interpret and apply the definition of “public documents” under its law. In terms of setting up a company or litigation, it is essential for documents such as a power of attorney, legal representative statements, and company incorporation certificates to be considered as public documents under China’s domestic law. This would greatly benefit foreign businesses operating in China. We will keep you updated for further clarification in terms of application in China. Contact If you need further information, please do not hesitate to contact Ye Yu.  

If you are conducting foreign trade activities in China or seeking to get engaged, it is good to know that you are no longer required to prepare extensive registration materials to apply for import and export licenses. China lifted the registration requirements for foreign trade activities, according to the Ministry of Commerce. China’s Foreign Trade Law was amended on 30 December 2022 by the National People’s Congress. The Congress removed Article 9 from the Foreign Trade Law, which required foreign trade operators to complete record filing and registration. Lifting the registration requirements simplified the procedure of import and export. Before 30 December 2022, Article 9 required “foreign trade operators engaged in the import and export of goods or technology to complete record filing and registration”. After the amendment, foreign trade operators automatically get the right to import and export. No need to apply for import and export licenses, registration certificates, and other relevant documents any more. The simplified procedure will speed up the process and lower the barriers of conducting foreign trade activities in China. It will certainly shorten the waiting time for starting up the import and export business, thus reducing the costs for foreign trade operators. Considering that China removed the travel restrictions 8 days after lifting the registration requirements, it is not difficult to see that China is making an effort to reopen the border to the world and attract foreign investors. According to the ministry, lifting the registration requirements is one of China’s efforts to “promote trade liberalization” and “release the potential for foreign trade growth.” Contact If you need further information, please do not hesitate to contact our Asia team or Ye Yu.

From March 2020, China has been enforcing extensive entry bans for foreigners to prevent the spread of the COVID-19. Foreigners’ visa were halted to issue for almost a year except for urgency. The bans are temporally being eased to some extent since March 2021. The Chinese Ministry of Foreign Affairs and some Chinese embassies abroad announced that from 15 March 2021, people vaccinated with vaccines produced in China will be able to apply for a visa to China, including those having received two doses of Chinese-made vaccines with the stipulated gap in between, or having received a single-dose Chinese-made vaccine at least 14 days prior to the application) and obtained the vaccination certificate. Thus, proof of a negative COVID-19 nucleic acid test result and the Health and Travel Record Declaration Form for Visa Application is no longer required. Besides, we understand China requires two to three weeks of quarantine upon arrival. Some regions might mandate a longer quarantine period either in the hotel or at home. After quarantine, traveling between regions is generally allowed but with minor restrictions. We will keep you up to date if the Embassy of the PRC in the Kingdom of the Netherlands releases exact details in terms of Visa for foreigners. Please note that the regulations can change very quickly.  

Apart from the human tragedy, the Coronavirus will also have negative economic consequences. Among which, it is estimated that lots of contracts can not be performed as expected. So, whether Corona can be deemed as Force Majeure to get an exemption of liabilities for breach of contract, is a question that we would like to figure out. Another question is whether delayed performance or termination of contract is allowed. Force Majeure in Chinese Law An example: an auto parts manufacturing company in China cannot deliver a steering gear unit to an African factory of a car manufacturer as stated in the contract. Is this Force Majeure? Of course this depends on the law applicable to the contract. In case Chinese law is applicable, article 117 of the Contract Law of the PRC, and Article 180 of General Rules of the Civil Law of the PRC stipulates that a party who is unable to perform a contract due to force majeure is exempted from liability in part or in whole in light of the impact of the event of force majeure, except otherwise provided by law. Where an event of force majeure occurs after the party’s delay in performance, it is not exempted from such liability. Article 94 of the Contract Law stipulates the parties may terminate the contract under the circumstance of force majeure. For purposes of this Law, force majeure means any objective circumstances which are unforeseeable, unavoidable and insurmountable. Covid-19 Obviously, the Covid-19 (Corona) outbreak is an unforeseeable incident, neither experts could have predicted it, let alone the ordinary public. As of now, there are no curable vaccines or effective medicines available. So, it is non-disputable that the Coronavirus is unforeseeable and unavoidable. The only doubt goes to whether it is insurmountable. From a legal perspective, the Coronavirus shares many similarities with SARs. Let’s refer to the cases that happened during the SARs period, to see how force majeure cases were dealt with by the multiple layers of courts of the PRC. Comparison to SARS On June 11, 2003, the Supreme People’s Court issued a guideline to its subordinate courts, stating how to handle trial and enforcement properly according to the Law with respect to SARS. The Supreme court stated the following: “Cases in which parties of the contract can not perform because of SARS can be dealt with according to Article 117 and Article 118 of the Contract Law of the PRC, which is force majeure. In short, the non-performance of contract due to SARS can be recognized as force majeure. However, also in some “SARS” cases, some courts did not support the application of force majeure, because the government’s acts were deemed to have only partially affected the business activities of the breaching parties and did not directly or radically trigger the non-fulfillment. So, whether force majeure can be a reason for the exemption of contractual liability should be judged case by case. General judgment rules are: whether the force majeure is the direct cause that one party cannot perform the contract. On 30 January 2020 the China Council for the Promotion of International Trade stepped in to help companies announcing to offer force majeure certificates to help companies deal with disputes with foreign trading partners. While applying companies must provide legitimate documents such as proof of delays or cancellation of transportation to the council. If contracts state that to rely on force majeure one needs such a certificate by a relevant authority, these certificates may help. Even if the contract does not require such a certificate and these certificates are not necessarily binding on the courts, these are a major help in proving force majeure. More information If you need further information please do not hesitate to contact our Asia team Joost Vrancken Peeters at +31620210657 or [email protected] or Ye Yu at +31639267995 or [email protected].

The new China’s Export Control Law (“CECL”) was passed on 17 October 2020 by the National People’s Congress Standing Committee. It unifies the several regulations and has come into effect as of 1 December 2020. CECL aims to fulfill international obligations, safeguard national security and national interests, and enhance export control by introducing restrictions on the export of specific items. It will regulate the export of technologies and sensitive materials from China to overseas countries. It obliges foreign customers and Chinese exporters to comply with this law or be liable and get penalized. The monitoring will be more strict than under the previous regulations and is more far reaching since extends the jurisdiction of China outside its national borders. The CECL is also applicable to importers, end-users and in general organizations outside China. The CECL is divided into five chapters namely, general provisions, control policies, control lists and control measures, regulations, legal liabilities, and supplementary provisions. Who is affected by the CECL? Not only exporters located in China, but also end-users and importers may have specific duties under CECL and may be subject to heavy restrictions. Before a license to export is granted, the exporter has to submit forms certifying the end-users and end-use of the items. According to the CECL, end-users are not allowed to change the submitted end-use, nor assign them to a third party without the prior approval of the State Council and the Central Military Commission/State Export Control Administrative Departments (“SECADs”). Moreover, and exporter or importer should report any possible change of end-use immediately to the SECADs as soon as it becomes aware of such change. Under the CECL the SECADs have to issue a restricted list mentioning the importers and end-users that in short violate the CECL. The SECADs can either prohibit or restrict deals regarding the export of the controlled items, suspend the export of such items, and withhold export licensing facilitation measures to anyone who is on the list. The CECL also forbids exporters to deal with parties in the list, unless they apply to SECADs in case of a true need. Importers and end-users can apply to SECADs to be removed from the list. Outside of China The CECL not only applies to organizations or individuals in China, but also outside of China. It also clearly states that “if any country or region abuses export control measures to endanger the national security and national interests of the People’s Republic of China, the People’s Republic of China may, based on the actual situation, take reciprocal measures against that country or region. What items fall under CECL? For items that fall under CECL exporters have to apply for a license from SECADs. Controlled Items The items covered by the CECL are called “controlled items” and also include the technical information and data related to such items. Controlled items include among others dual-use items, military items, nuclear items, technologies, services and items related to the maintenance of national security and national interests and to the performance of anti-proliferation. This is not an exhaustive list since SECADs will issue lists and update these lists and they can also temporarily control certain good or technologies etc. Unlisted items There is another category of items that fall under the CECL restrictions: goods, technologies, or services that may endanger the national security or national interests, be used for designing, developing, producing, or using weapons of mass destruction or be used for terrorism purposes. The penalties imposed by CECL Under the CECL the SECADs have far reaching powers to investigate such as on-site inspections, interviews, confiscation and seizure of items, inspecting means of transport used for export, duplicating documents and bank-account examinations. The export operator who refuses or obstructs any regulatory inspection, can receive a warning, but can be also punished with a fine ranging from RMB 100,000 (about US$ 15.109) to RMB 300,000 (about US$ 45.328). In case of violations of the export controls, penalties may consist of amongst others warnings, confiscation, business suspension, revocation of export business qualification and fines of up to RMB 5 million (about US$ 755.857) or 10 times the gains made from the illegal activities. At last export control violation constitutes a crime, so criminal penalties also apply. Conclusion CECL clearly is China’s answer to also stricter controls from the US and the EU. Every exporter or importer of items covered by CECL should take notice of this new law and take proper measures to ensure compliance with the law.