Chinese Law Prof Blog

Editor: Donald C. Clarke
George Washington University Law School

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Friday, March 29, 2013

Hotel Loses Case in Breaching Contract for “Stability Maintenance”

Here's a fascinating case that makes for an interesting data point in what we think we know about the Chinese legal system. An anti-discrimination NGO reserved rooms at a hotel in Suzhou for a conference. The police got wind of it and instructed the hotel to cancel the reservations in the name of stability maintenance. The hotel, needless to say, did as it was told. Yawn. Dog bites man.

Now it gets interesting. The NGO sued the hotel for damages in a Suzhou. What would we expect? That no court would accept the suit, and that if it did, the plaintiffs certainly would not win. But what happened is that the court not only accepted the suit, but found for the plaintiffs. It rejected the hotel's argument that the police order to close was a kind of force majeure and that the state had expropriated the rooms ("政府临时征用客房开会"). But apparently the government did not in fact take the rooms in question for some other purpose, and the court rejected the force majeure argument, stating that it wasn't one of the events of force majeure spelled out in the contract.

Astonishingly, the vice-chief of the local police station, Mr. Pan, appeared in court and testified that they had indeed orally ordered the hotel not to allow the meeting to go forward:

    (潘):2012年4月29日左右,我们派出所接到上级相关部门的口头通知,五一期间维稳工作需要,对辖区内酒店宾馆要求不允许接待从事会议的集会活动……为此,我们口头要求莫泰公司停止接待活动。这一次主要目的是不允许大型的会议举行。

        Pan: Around April 29, 2012, our station received an oral notice from the relevant superior departments saying that during the period of May 1st, because of the needs of stability maintenance work, hotels within our jurisdiction were requested not to permit the hosting of meetings. . . . Because of this, we orally requested the Motai Company [i.e., the hotel] to discontinue their hosting activities. The main objective at that time was not to permit large-scale meetings to go ahead.

  (法院)问:关于公安的此次举措有无书面的材料? 

        Court: Are there any written materials pertaining to this measure by the police?

  (潘)答:没有的,都是自上到下口头传达的。当时的平江公安分局治安大队和我们所的民警一起到被告莫泰酒店向他们的店长封晓军做工作的。

        Pan: No. Everything was orally transmitted from above to below. At the time, officers from the Security Brigade of the Pingjiang Public Security Branch Bureau went with policemen from our station to the defendant Motai Hotel and worked on the hotel manager Feng Xiaojun. [I have translated "做工作" as "worked on"; the basic idea of the term is to try to persuade someone, but one can imagine it was done in a pretty coercive atmosphere.]

It's hard not to have some sympathy for the hotel here. It's unrealistic to suppose that they could just have blown the police off; I would have thought there was indeed a good case to be made for force majeure. What message is the court sending to hotels in cases like this? That they should not listen to police instructions? It seems extraordinary that a court, especially on in the same city as the police in question, should have come up with a judgment like this. Does this mean that courts are not as subservient to local powerholders as we thought? Or is there some fascinating behind-the-scenes story that explains this apparent anomaly? My inclination is to suspect the latter, but if enough data points like this accumulate then the former will start looking more plausible.

It's the old question of whether you make the observations fit the theory ("My theory tells me that this stuff doesn't happen, so there must be something fishy about the observation") or the theory fit the observations ("Time to reassess what we think we know about Chinese courts"). Although many people think the first method is obviously wrong - of COURSE we should adjust our theory to fit the facts, right? - in practice we constantly, and often correctly, question the validity of our observations precisely because they seem so out of whack with a theory in which we have confidence. Remember the Italian scientists who thought they might have found neutrinos that traveled faster than light? Even they doubted their own findings.

Here are two news reports:

March 29, 2013 in Commentary, News - Chinese Law | Permalink | Comments (0)

Wednesday, March 27, 2013

MOFCOM solicits comments on draft regulation on merger remedies

The headline says it all. Here's the link to the draft regulation. The deadline for comments is April 26, 2013. The ABA's International Law section and its Antitrust section are assembling a group to draft comments; the group's work needs to be done by April 12 in order to allow sufficient time for internal review. If interested in participating, contact Ms. Yee Wah Chin (ywchin at ywc-antitrust.com), the Deputy Policy Officer of the Section of International Law.

March 27, 2013 in News - Chinese Law | Permalink | Comments (0)

Sunday, March 24, 2013

New developments in China-Philippines UNCLOS arbitration: tribunal appoints representative for China

In the latest development in the China-Philippines UNCLOS arbitration, the International Tribunal for the Law of the Sea has appointed a representative for China, since China failed to do so. 

I've previously blogged about this arbitration (in chronological order, herehere, and here). China has objected to the arbitration on the substantive grounds that the complaint lacks merit, and possibly on procedural grounds that the tribunal for various reasons doesn't have jurisdiction. What the Chinese government doesn't seem to understand (perhaps willfully) is that you don't get to be your own judge of these issues; whether the complaint has merit and whether the tribunal has jurisdiction are things the tribunal decides. To fight the claim in no way acknowledges its legitimacy. What it does acknowledge is the legitimacy of the UNCLOS dispute settlement system. That's presumably an important part of UNCLOS. Does China really want to promote the principle that the system applies only to states that consent to its jurisdiction after the dispute arises?

March 24, 2013 in Commentary, News - Chinese Law | Permalink | Comments (0)

Monday, March 18, 2013

Job openings at the Congressional-Executive Commission on China

The CECC has openings for two professional staff members and a communications director. The deadline is April 8th. Here's the announcement:

Professional Staff Members (2)

The Congressional-Executive Commission on China is a bipartisan commission created by Congress in 2000 to monitor and report on human rights and rule of law developments in China. The Commission consists of Senators, Members of the House of Representatives, and senior officials from the Administration. The Commission holds hearings, issues an Annual Report, and maintains a database of political prisoners in China, among other activities. For more information on the Commission, see www.cecc.gov.

The Commission is seeking professional staff members to assist in monitoring and reporting on substantive issues pertaining to the freedom of religion and criminal justice portfolios. The professional staff member will assist in assessing China's compliance or noncompliance with international human rights standards and Chinese domestic law. Successful candidates should have substantive background and/or an interest in one or more of these issue areas. Successful candidates should also possess the necessary Chinese language, English writing, and communication skills to effectively research, analyze, and explain such developments to U.S. policymakers and the broader public.

Main duties:

  • Monitoring and researching Chinese and English language sources (media, government, NGO) for developments relating to their issue area.
  • Identifying and analyzing key developments and reporting their significance orally and in writing, including through drafting sections of the Commission's Annual Reports, short analysis pieces, public statements, and press releases.
  • Researching political prisoner cases and creating and maintaining case records in the CECC Political Prisoner Database.
  • Assisting in organizing CECC public hearings and roundtables.
  • Staff member also may be asked to travel to U.S. cities, China, or other foreign locations on official business.

Qualifications:

  • Candidates must be a U.S. citizen.
  • Very strong demonstrated ability to speak, read, write, and perform research in Chinese (Mandarin) is required.
  • The successful candidate will likely have worked or studied in mainland China, Taiwan, or Hong Kong.
  • Candidates will preferably have a law degree or a Ph.D. or M.A. in political science, history, business, economics, or other social sciences. B.A. candidates with very strong credentials will also be considered.
  • Strong oral and written communication skills, and the interpersonal skills and enthusiasm to work under tight deadlines and as part of a team.

Application Procedure:

  • Please submit a brief cover letter, resume, short writing sample (5 pages or less), and the names and contact information for two references to Judy Wright, CECC Director of Administration, via e-mail at judy.wright@mail.house.gov or via FAX at 202-226-2915. PLEASE NO PHONE CALLS. The deadline for applications is Monday, April 8, 2013, by 11:59 PM, EDT. Applications received after this deadline will not be considered.
  • The Congressional-Executive Commission on China is an equal opportunity employer.

Communications Director

The Congressional-Executive Commission on China is a bipartisan commission created by Congress in 2000 to monitor and report on human rights and rule of law developments in China. The Commission consists of Senators, Members of the House of Representatives, and senior officials from the Administration. The Commission holds hearings, issues an Annual Report, and maintains a database of political prisoners in China, among other activities. For more information on the Commission, see www.cecc.gov.

The Commission is seeking a communications director to be responsible for developing and implementing a communications and outreach strategy to increase the accessibility, visibility, and relevance of the Commission's work to key stakeholders, including Commissioners, Congress, the Executive Branch, media, non-governmental organizations, and the general public.

Main duties:

  • Develop and implement a communications and outreach strategy for the Commission's key stakeholders, including Commissioners, Congress, the Executive Branch, media, non-governmental organizations, and the general public.
  • Develop and implement a strategy for increasing accessibility to Commission work products, including newsletters, political prisoner records, special reports, and the Annual Report.
  • Increase media coverage and raise awareness on the Hill and to the general public regarding the Commission's work.
  • Maintain the Commission's new Web site and social media sites (Twitter, Facebook).
  • Draft, edit, and distribute Commission statements, press releases, newsletters, new media content, and event announcements.
  • Develop, plan, and provide logistical support for Commission events, including hearings, roundtables, and briefings.
  • Monitor, track, and assess the effectiveness of the Commission's outreach efforts.

Qualifications:

  • Candidates must be a U.S. citizen.
  • Candidates will have a B.A. with relevant work experience.
  • Some background in layout and design (including for Web sites and publications) is desirable.
  • Ability to speak and read Chinese is preferable.
  • Strong oral and written communication skills, and the interpersonal skills and enthusiasm to work under tight deadlines and as part of a team.

Application Procedure:

  • Please submit a brief cover letter, resume, short writing sample (5 pages or less), and the names and contact information for two references to Judy Wright, CECC Director of Administration, via e-mail at judy.wright@mail.house.gov or via FAX at 202-226-2915. PLEASE NO PHONE CALLS. The deadline for applications is Monday, April 8, 2013, by 11:59 PM, EDT. Applications received after this deadline will not be considered.
  • The Congressional-Executive Commission on China is an equal opportunity employer.

 

March 18, 2013 in Internships/Employment Opportunities | Permalink | Comments (0) | TrackBack (0)

Supreme People's Court Work Report, 2013

Here's the text of Wang Shengjun's Supreme People's Court Work Report presented to the National People's Congress earlier this month.

March 18, 2013 in News - Chinese Law, Research Resources | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 6, 2013

Risk of Loss of Freedom for Serving as Legal Representative of a Company in China

That's the title of this very important blog post from the Chinese Lawyers in Shanghai blog. Yes, if your company owes money to suppliers or employees, you, the local expat manager and legal rep, may find yourself detained until the creditors are satisfied even though it's a corporate debt over which you may have no control. If you ever might be in this position, read this post.

March 6, 2013 in Commentary | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 5, 2013

USCC Hearing on Corporate Accountability, Access to Credit, and Access to Markets in China’s Financial System

The US-China Economic and Security Review Commission (USCC) is holding a hearing this Thursday in Washington, DC on the above subject. Among those testifying will be Prof. Paul Gillis, the author of the excellent China Accounting Blog. His testimony is a good summary and review of the current problems faced by the SEC and the PCAOB in their efforts to get information about audit procedures from Big Four-affiliated Chinese accounting firms. (I say "affiliated" because the Chinese firms are separately owned and I don't know what kind of contractual arrangements actually bind them to the foreign firms whose name they share.)

Because I have provided expert testimony on this issue, it's probably important to add that I don't necessarily agree with everything Prof. Gillis says in his testimony. In particular, I have expressed here my own views on the issues of how far China's laws on state secrets and archives actually constrain the auditing firms.

March 5, 2013 in Commentary, Conferences, News - Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Ghost Cities: What Do They Mean?

First ghost weddings; now ghost cities.

Ghost cities in China have been in the news a lot lately. The term refers to places like Ordos in Inner Mongolia, where a vast expanse of residential and office buildings lies uninhabited, the product of somebody’s miscalculation as to where people would like to live and work.

Ghost cities have often been Exhibit A in various arguments about China’s economic problems, in particular the argument that the system massively misallocates investment. But wherever there is conventional wisdom, there’s going to be contrarian pushback because it’s always fun to challenge conventional wisdom. Nevertheless, I don’t find two recent examples terribly convincing.

First, the contrarians have been talking up a recent report by Jonathan Anderson of Emerging Advisors Group provocatively entitled “Hurray for Ghost Cities.” I don’t have a copy of the report, but according to a description of it at the Wall Street Journal’s China Real Time Report, it is less than a resounding hurray. In fact, the argument (again, as reported) seems to be only that ghost cities aren’t quite as bad as you think, because if the money hadn’t been invested in ghost cities, it might have been invested in creating overcapacity in industry, which would have been much worse for the economy:

His point is that by investing in “ghost cities” to underpin growth, China saved itself from even more unwise overinvestment in areas that could have done lasting damage to the economy, such as manufacturing.

[text omitted]

They’ve certainly been a black hole, he says, but a hole that has emptied largely into the equally dark vaults of China’s state-owned banks, where bad debts can remain buried for a long time.

“Lesson learned: If you’re going to waste capital best to waste it completely, where it will do the least damage to everyone else,” writes Mr. Anderson.

Or, to put it another way, he offers: “Why truly crap investment projects help ‘save’ China.”

As George Will would say, in a paragraph all its own: "Well."

Anderson’s analysis in no way undermines the idea that ghost cities represent a massive misallocation of investment. If the money had been spent on digging holes and then filling them up again, Anderson could equally well have written “Hurray for Holes in the Ground.” Anyone who cites this piece as support for the contrarian case hasn’t read beyond the headline.

Second, in a recent column in the New York Times, Bill Bishop cites Tom Miller’s book “China’s Urban Billion” as being dismissive of the “ghost cities” problem. Here’s what Miller writes, as quoted by Bishop:

The truth of the matter is that China is not building too many apartments, and a handful of empty urban districts are not evidence of a giant property bubble. Chinese property investment may be inefficient, but it is sustained by a huge, growing and sustainable demand for new housing. …

China’s current modern housing stock, defined as homes with individual bathrooms and kitchens, is around 150 million units. But 200 million migrant workers currently live in dormitories or slum housing. If one believes that the urban poor deserve to live in proper flats, the corollary is that Chinese cities actually have a significant shortage of housing – somewhere in the region of 70 million units. China is not building too many new apartments; it is building too few.

My first comment is about what Bill Bishop says, with which (if I understand him correctly) I must respectfully disagree. I can’t see how what Miller says counts as dismissive of the ghost cities problem. Chinese cities may well have a significant shortage of housing. But the fact that people may want housing in Beijing or Shanghai or any one of hundreds of other cities does not mean that they want it in Ordos. Of course it is silly to argue that overinvestment in Ordos means there must be a housing bubble everywhere in China, but it would be equally silly to argue that underinvestment in some places means that the phenomenon of ghost cities can be dismissed as unimportant. To be clear, I don’t read Miller as making that argument in this excerpt. That’s why I disagree with Bishop’s citing Miller in support of the contrarian thesis.

My second comment is on what Miller says here. The argument that there is overinvestment in housing, as I understand it, does not address the issue of who deserves what. It addresses the issue of what kind of return one can expect from the investment. If it costs $10 million to build a block of 100 “proper flats” for the urban poor, the project won’t even break even unless the urban poor have $100,000 per family to spend on flats. If they don’t, then we have to ask where the money will come from. Economic analysis cannot, of course, answer the political question of whether such housing should be subsidized in some way, but it’s useful for thinking about the question of whether it will need to be subsidized. Merely asserting that poor people will need housing, and deserve it, doesn’t help us answer the question of whether housing developers will make back their investment, and therefore whether the banks from which they borrow will or will not get stuck with a big pile of non-performing loans.

If the housing is intended for a class of people who can afford it, then that is of course a different story. But Miller’s argument that China has too little housing is premised on the existence of precisely that group that can’t currently afford a decent flat.

I should add that I can’t agree with the way Miller loads the emotional dice here: apparently, if you think there’s overinvestment in housing in China, you’re not only wrong on the economics, but you’re also a bad person who thinks that the urban poor don’t deserve to live in proper flats. I don’t see this as a useful way to start a discussion of a complex issue.

 

 

March 5, 2013 in Commentary | Permalink | Comments (0) | TrackBack (0)

Four Funerals and a Wedding: Chinese Police Crack Down on "Ghost Weddings"

This heading is, alas, not my own. It comes from my colleague, Jonathan Turley, to whom I forwarded this item knowing that he could say something wittier about it than I could.

March 5, 2013 in Commentary, News - Chinese Law | Permalink | Comments (0) | TrackBack (0)