Comparative Law – European Chinese Law Research Hub

Regulation of Cryptoassets in Mainland China, Hong Kong, Macau & Taiwan

2. March 2022

A new paper by Aleksandr Alekseenko

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Investors increasingly diversify their investment portfolios by investing in cryptocurrencies. Cryptocurrencies however are not a safe haven for investors. Bitcoin is extremely volatile and can bring both exceptionally high profits and terrible losses, seemingly due to market manipulations. The question of how cryptoassets should be regulated is approached differently by jurisdictions. This paper compares the current regulatory frameworks for cryptoassets of Mainland China, Hong Kong, Macau and Taiwan.

China is among the world’s leaders in e-commerce and FinTech, but despite this fact the Peoples Bank of China (PBOC) banned cryptocurrencies and initial coin offering (ICO). From 2013-2021 the PBOC issued several notices which obliged financial institutions not to provide transactions of digital financial assets. The People’s Republic of China also proclaimed that Bitcoin and ICO’s are tools for illegal fundraising, money-laundering, and scamming, and that therefore all activities using them violate national laws and regulations. The worries are not unfounded: In one case tried before the Heilongjiang High Court, the defendant had exchanged illegal gains money from RMB into 1,200 Bitcoins and transferred them to Macau, there converted the Bitcoins into Hong Kong Dollar and consequently exchanged them for RMB to transfer the money back to mainland China.

In addition, PRC authorities have pointed out that cryptocurrency production requires a lot of electricity. At the same time, energy is needed by organizations that produce goods and suffer from a shortage of electricity. Therefore, the second reason for prohibition is energy efficiency and concern for the environment. In order to discourage citizens from investing in projects based on digital tokens, Mainland Chinese courts do not protect the rights of investors, indicating that investors themselves are violators who expect to receive illegal income.

Macau’s authorities closely cooperate with mainland China to prevent money laundering through digital financial assets and therefore prohibited transactions with Bitcoin and banned ICO. It reduces opportunities for illegal activities and protects investors from investing in projects that exist as a pyramid scheme. In comparison with Mainland China and Macau, Taiwan has a more liberal approach to cryptoassets regulation and restricts only financial institutions from dealing with Bitcoin. Other companies may sell and buy goods for Bitcoins.

In Hong Kong, cryptocurrency and tokens are only strictly regulated by the Hong Kong Securities and Exchange Commission (SEC) if they have the characteristics of securities, bonds or futures. The SEC doesn’t regulate Bitcoin because it is neither a means of payment nor any other regulated asset. Hong Kong’s authorities pay most attention to digital platforms, which provide opportunities for ICO’s and cryptofundraising. In this regard, the SEC has issued some standards that clarify the licensing procedure for cryptocurrency exchanges and organizations that manage digital financial assets.

Thus, although Hong Kong does not create a liberal haven for crypto business, an entire segment of Hong Kong’s digital assets market is in a regulatory “gray” area. As a result, both Taiwan and Hong Kong de facto serve as bridges from the market of digital financial assets to the PRC. Mainland investors may use them as a “crypto-hub”. For the case of Hong Kong, this situation fully fits the principle of “one country – two systems.”

Find Dr. Aleksandr Alekseenko’s paper, published with the China and WTO Review, here. Dr. Aleksandr Alekseenko is an Associate Professor in the Faculty of Law of the Saint-Petersburg State University, with a research focus on Commercial Law, Investment Law and Legal Regulation of digital Financial Assets. He received his LL.M from the Far Eastern Federal University (Vladivostok) and a PhD in laws from the Ural State Law University (Yekaterinburg). He studied Chinese language at the Linyi Normal University and is the principal investigator and participant of scientific project of Russian Foundation for Basic Research on the topic of e-commerce legal regulation and new technologies in the sphere of investments.

After Difference: A Meta-Comparative Study of Chinese Encounters with Foreign Comparative Law

12. April 2021

A new paper by Samuli Seppänen

European and American comparative lawyers’ engagement with so-called “radically different” legal systems has generated much introspection and methodological controversy among comparative lawyers. Is it possible to truly understand “radically different” foreign law? Can one understand foreign law through translations? What right do comparatists have to write about areas of law which are outside their field of expertise, in the first place? Similar questions have long been raised in comparative law, but they have gained new momentum as American and European comparatists have begun to examine “non-Western” legal systems.

Yet, there remains a striking asymmetry in how such questions are conventionally posed. While many American and European comparatists have expressed concerns about intercultural comparisons, few studies have examined whether the experience of “radical difference” and its side effects—self-doubt, suspicion of cultural bias, and feelings of inadequacy—affect comparative lawyers in “radically different” legal cultures, such as China.

My article “After Difference: A Meta-Comparative Study of Chinese Encounters with Foreign Comparative Law” (free draft) examines perceptions of difference in Chinese comparative law. I seek to demonstrate that labelling foreign law as “different” or “similar” carries different political implications in China than in liberal democratic societies, such as Britain and the United States. China’s governing Communist Party sees the promotion of Western constitutional democracy as an “attempt to undermine the current leadership and the socialism with Chinese characteristics.” The Chinese leadership has also instructed legal scholars and other social scientists to develop original theories based on China’s practical conditions.

In this political climate, an emphasis on “similarity” in comparative legal scholarship often coincides with a willingness to adopt liberal legal and political reforms, whereas a conspicuous preference for “difference” implies resistance to such reforms. A legal institution that is described as foreign, and yet familiar, can be more easily advanced in China than a legal institution that can never be “truly” understood or one that is portrayed as being “radically” different from Chinese law.

Comparative law has also supported mainstream legal scholars who try to find a middle ground between conservative socialism and devotional liberalism. A comparative law focus on the social purposes of legal institutions, for instance, has allowed Chinese comparatists to denounce politically sensitive foreign legal institutions—such as the judicial review of legislation—which supposedly serve the idiosyncratic purposes of Western societies, while at the same time endorsing and advocating politically less controversial legal reforms.

To be sure, there are many nuances in Chinese comparative law. An emphasis on difference can be a liberal strategy, whereas arguments about similarity have been used to resist legal and political reforms. It is also true that many Chinese comparatists are sufficiently familiar with American and European law so as not to experience them as exotic. The question of (radical) difference and similarity also relates to Chinese legal scholars’ professional identity and worldview. Whereas American and European comparatists may view Chinese comparatists (and indeed, all students of Chinese law) as being on the margins of their discipline, Chinese mainstream comparatists are committed to learning and understanding foreign law. This attitude is not limited to Chinese studies of European and American law, but it can also be seen in some Chinese research on non-European legal systems, such as Hindu law.

Finally, the larger argument of my Article is that statements about difference and similarity—and attitudes towards understanding, in general—should be understood in light of the individual scholar’s ideological project. There is no ideologically innocent way to relate to foreign legal systems either in China or abroad. Scholars who encounter legal systems that at first seem difficult or even impossible to “understand” would do well to remember that difference and similarity are matters of perception—and, it would appear, not the most fruitful theoretical basis for legal research.

Find Samuli Seppänen’s free draft of “After Difference: A Meta-Comparative Study of Chinese Encounters with Foreign Comparative Law” here. He is an Associate Professor at the Chinese University of Hong Kong. His research focuses on legal and political thought in China and developmental aspects of international law. Reach out to him at sseppanen(at)cuhk.edu.hk.

American Constitutional Law in China

22. March 2021

A new paper by Han Liu

American constitutional law has influenced various countries, but what about China? For conventional account, the answer is, little, given China’s socialist constitutional system and continental legal thinking. Diving into a relatively unexplored domain, Han Liu traces the reception of American constitutional law in post-Reform China, arguing that American constitutional law has greatly influenced Chinese constitutional thinking, sometimes even generating practical reform projects (article, free draft).

One influential Chinese text book on US-American Constitutional Law

To be sure, American constitutionalism had almost no influence in proto-socialist China (1949–1979). In 1979, as China and the United States established diplomatic relations, interest in American constitutional system began to surge. Translations, studies, and introductions about American constitutional law started to grow rapidly. This academic project also influenced practice, especially by providing an example of the separation of powers and judicial review.

Han Liu points out that there has been a great change in Chinese understandings of American constitutionalism, that is, from “regime-centered” to “court-centered”. These two exerted different practical influences. In the 1980s, American constitutionalism was generally tantamount to tripartite “separation of powers” to Chinese intellectuals, legal or otherwise, and even political leaders. Deng famously said that “I always criticize the American power holders for having three governments.” Despite Deng’s critique, others tried, without success, to learn from the American example, bringing checks and balances into the Chinese system.

But at the turn of the century, especially in the early 2000s, American constitutionalism shows a different face. For many legal scholars and lawyers, it was understood as synonomous with judicial review. They came to believe that a constitution remains a dead letter if not used in courts and litigations, as in the US. The US Supreme Court, with its power to enforce the Constitution, now took the center stage in the Chinese understandings. Its Chinese counterpart, from 2001 to 2008, even introduced an American model of judicial review into the Chinese judicial system.

Why has this happened? It was not simply a “response-impact” mechanism. Rather, China’s different receptive attitudes towards American constitutional law hinge upon China’s own frame of reference in the legal reform. As the authorities began to construct “the rule of law” in the 1990s, the Constitution had to be activated in practice. Then the American model became attractive.

In the space between theory and practice, the Chinese constitutional mind becomes receptive to American influence.

This logic also explains the decline of American influence in Chinese constitutional theory and practice in the last ten years. While the authorities declare the principle of “governing according to the constitution”, they at the same time stress China’s distinction from “Western” models, especially the US. In due course, American constitutionalism in China will perhaps no longer be the single idol to adore, let alone the best model to follow.

Looking back, American constitutionalism’s impacts on Chinese constitutional development depend upon the internal logic and dynamics of Chinese reform, which determines the optics in the reception of foreign law. The fundamental change in Chinese understandings of American constitutionalism reflects the great transformation in the deep structure of Chinese ideology and jurisprudence.

Han Liu is Associate Professor at Tsinghua University Law School and Deputy Director of Tsinghua Institute for Law and AI. He researches comparative constitutional law, cyber law and policies, and legal theory. His recent paper ‘Regime-Centered and Court-Centered Understandings: The Reception of American Constitutional Law in Contemporary China’ (free draft here) appears in American Journal of Comparative Law, selected as one of the top 10 comparative law articles in the Best of 2020 Law Journals from Oxford University Press. His book Think Big and Beyond Yourself: Law as a Way of Thinking (in Chinese) won “The 10 Best Books 2020 in Law” in China. His online course “Legal Thinking” has attracted more than 70, 000 subscribers. Reach out to him at liuhan[at]tsinghua.edu.cn.

How Comprehensive is Chinese Data Protection Law?

1. February 2021

A new paper by Anja Geller

When I told people that I am writing an article about Chinese data protection law, the most common reaction was the question “does that even exist?” The surprised and doubtful undertone motivated me to find a convincing answer. On my way, I encountered some obstacles. There is a plethora of regulations with different scopes, legislation bodies and legal effects. Even for specialised Chinese lawyers, it can be difficult to figure out which norms apply in a certain case. In the end, I chose to restrict my analysis to the 13 most important Chinese regulations with a nationwide scope of application.

Lacking a unified law, these norms have to be seen in combination to determine the comprehensiveness of Chinese data protection law. As the European General Data Protection Regulation (GDPR) is one of the most comprehensive and modern data protection regimes, I used it as a framework. When viewing the Chinese norms against this backdrop, it quickly becomes clear that especially the non-binding norms and drafted provisions are the most progressive and strict ones. They show that the Chinese legislators are moving towards the European system rather than the US or a taking a third way.

However, as is common for such cases of legal orientation, “Chinese characteristics” remain. For example, strong divergences exist in the area of administrative penalties. Instead of a focus on severe monetary penalties similar to the GDPR, there are many different sanctions. Starting with warnings and orders to correct, infringers may face a suspension or closure of their business, revocation of their business licences or even a definitive ban from the profession. Furthermore, measures of “naming and shaming” such as the publication of these sanctions in the “Social Credit Register” and other public announcements may be ordered. Compared to the European medieval equivalent of the pillory, such punishments have a long and living tradition in China. Especially the emerging “Social Credit System” relies on such punishments and is presented as a crucial tool for making citizens and companies comply with the law.

Another “Chinese characteristic” is the “real-name registration” requirement, which has already existed in many other fields for quite some time. Providers of network access and other digital services have to require users to provide true identity information before allowing access. Although this may help law enforcement in digital environments, there are well-founded fears concerning its negative implications on privacy and the freedom of speech.

Nevertheless, there are also a lot of positive developments from a European data protection perspective. The Chinese legislators have been very active in recent times and many new regulations and drafts appear on an annual basis. In fact, on 21 October 2020, one month after the online publication of my article, perhaps the most significant draft was published: the “Law of the People’s Republic of China on the Protection of Personal Information (Draft)” (中华人民共和国个人信息保护法（草案）). In the article, I covered an already very promising draft of the same name, which was proposed by several delegates of the National People’s Congress (NPC) in 2017. The 2020 draft, on the other side, was published by the Standing Committee of the NPC as a whole, which gives it much more weight. Both drafts intend to become the first national “laws” that aim to protect the right to personal information as a primary goal. All other regulations that share this as a central objective are on a lower level in the hierarchy of norms.

A quick comparison of their lengths and the amount of their articles – 70 compared to 44 – suggests that the 2020 draft is even more comprehensive. Among the most striking innovations is the broad extraterritorial applicability of the 2020 draft, which is relatively similar to the GDPR. One could say that reciprocity prevails here. As the introduction of the European rules have led to much discussion and controversy, it will be interesting to see what the international response will be as this draft becomes more widely known. Since a more detailed treatment of this new draft would go beyond the scope of this blog post, I refer to the comparisons here, here and here (all in Chinese), and a comprehensive analysis here (English). When and in which form this draft will be enacted is still unclear. Nonetheless, it shows yet again that the Chinese lawmakers are actively working to create an increasingly comprehensive data protection regime.

Therefore, to the question whether or not a Chinese data protection law exists, the short answer is: yes.

The paper “How Comprehensive Is Chinese Data Protection Law? A Systematisation of Chinese Data Protection Law from a European Perspective” appeared in GRUR International 2020, 1191-1203. It is available via open access here.

Anja Geller is a PhD candidate at the Ludwig-Maximilians-Universität and a junior research fellow at the Max Planck Institute for Innovation and Competition, Munich, Germany. Contact her via Anja.Geller@ip.mpg.de or via Linkedin.

Chinese influence – New perspectives on international arbitration regimes

3. January 2021

A new paper by Ulla Liukkunen

Cross-border dispute resolution is changing as a part of the Belt and Road Initiative (BRI) development. With the BRI, Chinese interest in international commercial arbitration has gained a new dimension as BRI promotes the expansion of Chinese dispute resolution institutions and their international competitiveness. Ulla Liukkunen finds that these developments challenge the current narrative of international arbitration, underlining the connection between the legal regime of arbitration and endeavours by the state. In her recent paper (PDF), she explores private international law as a framework for discussion of noteworthy characteristics of the Chinese legal system and legal culture that are present in international commercial arbitration.

The People’s Republic of China has made initiatives to develop a joint dispute resolution circle for BRI countries so that there would be an area in the BRI sphere which offers effective and foreseeable dispute resolution based on jurisdictions close to the disputing parties. In 2016, upon an order by the State Council, Shanghai pressed forward with the creation of an international commercial arbitration system which has since then developed rapidly: The Shanghai International Arbitration Centre has witnessed an increase in the number of cases, and has launched a series of initiatives to promote the development of arbitration. In 2018, the CCP’s Central Committee and the State Council issued an Opinion calling the Supreme People’s Court to set up international commercial courts, to take the lead in setting up a committee of international commercial experts, and to support a BRI-related international commercial dispute resolution mechanism. The aim is that the BRI dispute resolution mechanism would form a convenient, speedy and low-cost “one-stop” dispute resolution centre to provide high-quality and efficient legal services for parties involved in BRI construction.

In the theory of international commercial arbitration, elaboration of a doctrine based on the claimed autonomous nature of international arbitration exists, resting on views of self-standing transnational legal standards that distance arbitration from state-bound laws as well as a state-bound setting. The growing role of China in international arbitration ‒ and the state interest embedded therein ‒ challenges this picture which has been built within international arbitration doctrine and which has resulted in loosening the scene of the role of state law in arbitration.

A rethink of comparative methodology is proposed in order to promote an understanding of Chinese law in the arbitration process. This article argues for adopting micro-macro comparison as a methodological approach in arbitration. Micro-macro comparison as a process penetrates the decision-making of arbitrators, also governing the conflict-of-law dimension.

Moreover, considerations of the Chinese private international law and arbitration regime speak for a broader comparative research perspective towards international commercial arbitration. In the international commercial arbitration frame under scrutiny, we can see the conception of party autonomy placed in a Chinese context where the state is shaping the still relatively young private international law frame for exercise of that freedom and certain institutional structures are advocated where party autonomy is placed. Chinese development underlines the connection between the legal regime of arbitration and endeavours by the state, thereby requiring assessment of party autonomy from the perspective of the regulatory framework of private international law that expresses the complex dichotomy between private and public interests.

The article “Chinese context and complexities — comparative law and private international law facing new normativities in international commercial arbitration” is among the first in the new open access publication Ius Comparatum launched by the International Academy of Comparative Law.

Professor Liukkunen examines international commercial arbitration from the perspective of Chinese developments, noting that, in global terms, the organization of cross-border dispute resolution is changing as a part of the Belt and Road Initiative (BRI) development. With the BRI, Chinese interest in international commercial arbitration has gained a new dimension as BRI promotes the expansion of Chinese dispute resolution institutions and their international competitiveness.

European Chinese Law Research Hub

Tag: Comparative Law

A new paper by Aleksandr Alekseenko

A new paper by Samuli Seppänen

A new paper by Han Liu

A new paper by Anja Geller

A new paper by Ulla Liukkunen