Issuing Body: Supreme People's Court
Issuing Date: December 14, 2009
Effective Date: January 4, 2010

China's Supreme People's Court has issued a set of rules that, while technical and detail-oriented in nature, are important to foreign businesses that must routinely work with and in China's extensive administrative licensing system. The nation's top court issued the Regulations on Various Issues Concerning the Hearing of Cases Involving Administrative Licenses (Administrative License Regulations) on December 14, 2009, hoping to assure enforcement of China's Administrative License Law and unify standards nationwide for the hearing of lawsuits involving administrative licenses under the Administrative Litigation Law.

Background

The Administrative License Law, which has been in effect since 2004, broadly governs the administrative actions by which government agencies in China allow individuals, companies and other organizations to engage in specific activities after reviewing and examining applications. A number of agencies have the power to grant administrative licenses.

The administrative licensing system in China is crucial to foreign business organizations in that every stage of organization, from establishment to operation, development and dissolution, must be done within what is broadly known as the administrative licensing system. For example, foreign-invested enterprises (FIEs) must be approved by a foreign investment approval authority and registered with an administration of industry and commerce, and trademarks must be registered with the Trademark Office.

Administrative licensing is also important to foreign businesspeople. For example, every foreigner must obtain a visa and work permit before being employed in China. Visas and work permits likewise fall within the scope of China's administrative license law.

The Supreme People's Court acted, in part, because the number of lawsuits in China that involve administrative licenses has risen in recent years. The Administrative License Regulations were issued after six years of review and revision by the court. They provide clarification on several key aspects for the hearing of lawsuits related to administrative licenses that have raised practical challenges for courts across China.

Scope of Accepting and Hearing Cases

Under the Administrative Litigation Law, which was enacted in1990, if an administrative agency refuses to grant a permit or license, or if the agency fails to reply to an applicant that believes itself to be qualified for a permit or license, the applicant may bring a lawsuit against the administrative agency before the court, and the court should accept the case. The applicant for an administrative license can be an individual, legal person or an organization. The Administrative License Regulations further clarify the guidelines for accepting and hearing cases involving a dispute related to administrative licensing:

• If an individual, legal person or other organization believes a decision about an administrative license made by an administrative agency, or the agency's inaction (e.g., failing to reply to application), infringes on his or its legal rights and interests, the individual, legal person or other organization may bring a lawsuit against the administrative agency before the court, and the court should accept the case.
• If an individual, legal person or other organization believes an administrative act in connection with a change, renewal, rescission or cancellation of an administrative license, or the inaction of an agency, infringes on his or its legal rights and interests, the individual, legal person or other organization may bring a lawsuit against the administrative agency before the court, and the court should accept the case.
• According to China's Administrative License Law, agencies must publish administrative license decisions publicly, and the public has the right to view such decisions, unless the license involves state secrets, commercial secrets or individual privacy. If an individual, legal person or other organization believes the failure to publish an administrative license, or the failure to provide records relating to the supervision and examination of administrative licenses, infringes on his or its legal rights and interests, the individual, legal person or other organization may bring a lawsuit against the agency before the court, and the court should accept the case.
• In accordance with the Administrative License Regulations, courts are not to accept cases that merely involve notification activities, such as a request to add or correct application documents, or the date of a hearing. The regulations thus attempt to make a distinction between procedural formalities and substantive activity, such as the failure to grant a license. In general, notification activities are those that do not exert a decisive impact on the license.

Defendant Qualification

According to the Administrative Litigation Law, the defendant in an administrative license case should be the agency that makes the decision regarding the administrative license. The Administrative License Regulations further clarify that:

• If an administrative licensing decision must be approved by an agency at a higher level after a lower-level agency has accepted the application for an administrative license, the lower-level and higher-level agencies are to be co-defendants when a plaintiff brings a lawsuit.
• If an administrative license must be examined preliminarily by an agency at a lower level and then is simply reported to an agency at a higher level, when a plaintiff brings a lawsuit with regard to the preliminary examination or report, the agency at a lower level is the defendant.

Statutory Processing Time Limit

According to the Administrative License Law, the designated time limit for an agency to process an administrative license application is calculated from the date on which it accepts the application for an administrative license. There has been some confusion, however, regarding electronic submissions (i.e., fax, email, the Internet, etc.) and how to calculate that time frame. The Administrative License Regulations clarify that the time limit for processing should be calculated from the date on which the fax, email or other data message enters the specialized application or processing system designated by the agency; if the message must be acknowledged for receipt, the time limit is calculated from the date on which the applicant receives such an acknowledgement of receipt.

Burden of Proof

Under China's Administrative Litigation Law, an administrative agency, as defendant, assumes the burden of proof and must provide evidence in support of its decision to grant or reject an administrative license, as well as the laws, rules or other regulatory documents on which the decision is based. In accordance with a previous Supreme People's Court publication released in 2002—the Regulations on Various Issues Concerning Proof of Administrative Litigation—if the defendant agency does not provide evidence within a statutory time limit, the court is supposed to determine that there is no evidence for the administrative activity in question.

In practice, however, this rule has sometimes had a negative impact on the applicant for an administrative license or a related third party. For example, one company could challenge an agency's decision to grant a license to another company, and the second company could lose its license, without having an opportunity to respond, because of the agency's failure to provide evidence in a timely manner.

The lack of a legal basis for such a related third party to provide evidence has sometimes made it difficult for Chinese courts to hear such cases. The Administrative License Regulations address this problem by saying that if the defendant agency does not provide evidence, or if the agency provides evidence beyond the statutory time limit without justification, a third party with a legal interest in the administrative license activity may provide evidence to the court. In addition, if the third party has difficulty obtaining relevant evidence (for example, documentation from the administrative agency), it may apply with the court to obtain such evidence.

Conclusion

Given the increase in lawsuits involving administrative licenses, the Administrative License Regulations provide courts across China with clarification regarding certain questions that have arisen during the hearing of cases involving administrative licenses. But it is impossible for this judicial interpretation to address all the questions faced by courts, so there will still be a certain amount of uncertainty in how local courts enforce China's Administrative License Law and the Administrative Litigation Law. In addition, the differing ability of judges in various jurisdictions may also lead to alternate interpretations of the regulations and accordingly different court rulings.