The law on the promotion of the private economy "does have a need for legislation", and experts say it needs to respond to these six demands

The legislative process of the Law on the Promotion of the Private Economy is expected to be accelerated, and the legitimate rights and interests of private economic organizations and their managers are expected to receive special legal protection. So, what principles should be adhered to in the Law on the Promotion of Private Economy, and what demands should be responded to?

Liu Junhai, a professor at the Law School of Chinese University and director of the Institute of Commercial Law, said in an interview with First Financial Reporter that in the past year, the central ministries and commissions alone have issued more than 100 "reassuring pill" policies involving the development of private enterprises, and many places have also issued local regulations on the promotion of the private economy. These policies have played a positive role in boosting the confidence of the private economy, but the shelf life is relatively short, the "efficacy" is limited, and many "reassuring" policies are strong in advocacy and principle, and the operability is weak, and some private entrepreneurs have even produced "drug resistance".

Liu Junhai said that the "Law on the Promotion of Private Economy" should respond to the six major demands of "equal status, common development, fair competition, mutually beneficial cooperation, equal supervision and equal protection" for the development of the private economy, confirm the equal legal, political and social status of private enterprises, and provide long-term and powerful legal "reassurance" for the private economy.

On 9 January, a responsible comrade of the National Development and Reform Commission's Private Economic Development Bureau said that the legislative process of the law on the promotion of the private economy would be accelerated; the day before, the National People's Congress Financial and Economic Committee reported that the law on the promotion of the development of the private economy "is indeed necessary."

Yicai learned that after preliminary research and expert discussions, a "Private Economy Promotion Law" (Proposed Draft Legislation) (hereinafter referred to as the "Proposed Draft") was completed in May 2023. The draft is divided into six chapters: General Provisions, Equal Access, Entrepreneurship and Innovation, Protection of Rights and Interests, Promotion of Development and Legal Responsibility. At present, the draft proposal has been submitted to the Private Economic Development Bureau of the National Development and Reform Commission, and the core proposition has won a preliminary consensus from the industry and relevant government departments.

Competitive neutrality

According to the draft proposal, it is necessary to clarify the six principles of the rule of law in the private economy, namely equality of status, common development, fair competition, mutually beneficial cooperation, equal supervision and equal protection, and these six rule of law principles are the core connotation of realizing the principle of competition neutrality in China and in the times.

The so-called principle of "competition neutrality" with Chinese characteristics first reflects the strict implementation of the "two unswerving" principles, and does not allow industrial policies to override competition policies.

As far as the principle of fair competition is concerned, the draft proposal further states that the state should create a legal ecological environment of fair competition for the development of the private economy by opposing monopoly advantage and unfair competition.

Yuan Jia, director of the Economic Law Research Office of Sichuan University Law School and director of the Innovation and Competition Law Research Center, said to Yicai that the development of private enterprises does not need to be "particularly preferential", but it is necessary to restore a system and law that can ensure "competitive neutrality" in the general environment, obtain fair rights, fair opportunities, fair rules, and break down a series of institutional barriers to market access and financing. The Law on the Promotion of Private Economy can fully respond to the demands of private enterprises for fair competition, and on this basis, crack down on all kinds of unfair competition and monopolistic behaviors, including administrative monopoly.

From the perspective of legal positioning, Yuan Jia believes that the law on the promotion of private economy should belong to the category of economic law. Based on this, the Law on the Promotion of Private Economy should emphasize the important legislative principle of civil and commercial law that "it is sufficient if the law does not expressly prohibit it". In particular, it is recommended that the "negative list" system be adopted to clarify which industries, such as those unnatural monopoly industries and emerging industries, are open to private enterprises through a more granular system.

Since the official release of the national unified negative list for market access in December 2018, a negative list management model for market access has been established nationwide, and market entities can enter industries, fields, and businesses outside the list on an equal footing in accordance with the law, realizing "non-prohibition and entry". However, due to the intervention of protectionism in some sectors and local protectionism, the private economy is still subject to many restrictions in terms of market access.

The draft proposal devotes a chapter to "equal access". It mentions that all private economic organizations can enter industries, fields and businesses that are not included in the negative list for market access on an equal footing in accordance with the law. No organization or individual may set or covertly set differential market access conditions or discriminatory conditions unfavorable to private economic organizations because of different forms of ownership.

With the increase in cooperation between state-owned enterprises and private enterprises in recent years, Yuan Jia also believes that how to ensure that private enterprises are treated and protected equally in the process of cooperation is also an issue that needs to be considered by "competitive neutrality" and should be paid attention to in the Private Economy Promotion Law.

According to the draft proposal, if state organs, public institutions, state-owned enterprises and private economic organizations cooperate in the fields of infrastructure and public services, they shall clarify the basic information of the project, the return mechanism, the risk sharing mechanism and other matters in the implementation plan of the specific cooperation project, and shall not set unequal conditions for the private economic organization.

Equal protection and equal supervision

The relevant responsible comrades of the Private Economic Development Bureau of the National Development and Reform Commission recently said that it is necessary to ensure that all kinds of ownership economies are equally protected by law, put an end to selective law enforcement and let enterprises "prove their innocence" type of supervision, and create a good and stable expectation for the development of the private economy.

Liu Junhai believes that the reason why it is necessary to "put an end to selective law enforcement and let enterprises 'prove their innocence' supervision" is because there is regulatory chaos at the local level that violates legal regulations, which also means that the rule of law principles such as "equal supervision" and "equal protection" need to be further implemented.

According to the draft proposal, the Law on the Promotion of the Private Economy is a comprehensive law based on protecting rights, protecting the law, and promoting development, and the legitimate rights and interests of private economic organizations and their operators are protected by law. These legitimate rights and interests include the property rights, management rights, fair competition rights and other legitimate rights and interests of private economic organizations, as well as the personal rights, property rights, innovation income rights and operational autonomy of their operators.

Yuan Jia believes that in supervising and enforcing the law, governments at all levels should strictly abide by the requirements of the government under the rule of law that "nothing can be done without the authorization of the law," restrain public power, and government officials must have a legal basis for supervising and inspecting private enterprises; the judicial field should also treat private enterprises without discrimination, and should adhere to the criminal concept of "blending leniency with severity"; while severely cracking down on serious economic crimes and punishing corruption crimes within private enterprises according to law, they should not arbitrarily use criminal means to intervene in economic dispute cases.

The draft proposal also proposes that to create a healthy environment for the development of the private economy, it is the duty of discipline inspection and supervision organs to perform their duties. However, when some public authorities ask the operators of private economic organizations to cooperate with the investigation, they only aim to ascertain the truth, and neglect to protect the legitimate personal rights and property rights and interests of private economic operators and their families, and ignore the protection of the legitimate and normal operation of enterprises. In terms of the ownership of property rights in the private economy, there is a lack of regular and effective ways to redress and correct wrongful and unjust cases, and the property rights and interests of private economic operators cannot be fully protected.

In the judicial sector, the draft proposal reiterates the principle of "civil first, then criminal". According to the Draft Proposal, the background of the determination of "prior punishment" is to crack down on economic crimes, but when the rights of the parties are infringed, the fundamental purpose of the law is to protect the legitimate rights and interests of the parties. In practice, it is sometimes difficult to draw a clear line between the crime and non-crime of economic crimes, there is no time limit for the court's review of the nature of the case, and various drawbacks such as the excessive power of judges in the transfer of cases and the lack of a restraint and supervision mechanism may open the door for local protectionism, the use of criminal means to intervene in economic disputes, and the malicious use of state judicial resources, which are not conducive to protecting the legitimate rights and interests of private economic organizations and their operators.

"If there is no civil liability, there must be no criminal liability. There is civil liability, not necessarily criminal liability. Liu Junhai further explained that the "civil first, then criminal" model is conducive to maintaining the unity of legal order and improving the stability, transparency, fairness and predictability of the business environment based on the rule of law.

In addition, the draft proposes a mechanism for correcting deviations and errors in property disputes. During the two sessions last year, the All-China Federation of Industry and Commerce submitted the "Proposal on Formulating a Law on the Promotion of the Private Economy," which also proposed that the correction of unjust and wrongful cases infringing on the rights and interests of private enterprises and private entrepreneurs should be brought into the track of the rule of law.

In order to prevent a crime committed by one person from harming the entire enterprise or enterprise group, the draft proposal proposes that where it is necessary to take compulsory measures such as sealing, seizing, or freezing the assets involved in the case of a private economic organization and its operators in accordance with the law, the public security organs, people's procuratorates, and people's courts shall clarify the ownership of the property, and shall not employ compulsory measures beyond the scope of authority, the scope, the amount, or the time limit, and shall protect the lawful rights and interests of the private economic organization and its stakeholders, and reduce the adverse impact on their normal production and operation.

In addition, for a long time, the private economy has mostly developed extensively, resulting in a weak awareness of the rule of law in some private economic organizations, and deficiencies in corporate compliance management and internal corruption supervision. In recent years, corruption in private enterprises has been at a high rate.

On December 29 last year, the Seventh Session of the Standing Committee of the 14th National People's Congress deliberated and passed the 12th Amendment to the Criminal Law. The amendment aims to strengthen the protection of the property of private enterprises, effectively prevent and punish corruption crimes within private enterprises, and extend the current crimes applicable to "state-owned companies, enterprises" and other relevant personnel to private enterprises, and maintain the same statutory penalties. At the beginning of 2024, Anhui and other places emphasized in promoting the construction of a law-based business environment that they should adhere to equal protection and crack down on job-related crimes within enterprises in accordance with the law.

The draft proposal also responds to this phenomenon, pointing out that "anti-corruption in private enterprises" should be "anti-corruption under the rule of law", and should "treat both the symptoms and the root causes". Specifically, private economic organizations should strengthen the construction of the criminal compliance system, which is conducive to strictly distinguishing and separating corporate crimes from individual entrepreneurs, and reducing the risk of crimes committed by private economic organizations and their operators. Private economic organizations need to form an effective self-supervision and risk prevention and control mechanism, improve their self-governance capabilities, and lay a solid foundation for development.

The relevant legal relationships should also be straightened out

According to data released by the State Administration for Market Regulation, as of the end of August 2023, private enterprises accounted for 93.3% of the total number of enterprises. As an important part of the mainland's socialist market economy, there are shortcomings in the construction of the rule of law in the private economy.

"At present, foreign investors have a foreign investment law, and state-owned enterprises have a law on state-owned assets, but private enterprises lack a special law. Liu Junhai said.

In 2022, affected by the epidemic and other factors, the development of the private economy will be challenged. In order to stabilize the expectations of private enterprises, Zhejiang, Zhuhai in Guangdong, Fushun in Liaoning, Yantai in Shandong and other places have passed local legislation to create a law-based business environment for local private enterprises.

When the Central Economic Work Conference deployed the economic work in 2023, it was further clarified that we must be clear and unambiguous in response to the incorrect discussions in the society about whether we adhere to the "two unwavering". It is necessary to put down the requirements for equal treatment of state-owned enterprises and private enterprises in terms of system and law. In the same month, Liu Junhai was entrusted by the All-China Federation of Industry and Commerce and the China Legal Exchange Foundation to study the topic of the "Private Economy Promotion Law".

"The best strategy to put the demand for equal treatment in law down is to introduce a law to promote the private economy. Liu Junhai said.

In Yuan Jia's view, the enactment of the law on the promotion of the private economy will inevitably have a greater impact on local governments, and then force them to change some traditional work concepts and working methods that are contrary to fair competition. For a long time, there has been a natural "binding" relationship between local governments and state-owned enterprises, and in the process of government project bidding, if private enterprises are introduced, local governments often need to bear greater liability risks, which together lead to unfair treatment of private enterprises in the government bidding process.

At the same time, we cannot expect a law to "conquer the world", and after the implementation of the "Law on the Promotion of Private Economy," it should work together with other laws to promote the sustainable and healthy development of private enterprises.

"The private economy promotion law also needs to form the same frequency resonance with the general civil and commercial laws such as the company law, the partnership enterprise law, and the securities law, as well as the civil code, criminal law and other laws, and the relationship between these laws has not yet been fully connected. Liu Junhai said.

责编:王时丹 | 审核:李震 | 监审:万军伟

(Source: Yicai)