Big Brother is watching you: Das Chinesische Corporate Social Credit System und seine Auswirkungen auf deutsche Unternehmen mit China-Präsenz
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Big Brother is watching you: Das Chinesische Corporate Social Credit System und seine Auswirkungen auf deutsche Unternehmen mit China-Präsenz WORKSHOP UND WEBINAR VON KELLERHALS CARRARD IN ZUSAMMENARBEIT MIT FRIEDRICH GRAF VON WESTPHALEN CHENG CHEN, SABINE NEUHAUS 12. FEBRUAR 2020
*** DISCLAIMER ***
THIS PRESENTATION WAS SOLELY MADE FOR EDUCATIONAL PURPOSES IN
CONNECTION WITH THE WORKSHOP/WEBINAR STATED ON THE FIRST PAGE
AND DOES NOT CONTAIN ANY LEGAL ADVICE. THE PRESENTATION SHALL NOT
BE SHARED WITH THIRD PARTIES, REPRODUCED AND/OR DISTRIBUTED
WITHOUT THE PRIOR WRITTEN CONSENT OF THE AUTHORS OF THIS
PRESENTATION. THE INFORMATION CONTAINED IN THIS PRESENTATION IS
CURRENT AS OF THE DATE STATED ON THE FIRST PAGE AND DOES NOT
DISCLAIMER
PURPORT TO BE COMPREHENSIVE. IN CASE OF ANY QUESTIONS WITH
RESPECT TO THE CONTENT OF THE PRESENTATION, PLEASE DO NOT HESITATE
TO CONTACT THE AUTHORS.
sabine.neuhaus@kellerhals-carrard.ch 2
PART I: PRACTICAL INTRODUCTION
I. POLICY CONSIDERATIONS
II. KEY FUNCTIONS
III. IMPACTS ON GERMAN COMPANIES
IV. TO DOS
V. OUTLOOK
TABLE OF CONTENTS
PART II: ANALYSIS OF LEGAL FRAMEWORK AND REMEDY SYSTEM
VI. LEGAL FRAMEWORK
VII. REMEDIES AND CREDIT RESTORATION
VIII. LEGISLATIVE OUTLOOK
IX. ABOUT US
X. OUR SERVICES
sabine.neuhaus@kellerhals-carrard.ch 3
THE CSCS: COMPETITION FOR TRUSTWORTHINESS
«Let there be benefits everywhere for the trustworthy,
and for the untrustworthy restrictions with every step.»
Li Keqiang
I. POLICY
CONSIDERATIONS
(1/2)
Source: Picture by Markus Herrmann, Shanghai, IAPM mall in Huangpu District, Nov. 2019
sabine.neuhaus@kellerhals-carrard.ch 4
OBJECTIVES OF THE CSCS
➢ Improve:
➢ Socialist market economy («single market»)
➢ China’s competitiveness
I. POLICY
➢ Social governance
CONSIDERATIONS
(2/2)
➢ Establish:
➢ Cultural concept of honesty
➢ Level-playing field:
➢ Lower market entry barriers (FIL / Negative List)
➢ Equal standards for operational compliance for all market actors
= fair, transparent business environment
sabine.neuhaus@kellerhals-carrard.ch 5
HETEROGENEOUS REGULATORY SYSTEM
➢ Various fields (e.g. environment, product and work safety, tax, customs)
➢ References to CSCS in laws and regulations
➢ Punishment and reward system
II. KEY FUNCTIONS
(1/3) ➢ Rating-specific punishments (depending on industry)
➢ Joint punishments (MoUs)
➢ Internet + Monitoring System (data transfer, pooling of information)
➢ Licensed commercial and governmental rating agencies
sabine.neuhaus@kellerhals-carrard.ch 6
3 LEVELS OF DATA COLLECTION AND RATINGS
National Credit
Information Sharing
Platform
II. KEY FUNCTIONS
(2/3)
Social Credit Platforms
of
Regional/local
Specialized Authorities
Credit Platforms
(commercial register, tax,
customs, etc.)
Currently:
- No Company Rating on National Level (yet).
- Incomplete flow of data.
Websites:
CreditChina: https://www.creditchina.gov.cn/
Commercial: http://www.gsxt.gov.cn/index.htxl
Tax: http://hd.chinatax.gov.cn/nszx/InitCredit.html#
Customs: http://credit.customs.gov.cn
Energy: http://www.creditenergy.gov.cn/publicity
sabine.neuhaus@kellerhals-carrard.ch 7
RATING MECHANISM (EXAMPLE)
Topic specific regulatory rating, parallel set of compliance
records
State MoUs Other competent
Administration of
MoUs authorities
Taxation
Non-compliance with Tax Law
II. KEY FUNCTIONS
&
(3/3)
Data collection, monitoring of Cooperation of
company, sharing of data in Shanghai with
central system Jiangsu Province
Non-compliant behavior
detected in Shanghai
Algorithm-based rating
Negative credit rating (Joint) Sanctions
sabine.neuhaus@kellerhals-carrard.ch 8INCREASED TRANSPARENCY
➢ Who is subject to the CSCS?
➢ Joint awards:
➢ Less inspections (e.g. customs)
➢ Enhanced access to loans
III. IMPACTS ON ➢ Lower taxes
GERMAN ➢ Fast-track bureaucratic procedures
COMPANIES
(1/6) ➢ Joint sanctions:
➢ “black-listing” // “heavily distrusted entity”
➢ More inspections / targeted audits
➢ Import / export restrictions
➢ Restricted access to loans / public procurement
➢ Key personnel of a company, e.g. travel restrictions
Source:
https://www.nytimes
.com/2019/09/22/bu
siness/china-social-
sabine.neuhaus@kellerhals-carrard.ch
credit-business.html 9WHAT INFORMATION IS ONLINE?
III. IMPACTS ON
GERMAN
COMPANIES
(2/6)
sabine.neuhaus@kellerhals-carrard.ch 10CASE EXAMPLE I: WOFE
Redlisted = positive
III. IMPACTS ON
GERMAN
COMPANIES
(3/6)
Taxpayer with grade A Credit Rating
sabine.neuhaus@kellerhals-carrard.ch 11CASE EXAMPLE II: LOCAL COMPANY
Blacklisted
III. IMPACTS ON
GERMAN
COMPANIES
(4/6)
Dishonest person subject to enforcement
sabine.neuhaus@kellerhals-carrard.ch 12CASE EXAMPLE III: JV
Blacklisted and
abnormal status
III. IMPACTS ON
GERMAN
COMPANIES
(5/6)
sabine.neuhaus@kellerhals-carrard.ch 13CASE EXAMPLE IV: WOFE
Trustworthy incentive
objects
III. IMPACTS ON
GERMAN
COMPANIES
(6/6)
Administrative Fine due to
environmental issues
sabine.neuhaus@kellerhals-carrard.ch 14KEEP CALM AND COMPLY!
➢ Limited reaction from Chinese businessmen vs. red alert for foreigners
➢ Determine and monitor ratings applicable to your business
➢ Keep good records (compliance 2.0)
IV. TO DOS
➢ Choose business partners and key executives wisely
➢ Initiate remedial actions to restore negative rating
Processing
Listed for a Application Inspection
Distrusted and update
minimum and and Acceptance
entity online
period submission verification
registry
sabine.neuhaus@kellerhals-carrard.ch 15HETEROGENOUS SYSTEM = HETEROGENOUS RISKS AND POTENTIAL
➢ Government influence vs. power of private actors
➢ “Meta-database” (Huawei, Alibaba, Tencent, etc.) vs. data protection?
➢ Transparency / predictability vs. opaque algorithms calculating credit scores
V. OUTLOOK
➢ Extinction of black sheep on the market vs. top credit score as marketing tool?
sabine.neuhaus@kellerhals-carrard.ch 16STRUCTURE OF THE NATIONAL LEGAL FRAMEWORK
• Notice of the State Council on
Promulgating the Outline of the Plan for
Framework
the Building of a Social Credit System
Documents
(2014-2020) [Programmatic Notice]
Administrative
Regulatory Documents • Guiding Opinions of the State Council on
Establishing and Improving the Joint
Incentive and Trustworthy Disciplinary
System to Accelerate the Construction
of Social Integrity
VI. LEGAL Department-specific Measures / Guiding Opinions / Notices
FRAMEWORK for Credit Management (e.g. credit rating, credit
(1/3) restoration)
Memoranda of Understanding for Cooperation of Joint
Sanctions and Awards
Technical Work / Administrative
e.g. publicity mechanism; data
Coordination / Internal
transmission between relevant authorities
Management Related Documents
➢ Defective Legal Basis
➢ Most of the existing documents fall into the category of “Other Regulatory
Documents” instead of laws or administrative regulations / departmental rules.
cheng.chen@kellerhals-carrard.ch 17PROVINCIAL LEGAL FRAMEWORK
➢ Administrative legislation at provincial level:
➢ Promulgate local regulatory documents based on national legislation
➢ Status quo:
VI. LEGAL ➢ Despite the lack of national laws and regulations, many provincial
FRAMEWORK governments have promulgated their own administrative regulations
(2/3) or measures for social credit management
➢ Watch out for the regional differences!
cheng.chen@kellerhals-carrard.ch 18INDUSTRIES COVERED BY THE CSCS
➢ General coverage of all industries
➢ Seven industries already have their own set of credit management measures:
Tax
Customs
Transportation
Energy
Finance
Product and Work Safety
VI. LEGAL Environment
FRAMEWORK ➢ Over 40 industries have their own punishment and reward mechanism, e.g.:
(3/3)
Tax
Accounting
Customs
Bid (public procurement)
Trade
Real Estate
Finance
Transportation
Foreign Economic Cooperation
IP
Product and Work Safety
cheng.chen@kellerhals-carrard.ch 19REMEDIES
• Objection
• (Application for Removal due to changed circumstances)
VII. REMEDIES AND • Administrative Reconsideration
CREDIT • Administrative Litigation
RESTORATION
(1/2)
cheng.chen@kellerhals-carrard.ch 20CREDIT RESTORATION
➢ Trial Version
➢ Existing Channels: Credit China; competent authorities (e.g. tax, patent, commercial
bureau); Credit Energy.
➢ General Requirements:
1. Correction of the acts;
2. Within the scope of restorable credit records (clear list of restorable scope;
certain administrative punishments cannot be restored);
VII. REMEDIES AND 3. Other preconditions (e.g. minimum listing period of 3/6 months of Credit China)
CREDIT
RESTORATION ➢ Procedure:
(2/2)
1. Application and submission of required documents (e.g. a credit restoration
commitment letter)
2. Inspection and verification
3. Acceptance
➢ Upon Credit Restoration:
1. Restoration of publication;
2. Termination of joint sanction measures (e.g. restrictions on financing,
consumption).
➢ Upcoming Measure for List of Heavily Distrusted Market Entities!
cheng.chen@kellerhals-carrard.ch 21LEGISLATIVE OUTLOOK
➢ Competent authorities: more than 30 departments
➢ Each department shall implement award and punishment measures
within the scope of its powers and responsibility according to the
concluded MoU
➢ Provincial joint sanction measures are scheduled to be in place with reference
to the MoUs on joint sanctions signed by the relevant departments of the
State
VIII. LEGISLATIVE
OUTLOOK ➢ Currently, the joint awards system is less developed than the joint sanctions
system
➢ Social Credit Law, Administrative Regulation for Public Credit Information and
Administrative Measures for Unified Social Credit System in 2020/2021?
cheng.chen@kellerhals-carrard.ch 22OVERVIEW AND SET-UP
Kellerhals Carrard (“KC”) is one of the top 2 Swiss law firms with over 195
lawyers and tax experts and more than 300 employees overall – around 30 at
each of our locations in Zurich, Basel, Berne, Geneva, Lausanne, Sion and
Lugano. KC is providing one stop shop services including Corporate and M&A,
Contract and Commercial Law, Litigation & Arbitration and IP. KC is also one of
the few Swiss law firms that has “field offices” and representatives in Binningen
and Shanghai. The firm’s roots date back to 1885.
Our Kellerhals Carrard China Desk consists of 10 team members and is based in
Shanghai. The team is integrated in a large-sized Chinese law firm, Huiye Law,
IX. ABOUT US which is the partner firm of both Kellerhals Carrard and Friedrich Graf von
Westphalen & Partner mbB. Because of this set-up with both an international and
local orientation, we have all the necessary licenses and qualifications for
advising our clients in China, including on matters of Litigation and Arbitration,
Insolvency and Bankruptcy Administration, as well as on Patent and Trademark
issues. We work closely with the integrated domestic offices of Huiye Law in 21
major Chinese cities. Huiye Law has nearly 700 professionals who specialize in a
wide variety of areas of commercial law. Mr. Cheng Chen is the Head of the KC
China Desk and recently became Senior Partner of Huiye Law.
cheng.chen@kellerhals-carrard.ch 23LEGAL SUPPORT IN TERMS OF THE CSCS
➢ CSCS Compliance Check
Screening service and background research
Industry-specific
Customs and tax
Environment
Data Protection
Competition
Labor
➢ CSCS Preventive Measures
X. OUR SERVICES
Establishment and update of compliance system
Establishment of compliance review mechanism
Litigation management
➢ CSCS Procedures
Application for awards and recognition
Support with remedies against sanctions
Application for credit restoration
cheng.chen@kellerhals-carrard.ch 24VIELEN DANK.
KONTAKT:
cheng.chen@kellerhals-carrard.ch
sabine.neuhaus@kellerhals-carrard.ch
Contact for German
Clients:
Dr. Barbara Mayer,
barbara.mayer@fgvw.de
Basel – Bern – Genf – Lausanne – Lugano – Sion – Zürich
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