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Chapter VI Service Guarantees

Article 50 [Original Text]

Article 50 Administrative organs shall adhere to law-based administration. When conducting law enforcement activities, administrative organs shall avoid or minimise disruption to the normal production and business operations of private economic organisations, and shall respond to and address their reasonable and lawful demands in a timely manner.

[Interpretation]

Legislative Background and Purpose: Irregular and uncivilised administrative law enforcement practices severely disrupt normal business operations and undermine the business environment. This provision establishes explicit requirements for administrative law enforcement activities, centred on legality, prudence, civility, and timely responsiveness to business concerns.

Interpretation:

a. ‘Administrative organs shall adhere to law-based administration’: This constitutes the overarching requirement for administrative conduct, mandating that law enforcement activities possess legal basis, comply with statutory procedures, and not exceed prescribed authority.

b. ‘Avoid or minimise impact on the normal production and business activities of private economic organisations’: This emphasises the principles of prudence and necessity in enforcement. For instance, during inspections, authorities should reasonably schedule timing, methods, and scope, and must not arbitrarily interrupt production or seize property unrelated to the case. Non-site supervision and credit-based regulation should be promoted.

c. ‘Timely response and resolution of reasonable and lawful requests’: Requires administrative bodies to actively address and appropriately handle legitimate requests from enterprises, such as policy consultations, reporting difficulties, or seeking redress for rights infringements, without passing the buck or failing to act.

【Relevant Legislation】

● Administrative Penalties Law of the People's Republic of China: Provides detailed provisions on the establishment of administrative penalties, implementation procedures, and rights of parties concerned.

● Administrative Compulsory Measures Law of the People's Republic of China: Regulates the establishment and implementation of administrative compulsory measures.

● Administrative Licensing Law of the People's Republic of China.

● Regulations on Optimising the Business Environment: Article 59 stipulates that non-compulsory enforcement measures shall be promoted in administrative law enforcement; where administrative compulsion is indeed necessary, its impact on the normal production and business activities of market entities shall be minimised as far as possible.

● State Council Guidance on Comprehensively Advancing Law-Based Administration and Standardising Administrative Law Enforcement Conduct.

【Practical Guidance】

a. Enterprise Rights Awareness and Protection:

● Private enterprises should understand their rights within administrative law enforcement procedures, such as the right to make statements, the right to defend, the right to request a hearing, and the right to apply for reconsideration or initiate litigation.

● Should they encounter improper law enforcement by administrative organs, they may lawfully lodge complaints, reports, or seek redress with superior authorities, supervisory bodies, or judicial organs.

b. Standardised Law Enforcement by Administrative Authorities:

● Strictly implement the three systems: the administrative law enforcement disclosure system, the full-process law enforcement record system, and the legal review system for major law enforcement decisions.

● Promote tolerant and prudent regulation, adopting an approach that encourages innovation and allows for trial and error in regulating new technologies, industries, business models, and modes of operation.

● Establish and refine a list of flexible enforcement measures, whereby penalties may be waived or mitigated for minor violations that are promptly rectified and cause no harmful consequences.

● Enhance training for law enforcement personnel to improve their professional competence and civilised conduct.

c. Streamlining Appeal Channels: Administrative bodies shall establish accessible channels for complaints, reports, and feedback, ensuring timely resolution of issues raised by enterprises.

Article 51 【Original Text】

Article 51 Administrative penalties for unlawful acts committed by private economic organisations and their operators shall be imposed in accordance with the principle of equality with other economic organisations and their operators. Where administrative penalties or other measures are required by law for unlawful acts, such penalties or measures shall be commensurate with the facts, nature, circumstances, and degree of social harm of the unlawful acts. Where unlawful acts fall under circumstances warranting leniency, mitigation, or exemption from penalties as stipulated in the Administrative Penalties Law of the People's Republic of China, penalties shall be imposed with leniency, mitigation, or exemption in accordance with its provisions.

[Interpretation of the Provision]

Legislative Background and Purpose: This provision aims to regulate administrative penalties imposed on private economic organisations, emphasising the principles of equality in penalties, proportionality between offence and penalty, and the lawful application of mitigating circumstances where applicable. It seeks to prevent selective enforcement and excessive penalties.

Interpretation of the Provision:

a. ‘Implemented in accordance with the principle of equality with other economic organisations and their operators’: This emphasises that all market entities possess equal legal standing before administrative penalties and shall not be treated differently based on ownership structure.

b. ‘Shall be commensurate with the facts, nature, circumstances, and degree of social harm of the violation’: This reflects the principle of proportionality in administrative penalties, requiring that the type and severity of penalties correspond to the objective circumstances of the violation to avoid disproportionately light or heavy sanctions.

c. ‘Where the violation involves circumstances warranting leniency, mitigation, or exemption from punishment as stipulated in the Administrative Penalty Law of the People's Republic of China, such leniency, mitigation, or exemption shall be applied’: This explicitly requires administrative authorities, when enforcing the law, to apply corresponding leniency, mitigation, or exemption for circumstances meeting the relevant provisions of the Administrative Penalty Law (e.g., where the violator voluntarily eliminates or mitigates the harmful consequences of the violation; where the violation was committed under coercion or deception by another person; voluntarily disclosing violations unknown to the administrative authority; demonstrating meritorious conduct in assisting the administrative authority's investigation; or where the violation is minor, promptly rectified, and has caused no harmful consequences, no penalty shall be imposed). This reflects the legislative spirit of combining punishment with education and encouraging self-correction.

【Relevant Legislation】

● Administrative Penalty Law of the People's Republic of China:

Article 5 stipulates that when imposing administrative penalties to rectify unlawful conduct, penalties shall be combined with education to encourage citizens, legal persons, or other organisations to voluntarily comply with the law.

Article 6 stipulates that administrative penalties shall be commensurate with the facts, nature, circumstances, and degree of social harm of the unlawful conduct.

Article 32 specifies circumstances under which penalties may be mitigated or reduced.

Article 33: Circumstances under which administrative penalties shall not be imposed.

【Practical Guidance】

a. Enterprise Rights Awareness: Private enterprises and their operators should understand the specific circumstances for leniency, mitigation, or exemption from penalties under the Administrative Penalties Law. Upon committing an illegal act, if relevant conditions are met, they should actively take remedial measures and proactively explain the situation to the administrative authority to seek lenient treatment.

b. Standardised Enforcement by Administrative Authorities:

● Prior to issuing administrative penalty decisions, authorities must fully hear the statements and defences of the parties concerned, comprehensively investigating and verifying the facts, nature, circumstances, and degree of social harm of the case.

● Strictly adhering to the Administrative Penalty Law, conditions warranting leniency, mitigation, or exemption must be applied lawfully where applicable; arbitrary aggravation of penalties or failure to apply such provisions is prohibited.

● Refine the benchmark system for administrative discretion, specifying penalty standards for specific violations to reduce discretionary scope and ensure consistent penalties for comparable cases.

c. Legal Remedies: Enterprises may apply for administrative reconsideration or initiate administrative litigation if they deem the penalty decision unjust or procedurally flawed.

d. Compliance as the Foundation: Enterprises should strengthen internal compliance management to prevent violations at source, representing the most effective means of avoiding penalties.

Article 52 [Original Text]

Article 52. People's governments at all levels and their relevant departments shall promote the sharing and mutual recognition of regulatory information, implement tiered and categorised supervision based on the credit status of private economic organisations, and enhance regulatory efficiency.

Except for special industries and key sectors directly involving public safety and the health and lives of the people, where comprehensive key supervision shall be implemented in accordance with laws and regulations, administrative inspections by relevant departments in the field of market regulation shall be conducted through random selection of inspection subjects and random assignment of law enforcement inspectors. The items subject to random inspection and the results of investigations and penalties shall be promptly disclosed to the public. Where multiple inspection items pertain to the same inspection subject, they shall be consolidated where possible or incorporated into the scope of cross-departmental joint inspections.

[Interpretation of Provisions]

Legislative Background and Purpose: Traditional ‘manpower-intensive’ regulatory approaches are inefficient and prone to causing unnecessary disruption to enterprises. This provision aims to enhance the precision, scientific rigour, and efficiency of regulation through promoting information sharing, credit-based regulation, ‘double random, one public’ oversight, and joint inspections, thereby reducing interference with law-abiding enterprises.

Interpretation of Provisions:

a. Paragraph 1: Credit-Based Regulation and Tiered Classification:

● ‘Promoting mutual recognition of regulatory information’: Requires the sharing of regulatory information on enterprises (such as inspection records, penalty information, licensing details, etc.) between different regulatory departments and across different levels of government to avoid duplicate inspections and information barriers.

● ‘Implement tiered and categorised supervision based on the credit status of private economic entities’: This constitutes the core of credit-based regulation, whereby enterprises with high credit ratings and low risks undergo reduced inspection frequency (‘no unnecessary interference’), while those with low credit ratings and high risks face increased inspection frequency and intensified oversight, thereby achieving targeted regulation.

b. Paragraph Two: ‘Double Random, One Public’ and Joint Inspections:

● ‘Except for special industries and key sectors directly involving public safety and the health and lives of the people, where comprehensive key supervision is implemented in accordance with laws and regulations’: This clarifies exceptions to key supervision, where stricter and more comprehensive oversight is required due to sector-specific characteristics.

● ‘Administrative inspections by relevant departments in the market regulation field shall be conducted through random selection of inspection subjects and random assignment of law enforcement personnel (“double random”)’: This constitutes the primary method for standardising routine regulatory inspections, aiming to minimise human intervention and ensure fairness and impartiality.

● ‘Inspection items and investigation outcomes shall be promptly disclosed to the public (“one disclosure”)’: Enhances regulatory transparency and facilitates public oversight.

● ‘Multiple inspection items concerning the same subject shall, wherever possible, be consolidated or incorporated into cross-departmental joint inspections’: Addresses issues of ‘multiple inspections’ and ‘duplicate inspections’, thereby reducing the burden on enterprises.

【Relevant Regulations】

● State Council Opinions on Fully Implementing Joint Departmental ‘Double Random, One Public’ Supervision in Market Regulation.

● State Council Guidance on Strengthening and Standardising Mid-term and Post-event Supervision.

● Regulations on Optimising the Business Environment: Article 60 stipulates provisions for ‘Double Random, One Public’ supervision, credit-based regulation, and joint inspections.

● National planning and policy documents concerning the construction of the social credit system.

【Practical Guidance】

a. Enterprises maintaining sound credit standing: Private enterprises should prioritise their own credit development, operate lawfully and with integrity, thereby securing more favourable treatment under tiered and categorised supervision (e.g., reduced inspection frequency).

b. Government departments transforming regulatory approaches:

● Accelerate the establishment and refinement of unified regulatory information sharing platforms and enterprise credit information disclosure systems.

● Refine the ‘double random, one public’ inspection mechanism by enhancing randomised inspection databases and enforcement officer rosters, while rationally determining inspection ratios and frequencies.

● Promote cross-departmental joint inspections through coordinated plans that clarify lead and supporting agency responsibilities.

● For key regulatory sectors, define scopes and standards for lawful, compliant oversight.

c. Enhancing Regulatory Efficiency: Through these innovative regulatory approaches, allocate limited regulatory resources more effectively to high-risk sectors and enterprises with poor credit records, thereby improving the precision and effectiveness of oversight.

d. Safeguarding Rights: During inspections, enterprises have the right to understand the basis and content of the inspection, as well as the identity of the enforcement officers. For ‘double random’ inspections, enterprises may verify whether the selection process complies with random sampling requirements.

(To be continued)

Special Notice:

This article is an original work by a solicitor of JAVY Law Firm and represents solely the author's personal views. It shall not be construed as formal legal advice or recommendations issued by JAVY Law Firm or its solicitors. Should any part of this article be reproduced or referenced, the source must be duly acknowledged.