Article 05.09.16
Alert
Alert
05.02.16
On April 28, 2016, the 20th meeting of the 12th Standing Committee of the National People's Congress (NPC) of China approved The Law on the Administration of Activities by Foreign Non-Governmental Organizations within the People’s Republic of China (Foreign NGO Law). Foreign NGOs will need to understand the new law's tighter policing provisions, reporting requirements (including annual reports on planned activities for the coming year) and restrictions on fundraising and recruiting within China, among other changes. The new law does clarify some uncertainties regarding how foreign NGOs in China can operate, but it also engenders new questions about how the relevant authorities will apply its provisions. Foreign NGOs ought to maintain close cooperation with their Chinese partners in efforts to comply with the new rules.
The Foreign NGO Law passed with 147 affirmative votes, one dissenting vote and one abstaining vote in the NPC. The vote took place after almost a year of conducting surveys and research, solicitation of public comments and other forms of exchange of views by the legislators based on a second draft of the Foreign NGO Law (Second Draft) published on May 5, 2015 for public comments (See Pillsbury Alert on the Second Draft). The NPC held a press conference on the same day of the release of the Foreign NGO Law to answer questions from foreign and domestic media.
While the Foreign NGO Law has made a significant number of changes to the Second Draft, the basic mechanism and rules for regulating foreign NGOs set forth in the Second Draft remain unchanged, including that the Public Security Bureau (PSB) will be the regulator for all foreign NGOs conducting activities in China. Below is our summary of the major provisions in the Foreign NGO Law and our comments on the impact of the law on foreign NGOs.
Scope of Application
A foreign NGO is still broadly defined as “a nonprofit and non-government social organization legally established outside of China” but the Foreign NGO Law gives specific examples of foreign groups that will be regulated by the new law, namely “foundations, social groups and think tanks” (Art. 2). The Foreign NGO Law expressly removes any academic exchanges and cooperation between any foreign and Chinese domestic schools, hospitals and research or academic institutions involving natural science and engineering technology from the scope of the Foreign NGO Law and these activities should be carried out in line with existing regulations (Art. 53).
The Foreign NGO Law also provides a list of sectors in which foreign NGOs are welcome to engage, which are economics, education, science and technology, health, culture, sports, environmental protection, charity and disaster relief (Art. 3). Foreign NGOs engaging in one of these sectors may find it easier to apply than those engaging in sectors that are deemed to be sensitive by the Chinese authorities, such as human rights, civil liberties, etc. The Foreign NGO Law requires an “area of activities and catalogue of projects” to be published by the PSB (Art. 34) but it is unclear at this stage how this document will be drafted and whether activities outside of the scope of this document will be prohibited in China.
Since the Foreign NGO Law aims to regulate the activities conducted by foreign NGOs in China (Art. 2), the name of the law has been changed from the “Law on the Administration of Foreign Non-Governmental Organizations” used for the Second Draft to the “Law on the Administration of Activities by Foreign Non-Governmental Organizations within the People’s Republic of China.”
Form of Presence
As required by the Foreign NGO Law (Art. 9), any foreign NGO conducting activities in China must (1) either register as a legally registered representative office (Rep Office) or (2) make a filing for a temporary activity. Any foreign NGO that has not so registered or made a filing is neither allowed to conduct activities within China nor allowed to engage or fund any individual, legal person or other organizations to conduct activities within China. Any foreign NGO failing to register a Rep Office or make a filing for a temporary activity could be forced to stop any illegal activity, confiscation of illegal property and income with respect to such activity and administrative liabilities for the responsible person, such as up-to-ten-days detention (Art. 46).
1. Rep Office
Any foreign NGO intending to establish a Rep Office in China must have at least two years of substantial operations overseas. The Foreign NGO Law requires the NGO to first obtain prior approval from its Professional Supervisory Unit (i.e. a relevant department or unit of the State Council or a provincial government) (Art. 11) (or so-called “mother-in-law”). A catalogue of such Professional Supervisory Units will be published by the Ministry of Public Security of the State Council and the PSBs of the provincial governments which are mandated by the Foreign NGO Law as the regulator of foreign NGOs. The law is silent over the application procedures to obtain approval from a Professional Supervisory Unit. It remains to be seen whether a uniform set of procedures will be adopted or different Professional Supervisory Units will issue different rules.
Within 30 days after obtaining the approval from the Professional Supervisory Unit, a foreign NGO must then submit an application with the PSB. The PSB will issue a registration certificate (Registration Certificate) within 60 days after receiving the application (Art. 12). The Registration Certificate will specify, among others, the business scope and territory of activities of the Rep Office of a foreign NGO (Art. 13) and the Rep Office must conduct activities within such registered business scope and territory (Art. 18).
The Foreign NGO Law removes the restriction on foreign NGOs of being allowed only one representative office in China set forth under the Second Draft. They will be allowed to establish offices according to their operational needs but the number and locations are subject to the approval by the regulatory authorities. In addition, the new law also removes the five year limit on operations of representative offices in China which was required in the Second Draft.
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