News - China

China - February 2021

China’s First Civil Code, 1st January 2021

China’s first ever Civil Code will come into effect on January 1st, 2021. This Civil Code is a codification of the existing civil and tort related laws, regulations and judicial interpretations issued by the Supreme People’s Court.

The following laws shall be repealed on January 1st, 2021:

  • The General Principles of the Civil Law of the People's Republic of China
  • The Marriage Law of the People's Republic of China
  • The Law of Succession of the People's Republic of China
  • The Adoption Law of the People's Republic of China
  • The Security Law of the People's Republic of China
  • The Contract Law of the People's Republic of China
  • The Real Rights Law of the People's Republic of China
  • The Tort Law of the People's Republic of China; and
  • The General Rules of the Civil Law of the People's Republic of China

The Civil Code consists of eight key sections:

  1. General Principles
  2. Real Rights
  3. Contracts
  4. Personality Rights
  5. Marriage and Family Law
  6. Inheritance
  7. Tort Liability
  8. Miscellaneous Provisions

While the Civil Code does not significantly change the legal regime that governs commercial relations of foreign invested firms, the following changes are of note to foreign investors.

Contract Law Developments

Electronic Contracts become formally recognised:

The Civil Code specifies rules for execution and performance of electronic contracts. The Civil Code recognises that Electronic Contracts online are considered written contracts. The point of delivery and conclusion for the contract will differ depending on whether the electronic contract is for a service or a good. This recognition of Electronic Contracts extends to Labour contracts, under the previous Contract Law of the People’s Republic of China employees were required to be provided a hardcopy of their employment contract within one month of their commencement of work, under the Civil Code an electronic contract will suffice. 

Force Majeure:

The Contract Law permits the change or termination of a contract with respect to a force majeure event or material adverse change which will result in:

  1. obvious unfairness for a contractual party; or
  2. a failure to fulfil the purpose of the contract
     

The Civil Code has removed the failure to fulfil the contacts purpose as a cause for invoking force majeure. The contractual parties must negotiate for a reasonable period of time before a change or termination of the contract. This is an important consideration in China due to the extensive travel restrictions and border closures, if an employee is unable to return to work, the employer and employee must engage in negotiation prior to the termination of the labour relationship.
 

Personal Privacy and Personal Information Protection:

The Civil Code provides for a right of privacy and a right to the protection of personal information in Chapter VII of Part IV Personality Rights.

The right to privacy and protection of personal information are considered a personality right, which provides a legal remedy in tort law in cases of infringement the personality rights. The Civil Code is the first-time privacy is defined by law in the PRC as the “private peaceful life of a natural person and the private space, private activities, and private information that a natural person does not wish to be known by others.”

The Civil Code is focused on regulating the collection, use, processing, transmission, provision, and disclosure of personal information by a third party, and establishes the principles and conditions which are required to process information. The Civil Code establishes the person’s rights toward their information, such as rights to access, copy, correct, and to request erasure.

The Civil Code also establishes the concept information processing which concerns the actions of collection, storage, use, processing, transmission, provision and disclosure of personal information.

The Civil Code also addresses personality rights, covering provisions which establish the right of a private citizen to sue for damages or other remedies in tort in cases where medical records are mishandled, where the internet is used to harm the interests of the private citizen or, more generally, where the private citizen's right to personality, such as life, body, privacy, health, name, reputation, honour, or portrait, has been infringed upon and damages have occurred.

Data Protection in China has progressed significantly in recent years, starting from the issuance of the Cybersecurity Law (2016) to the more recent introduction of the Civil Code of the People’s Republic of China (2021). The Civil Code became effective on 1 January 2021, and expressly provides for the right to privacy and the protection of personal information.

The Civil codes provides for the protection of personal information ushering in a new regime of data, privacy and personal identification protection requirements which companies operating in China or globally with Chinese citizens must comply with.

In addition to the enacted Cybersecurity Law and the Civil Code, two additional laws have been issued for commentary in 2020, The Data Security Law and the Personal Information Protection Law. These are expected to be promogulated in either 2021 or 2022.

While the Civil Code provides for the rights of the individual, the Cybersecurity Law, the Data Security Law, and the Personal Information Law will provide the main legislative instruments for ensuring cybersecurity and data protection.

Cybersecurity Law

The Cybersecurity Law became effective on the 1st of June 2017.

The Cybersecurity Law contains personal information protection requirements which are applicable to all enterprises that operate a computerised information network system. The Cybersecurity Law contains a data localisation requirement, under which operators may not transmit personal information which they collect or generate within China in the course of operating their business in China to a destination outside of China, unless they first undergo a security assessment.

The Cybersecurity Law also establishes personal information protection obligations for network operators. Specifically, under the Cybersecurity Law, network operators are subject to notice and consent requirements in respect to the collection and use of personal information, and a requirement to comply with the principles of legitimacy, rightfulness, and necessity.

The Data Security Law

On 3 July 2020, the Data Security Law (Draft) was issued for public comment. The Data Security Law is considered to be a fundamental piece of legislation in the field of data security and is set to constitute the legal system for data regulation together with Cybersecurity Law and the Personal Information Protection Law.

Personal Information Protection Law

On 21 October 2020, the Personal Information Protection Law (Draft) was issued for public comment.

Reliant on the rights of the Civil Code and the rules of the Cybersecurity Law, Data Security Law and other relevant laws and regulations in China and overseas, the Personal Information Protection Law establishes the personal information processing rules, rights of individuals in personal information processing activities, and the obligations of personal information processors, and provides a comprehensive regulatory legal framework for personal information protection in China.

The Law borrows some principles from the General Data Protection Regulation similarly applies to the processing of personal information outside China in the following circumstances: (1) where the purpose is to provide products or services to individuals in China; (2) the analysis or assessment of the activities of individuals in China; and (3) other situations as stipulated by laws and regulations (art. 3).