2021 CIBEL Young Scholars Workshop: A progressive commercial law in a changing world

2021 CIBEL Young Scholars Workshop: A progressive commercial law in a changing world

good morning to those in the asia pacific region and good afternoon and evening to those of us joining us from the united states and north america i am emma armstrong and i’m a member of the herbert smith freehills siebel center and associate professor at unsw law and justice and i’m delighted to welcome you to the first session of siebel’s 2021 young scholars workshop i begin today by acknowledging the traditional custodians of the lands on which we meet today the betigl and gadigal people for where i am and where unsw stands and pay my respects to the elders past present and emerging i would also like to extend that respect to other aboriginal and torres strait islanders who are present here today thank you for joining us to discuss commercial law in our changing world our young scholars in this session have been researching in the important areas of enforcing stakeholder interests in the context of directors duties transnational suppliers in global value chains reforming personal information protection in china and promoting a level feel a playing field between chinese state-owned and other enterprises [Music] i’d like to thank my sible colleague associate professor charlie weng for his work in bringing together the panel for this webinar i will introduce each panelist right before they speak and our format is that the panelists will each speak for somewhere between 10 to 12 minutes before we open up the questions at the end our first speaker is mr param pandya a phd candidate of the national university of singapore param is currently pursuing his doctoral studies at nus as the president’s graduate fellow he completed the master of science and law and finance at the university of oxford as the jn tata scholar in 2019-2020 he is qualified to practice law in india prior to pursuing his masters he worked as a research fellow at the findi center for legal policy new delhi here he had the opportunity to draft the zero draft of india’s national action plan for business and human rights he also assisted the government of india in drafting amendments to the indian insolvency law company law among others before this he worked as a corporate lawyer at cam a top-tier full-service law firm in india his key interest areas are business and human rights corporate governance and financial regulation with a special focus on india perham’s topic today is directors duties and stakeholder interests the need for an enforcement mechanism good morning good afternoon and evening to everyone my presentation aims to highlight the need for an enforcement mechanism to remedy the breach of directors duty to consider stakeholders interest so my presentation is structured in a way that it first provides an overview of the directors duties to consider interest of non-shareholder constituencies such as employees creditors consumers suppliers environment and the community at large which i refer as stakeholders i then discuss the governance model and how these duties are currently being enforced the second part discusses four principal justification for the need for an enforcement mechanism lastly i welcome commencement questions next slide please so uh what does considering stakeholder interest entail for instance if a company is proposing a new mining project director should not only evaluate the future possib profitability estimates but also consider if the mining site say is a heritage site or there are environmental issues among others directors duties to consider stakeholder interests benefits into two major forms the pluralist approach and the esp or the enlightened shareholder value approach the pluralist approach treats stakeholders interest as an end goal and does not prioritize between shareholder interest and stakeholder interest it’s based on the stakeholder theory so continuing the earlier example of the mining project while a new mining site may yield higher profits it may also provide an employment and better infrastructure so you see the conflicts shareholders employees are on the one side and the environment in the community whose heritage is being lost on the other the issue of conflict of interest is atypical to the pluralist approach and in it increases the cost of the corporate decision making the indian company law adopts this approach it acquires equal priority to all stakeholders however fails to guide on how to balance the interest of all stakeholders next slide please the esp approach sees shareholder value or long-term interest of the company is the end goal and prioritizes shareholders interest in case of conflicts so again getting back to the earlier example despite conflicts of interest the mining project could go through because it enhances value and leads to certain benefits to employees this approach helps directors at times to take tough call as the priority is put together the uk approach the uk section 172 of the uk’s companies act seems to adopt this approach it says that directors must promote the success of the company for the benefit of its members as a whole but in doing so have regard to the interest of other stakeholders next slide please the australia and singapore approach towards director duties is somewhat similar as both accord and implicit recognition to directors duty in their respective company law this is by virtue of judicial interpretation and also certain committee deliberations in australia in particular however in australia the priority of shareholders interests uh i mean shareholders interest having a priority to stakeholder interest is a bit more clearer than in singapore i’m sure you by the time by this time you have guessed the references to the example that is where i am referring to the rio tinto uh and the issue of the uh gorge caves uh uh in australia the case throws clear light on how board of directors actually failed to consider the issue of the heritage site which is expressly acknowledged in the many reports that were even published by committees and also by the company itself this site which was very special to the local communities there is just textually realistic uh since the provision has been introduced we have not seen a case law that highlights the counters of 166.2 of the companies act and india also has certain substantive and procedural barriers that do not incentivize private enforcement such as direct action or derivative action one may argue that public enforcement avenues are available in the form of government initiating an action in public interest however here again there has been no action on this slide in in this case next slide please the uk government realized that section 172 is not having enough impact it did undertake a consultation exercise in 2017 and adopted a disclosure-based enforcement approach the governance corporate governance code of 2018 and section 414 cz a of the companies act requires companies to disclose how they’ve imbibed section 172 in their own corpora decision making process uh but as it is inherent in a disclosure based mechanism there is serious lack of consequences why as the only only matter that is being uh checked is whether it’s compliant complying or not the quality of disclosures is left to market forces australia is just not novel in terms of recognition of directors duties but also in its enforcement it allows both private and public enforcement to remedy breach of the director duties the uniqueness of its model makes it as an interesting case for analysis uh this public enforcement fills the void of lack of incentives for private parties to initiate action however it also shed light on some issues that public enforcement may face such as regulatory capacity or political economic considerations next slide please singapore adopts the esv approach but again lacks any credible enforcement mechanism there are certain penalties for non-compliance with 157 which is the provision which provides for directors duties and one can initiate uh derivative action but so far there is no been no instance in fact uh while there is one point that singapore has issued a practical guidance the corporate governance code but this practical guidance actually is two steps backward uh it it’s put stakeholders interest as a me to a mere public relations angle so you see that the the the enforcement mechanisms are not that great with in the jurisdictions under study uh next slide please so this is where i’m seeking more clarity i am i’m i’ll be great if the participants could provide some comments on this uh i’m keen to incorporate china as a jurisdiction because it makes a good case for a developed versus developing economy also there are good similarities between india and china in terms of the soe presence among everything but there are certain questions such as how does an anglo-american concept of directors duty play out in civil law china with a dual board structure how does the provisions of the prc company law and stock exchanges guide which basically do acknowledge uh stakeholder interest and the corporation’s responsibility for it uh manifest in practice i would be glad to hear from the participants on these uh points so this is the gist of my presentation uh which basically argues for four justifications next slide please so as you can see there are four principal justifications the justice justification synergy justification stakeholders salience justification and accountability justification i detail it out in the next slides next slide piece the justice justification so in all jurisdictions discussed about which recognize directors duties to consider stakeholder interest but they do not provide any credible enforcement barring of course australia this puts stakeholders in a very precarious situation as they have a right with no remedy stakeholders only mostly lack bargaining power and enter into incomplete contracts they may also be subject to opportunistic behavior by corporations in a case where they make firm specific investment thus to provide remedy to stakeholders against breach of directors duties within the corporate law framework an enforcement mechanism is required this could also provide or link liability to other sustainability enhancing mechanisms such as human rights due diligence sustainability reporting and sustainable finance next slide please the synergy justification is a bit more complex so traditionally corporate law scholars have viewed stakeholder protecting stakeholder interest as the role for external regulation external regulations such as environmental law labor law financial regulation among others they obeying the corporate law or internal regulation is ill-equipped to deal with stakeholders concern this view has actually resulted into corporate law being an island so so also corporate lobbying has reduced the intensity and effectiveness of external regulation to protect stakeholders penalties imposed by external regulation seem to have no deterrence value so how will an enforcement mechanism come complement external regulation breach of directors duties will be the higher threshold as would include breach of external regulation and even an anticipatory breach of external regulation it could also include areas where there is lacking or absence of external regulation however the remedy will be corporate law based only that is to say director disqualification or compensation from the company it will not be an all cup encompassing mechanism or an overkill to be fair further to mitigate this liability that results from the breach of directors duties to consider stakeholder interest compliance programs may be put in place thereby leading to mitigating the breach of external regulation as well if this works out well external regulation and its enforcement will have less less role or or rather in in the sense would would not be heavily burdened and thus it will this this enforcement mechanism would create a synergy between internal and external regulation next slide please the stakeholder salient justification basically is based on the stakeholder salience theory proposed by mitchell uh basic which suggests that there are three major factors power urgency and legitimacy that provide stakeholder interest salience in in front of managers so needless to say when that then there is a remedy for breach of directors duties to consider stakeholder interest it will enhance stakeholder power i’m not saying that it will directly enhance or allow stakeholders to get it at this juncture but even if there are indirect informal remedies it can help to enhance stakeholder power when stakeholders concerns will be raised through a formal mechanism such as a direct or a derivative action or an informal mechanism such as voice and engagement by institutional investors it will make these concerns more urgent for managers to redress or else consequences will follow further safeguards would have to be put in place to avoid frivolous concerns that means only the legitimate uh concerns or legitimate stakeholder interests which have not been considered get attention this basically tick boxes all the three uh factors of power urgency and legitimacy and thus i argue that an enforcement mechanism would create would basically lend more salience next slide please the accountability justification is quite straightforward because the problem of the stakeholder theory is that it has many masters creditors suppliers consumers employees environment among others this means that the directors would justify efficient actions or omissions in the name of stakeholders interest they would lobby for reforms uh and which provide more discretion and reduce accountability introducing an enforcement mechanism will bring the decisions under the scanner and serve as a discipline mecha measure we must bear in mind that we can we can’t also allow stakeholders to behave opportunistically as it is harmful for businesses an enforcement mechanism which provides for procedural and substantive safeguards would minimize this risk as well thereby making both stakeholders and shareholders accountable next slide please so finally this is the scope uh i’ve uh the first point that i want to make it clear is that i don’t attempt to solve the larger debate between shareholder primacy and stakeholder theory because evidently so there is enough enough research which says that stakeholders interests are getting traction even in shareholder primary jurisdictions i’m not envisaging an enforcement mechanism as well which is a pill for all else it’s the corporate law realm needs to be left in there at the same time it can be made more sensitive to stakeholders concern so it’s only a breach of directors duties and also is subject to three major factors such as political economy regulatory architecture and the limitations of judiciary in these jurisdictions i think while i had explained how uh private enforcement of derivative direct and derivative action or public enforcement by regu in in terms of regulatory action makes sense uh i have currently not dealt with what constitutes an enforcement mechanism uh because that’s part of my thesis and probably you might have to wait for the young scholars workshop in 22 2022 to get some answers next slide please uh that’s i think from my end i welcome all your questions comments suggestions uh thank you hello um thank you very much um and if you wouldn’t mind just muting um thank you very much for your presentation um for those participating you can start posting your questions in the q a section and we’ll prioritize those uh that are the most liked our next speaker is main wen an assistant professor of law at the temple university beasley school of law may is also an affiliated scholar at the u.s asia law institute at new york university school of law she researches and writes in the intersections of contract law transnational business governance and comparative law her work has appeared in the american journal of international law unbound the stanford law and policy review the harvard human rights journal and the new york university law review among others prior to entering academia professor nguyen practiced corporate law in the silicon valley office of davis polk and ward wall and served on the policy team of the california office of the attorney general she earned a jd degree from the nyu school of law where she was a law and business scholar and an executive editor of the nyu law review the topic of her presentation today is norm assembly in global value chains uh hello everyone from from philadelphia it is wonderful to be here today many thanks to the organizers and to professor armstrong for sharing this panel so i am presenting today a work in progress that is still taking shape it is an article called norm assembly in global value chains and normal assembly is is of course inspired by the process of physical products assembly and the metaphor is meant to invite envisioning supply governance supply chain governance as a co-production process whereby intermediaries like suppliers and contractors alongside their corporate buyers and other actors all participate in the creation interpretation and implementation of a range of legal and business norms spanning from contract designs to corporate liability to labor standards now it is it is often assumed that multinational brands like walmart and nike and apple usually based in developed economies other rulemakers in global trade who dictate the terms and engage terms of engagement to a sprawling dispersed network of suppliers worldwide this stylized picture of globalization is no longer accurate today just as corporate retailers divest and outsource their foreign-based first-year corporate suppliers in a parallel move have increasingly scaled up and consolidated to serve corporate demands so as a result a group of powerful but largely hidden global economic actors transnational suppliers and manufacturers have emerged as a new crop of multinational enterprises so i want to highlight just three things that animate this project first is the rise of these so-called big suppliers transcontinental multinational companies like foxconn are probably the most well-known which is the 26th largest company in the war there are also li and fung the world’s largest apparel trading house uaun which makes one out of every six pairs of sneakers so globally apparel cotton shirts that you and i wear just to name a few so these are the multinationals at the top of a global supply base that made possible the business empires the brands like apple and walmart and target so second the second point is about supply chain governance defined very broadly as a production network labor and environmental standards product safety etc that are increasingly being managed by these transnational suppliers rather than their corporate buyers and finally such economic arrangements in turn impact the ways in which certain legal and business norms and rules are so-called assembled and implemented in global value chains and i will use some vignette examples to illustrate these points but the overall takeaway of this project is that even though economic powers in supply chains today are still in balance in favor of big brands instead of a one-way power exertion there is a relative shifting and sharing of locus of power and that matters with legal implications for contracting practice corporate social responsibility designs just to name a few okay so let me dive deeper into each point first is about the economic story big suppliers are of course not a new phenomenon but their legal implications and their roles in non-making are still under study many of these big suppliers are vertically integrated so they are doing the reverse of the western multinationals there’s a fascinating historical account of how that transformation happened that is highly industry specific for textile and garment for example it is a quota system under the multi-fiber arrangements and its exploration in 2005 that was one key driver so today big suppliers manage and sometimes own to various degree a transcontinental network of factories and manufacturers that cover the entire production process so that they can provide turnkey full-service access to brands and ironically that include reopening shutdown plans that firms have left behind firms in the u.s and europe uh and elsewhere have left behind in the u.s the the latest controversy was foxconn reopening of a um of a plan in wisconsin okay uh so very quickly supply chain governance uh let’s just uh let me just give one example in the interest of time so tau apparel group is a textile manufacturer that supplies for brooks brothers ella bean jcpenney among others tao manages its inventory through what is called an integrated synchronization service also known in contract parlance as vendor managed inventory of vmi whereby it takes full responsibility for maintaining jc pennies in inventory levels now traditionally manufacturing was based on a business model of so-called command demand such that vendors simply responded to orders and had little visibility into their customers activities vni by contrast links data from the retailer’s point of sale directly to the factory floor so when i buy a purple shirt at jcpenney that data is collected at the point of sale through tile’s proprietary software and flows directly to the particular factory the tile had assigned for jcpenney which then automatically replenished jcpenney with the style size and color that is running low all without the need to consult with jc penny itself as one tile managing director noted instead of asking jcpenney what it would like to buy i simply tell them how many shirts they just bought this is known as just in time two so that’s the next evolution of toyota’s well-known just-in-time system and the key takeaway is that supply chain governance traditionally about managing people and products beyond the borders of brands and retailers and traditionally conceptualized as this bio-driven vision are now increasingly about the internal functions of brands themselves with suppliers taking on bigger roles all right finally let’s talk about norms what norms and how does non-assembly happen let me give another example of uun which is one of the world’s biggest manufacturers of branded footwear supplying to adidas nike among others uaun factories organize their production lines by customer so each production line including not only the machines but also the workers is responsive to the specific customers requirements including their codes of conducts and that’s because the footwear industry has a wide range of such codes nike in particular uh once the the poster trial of uh sweatshop practices as one of nike’s major suppliers uaun became embroidered in the anti-sweatshop campaign against nike in the late 1990s including major expose in its factories in vietnam as an early adopter of corporate social responsibility uan following nike’s lead increasingly needs to comply with not only varying manufacturing specifications but also a variety of codes of conducts and labor and safety standards because it organizes its production lines based on specific merchandisers it was able to impose stringent standards only where required un’s business model made us give insights into why course of conducts and csr efforts continue to face persistent challenges the customer-specific arrangement arguably limits a so-called brussels effect so california effects on overall factory conditions so just to sum up at the macro level the big question that interests me in this project is an interplay between the economic forums and legal forms in global production so in this case how do these transnational suppliers come to be and now that they are here how should regulators and other actors think about them recognizing the relevance organizational logics and regulatory potentials of these actors is significant especially in today’s pandemic war where global value chains have increasingly become arenas of not only economic activities but also security human rights and geopolitics contestation thank you thank you very much may our next speaker is ms luna zhang who’s a jsd candidate at washington university st louis school of law luna is currently a fourth year doctor of deridical science student a candidate and she obtained her joint bachelor’s degree in laws and business administration from china university of political science and law followed by obtaining her two master’s degrees in laws and legal studies from washington university her research interests lie in the fields of comparative commercial law and financial regulation with particular interests in fintech law privacy law cyber security law finance law commercial law and information law as well as other laws in the fields of the most cutting-edge forms of financial regulation aspiring to be a legal expert in comparative commercial law she would like to strengthen her intellectual background and substantive legal knowledge by conducting comparative studies on business law under an international context and in a global perspective luna’s topic today is a comparative study on personal information protection legislative reforms in china a progressive wave of privacy reforms in a changing world hello everyone thank you professor ompson my name is luna jung and i’m currently a fourth year gst candidate at washington university in san luis school of law the united states first of all i would like to express my thankfulness to the herbert myth free hills civil center at unsw sydney for offering me this opportunity to present my work it is such a valuable occasion for academic encounters and dialogue today i’m going to conduct a presentation on my current research the title of my presentation is a comparative study on personal information protection legislation in china a progressive wave of privacy reform in a changing world page 2 please firstly i would like to briefly walk through the roadmap of today’s presentation my presentation is divided into six sections section 1 introduction section 2 the fundamental principles of credit big data and the advent of big data technology with its applications in various kinds of activities section section 3 china’s personal information protection legislation at a crossroads section 5 section 4 an important lesson to china enlightenment from the euro section 5 outlooks and proposals finding an ideal chinese model and section 6 conclusion next i’m going to carefully guide you through each section in detail [Applause] in the past few years with the gradual awakening on the production of individual freedom civil liberties and human dignity countries and regions around the world are experiencing a progressive way of privacy reforms currently china has completed two rounds of reviews on its job personal information protection law and has entered the process of the third round of review a new kind of data privacy arrangement is expected to be introduced in the near future however at present there is not a single unified and comprehensive personal information protection legislation in china how to boost the legislative reforms on personal information protection in china has become an essential topic for chinese legislators page 4 please hello uh before we we can head into the concrete analysis and examinations of legal perspective of this issue there are some fundamentals to grasp in this section i will briefly introduce this background information page 5 please credit is an essential aspect of human society the concept of credit contains rich meanings it can be examined from various perspectives of law economy sociology and ethics etc different angles of perspective reveal different versions of definition of the concept of credit at the same time the connotations of credit do not always remain the same and are gradually evolving throughout history the progress of credit mirrors the progress of human civilization and therefore in a sense the history of credit mirrors the history of human civilization page six points after the year 2000 due to the rise of information technology the real concept of big data has emerged currently there is not an official definition of the concept of big data the earliest definition of big data was firstly introduced by the renowned consulting firm mackenzie in year 2011 big data was defined as datasets whose science is beyond the ability of typical database software tools to capture store manage and analyze page 7 please the real emergence of big data came with the birth of internet in 1993. nowadays the big data revolution has completely changed our lives the utilization of big data in virus industries has become a new engine and a new driving force for economic development while big data brings enormous transformations to human beings it also pose great challenges to the traditional framework of personal information protection it is increasingly important to to strengthen the governance of big data technology with its applications in various forms of activities page 8 please after understanding the basic issues it is time to examine the floors and limits of existing standards and norms on personal information protection in china in this section i will firstly illustrate the four categories of personal information production standards in china secondly note several major laws and regulations governing personal information protection in china and thirdly at articulate the force and limits of existing standards in china page 9 please my research divided the current existing china’s personal information protection laws and regulations into four categories according to the levels of their red injurious buddhists the first layer is the constitutional law of people’s republic of china because the constitution has the highest status in the legal hierarchy and is the most essential fundamental law among all law departments the second layer is auditory law such as the civil code of people’s republic of china and the criminal law of people’s republic of china the third layer is administrative regulations such as the telecommunication regulation of people’s republic of china the fourth layer is the departmental regulations such as the regulation on management of internet electronic node services currently there is not a single unified and comprehensive personal information protection legislation in china page 10 please major laws and regulations governing personal information protection include just to name a few the constitutional law the civil code the amendment 709 of the criminal law the cyber security law the taught liability law and the consumer rights and interest law page 11 please generally speaking the current legislation on personal information production in china is mostly indirect fragmented and is in overly general provisions at present china’s legislative branch has already finished the review of the first and second jobs of its personal information protection law a some strong and comprehensive personal information protection mechanism in the era of big data can be expanded in the near future right now there are currently three major insufficiencies existing in the personal information protection laws and regulations governing big data credit reporting activities in china these insufficiencies are firstly less of a single unified and comprehensive personal information protection mechanism secondly lack of a clear definition of personal information in current legislation and thirdly lack of a comprehensive and effective legal enforcement mechanism it is imminent for china to establish a well-rounded personal information protection in credit reporting activities in an era of big data page 12 please in section 4 i’m going to analyze the current personal information protection legislative metrics from european perspective in order to provide proposals for the personal information protection in china page 13 please europe is the birthplace of modern data protection laws and regulations the european union has the highest standard for personal data protection with the most comprehensive and stringent data protection legislation in the world steaming from the personal data protection directives the new general data protection regulations known as gdpr was approved in 2016 and effective in 2018 it is regarded as a single symbol of the new era of big data governance gdpr okay all right thank you gdpr can not only protect the individual rights of eu citizens from the infringement of personal information but also is a key step of eu’s global strategy in the era of information society gdpr makes eu the leader of the global digital economic order page 14 please in section 5 i’m going to illustrate the enlightenment from the current legislative model in european union and provide suggestion to find an ideal chinese model on personal information protection page 15 please the e the european union legislative model on personal information protection has three essential aspects firstly a single unified and comprehensive law on big data credit reporting secondly a definition of personal information in a single unified and comprehensive law and thirdly assault legal enforcement mechanism on big data credit reporting my research believes that china should facilitate the current legislative mechanism on the production of personal information in big data credit reporting activities in at least three corresponding aspects page 16 please the case of china is like a chaos today and a promising prospect tomorrow having finished two rounds of reviews china’s gdpr is just around the corner besides china the european union and the united states legislative model on personal information protection or range originate from their unique economic social political culture and historical backgrounds china should also explore the effective ways and means to protect its citizens human interest rights dignity and freedom based on its own conditions page 17 please to sum up my research in the intersections of privacy law and foreign tech law aims to answer the following questions uh could you please give me three more minutes to wrap up my presentation beyond to sum up my research in the intersection of privacy law and finance law aims to answer the following questions what is the future of credit reporting industry in china how should china develop its credit reporting industry within a superior legal framework how will traditional credit reporting activities develop with the advent of modern big data technology what are the legal problems of and their countermeasures to the currently existing legislations on personal information protection in big data credit reporting activities in china what are entire enlightenments from data protection legislative metrics in europe what other europe can borrow from the current legislation of personal information protection in china page 18 police this question expect answers yet without question the advent of the era of big data with its applications in financial activities will continue changing the traditional financial ecosystem and transforming the world page 19 please the world is constantly changing with a progressive way of social revolutions in forms of judicial reforms fixing aiding on the judicial reforms in forms of privacy renovations will lead us to a stage of superior information privacy governance my research embodied in today’s presentation expect 2000 one facet of the of the privacy renovations in forms of personal information protection legislation privacy is a human right as the article 12 of the universal declaration of human rights states no one’s privacy family residence or communication is subject to arbitrary interference and his dignity and reputation are not subject to unjustified attack the protection of personal information is not only the demand to protect protect personal in the public and private sphere but also directly relates to national information sovereign surveillance cultural sovereignty and economic development in order to build a stronger and healthier credit reporting industry in an era of big data it is increasingly essential for china to establish a sound personal information protection legislative mechanism to protect its citizens human dignity civil liberties and individual freedom based on its own condition that’s all for today’s presentation thank you for listening thank you very much luna our final speaker is dr sofia bai a phd graduate from unsw law and justice sophia has been awarded a doctor of philosophy degree at unsw law in 2021 where she conducted doctrinal research on the reform of chinese state-owned enterprises what china can learn from the practice of competitive neutrality policy in australia prior to commencing her phd degree dr bai was awarded her llb and llm degrees in law at beijing zhangtong university dr bai’s current research is in the area of competition law and policy her recent co-authored article is published in the international and comparative law quarterly on china’s soe reform using wto rules to build a market economy sophia’s topic today is reform of chinese state-owned enterprises what china china can learn from the practice of competitive neutrality policy in australia hello everyone i would like to thank sibo for inviting me to speak at the this workshop what i will talk about today um is largely three part what is competitive neutrality and what is not why competitive neutrality is important and how to achieve competitive neutrality especially for china next please the term competitive neutrality is a multi-dimensional and somewhat abstract concept there are different ways to understand the term depending on the context for example in transnational discussion like international trade regime competitive neutrality often refers to no entity operating in a market is subject to undue competitive advantages or disadvantages under this definition the primary cause of competitive mutuality concern is lessly relevant is less relevant to ownership and has more to do with home country measures like state aid or the use of industrial policy by contrast competitive neutrality when discussed in domestic perspective focus mostly on the participation of soes in the market for example competitive neutrality in australia refers to government business should not enjoy any net competitive advantage simply as a result of their government ownership for the purpose of today’s presentation competitive neutrality is discussed in chinese market and refers to a guiding principle that soes when competing with other firms should now enjoy competitive advantage merely because their government ownership it is worth clarifying here that competitive neutrality does not become relevant to the question of whether to reduce the existence of sle in the competitive market or even a bigger question of whether soes should exist in the first place or not competitive neutrality in this sense is secondary to the matter of privatizing soes or retaining government ownership in a firm what is more relevant to competitive neutrality is when soes are engaging commercial competition how a neutral market can be maintained without changing the in nature of the firm next slides please government ownership within soes can generate competitive advantages such as have better access to bank loans borrow money at lower cost for example lending to state-owned enterprise often perceived to have a lower risk and this is often often reflected in lower interest rate and have better access to public resources like land free of charge or at a lower commercial rate so is when competing can benefit from this kind of competitive advantages and take business away from more efficient firm in competitive market in addition the dual role played by government in the market may cause competitive neutrality concern that governments have incentive to favor soes over other competitors in particular government as a shareholder has incentive to maximizing its financial interest in its commercial firms however government as a regulator oversees commercial activities of our market players this outcome is undesirable from a competition point of view for several reasons firstly allowing so used to compete based on their government ownership generated advantage sends the wrong signals to market participants which is that to succeed against the rivals firm need to pursue government ownership rather than focusing on perth rather than focusing on performing activities more efficiently than their competitors secondly allowing isos to benefit from their government ownership is likely to lead sub optional use of resources because a market that allows less efficient firms to survive is unlikely to ensure their good and services are delivered at the lowest possible cost the comparative study in australia found that soes in the market does not necessarily cause concern if anti-competitive conduct of soes exist is successfully regulated by the competition law and there is a competitive neutrality mechanism in place to maintain a level playing field in the market based on this observation i evaluated the ability of current chinese competition law or the anti-monopoly law and competition policy to maintain a level playing field in china the finding in my research suggested that current chinese competition law and policy may have limited the effect ensuring a level playing field between soes and other market players in particular uh i found that while there are cases to suggested soes like all the other market players are under the coverage of competition law and will continue to be so in the future enforcing competition law against soes posts additional difficulties to chinese competition authority for example merger enforcement can be affected by the involvement of chinese sois the concentrating of central soes or yangtze is often published by sasik the supervisor of central soes before it has been cleared by the competition authority in addition i found that while fair competition review system is designed to address unjustified competition restraint imposed by regulatory policy the application of such policy can address only part of the competitive neutrality concern the regulatory advantage in dried by chinese soes this means that more needs to be done to address the lack of level playing field between soes and other competitors in china you probably wonder why china need competitive neutrality for people who is now familiar with china it is essential to know that different stages of sos reform have altered the relationship between government and chinese so yes however the connection between soes and government and political authorities still exist the current reformation years introduced in 2012 also increased the pressure on chinese so yes to be more competitive in both domestic and international markets my papers argues that adopting tools to encourage soes compete based on efficiency rather than on government ownership generated advantage will greatly benefit china a country with a substantial number of soes active in the market having effectively enforced competition law and a chinese competitive neutrality pla in place will bring increased domestic competition this strong domestic competition environment would push companies especially soes to improve their efficiencies through means like innovation in order to survive in the competitive process and eventually toughen them up for the international competition the protection of soes from competition at home on the other hand may make them less likely to succeed in the international market to ensure a level playing field between soes and other competitors in mainland china i proposed several measures for government to consider first the measure is to reform chinese anti-monopoly law to address soes more effectively i suggested article 7 could be deleted and the possible exemptions available to sles should be evaluated in a systematic manner in addition i suggested that china should consider introducing competitive neutrality policy in a gradual manner while main content of competitive neutrality will be decided by chinese policy maker based on the identified competitiveness neutrality concern unique to chinese soes i explored several ways of regulator for regulators to consider when drafting such policy in my paypal for example i propose the regulatory neutrality that requires policy maker to ensure as far as practicable practicable the iso is operating in the same regulatory environment as soes competitors policy makers choose to provide a different regulatory treatment for sles should demonstrate in writing why this different treatment is necessary for the purpose of competitive neutrality policy you thank you very much to all of our speakers we are now going to have a q a session and hopefully you’ve already opened up the live event q a the the question mark uh column on your screen and what we’ll be doing is looking at the um the questions that have been posted and the most um light uh i i might um i might start off with the question from um apologies if i mispronounce your name here uh mr habib alam and he asks how should we draft the commercial contracts to compromise the impact of the covert 19 situation and i’m assuming that this is being directed to may uh sorry oh here we go okay can you hear me sorry i’m having some trouble unmuting myself um thank you very much for your questions um so so the question is how how do we draft um commercial contract going forward now knowing the risk of um the covet 19 pandemic and of course this is the million dollar questions that um all the lawyers around the world are working on um so so from a um from the u.s sort of contract law perspective i think the answer to this will depends on whether you are a um a formalist or um uh what we call a relationalist um so uh as a formalist contract person i would say we would have to make sure to show up those force major clause in in this commercial contract um we have to make sure we understand how these clauses will be enforced in different jurisdictions um to take into account this new risk of the pandemic relationalist contract lawyers of course will counter that is not the formal contract that matters in business relationship uh but really it is the informal norms industry norms that makes a difference um uh just uh from my own research when covet 19 hit robot’s value chains and i did some of my field work in vietnam the supplies that i talked to say nobody but no one bother pull out the formal contract to see whether there’s a force major clause um people just scramble to figure out how to reshuffle their supplies um how to cover the contracts and and work together to figure out uh some kind of compromise uh so relationalists would say um it’s about the industrial norm uh the business norms that matter uh and of course there’s the the braiding theory of contract uh whereas the formal and the informal together uh where we have a formal contract but also try to figure out uh where the uh informal mechanisms are most alien thank you very much for your question thanks very much may the next question is for param can you talk more about the reasons for the lack of enforcement by the government and privately in india in relation to uh directors duties uh thanks emma uh so the question uh is quite pertinent because uh private enforcement in terms of direct action stakeholders have no remedy whatsoever uh direct action can be taken up by shareholders and they can advocate for the causes of stakeholders however the remedies provided in the company law itself don’t pro don’t allow uh stakeholders concerns to be established by uh shareholders so on the direct action front this is the problem on the derivative actions front uh the class action provided under companies act uh has many procedural uh barriers because of which stakeholders cannot approach directly to uh to uh to to launch a class action and also a few of the class actions that have been put together have not been successful uh in terms of the shareholders raising concerns uh against the company uh it’s not clear also whether common law derivative action which is non-statutory derivative action is clearly recognized but there again we have not seen uh derivative actions in india generally some institutions uh institutional investors have reached out to companies and have engaged with them to make uh to to take environmental issues and others in in into light but that also has been just uh engagement and no definite action on the government enforcement uh see there are two possibilities of enforcement but these are a bit uh they are always shareholder-centric they are not meant for stakeholders again the lack of political will and industry political nexus would be another reason why the government is not too keen to take up action and the uh sebi who’s the securities market regulator uh he might just be ending up into a tricky tough battle between the ministry of corporate affairs which is the relevant regulator under the company’s act vis-a-vis the listed companies with semi-regulates and they don’t have a direct part to enforce the director duties section 166. so this is the complex merit and why there is actually no enforcement of the same in india thank you thank you very much param if i could direct pick up the next question for luna um as you you mentioned in your presentation that both the union and the united states have mechanisms in statutory law and case law governing the effective protection of personal data since china is a civil law country with statutory jurisdiction how would you address the issues of statutory law versus case law when you attempt to incorporate the advantages of the standards and norms in both regimes okay thank you very much for your question in my opinion there is no definite boundary between statutory law countries and k-12 countries for example although china is a civil war country it is learning from the legal behaviors from the country with case law the supreme court uh the supreme people’s court of people’s republic of china issued china guiding cases frequently this is called the china guiding cases project basically these guiding cases are disseminated for chinese judge prosecutors lawyers and other legal professionals to learn from in contrast in a case for country such as the united states there are still statutory laws take the united states as an example the uniform commercial code in the u.s is an example of statutory law in a typical case law country in my opinion there is no contradiction between statutory law and case law they can coexist in a legal jurisdiction without confronting with each other so this is my answer to the question thank you very much thanks luna if i can direct the next question to sophia what impact would adopting competitive neutrality have in relation to the protection of chinese small and medium-sized enterprises do you think protection of sme should be one of the objectives of chinese competition a competitive neutrality policy thank you emma for the question it is indeed a very good question personally i think the purpose of adopting competitive mutuality policy in china is to protect competition or competitive process by requiring that competition between soes and other competitors is based on efficiency rather than who can benefit benefit from government ownership or political connections it seems that adoption of such policy can benefit the development of chinese small medium enterprise to some degree what i can think of is the adoption of debit neutrality could potentially improve the allocation of bank loan situation in china in this sense um small business enterprise will benefit from adoption this po of such policy and will have better access to bank loans in practice however in my opinion such an outcome is achieved through the increased competition from the adoption of this policy and the purpose of introducing competitive mutuality policy should not be interpreted as to protect certain competitors like small and medium enterprises thank you i hope this answers the question thank you very much sophia i’d like to come now back to a question that was asked of may you’ve spoken about the challenges of implementing codes of conduct for suppliers on assembly lines can you talk about the impact of regulation at point of sale in relation to those assembly lines um anyhow uh thank you very much for the questions um so so by point of sale i assume um uh uh you mean the the um corporate store the retailers right so um a shirt is shipped from uh taiwan or vietnam to uh jcpenney store for example in in philadelphia where i am and that’s the point of sale um so because these stores are in different jurisdictions so the regulations um so uh a great question is a very complicated one because it’s affected by the jurisdiction of where the story is um so in the united states with regards to codes of conduct um uh the united states has adopted uh generally a sort of um sunshine in the best disinfectant kind of approach to justice brandeis so it has just like the securities regulation regime it has generally adopted a disclosure model when it comes to codes of conduct in csr so at the state level it is california with with its supply chain modern supply chain risk law that is sort of the most advanced in in this area at the federal level there is currently no specific body of law but there’s various provision within various federal law that regulate suppliers code of conduct the dot frank act uh section 502 for example um is one specifically to two critical minerals um and then countries in europe like the uk and france are much more advanced uh in this field uh the uk modern slavery act france duty of virgilans law impose much higher standards on companies at point of sale thank you thank you very much may um now there’s a question here um a follow-up question for sophia who should be responsible for implementing competitive neutrality in china oh this is another good question i talked about this in my papers i think the principle of government who owns or controls soes shall be responsible for the implementing of such policy this means the owner of soes need to assist assist soes to implementing a competitive neutrality arrangement however one potential issue with this self-implementing approach is a lack of supervision and potentially transparency in my opinion the design of complaint handling process could potentially remedy this shortcoming therefore for a design of complaint handling authority i think competitive neutrality can the responsibility should not fit in with one government authority so i suggested to consider have multiple government regulators to handle such complaints i i think sasik the super advisor of soes can have a formal role in handling such complaints and competition authority in china samr could act as an advisory to sasik thank you thank you very much sophia now we have another question here for luna in your presentation you mainly conducted comparative study on personal information protection based on the examinations of the current existing eu law and chinese law i’m wondering how the other countries and regimes around the world are responding to the same issue are there any lessons that can be learnt from the other countries in relation to the questions you are examining in your research thank you very much for this question lots of countries around the world are responding to personal information protection legislation such as the united states india brazil the united kingdom and japan etc it has been a global tendency to enact norms and standards on personal information protection there is a lot of enlightenment for chinese legislators to learn from take the legislative approach in the united states as an example the united states takes and decentralized market-oriented legislative model besides the single unified and comprehensive legislative model in eu as i described in my presentation the u.s legislative model is another major ledges model it is valuable for china to learn from the advantages of both the eu model and the us model thank you hey thank you very much sorry about that um oh very sorry now i’m having a technical issue um i’ll be back soon great okay um okay now um okay so i have another question for param um why do you think an enforcement mechanism for directors duties to consider stakeholders interests is required so yeah that’s a interesting question uh of course the the most important one is that there is a right and there’s no remedy which makes no sense in the first place uh second point is that uh increasing stakeholders the interest are i mean stakeholders will occupy the central role as we go by kovid has accelerated that which means that we will have uh directors who are not accountable to anyone and stakeholders may want to get their concerns heard by by whatever way possible in this case an enforcement mechanism would provide a structural answer to to both these issues that it will ensure that directors are accountable at the same time uh stakeholders get an avenue and that also is not they also don’t uh act rogue so uh with with even with three principal justifications of the fact that a a remedy for a right is must we directors need to be accountable even in a stakeholder-centric uh world they cannot just argue for for stakeholder interest and hide their inefficiencies at the same time stakeholders should should also not be allowed to stall businesses at at any cost so their providing legitimacy to them is also important so i see that these are the reasons why we need an enforcement the counters of it can be of course worked out thank you very much param now i have a question that has come from uh may um and this is directed to sofia um china’s recent development work guide mandates the chinese soes follow the higher global standards re-environmental protection rather than more lacks local laws if there’s a conflict how will this impact chinese sos competitiveness globally if at all thank you this is indeed a really great question because we talk about soes have competitive advantage because their government ownership so it’s in the same time they also suffer from competitive disadvantage because of this government ownership one example is a higher standard of environmental responsibility another is social responsibility sometimes like during colbit soes have higher responsibility with supplying good and service to effective zones so this definitely will affect so is competitive like globally that’s for sure however competitive neutrality requires so ease it doesn’t competitive neutrality does not forbid so used to performing social services it just like uh requires soes to do it more um transparent and if you want to achieve public objective to a project public objectivities you need to wait it up and be transparent thank you hope this helps thank you very much sophia now apologies um we are having some uh issues with the q a so our apologies if they’re if you protested a question and it hasn’t quite come up yet um i i’ll wait to see if there’s any more coming through but in the meantime um i have another question for luna and luna you were focusing very much on the eu rules the data protection rules because they are um a single set of data protection rules um but i understand that there is a more fragmented um system that’s adopted in the us um so the question for china appears to be um choosing between these two models um and in one what approach in your opinion should china take okay this is a great question so basically there are two major legislative models existing in today’s war the first one is the u.s legis model and it is a decentralized market-oriented legislative model and another one is the eu model so it is a single unified and comprehensive set of rules so uh china is legislating its personal information protection law right now and um the draft has already entered the third round of review so uh my research proposed that china should learn from the enlightenment from both the eu model and the uf model basically uh i would like to take the single unified and comprehensive set of rules as one of the advantage that china should learn from so um the advantage from the u.s model that china should learn from in my opinion is that the self-regulatory legislative legislation in a current conduct in the u.s so in my opinion i basically propose that china should learn from the enlightenment from both legislative models thank you thank you very much now it appears that we don’t have any um further questions from the audience so i might um wrap up our discussion uh now and i wanted to thank our excellent speakers for their presentations um and it’s interesting because when we started they seem to be um disparate topics but as i’ve listened to our speakers um we started off with param talking about corporate social responsibility and the enforcement of stakeholder interests and that was um an element of mae’s discussion when she was talking about global protect protection uh look global production and may also talked about the use of personal information which leads us into luna’s presentation and sophia your your discussion of the state-owned enterprises and competitive neutrality is obviously a very burning issue which is very important so i would like to on behalf of the herbert smil smith freehill siebel centre at unsw law and justice i would like to thank the speakers for their presentations and for the webinar participants for your engagement with their research i also want to thank our sible administrators who’ve worked behind the scenes to make this webinar run smoothly we also have three other young scholars sessions today and um the details for that were posted at the start of our um our q a session today i’m just wondering if it might be possible just to repost that at the end so we have another one that’s starting in half an hour if you’re interested in joining us for that there are also siebel global network virtual conference panels every two weeks until october and you can register for any of these events on the siebel website we hope that you stay well and wish you all the best in these difficult times thank you very much for joining us today you
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2021 CIBEL Young Scholars Workshop: A progressive commercial law in a changing world

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