Corporate Law in the Shaghai\u27s People\u27s Court, 1992-2008: Judicial Autonomy in a Conemporary Authoritatian State

In late 2005 China adopted a largely rewritten Company Law that radically increased the role of courts. This study, based on a review of more than 1000 Company Law-related disputes reported between 1992 and 2008 and extensive interactions with PRC officials and sitting judges, evaluates how the Shanghai People\u27s Court system has fared over 15 years in corporate law adjudication. Although the Shanghai People\u27s Courts show generally increasing technical competence and even intimations of political independence, their path toward institutional autonomy is inconsistent. Through 2006, the Shanghai Court system demonstrated significantly increased autonomy. After 2006 and enactment of the new Company Law, a new, if partial, limitation on institutional autonomy seems to be at work, as the Shanghai People\u27s Courts refused to accept or adjudicate claims explicitly permitted in the revised 2006 statute but not yet elaborated in Supreme People\u27s Court Regulation. This reaction is perverse, as the same Courts had liberally adjudicated the same claims before 2006 without any statutory or Supreme People\u27s Court Regulatory authorization. That strange dynamic illustrates the bureaucratic embedding of the People\u27s Courts in China\u27s modified authoritarian system and how such entrenchment can divert or constrain the progressive autonomy won by the same Courts in the formal legal system. The conclusions have positive and negative aspects. On the positive side, there is significant momentum toward ever-increasing competence and autonomy of the People\u27s Courts in Shanghai, at least for the application of corporate and commercial law. On the negative side, a familiar paradox may be at work: with formal substantive law and institutional modernization promised and even partially delivered alongside equally apparent failures in the exercise of judicial autonomy, the result may be to de-legitimize the very institutions offered by the state and ruling Party as twin pillars of modern governance and rule of law

Quack Corporate Governance As Traditional Chinese Medicine: The Securities Regulation Cannibalization of China\u27s Corporate Law and a State Regulator\u27s Battle Against Party State Political Economic Power

From the start of the People’s Republic of China’s (PRC) “corporatization” project in the late 1980s, a Chinese corporate governance regime subject to increasingly enabling legal norms has been determined by mandatory regulations imposed by the PRC securities regulator, the China Securities Regulatory Commission (CSRC). Indeed, the Chinese corporate law system has been cannibalized by all-encompassing securities regulation directed at corporate governance, at least for companies with listed stock. This Article traces the path of that sustained intervention and makes a case—wholly contrary to the “quack corporate governance” critique much aired in the United States—that for the PRC this phenomenon is necessary, appropriate, and benign. That analysis, in turn, reveals a great deal about the following: the development of Chinese law and legal institutions after 1979; China’s contemporary political economy; the true identity of the firm under the PRC “corporatization without privatization” program; the normative character and function of corporate law across increasingly globalized capital markets; and the ways in which state intervention may protect against state abuse of power and enable greater private autonomy. For analysts of China’s contemporary political system, this Article uncovers a new identity of the Chinese party state’s horizontally oriented “fragmented authoritarianism,” where a central government agency has instituted pre-enforcement designs that systemically constrain the economic and directorial power of the PRC’s most powerful, formally non-governmental, political economic actors

A Partial View of China\u27s Governance Trajectory

Minxin Pei’s new book China’s Crony Capitalism: The Dynamics of Regime Decay recites in detail the morass of corruption and collusion in which the People’s Republic of China (PRC) party-state finds itself. Encyclopedic in scope, the book addresses corruption, extraction, and network formation in many of modern China’s formal settings—including in the Chinese Communist Party (CCP), the nomenklatura system, state institutions, enterprises, the investment sector, and the real property market, among others—but also in nonformal contexts such as the rise of the “local mafia state.” The book’s basic storyline is this: the PRC’s radical devolution of intertwined political power and governance authority over productive assets in the early 1990s, matched with the accelerating creation of property rights, delivered on the party’s mission to lift China out of poverty and create sustained economic development. It did so, however, at the cost of generating uniquely harmful incentive structures and resulting extractive and efficiency-defeating behavior that has contributed to regime decay and the frustration of any future advance to democratic and rule-of-law governance structures

Reverse Cross-Listings - The Coming Race to List in Emerging Markets and an Enhanced Understanding of Classical Bonding

This paper examines the implications for the traditional legal bonding hypothesis arising from future reverse cross-listings, meaning the cross-listing by issuers from jurisdictions with stronger investor protections into capital markets and on exchanges where investor protections are deemed less robust. We use as examples the first Indian Depositary Receipt or IDR IPO in May 2010, and IPOs we believe will complete on a future Shanghai Stock Exchange international board . This analysis serves to dilute one of the long-standing negative implications of the traditional legal bonding account -- that reverse cross-listings by issuers from jurisdictions with stronger investor protections into weaker investor protection markets exhibit abnormal negative price effects, allegedly because of market expectations that the foreign listing will facilitate conduct impermissible in the home market. More importantly, this analysis allows for a more nuanced understanding of the bonding hypothesis along either vector, and why firms cross-list into foreign jurisdictions, regardless of the receiving legal and regulatory environment. Those other factors include: the simple quest for capital, the possibility of higher initial valuations in capital controls-segmented markets and eventually higher secondary market values with the easing of such controls and thus enhanced global liquidity, the reduced cost ensured by listing in a less burdensome regulatory and enforcement environment, and a cluster of reasons which we describe as consumer-commercial markets bonding , distinct from the legal and regulatory system bonding that has featured so long in the traditional legal bonding hypothesis. This consumer-commercial markets bonding includes the advertising of goods, services and corporate identity into a given consumer market, identification of the issuer as a global firm but with local identity and ownership, demonstrated commitment to key markets and the customers and regulators connected with those markets, a tipping of the hat to the sovereign legal-regulatory establishment of the receiving jurisdiction, and appeals to the receiving market\u27s regulators for the provision of franchise or licensing benefits

Reflections

The American Society of International Law Committee recommended that the Manley 0. Hudson Medal be awarded to Professor Eric Stein for his lifetime of significant contributions to international and comparative law. Stein, the Hessel E. Yntema Professor of Law, Emeritus, at the University of Michigan Law School, had been an active supporter of ASIL as Honorary Vice President, Counsellor, and Honorary Editor of, and frequent contributor to, the American Journal of International Law. His many books and articles established him as a leading thinker and writer on European Community law and on what he described in a famous article as the Uses, Misuses, and Nonuses of Comparative Law

Quack Corporate Governance As Traditional Chinese Medicine: The Securities Regulation Cannibalization of China\u27s Corporate Law and a State Regulator\u27s Battle Against Party State Political Economic Power

From the start of the People’s Republic of China’s (PRC) “corporatization” project in the late 1980s, a Chinese corporate governance regime subject to increasingly enabling legal norms has been determined by mandatory regulations imposed by the PRC securities regulator, the China Securities Regulatory Commission (CSRC). Indeed, the Chinese corporate law system has been cannibalized by all-encompassing securities regulation directed at corporate governance, at least for companies with listed stock. This Article traces the path of that sustained intervention and makes a case—wholly contrary to the “quack corporate governance” critique much aired in the United States—that for the PRC this phenomenon is necessary, appropriate, and benign. That analysis, in turn, reveals a great deal about the following: the development of Chinese law and legal institutions after 1979; China’s contemporary political economy; the true identity of the firm under the PRC “corporatization without privatization” program; the normative character and function of corporate law across increasingly globalized capital markets; and the ways in which state intervention may protect against state abuse of power and enable greater private autonomy. For analysts of China’s contemporary political system, this Article uncovers a new identity of the Chinese party state’s horizontally oriented “fragmented authoritarianism,” where a central government agency has instituted pre-enforcement designs that systemically constrain the economic and directorial power of the PRC’s most powerful, formally non-governmental, political economic actors

A Partial View of China\u27s Governance Trajectory

Minxin Pei’s new book China’s Crony Capitalism: The Dynamics of Regime Decay recites in detail the morass of corruption and collusion in which the People’s Republic of China (PRC) party-state finds itself. Encyclopedic in scope, the book addresses corruption, extraction, and network formation in many of modern China’s formal settings—including in the Chinese Communist Party (CCP), the nomenklatura system, state institutions, enterprises, the investment sector, and the real property market, among others—but also in nonformal contexts such as the rise of the “local mafia state.” The book’s basic storyline is this: the PRC’s radical devolution of intertwined political power and governance authority over productive assets in the early 1990s, matched with the accelerating creation of property rights, delivered on the party’s mission to lift China out of poverty and create sustained economic development. It did so, however, at the cost of generating uniquely harmful incentive structures and resulting extractive and efficiency-defeating behavior that has contributed to regime decay and the frustration of any future advance to democratic and rule-of-law governance structures