On 19 February 2024, the State Council issued the Guiding Opinions on Further Regulating and Supervising the Creation and Imposition of Fines (Guiding Opinions), (Guo Fa [2024] No. 5), a directive formulated to significantly enhance the quality of legislation and enforcement regarding fines within the administrative enforcement sphere. This document introduces for the first time, a comprehensive and systematic framework for the establishment and enforcement of fines under administrative regulations and rules.
Main Content
The Guiding Opinions articulate a series of principles and standards in various aspects, outlined as follows:
I. Authority for Setting Fines
The Guiding Opinions emphasize that fines should only be introduced where explicitly provided for by laws and regulations. If laws and regulations have stipulated administrative penalties for illegal acts but have not set fines, rules shall not add fines. If laws and regulations have set fines but have not specified the amount, or if laws and regulations have not been formulated, and there is an urgent need for administrative management to lawfully set fines through rules first, the rules must make specific provisions within the prescribed fine limits.
The amount of fines set by the rules shall not exceed the amount of fines prescribed by laws and regulations for similar illegal acts, and shall be adjusted in a timely manner according to the economic and social development situation.
II. Proportionality Between Offense and Penalty
The Guiding Opinions underscore the importance of aligning penalties with the severity of offences, advocating for a balanced approach. When administrative regulations and rules set new fines or determine the amount of fines, it is necessary to adhere to the principle of matching the penalty to the severity of the offense, ensuring leniency where appropriate and strictness where necessary, to avoid imbalance.
A comprehensive use of various management measures should be employed, and fines should generally not be set if management can be achieved through education and persuasion, orders to make corrections, information disclosure, and so on.
The Guiding Opinions also encourages the use of diverse management strategies over fines unless absolutely necessary. When the implementation of fine penalties cannot effectively manage administrative tasks, it is necessary to legally determine a more appropriate type of punishment. The setting of fines should take into account the facts, nature, circumstances, and the degree of social harm of the illegal act, as well as consider factors such as the level of economic and social development, industry characteristics, local realities, subjective faults, profit situations, and the provisions for similar illegal acts, to differentiate cases and classify them for handling, ensuring effective deterrence against illegality and encouragement of compliance with the law.
III. Determining Fine Amounts Reasonably
Setting fines should conform to the legislative purpose of the Administrative Penalty Law and relevant legal norms, generally specifying the amount of the fine, and scientifically adopting methods such as fixed-amount fines and multiple (proportional) fines When stipulating a certain range of fines, except in cases involving the safety of citizens’ lives and health or financial security, the difference between the minimum and maximum amount of fines generally should not exceed 10 times.
IV. Strict and Standardized Enforcement
The Guiding Opinions require administrative organs, such as Customs, the Market Supervision Administration, the Tax Offices, and the Ecology and Environment Departments to rigorously adhere to legal and factual bases when imposing fines, prohibiting arbitrary penalties and encouraging fairness and consistency across similar cases to ensure that enforcement actions are just and motivate compliance. Fines must be implemented strictly in accordance with legal provisions and the facts of the violation; arbitrary imposition of maximum fines or exorbitant fines is not allowed, nor is arbitrarily lowering the threshold for identifying illegal acts or expanding the scope of illegal acts. For cases where the facts, nature, circumstances, and degree of social harm of the illegal acts are essentially similar, it is necessary to ensure that the discretion in imposing fines meets legal requirements to avoid different penalties for similar cases.
When administrative organs implement penalties, they should order the parties involved to correct or rectify the illegal acts within a specified period, and should not merely impose fines without correcting the illegal behavior.
V. Regulating Off-site Enforcement
When using monitoring equipment to collect and record facts of illegal activities, for example, by the Public Security Bureaus or the Transport Administration, it should undergo legal and technical review. The placement, spacing, and quantity of monitoring equipment should be determined based on regulatory needs. The locations should be clearly marked and visible, and should be publicly announced in a timely manner before being put into use.
Impact on the Administration of Fines in the field of IPR
The issuance of the Guiding Opinions by the State Council will have a significant impact on the administration of fines within China’s legal framework, including in the realm of intellectual property rights (IPR) protection, regarding how administrative penalties are levied for IPR infringements, underscoring a more systematic, fair, and regulated approach towards the enforcement of IPR laws.
In China, the primary administrative organs responsible for imposing fines on acts of intellectual property infringement include:
i) The Market Supervision Administration - Tasked with overseeing market order, including combating counterfeit and substandard goods and protecting trademarks and patents. These agencies have the authority to investigate and fine activities that infringe upon intellectual property rights.
ii) The Intellectual Property Office: Responsible for the registration, protection, and management of intellectual property, including patents, trademarks, and copyrights. Although its main duties pertain to the registration and administration of IP, it also plays a role in coordinating and promoting the protection of IP, including penalizing infringing acts.
iii) The Copyright Bureau: Dedicated to copyright protection, it tackles copyright infringement activities, including unauthorized copying, distribution, and public dissemination.
iv) Public Security Organs: In combating crimes against intellectual property rights, such as the manufacture and sale of counterfeit goods, public security organs have the authority to investigate and impose fines or other legal measures on related illegal activities.
The implementation of the Guiding Opinions ensures that the aforementioned authorities adhere to standardized and strict protocols when imposing fines for IPR violations. This not only enhances the protection of IPR but also promotes a fair and competitive market environment. By emphasizing the legal and factual basis for penalties, prohibiting arbitrary fines, and mandating proportionality and reasonableness in the determination of fine amounts, the Guiding Opinions aim to provide a more transparent, fair, and effective mechanism for IPR enforcement. This approach significantly contributes to safeguarding the interests of rights holders, deterring potential infringers, and ultimately fostering innovation and creativity.
Comment
The imposition of fines is a common aspect of administrative law enforcement. The issuance of these Guiding Opinions by the State Council underscores China’s commitment to enhancing governmental governance capabilities, safeguarding public interests, and maintaining social order. This initiative is poised to significantly contribute to the optimization of the business environment and the stable development of the economy and society at large. It reflects a thoughtful and balanced approach to administrative enforcement, aiming to ensure fairness, transparency, and accountability in the imposition of fines, thereby reinforcing the rule of law and fostering a more conducive environment for economic and social progress.
Main Content
The Guiding Opinions articulate a series of principles and standards in various aspects, outlined as follows:
I. Authority for Setting Fines
The Guiding Opinions emphasize that fines should only be introduced where explicitly provided for by laws and regulations. If laws and regulations have stipulated administrative penalties for illegal acts but have not set fines, rules shall not add fines. If laws and regulations have set fines but have not specified the amount, or if laws and regulations have not been formulated, and there is an urgent need for administrative management to lawfully set fines through rules first, the rules must make specific provisions within the prescribed fine limits.
The amount of fines set by the rules shall not exceed the amount of fines prescribed by laws and regulations for similar illegal acts, and shall be adjusted in a timely manner according to the economic and social development situation.
II. Proportionality Between Offense and Penalty
The Guiding Opinions underscore the importance of aligning penalties with the severity of offences, advocating for a balanced approach. When administrative regulations and rules set new fines or determine the amount of fines, it is necessary to adhere to the principle of matching the penalty to the severity of the offense, ensuring leniency where appropriate and strictness where necessary, to avoid imbalance.
A comprehensive use of various management measures should be employed, and fines should generally not be set if management can be achieved through education and persuasion, orders to make corrections, information disclosure, and so on.
The Guiding Opinions also encourages the use of diverse management strategies over fines unless absolutely necessary. When the implementation of fine penalties cannot effectively manage administrative tasks, it is necessary to legally determine a more appropriate type of punishment. The setting of fines should take into account the facts, nature, circumstances, and the degree of social harm of the illegal act, as well as consider factors such as the level of economic and social development, industry characteristics, local realities, subjective faults, profit situations, and the provisions for similar illegal acts, to differentiate cases and classify them for handling, ensuring effective deterrence against illegality and encouragement of compliance with the law.
III. Determining Fine Amounts Reasonably
Setting fines should conform to the legislative purpose of the Administrative Penalty Law and relevant legal norms, generally specifying the amount of the fine, and scientifically adopting methods such as fixed-amount fines and multiple (proportional) fines When stipulating a certain range of fines, except in cases involving the safety of citizens’ lives and health or financial security, the difference between the minimum and maximum amount of fines generally should not exceed 10 times.
IV. Strict and Standardized Enforcement
The Guiding Opinions require administrative organs, such as Customs, the Market Supervision Administration, the Tax Offices, and the Ecology and Environment Departments to rigorously adhere to legal and factual bases when imposing fines, prohibiting arbitrary penalties and encouraging fairness and consistency across similar cases to ensure that enforcement actions are just and motivate compliance. Fines must be implemented strictly in accordance with legal provisions and the facts of the violation; arbitrary imposition of maximum fines or exorbitant fines is not allowed, nor is arbitrarily lowering the threshold for identifying illegal acts or expanding the scope of illegal acts. For cases where the facts, nature, circumstances, and degree of social harm of the illegal acts are essentially similar, it is necessary to ensure that the discretion in imposing fines meets legal requirements to avoid different penalties for similar cases.
When administrative organs implement penalties, they should order the parties involved to correct or rectify the illegal acts within a specified period, and should not merely impose fines without correcting the illegal behavior.
V. Regulating Off-site Enforcement
When using monitoring equipment to collect and record facts of illegal activities, for example, by the Public Security Bureaus or the Transport Administration, it should undergo legal and technical review. The placement, spacing, and quantity of monitoring equipment should be determined based on regulatory needs. The locations should be clearly marked and visible, and should be publicly announced in a timely manner before being put into use.
Impact on the Administration of Fines in the field of IPR
The issuance of the Guiding Opinions by the State Council will have a significant impact on the administration of fines within China’s legal framework, including in the realm of intellectual property rights (IPR) protection, regarding how administrative penalties are levied for IPR infringements, underscoring a more systematic, fair, and regulated approach towards the enforcement of IPR laws.
In China, the primary administrative organs responsible for imposing fines on acts of intellectual property infringement include:
i) The Market Supervision Administration - Tasked with overseeing market order, including combating counterfeit and substandard goods and protecting trademarks and patents. These agencies have the authority to investigate and fine activities that infringe upon intellectual property rights.
ii) The Intellectual Property Office: Responsible for the registration, protection, and management of intellectual property, including patents, trademarks, and copyrights. Although its main duties pertain to the registration and administration of IP, it also plays a role in coordinating and promoting the protection of IP, including penalizing infringing acts.
iii) The Copyright Bureau: Dedicated to copyright protection, it tackles copyright infringement activities, including unauthorized copying, distribution, and public dissemination.
iv) Public Security Organs: In combating crimes against intellectual property rights, such as the manufacture and sale of counterfeit goods, public security organs have the authority to investigate and impose fines or other legal measures on related illegal activities.
The implementation of the Guiding Opinions ensures that the aforementioned authorities adhere to standardized and strict protocols when imposing fines for IPR violations. This not only enhances the protection of IPR but also promotes a fair and competitive market environment. By emphasizing the legal and factual basis for penalties, prohibiting arbitrary fines, and mandating proportionality and reasonableness in the determination of fine amounts, the Guiding Opinions aim to provide a more transparent, fair, and effective mechanism for IPR enforcement. This approach significantly contributes to safeguarding the interests of rights holders, deterring potential infringers, and ultimately fostering innovation and creativity.
Comment
The imposition of fines is a common aspect of administrative law enforcement. The issuance of these Guiding Opinions by the State Council underscores China’s commitment to enhancing governmental governance capabilities, safeguarding public interests, and maintaining social order. This initiative is poised to significantly contribute to the optimization of the business environment and the stable development of the economy and society at large. It reflects a thoughtful and balanced approach to administrative enforcement, aiming to ensure fairness, transparency, and accountability in the imposition of fines, thereby reinforcing the rule of law and fostering a more conducive environment for economic and social progress.