——Beijing Qingke Bodong Technology Co., Ltd. vs. Beijing Tsinghua Yuan Sub-branch of China Merchants Bank Co., Ltd. for a Case concerning the Savings Deposit Contract

[Principle of Adjudication]

When performing obligations of restricting, managing and controlling accounts, the bank is entitled to adopt varying forms of management and control measures for the accounts of depositors according to law, and the bank and depositors are not essentially on an equal footing. However, the assignment of rights and obligations between the bank and the depositors still needs to be made within the scope of civil relations in the first place. Possible control measures should comply with legal provisions or prior agreements, and a clear and reasonable expectation of the counterparty to the transaction needs to be ensured, and the bank needs to maintain prudent and continuous attention. When judging the reasonableness of the management and control measures the bank takes, appropriateness, necessity and balance of the management and control types and intensity may be considered by reference to the proportionality principle in the review of administrative acts. At the same time, it shall not infringe the depositors’ right to know within a reasonable scope on the ground that the relevant account information under restriction, management and control is classified information, shall ensure that the management and control procedures are open and standardized and shall restrict the management and control measures within a reasonable period, so as to clearly guide depositors to reasonably safeguard their civil rights and perform account control and management obligations in a proper and complete manner. In this case, although it was necessary for the Tsinghua Yaun Sub-branch of China Merchants Bank to take certain management and control measures to realize financial security and ensure risks were under control, it failed to limit the adverse effect on the private rights of the account holder to the smallest extent and limit. After a comprehensive analysis of the entire case, the court believes that the management and control measures taken by the Tsinghua Yuan Sub-branch of China Merchants Bank in this case are improper and unbalanced, and it finally gave a negative evaluation of the bank’s management and control measures.

[Implications]

Banks, as financial institutions, may take measures such as intensifying due diligence and imposing reasonable restrictions against clients with relatively higher risks. It is in line with financial institutions’ obligations of restricting, managing and controlling accounts and necessary measures for the internal risk control of financial institutions. However, though certain management and control measures are expressly prescribed by laws, in performing such obligations, the management and control measures taken by each bank to control risk-involved sensitive accounts and sensitive information vary, and a bank may abuse its advantageous position and infringe the rights of depositors to avoid its own risks. The judgment of this case summarizes five progressive rules on the identification of “appropriateness” when the bank is performing its obligations of account restriction, management and control, and explores and demarcates reasonable boundaries between the performance of public law obligations and the protection of private law interests.

[Basic Facts]

On March 5, 2018, Qingke Bodong Co., Ltd applied to the Tsinghua Yuan Sub-branch of China Merchants Bank for opening a basic deposit account, and on March 8, 2018, Zhongguancun National Independent Innovation Demonstration Zone Central Sub-branch of the People’s Bank of China issued an Account Opening Permit, approving the opening of the basic deposit account. In May 2019, Tsinghua Yuan Sub-branch of China Merchants Bank took a temporary payment suspension measure against the account involved in this case with the specific approach of restricting online banking direct transactions. All transactions shall be reviewed over the counter on a case-by-case basis. Materials for review include transaction background information, sales contracts, etc. The review period was one to two days. With respect to the reason for adopting such measures, Tsinghua Yuan Sub-branch of China Merchants Bank stated that the reason for taking the measure of temporary payment suspension was that Lu, the legal representative of Qingkebo Bodong Co., Ltd, was involved in high-risk transactions in 2013. As the legal representative, Lu has control over and influence on Qingkebo Bodong Co., Ltd, and the risk that Lu to use the account involved to conduct sensitive transactions could not be eliminated. The bank determined that the account involved in the case is at risk in accordance with the principles set forth in the relevant documents and on the basis of its own understanding. The first-instance court held that based on the existing evidence, it was unable to prove the necessity and reasonableness of continuing to impose temporary payment suspension measure on the account involved in the case, and the evidence submitted by Qingkebo Bodong Co., Ltd was insufficient to prove that it suffered direct economic losses due to such restrictions. Therefore, the first-instance court ruled that Tsinghua Yuan Sub-branch of China Merchants Bank shall cancel the temporary payment suspension measure taken against the corporate bank account of Qingke Bodong Co., Ltd within ten days from the effective date of the judgment, and other claims of Qingke Bodong Co., Ltd were dismissed. After the first-instance judgment was rendered, Qingke Bodong Co., Ltd filed an appeal. Through the review, the Beijing Financial Court holds that Tsinghua Yuan Sub-branch of China Merchants Bank may manage and control the risky account based on the performance of obligations to restrict, manage and control accounts, but the management and control measures taken shall comply with laws or the agreement reached with the client in advance, and the type and intensity of the management and control measures taken shall comply with the principle of proportionality, be maintained within a reasonable period and under standardized procedures, otherwise Qingke Bodong Co., Ltd shall be compensated for the reasonable losses. As the management and control measures taken by Tsinghua Yuan Sub-branch of China Merchants Bank were not proper and shall constitute a breach of contract, the Beijing Financial Court upholds the decision of the first-instance court regarding canceling the temporary payment suspension measure taken against the corporate bank account of Qingke Bodong Co., Ltd, and amends the judgement to acknowledge that Tsinghua Yuan Sub-branch of China Merchants Bank shall compensate Qingke Bodong Co., Ltd for the corresponding loan interest.

[Judge Comments]

In addition to providing financial services, banks also perform certain anti laundering obligations and have their social nature. In performing the obligations to restrict, manage and control accounts, banks are actually in the leading position. Judges engaging in financial trials shall not only pay attention to preventing and defusing various financial risks, but also protecting the legitimate rights and interests of citizens. In the determination and sharing of liabilities, the reasonableness and necessity of the relevant management and control measures shall be comprehensively considered. In this aspect, the principle of proportionality in the Administrative Law can be used as a reference, which is conducive to regulating the content, intensity, and procedures of the relevant behaviors.

[Expert Comments]

Expert: Ye Lin, Professor, Law School, Renmin University of China

To carry out normal business operations, a commercial organization shall establish financial service relationships with a commercial bank, such as the opening of bank accounts and entering into a savings contract, and the commercial bank shall assist it in matters such as receiving and sending payments. In such contractual relationships of account opening and savings contract, a commercial bank is not only the counterparty of the commercial organization, but also the subject in charge of management and control of the account of the account holder according to law. The bank shall manage and control the account opening, fund flow and so on of account holders in accordance with legal conditions and procedures. Bank management and control shall be in compliance with the law and conducive to promoting the account holder to operate in accordance with the law, provided that the prerequisite of implementation of such management and control measures shall be statutory or agreed triggers, and the management and control measures shall be in compliance with the law and contract terms and shall be reasonable and balanced. Only in this way can the bank protect the legitimate rights and interests of the account holder while managing and controlling the account in accordance with the law. Excessive management and control, violation of procedures or improper management and control measures by the commercial bank will all damage the legitimate interests of the account holder. The judgment of this case is based on the fact that there exists a management and control relationship between commercial banks and account holders, and it proposes that reference shall be made to the principle of proportionality in the review of administrative acts. This reason for the judgment objectively reflects the contents of the legal relationship between banks and account holders, enriches people’s understanding of the relationship between them, clarifies boundaries of management and control in accordance with law by commercial banks, and protects the legitimate rights and interests of account holders. The reasonings are clear and penetrating, and the judgment is fair and commendable.