——Case of Application for Enforcement of Administrative Penalty against Yu by the China Securities Regulatory Commission

[Implications]

The enforcement reconciliation system under the Civil Procedure Law refers to an enforcement agreement reached among civil subjects of equal status upon voluntary consultation, whereby the subjects of rights and obligations, subject matter for performance, time limit, place, method and other contents determined by an effective legal instrument are changed according to the law. This case is a bold attempt of applying the enforcement reconciliation system to the handling of non-litigation administrative enforcement cases. It has a certain significance in establishing rules. By promoting the administrative penalty organ and the person to be punished to reach enforcement reconciliation in enforcement procedure, the person subject to enforcement who was unable to pay the fine or confiscated amount in one lump sum at that moment was allowed to make payment in installments. This reflects exchanging ability with time and promoting performance through reconciliation. In such a way, not only the authority of the securities regulatory department in administrative penalty is powerfully safeguarded, collection and payment of the non-tax revenue by the state treasury are realized, but also the Central Government’s policy spirit of “stability on the six key fronts” and “security in six key areas” in enforcement procedures are implemented, so as to realize the policy objectives of “ensuring the operations of market entities” and “stabilizing employment”. It highlights the authority of law and at the same time, integrates the spirit of the policy. It can better demonstrate judicial warmness and realize judicial justice at a higher level.

[Basic Facts]

On March 14, 2019, the China Securities Regulatory Commission made the administrative penalty decision [2019] No. XX to confiscate Yu’s illegal income of RMB 6,126,657.45 and impose a fine of RMB 6,126,657.45 on him for insider trading. Later on, the China Securities Regulatory Commission served the said written decision of administrative penalty to Yu by public announcement, but Yu failed to perform in accordance with the penalty contents within the specified time limit after prompting. On April 29, 2021, the Beijing Financial Court rendered an administrative ruling of (2021) Jing 74 Xing Shen No.1, approving the enforcement of the Administrative Penalty Decision of China Securities Regulatory Commission (2019) No. XX made by the China Securities Regulatory Commission. On May 27, 2021, the China Securities Regulatory Commission applied to the Beijing Financial Court for enforcement of the effective ruling. During the enforcement, the Beijing Financial Court seized the properties used for office and business operation owned by Yu, the party subject to the enforcement, which may result in the risk of unemployment for nearly 400 people. Considering the positive factor that Yu proactively performed part of the penalty decision himself after the administrative penalty was imposed, and the possible negative impact of enforcement on the person subject to enforcement and the enterprise operated by him, the handling judge believed that allowing Yu to perform the penalty decision in installments would help achieve the purpose of education and punishment of administrative penalty, and would also ensure the continued survival of the enterprise operated by him and avoid the risk of a large number of people losing their jobs. Through active coordination and proactively seeking opinions from the enforcement applicant, the judge finally facilitated both parties to sign an enforcement reconciliation agreement for performance in installments. Under the supervision of the court, Yu, as the party subject to enforcement, has proactively performed the obligations of paying the fines and confiscated amount in installments according to the reconciliation agreement.

[Judge Comments]

In a non-litigation administrative enforcement case, the enforcement applicant is a state administrative organ, and the content it applies for enforcement is the decision of administrative penalty, representing the public power of the State, and the enforcement applicant does not have the right to freely dispose of own rights and interests as the party concerned in civil cases. However, with respect to the party subject to enforcement who does not meet the conditions for full enforcement at one time, that person voluntarily proposed payment in installments and employment of hundreds of employees in enterprises under his name was relevant. After careful consideration by the collegial bench, exploration of the relevant law essentials and sufficiently justifying the legitimacy of paying fines in installments, enforcement reconciliation was finally achieved through facilitation. We believe that this approach not only protects the continued business operation of the party subject to enforcement and helps the implementation of the concept of good faith and civilized enforcement, but also powerfully safeguards the authority of the administrative organ and realizes the effective supervision of the securities regulatory department, which is conducive to maintaining the healthy development of the securities market.

[Expert Comments]

Expert: Xiao Jianguo, Professor, Law School, Renmin University of China

There has always been controversy in academia over whether enforcement reconciliation can be applied to non-litigation administrative enforcement. The mainstream view is that enforcement reconciliation is an enforcement contract reached by the parties concerned based on the right of disposal. The administrative organ shall perform its duties according to the law when exercising state functions and powers. The monetary claim set out in a written administrative penalty decision is a claim under the public law, which is different from the claim under the civil law set out in a civil judgment, and the administrative organ has no right to dispose of a claim under the public law, so it cannot reach an enforcement reconciliation agreement with the person subject to enforcement. The special value of this case lies in that it confirms the applicability of enforcement reconciliation in non-litigation administrative enforcement. This is not only a reinterpretation of the provisions of the Law on Administrative Penalty and the Administrative Compulsion Law, but also accords with the provision in the Administrative Procedure Law that “for matters not covered by this Law, the provisions of the Civil Procedure Law shall apply”. In terms of legal policy, there is also space to consider reconciliation in non-litigation enforcement.