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CSRC Loses Lawsuit against Domestic Firm
Even powerful government departments have to abide by correct administrative procedures. Such was the message delivered in a recent legal bout that the China Securities Regulatory Commission (CSRC) lost.
The Beijing High People's Court rejected on Thursday CSRC's appeal over a case it had lost last December. It was also the first lawsuit ever filed by a domestic company against the securities watchdog in China.
The plaintiff that took CSRC to court was the Hainan Kaili Co, who submitted an A-share listing application, with relative documents, to the commission in June 1998 but had the documents returned in April 2000 as CSRC claimed some of the financial figures were fake.
Hainan Kaili decided to sue CSRC in July,claiming the commission's handling of its application was not compliant with legal procedures.
The Beijing No 1 Intermediate People's Court ruled in December that CSRC's rejection of Hainan Kaili's documents was against the law and ordered CSRC to review the application and give a definite answer regarding the listing matter within 60 days.
The judge said the fact that CSRC had not reviewed Hainan Kaili's application thoroughly according to established procedures made its return of the documents illegal.
CSRC has remained silent about the issue since the start. It also declined to give any official comment yesterday as to what it will do next.
But an insider said there could be two choices. CSRC could just obey the ruling and re-evaluate Hainan Kaili's listing documents according to correct procedures.
Or, in spite of the unfavourable final judgment, CSRC can submit a "protest'' to the Supreme People's Court.
"But from the legal perspective, I think it is a good lesson for CSRC, reminding it to always do things with the rightful procedures,'' he said.
As for Hainan Kaili, whether or not it gets the final go-ahead for listing, the company's application of a legal weapon to protect its rights not only helps promote its image, but also acts as a good example for other enterprises and investors who find their rights violated by the government, experts said.
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