I do not intend to restate my presentation on the cross-border insolvency arrangement between Mainland China and Hong Kong delivered at the BWILC PhD Workshop in Vilnius in April 2024 in this blog, as Marta Cirillo has already provided a detailed account in a previous blogpost. Instead, this blog presents my recent research on the intersection of China’s data protection regime and insolvency law. This blog outlines two key findings from my recent research: 1) Chinese authorities have been promoting the assetisation and marketisation of “data”; 2) the limitation of a subject’s personality associated with personal identifiable data is gradually relaxed in the context of insolvency proceedings.
Background
Recently, China has been promoting ‘data’ as a core driving force for industrial upgrading, technological innovation and the development of the digital economy. In an effort to maintain a competitive edge in the global digital landscape, Chinese lawmakers have responded swiftly by enacting three key data protection laws, namely 2016 Cybersecurity Law of the PRC (2016), Data Security Law of the PRC (2021) and Personal Information Protection Law of PRC (PIPL)(2021). These three laws, in conjunction with previously enacted National Security Law of the PRC (2015) establish a comprehensive legal framework for balancing technological innovation with data security concern and regulating data governance. However, it quickly became apparent that this new legal framework could encounter interface challenges with many other laws, among which insolvency law might be the most pressing concern. This blog will focus on the necessity of an interface between the Chinese new data legal framework and insolvency law as well as key areas of difficulty.
The Necessity and Difficulties of Interface between the China’s New Data Legal Framework and Insolvency Law
From the perspective of the core objectives of insolvency law, it is designed to maximise the debtor’s assets so as to satisfy as many creditor’s claims as possible. In a digital economy, data may be more valuable than many tangible assets, making its inclusion in the insolvency estate for achieving fair and efficient assets distribution and reorganisation. However, unlike tangible and intangible assets such as intellectual property, trademarks, and licenses-which are easier to value and realise-treating data as a new debtor’s insolvency estate presents significant challenges. One critical question is whether personal data collected and stored by the debtor can be treated as the part of debtor’s insolvency estate and thus be sold to satisfy creditors. Another pressing concern is whether, or to what extent, the insolvency administrator should be responsible for ensuring data and, more broadly, national security under the new legal framework. Due to space constrains, this blog does not attempt to exhaust all interface challenges, but rather describes the first question mentioned above in generalised and simplified way.
In principle, the transfer of personally identifiable data to third parties is prohibited unless the individual’s explicit consent has been obtained. However, Art. 22 of the PIPL provides an exemption for such transfer, that is, a processor of personal information has to transfer personal information due to a merger, demerger, dissolution and liquidation, provided that the individual should be noticed of the name of the recipient or his contact information. Art. 23 is even more aggressive. It authorises an information processor can transfer personal data to any other processors, provided that the individual’s consent is obtained. Although these two articles are intended to relax the strict model of express notice and consent model on which privacy protection is based, Chinese judges, who are heavily influenced by traditional civil code,rarely do so in practice. These two articles therefore requires a clearer interpretation, both in literate and in practice. Otherwise, this legal uncertainty poses regulatory challenges in balancing the economic value of data and protecting personal data in insolvency proceedings.
*This research blog was written by Shuaihao Mi, Lecturer at Shanxi University of Finance and Economics.
Conclusion
To be honest, the debate of interface between the data protection laws and China’s insolvency law was actually hardly mentioned even with one year of the completion of China’s new data legal framework. This is because the topic of focus at the time was how to mitigate national security concerns under global digital landscape. While many scholars have realised the economic value of data, deeply rooted concepts of privacy protection and non-transferability have been restricting the free flow of data, especially in insolvency proceedings. The real shift came at the end of 2022. In December 2022, the Central Committee of Communist Party of China and the State Council issued the “Opinion on Better Leveraging the Role of Data Elements in Building a Data Foundation System”, deploying the economic value of data at the top agenda. To this end, many scholars have attempted to discuss the necessity and feasibility of including the debtor’s data resources as part of the insolvency estate. Likewise, they have also focused on the legal obstacles and uncertainties involved in interface between Chinese data protection laws and insolvency law.
About BWILC and the PhD Workshop
This research was presented and discussed at the last PhD Workshop on European and International Insolvency law, organised by the Stichting Bob Wessels Insolvency Law Collection (BWILC). Since 2018, BWILC maintains the private insolvency law book collections of Prof. em. Bob Wessels, extended with the collections of the late Prof. Ian Fletcher and the late Gabriel Moss QC, in addition to books that have been kindly donated by scholars and practitioners from around the world. To browse or visit this unique collection, click here.
Since 2019, BWILC organises an annual PhD Workshop for PhD students from Europe and beyond. At this workshop, PhD candidates can present their ideas, but also the challenges and questions they are confronted with in a two-day workshop attended by their peers and senior academics. At the end of the workshop, organised in alternately in Leiden and another city, prizes are awarded for the best presentations.