Recently, in order to give full play to the exemplary and leading role of typical cases and promote the legalization of market access, the Supreme People's Court has released the first batch of ten typical administrative litigation cases concerning market access. The case of "Jiangsu Kunshan Hongmou Concrete Co., Ltd. v. Kunshan Housing and Urban-Rural Development Bureau on Restricting the Conduct of Production and Business Activities and Review of Regulatory Documents" represented by Lawyers Li Yuqi and Zhang Chunchao, partners of SUNHOLD Law Firm, has been included in the first batch of ten typical administrative litigation cases concerning market access released by the Supreme People's Court.

|  Case of Jiangsu Kunshan Hongmou Concrete Co., Ltd. v. Kunshan Housing and Urban - Rural Development Bureau regarding Restriction on Production and Business Activities and Review of Regulatory Documents  |

[ Key Word ] Administrative Sanction, Market Access Prohibition, Review of Regulatory Instruments

I.Case Brief

In December 2018, Jiangsu Jinmou Company signed a concrete procurement and sales contract with Kunshan Hongmou Concrete Co., Ltd. (hereinafter referred to as "Hongmou Company"), stipulating that Hongmou Company would provide ready-mixed concrete for the construction of a certain residential project. Subsequently, problems regarding project quality emerged. After detection by a professional institution and professional demonstration, it was clearly identified that the insufficient strength of the concrete was the main cause. The Kunshan Housing and Urban-Rural Development Bureau (hereinafter referred to as the "Housing and Urban-Rural Development Bureau") imposed a fine on Hongmou Company for its act of selling substandard cement and ordered the construction party to rectify the already-poured project within a specified time limit (afterwards, the project passed the acceptance inspection after being demolished and reconstructed, as well as solidly reinforced). On November 24, 2020, the Housing and Urban-Rural Development Bureau issued the Circular on the Handling Decision of the Quality Problem of the Concrete Strength of the Residential Project on the South Side of 339 Provincial Highway and on the East Side of Qingyang North Road in Zhoushi Town (No. 352, 2020) (hereinafter referred to as the "Circular No. 352"). According to the provisions of the Interim Measures for the Registration Administration of Engineering Materials of Housing Construction and Municipal Infrastructure Projects in Kunshan (hereinafter referred to as the "Interim Measures"), it was decided to cancel the material registration of the ready-mixed concrete that had already been registered by Hongmou Company, and the company was not allowed to apply for registration again within half a year. In addition, the company was included in the list of construction enterprises suspended from undertaking business in the city. Displeased with this, Hongmou Company filed a lawsuit with the court, requesting a judgment to revoke Circular No. 352, take remedial measures, and conduct a review of the regulatory documents of the Interim Measures simultaneously.

II.Court Judgement

In the first instance, the People's Court of Changshu held that the provision in Item 6 of Article 15 of the "Interim Measures" regarding the cancellation of material registration obviously exceeded the scope and extent specified in Item 2 of Article 22 of the "Measures for the Quality Supervision and Management of Housing Construction and Municipal Infrastructure Projects in Jiangsu Province" (hereinafter referred to as the "Provincial Engineering Quality Supervision Measures"). Since there was nothing left to be revoked as the period for the cancellation of registration had expired, the court ruled to confirm that Circular No. 352 was illegal and rejected other claims of the lawsuit. After Hongmou Company appealed, the Intermediate People's Court of Suzhou held in the second instance that the provisions in Article 4 of the "Interim Measures" stating that "Materials subject to registration shall only be used after the completion of registration and publication" and the provisions in Article 15 regarding "cancellation of registration" and "not being allowed to apply for registration again within half a year" and other relevant provisions essentially established administrative penalties restricting the conduct of production and business activities. These obviously exceeded the scope of registration content specified in the "Provincial Engineering Quality Supervision Measures" and increased the obligations of the enterprise. Moreover, the "Interim Measures" failed to go through the relevant procedures for formulation and record-filing. Therefore, the court ruled to reject the appeal and affirm the original judgment. Thereafter, the Housing and Urban-Rural Development Bureau accepted the judicial suggestion and voluntarily revoked the "Interim Measures" on its own initiative.

III.Typical Significance

This case involves an administrative dispute arising from the administrative management department's restriction on the business entities' production and business activities. Article 64, Paragraph 1 of the "Regulations on Optimizing the Business Environment" of the State Council stipulates that without the basis of laws, regulations, or decisions and orders of the State Council, administrative regulatory documents shall not undermine the legitimate rights and interests of business entities or increase their obligations, nor shall they set conditions for market access and exit, or interfere with the normal production and business activities of business entities. In practice, many of the pain points and blockages that prevent business entities from carrying out activities independently and orderly stem from the "red - headed documents" of local governments and their departments. In this case, the people's court clearly pointed out that the quality problem of ready - mixed concrete involves building safety. While severely punishing illegal enterprises, the specific measures taken should have a legal basis. The "Interim Measures" sets many extra - legal restrictive conditions and cannot be used as the legal basis for the circular in question. When reviewing regulatory documents, it is necessary for the people's court to strengthen the review from aspects such as whether the formulating authority has exceeded its authority or violated the legal procedures, whether there is a conflict with the superior regulations, and whether it has illegally increased the obligations of citizens, legal persons, and other organizations or undermined their legitimate rights and interests, so as to supervise and support the administrative organs to perform their duties in accordance with the law and create a market - oriented and law - based business environment.