Current status quo and proposed legal reform from a commercial perspective

CHINESE TOURISM LAW: CURRENT STATUS QUO AND PROPOSED LEGAL REFORM FROM A COMMERCIAL PERSPECTIVE CHAN LAI HING NATIONAL UNIVERSITY OF SINGAPORE 2008 CHINESE TOURISM LAW: CURRENT STATUS QUO AND PROPOSED LEGAL REFORM FROM A COMMERCIAL PERSPECTIVE CHAN LAI HING (LLB (Hons), NUS) A THESIS SUBMITTED FOR THE DEGREE OF MASTER OF LAW FACULTY OF LAW NATIONAL UNIVERSITY OF SINGAPORE 2008 ACKNOWLEDGEMENTS I would like to thank all the wonderful individuals, friends and colleagues who have made this endeavor possible, in particular my mother, who is a fervent supporter of further education; my father and brother, who have supported me in more ways than one throughout the various phases of my research program; my partner, Seok Chuan, for his patience and understanding through all the most trying and difficult times; and most importantly, my supervisor, Associate Professor Li Mei Qin who has sparked my interest in academic work, for her guidance and patience in graciously agreeing to offer her valuable time in helping me craft this thesis, in spite of her impending retirement. I would like to take this opportunity to wish 李老师 a very happy and blissful retirement. TABLE OF CONTENTS SUMMARY .........................................................................................................................................3 TERMS AND ABBREVIATIONS ....................................................................................................4 INTRODUCTION ..........................................................................................................................6 CHAPTER 1: OVERVIEW OF CHINA'S TOURISM INDUSTRY...................................8 1.1 Introduction...................................................................................................................8 1.2 The Evolution of China's Tourism Industry ..............................................................8 1.3 Recent Trends and Developments in China's Tourism Industry ...........................13 1.4 Concluding Remarks ..................................................................................................17 CHAPTER 2: DEFINITION AND SCOPE OF DISCUSSION .........................................18 2.1 Introduction.................................................................................................................18 2.2 Tourism and Tourist...................................................................................................18 2.3 Tourism Industry and Tourism Sectors....................................................................19 2.4 Tourism Law and Legal Relationships .....................................................................20 2.5 Foreign Direct Investment, Investment Environment and Legal Environment ...22 2.6 Concluding Remarks ..................................................................................................23 CHAPTER 3: LEGAL FRAMEWORK OF CHINA'S TOURISM INDUSTRY.............24 3.1 Introduction.................................................................................................................24 3.2 Overview of the Chinese Legal System .....................................................................24 3.3 Evolution of the Chinese Legal Framework in the Tourism Industry ...................27 3.3.1 1949 to 1978 – Limited Tourism Rules and Regulations ..............................................28 3.3.2 1978 to Mid-1980s – Rules and Regulations to Promote the Tourism Industry ...........28 3.3.3 Mid-1980s to Mid-1990s – Development of Tourism Rules and Regulations in All Aspects ..........................................................................................................................29 3.3.4 Mid-1990s to Date – Formation of Tourism Legal Framework ...................................30 3.3.5 The Proposed Draft "Tourism Law" .............................................................................31 3.4 Current Legal Framework of China's Tourism Industry .......................................34 3.4.1 Current Legal Framework of the Hotel Sector in China ..............................................38 3.4.2 Current Legal Framework of the Travel Agency Sector in China ................................43 3.5 Concluding Remarks ..................................................................................................47 1 CHAPTER 4: LEGAL ISSUES RELATING TO THE TOURISM INDUSTRY ............48 4.1 Introduction.................................................................................................................48 4.2 Legal Problems in the Tourism Industry..................................................................48 4.3 Uncertainty of Certain Rights and Obligations........................................................54 4.4 Unfair Competition and Illegal Practices .................................................................67 4.5 Dual Systems of Rating of the Hotel Sector..............................................................76 4.6 Inconsistency of FDI Regulations with the Development Trends in the Tourism Industry........................................................................................................................81 4.7 Concluding Remarks ..................................................................................................88 CHAPTER 5: LEGAL REFORM IN THE TOURISM INDUSTRY ................................90 5.1 Introduction.................................................................................................................90 5.2 Proposal for a Basic "Tourism Law".........................................................................92 5.3 Proposal for a Specific Legislation in the Hotel Sector .........................................100 5.4 Proposal for Standard Form Contracts in the Tourism Industry ........................105 5.5 Proposal for Strengthening Law Enforcement and Implementation Mechanisms ....................................................................................................................................110 5.6 Proposal for Enhancing the Roles of Tourism Associations .................................115 5.7 Concluding Remarks ................................................................................................120 CONCLUSION .......................................................................................................................122 BIBLIOGRAPHY...........................................................................................................................126 ANNEX A ........................................................................................................................................135 ANNEX B ........................................................................................................................................139 2 SUMMARY This paper argues that although China's tourism industry has a bright future ahead, the current state of its legal system is disproportionate to the rapid growth of the tourism industry in general. This is evinced by the existence of numerous problems in China's tourism industry today which have disrupted the market order and affected the profitability of tourism ventures. A predominant cause of these problems is arguably the lack of a basic "Tourism Law" to regulate the different segments of the industry, which in turn triggered other related problems, such as the inadequacy of the contents of tourism law, inconsistency within the tourism legal framework and ineffective implementation of law. Some real life issues seen in the hotel and travel agency sectors, including the uncertainty of legal rights and obligations, unfair competition and illegal practices, dual systems of rating for hotels and the failure of FDI laws to catch up with the changing landscape of the tourism industry, are but some examples which demonstrate and reinforce these problems. Thus, the perfection of the legal framework of the tourism industry, led by the enactment of the proposed "Tourism Law" and followed by a series of other legislative overhaul, assumes paramount importance in the restoration of the tourism market order and sustainable development of the tourism industry. Taking into account China's market economy structure and some of the unique features and issues faced by China's tourism industry today, the proposals for legal reform raised in this paper include, first, the enactment of a basic "Tourism Law"; secondly, the enactment of a specific legislation in the hotel sector; thirdly, the introduction of a standard form contract, particularly in the travel agency sector; fourthly, the reinforcement of the overall law enforcement mechanism in China; and finally as an extra-legal means, the enhancement of the roles of tourism associations as a form of self-regulatory tool within the tourism industry. Looking to the future, a long-term, sustainable development approach which is supported by a concrete legal system is required to bring domestic and international tourism development in China to new heights in the 21st century. 3 TERMS AND ABBREVIATIONS "2004 Catalogue" "2007 Catalogue" "Anti Unfair Competition Law" CATS CHA China CITS CJV CNTA "Company Law" "Constitution" "Consumer Protection Law" "Contract Law" CTA CTHA CTS "Cultural Relics Law" CYTS "Draft Civil Law" EJV FDI GATS GDP "GPCL" HKSE IH&RA "Japanese Standard Terms and Conditions" JATA "Labor Contract Law" MOFCOM MOFTEC NASDAQ NPC RMB SGD "Tourism Law" "Catalogue Guiding Foreign Investment in Industry 2004" "Catalogue Guiding Foreign Investment in Industry 2007" "People's Republic of China Anti Unfair Competition Law" China Association of Travel Agencies China Hotel Association The People's Republic of China China International Travel Service Cooperative joint venture China National Tourism Administration "People's Republic of China Company Law" "Constitution of the People's Republic of China" "People's Republic of China Law on the Protection of Consumer Rights and Interests" "People's Republic of China Contract Law" China Tourism Association China Tourist Hotel Association China Travel Service "People's Republic of China Law on the Protection of Cultural Relics" China Youth Travel Service "People's Republic of China Draft Civil Law" Equity joint venture Foreign direct investment "General Agreement on Trade in Services" Gross Domestic Product "People's Republic of China General Principles of Civil Law" Hong Kong Stock Exchange International Hotel and Restaurant Association "Standard Terms and Conditions for Travel Contracts in Japan" Japan Association of Travel Agencies "People's Republic of China Labor Contract Law" Ministry of Commerce Ministry of Foreign Trade and Economic Cooperation National Association of Securities Dealers Automated Quotations National People's Congress Ren Min Bi or Chinese Yuan Singapore Dollars proposed "People's Republic of China Tourism Law" 4 "Tourism Law of Russia" UNWTO UK US USD WFOE WTO "Principles of Tourism Law of Russia" World Tourism Organization United Kingdom United States United States Dollar Wholly foreign owned enterprise World Trade Organization 5 INTRODUCTION China's tourism industry has developed at a blinding pace over the past 30 years and is headed for rapid growth in the foreseeable future. Over the years, the industry has matured in terms of profitability, market size, market share, economic framework and physical infrastructure. In this regard, foreign direct investment ("FDI") has been and is expected to continue to be one of the driving forces in the continued growth of the industry. While monies continue to pour into China to develop the tourism industry, the legal system in this respect, unfortunately, has not attained a corresponding level of maturity. Despite countless appeals by industry players and academics for legislative overhaul in the tourism industry, 1 to this date, the various tourism sectors are still regulated by a plethora of related laws, administrative rules and regulations, local rules and regulations and industry guidelines in a haphazard and piecemeal fashion. This contributes to the many legal and socio-economic problems currently faced by the tourism industry, which are evident in the context of the hotel and travel agency sectors. Although the drafting of the "People's Republic of China Tourism Law" ("Tourism Law") has begun some 25 years ago,2 no concrete legal framework has yet been put in place. As a result, there is currently no coherent tourism law for the regulation of the various tourism sectors, adjudication of tourism disputes, determination of tourism policies and utilization of tourism resources. This, amongst other things, poses a major roadblock for interested investors and industry players who have ready investment resources but very little knowledge of or confidence in the legal system in this aspect. 1 Xinhuanet, "NPC Delegate Proposed Enactment of 'Tourism Law' to Promote Tourism" (in Chinese), 5 March 2007, http://news.xinhuanet.com/travel/2007-03/05/content_5802676.htm (visited on 19 November 2007). 2 He Guangwei, "50 Years of China Tourism" (in Chinese), 10 September http://www.cnta.gov.cn/ziliao/lyjjyj/50.asp (visited on 27 August 2007), Chapter 6 at Section 2(4). 1999, 6 Thus, the objective of this paper is to discuss the legal issues relating to China's tourism industry and the proposals for legal reform from a commercial perspective. In the course of this discussion, focus is placed on the two main pillars of the tourism industry, namely the hotel sector and the travel agency sector, as they provide practical illustrations to the issues discussed. On this basis, this paper argues that although China's tourism industry has a bright future ahead, arduous efforts may be required to develop it efficiently, as there are still many problems in the tourism industry today which may be attributed to the lack of an effective "Tourism Law". Hence, an allround legal reform is imperative to remedy the existing situation and to lay the foundation for future growth of the tourism industry. In view of the foregoing, chapter 1 of this paper first presents an overview of China's tourism industry. Chapter 2 defines the important terminologies used in this paper as well as the scope of the present discussion. Chapter 3 deals with the legal framework of China's tourism industry; and chapter 4 zooms into the current legal issues relating to the same. Last but not least, chapter 5 provides some proposals for legal reform of China's tourism law, as the way to attain sustainable and continued development of the tourism industry. 7 CHAPTER 1: 1.1 OVERVIEW OF CHINA'S TOURISM INDUSTRY Introduction The development of modern tourism as an industry which brings economic benefits only began in the late 1970s in China.3 Despite being a relatively new industry, China's tourism has flourished, both at the domestic and international level, over the past 30 years. It will, nonetheless, continue to be a key industry in the national economy for the foreseeable future. Riding on the coattails of the rapid development of the tourism industry, hotels and travel agencies in China have also witnessed parallel growth. Following China's accession to the World Trade Organization ("WTO") in December 2001, FDI will become an important driving force in the development of China's tourism industry. Amongst other things, new tourism hotspots in more remote centralwestern areas are expected to complement the traditional tourism destinations and become a key attraction for both tourists and investors alike. The following sections of this chapter provide an overview of the evolution of and the recent trends and developments in China's tourism industry today. 1.2 The Evolution of China's Tourism Industry Leisure travel in China dates back thousands of years. Emperors, scholars, monks and other religious people were frequent travelers in ancient times. In modern days, however, leisure travel is more accessible to people of a wider class of society in China, as well as international travelers who want a more oriental travel experience. Before 1978, the travel industry in China was for all intents and purposes a form of political activity and was never really considered tourism in the true sense. Travel services (including both agents and tour operators), although set up, were only restricted to providing services for visiting overseas Chinese residents and for foreigners with special permission 3 Unless specifically stated otherwise, in this discussion, reference to the term "China" will be in relation to Mainland China, excluding Hong Kong, Macau and Taiwan. 8 to visit China.4 In this sense, there was very little economic benefit to be reaped from such activities. In 1978, however, China underwent a "second revolution" which totally changed the fate of China's tourism.5 Since then, and especially in the 1990s, the Chinese central government had issued several policies to encourage Chinese people to travel domestically, as a means of stimulating consumption and growth of the country's economy. At the same time, China declared that it would "open its door" to the outside world.6 What resulted was a huge influx of international tourists to China. Beginning with a trickle of intrepid pathfinders in the late 1970s, foreign tourists have been making China a "must-see" destination in rapidly increasing numbers. Like the rest of its economy, China's tourism industry has changed dramatically in the last 30 years. It was reported that in 2005, the number of inbound tourists and revenues from inbound tourism had increased 66 times and 111 times respectively from its humble beginnings in 1978.7 Within a short span of six years from 2001 to 2006, domestic travelers within China had contributed to more than RMB 2706.9 billion in national income, whilst international travelers had contributed to more than USD 110.55 billion of foreign exchange earnings.8 In 2006 alone, China earned USD 33.5 billion from tourism, making the country the sixth highest tourism revenue earner globally.9 Currently, tourism provides 17.4 million jobs in China and is forecast to support 20.4 million jobs by 2016. 10 From an almost 4 Alan A. Lew, Lawrence Yu, John Ap and Zhang Guangrui (editors), Tourism in China, 2003, The Haworth Hospitality Press at page 14. 5 Supra, note 4 at page 14. 6 Supra, note 4 at pages 14 and 15. 7 People's Daily Online (English), "China to become world's top tourist destination before 2020", 9 February 2007, http://english.people.com.cn/200702/09/eng20070209_348652.html (visited on 20 August 2007). 8 National Bureau of Statistics of China, Annual National Statistical Report (in Chinese), 2001 to 2006, http://www.stats.gov.cn/tjgb/ (visited on 17 August 2007). 9 Supra, note 7. 10 Chase Poffenberger and David Parry, "The New Face of Tourism in China", January/February 2007, The China Business Review, Volume 34, Issue 1 at page 12. 9 insignificant beginning some 30 years ago, China now ranks among the top five world international tourism destinations and is number one among Asia Pacific countries.11 International organizations and experts have made positive predictions for the future of China's tourism industry. The forecast by the World Tourism Organization ("UNWTO") shows that China's tourism industry will take up to 8.6% of the world's market share and will nudge ahead of the United States ("US") to become the world's top tourism destination by 2020. 12 The China National Tourism Administration ("CNTA") also predicted that China's tourism industry would notch up a new record with revenue hitting RMB 1 trillion in 2007.13 This figure, according to the UNWTO, is expected to rise to USD 277 billion by 2017. 14 With an expected boost from the upcoming Beijing Olympics in 200815 and another shot in the arm supplied by the Shanghai World Expo in 2010, the forecast is not at all farfetched. The development of China's tourism industry in general has trickled down to its specific tourism sectors as well. In this regard, the hotel sector and the travel agency sector have seen encouraging parallel growth alongside the tourism industry in the past three decades. When China first opened its borders to international tourism in 1978, the country suffered from a severe shortage of adequate lodging. At that time, the government owned all lodging facilities. Gradually, a few exclusive State guest houses normally used for Chinese leaders opened 11 World Tourism Organization, World's Top Tourism http://unwto.org/facts/eng/pdf/indicators/ITA_top25.pdf (visited on 17 August 2007). 12 UNWTO Secretary-General Francesco Frangialli pointed out at a ceremony in Beijing on 8 February 2007 that within the next 20 years, China will exhibit her important function in the world travel market and will become the top travel destination by 2020, supra, note 7. 13 Supra, note 7. 14 The Sydney Morning Herald, "China Heads for Top Spot in Tourism Ranking", 2 July 2007, http://www.smh.com.au/news/travel/china-heads-for-top-spot-in-tourismrankings/2007/07/02/1183351100873.html (visited on 20 August 2007). 15 Beijing is preparing to receive 500,000 overseas visitors during the 2008 Summer Games from 8 to 24 August 2008, supra, note 14. Destinations, 10 their doors to the growing number of inbound tourists. 16 Thereafter, the spontaneous growth in the late 1970s, the joint venture and cooperative development in the 1980s and the private ownership and stock ownership development in the 1990s have all demonstrated the evolution of China's hotel sector in the past three decades.17 This growth was fueled by a number of encouraging forecasts and events, namely, the UNWTO's forecast that China will become the worldwide top tourism destination by 2020; China's accession to the WTO; the upcoming 2008 Beijing Olympics and the 2010 Shanghai World Expo.18 A sector report predicted that in 2008, China will top the world in terms of the growth rate of its hotel sector.19 It was also estimated that half of all hotel construction projects in the Asia Pacific region in the next three to five years will be based in China.20 Following the award by the US Department of Transportation of seven new weekly US-China flights to United Airlines in February 2007,21 the demand for high-quality hotels in China is expected to heighten as well. Like the hotel sector, the development of the travel agency sector in China also took place in stages. The first stage was from 1979 to 1986, when inbound tourism business was largely dominated by the China Travel Service ("CTS"), which focused on tour groups of overseas Chinese and compatriots from Hong Kong and Macau; and its counterpart, the China International Travel Service ("CITS"), which took care of foreign inbound tourists.22 The travel agency business was 16 Larry Yu and Ginger Smith, "Hospitality, Chinese Style", January/February 2007, The China Business Review, Volume 34, Issue 1 at page 16. 17 Supra, note 4 at page 129. 18 Supra, note 16. 19 CIRN, "2007 Annual Report on China's Hotel Industry" http://www.chinairn.com/doc/50150/89923.html (visited on 3 September 2007). 20 Ibid. 21 US Department of Transportation, Office of Public Affairs, "DOT Awards New Daily U.S.-China Flight to United Airlines", 8 February 2007, http://www.dot.gov/affairs/dot1707.htm (visited on 3 September 2007). 22 China's first travel agency was established in 1923 when the Bank of China set up a small, separate department in its Shanghai headquarters to handle travel as a business. The CTS was formally launched in 1927 and the CITS was launched in November 1949 with eight branches located in various cities (in Chinese), 11 essentially a monopoly in which demand far exceeded supply.23 The second stage of China's travel agency development started in 1988, when the travel business monopoly came to an end following the increase of the number of "Category One" travel agencies (those authorized to engage in international inbound tourism) from 17 in 1987 to 44 in 1988.24 By the early 1990s, increasing competition and an overextension of company resources resulted in almost all travel agencies suffering from financial debts and increasing complaints from tourists. There was, therefore, an urgent need for reform, marking the beginning of the third stage.25 Since 1992, the CNTA had taken a major role in regulating travel agency activities through a variety of legal and administrative measures.26 These efforts played a positive role in bringing order to the somewhat chaotic travel agency sector. As at the end of 2006, there were a total of 18,475 registered travel agencies in China, with total annual revenue of more than RMB 140 billion.27 These numbers are expected to increase alongside with China's continued growth in the tourism industry. throughout the country. For over twenty years, however, the highly limited travel services were considered part of an effort called "People's Diplomacy" (supra, note 4 at page 145). 23 Supra, note 4 at page 146. 24 Supra, note 4 at page 146. During this period, travel agencies in China were divided into three categories: Category One and Category Two travel agencies were private-owned; while Category Three travel agencies were collectively owned. 25 Supra, note 4 at page 146. 26 Tour guide licensing and the national tour guide qualifying examination were introduced in 1989. An annual review of all travel agencies was initiated in 1991, which served partly to screen out those agencies that were poorly managed and operated. The licensing of travel agencies began in 1993, followed by a travel agency "service quality cash deposit" system, which was introduced in 1995. That same year saw the establishment of tourism quality supervision network at various government levels. More importantly, in 1996, the "Regulations on the Administration of Travel Agencies" was promulgated (supra, note 4 at page 146). Furthermore, The CNTA has also set up a national hotline for international and domestic tourists to complain about poor service on their trip (Larry Yu and Ginger Smith, "Ensuring Quality Service", March/April 2005, The China Business Review, Volume 32, Issue 2 at page 15). 27 CNTA, "2006 Annual Report of Travel Agencies" (in Chinese), http://www.ljta.gov.cn/readnews0.asp?newsid=2158 (visited on 21 November 2007). 29 May 2007, 12 1.3 Recent Trends and Developments in China's Tourism Industry Currently, China's tourism industry already shows a trend of multivariate investment bodies. According to a market research conducted on China's tourism industry, foreign private investment will, in the future, occupy a leading position in tourism investment, especially in commercial travel items. 28 As at 1 October 2006, the actual utilized foreign investment by the tourism industry amounted to more than USD 93 billion. 29 Reception facilities like hotels utilize most foreign investment, followed by transport services; tourist attractions and entertainment (see Chart 1 below).30 Chart 1: Industrial constitution of foreign investment in China's tourism industry Source: CNTA Hotel Tourist attraction Transportation Entertainment With China's accession to the WTO on 11 December 2001, the degree of openness of China's tourism sectors to foreign investors, particularly in the hotel and travel agency sectors has become higher. 31 Today, more than six years after the accession and a series of gradual liberalization later, China has fulfilled its WTO commitments in the tourism industry by allowing foreign hotel and travel agency operators unrestricted access to the Chinese market with the ability 28 China Market Research – China Tourism Industry, 2004, China Knowledge Press at page 70. 29 Xinhuanet, "Total Utilization of Foreign Investment by China's Tourism Industry Exceeds USD 93 billion", http://news.xinhuanet.com/environment/2006-01/10/content_4033038.htm (visited on 20 August 2007). 30 Supra, note 28 at pages 59 to 60. 31 Supra, note 28 at page 59. 13 to set up 100% foreign-owned hotels and travel agencies.32 These two sectors are therefore expected to become hotspot sectors for foreign investment entry. Traditionally, hotels in China are State-owned enterprises. 33 Following the country's economic reform, the State Council approved the construction of six foreign-invested tourist hotels in Beijing, Shanghai, Guangzhou and Nanjing respectively in May 1979.34 In June of the same year, the State Council approved the USD 200 million investment proposal of China's first Sino-foreign joint venture hotel, the Jianguo Hotel in Beijing (managed by the Hong Kong-based Peninsula hotel group), which opened in April 1982. This was followed by the opening of Guangzhou's White Swan Hotel in February 1983, Beijing's Great Wall Sheraton Hotel in December 1983, Lido Holiday Inn Beijing in February 1984 and the Marriott China Hotel Guangzhou in June 1984.35 This ushered in a new wave of FDI in the hotel sector that lasted through the 1980s and 1990s to date. Though still large, the State-owned share of the hotel sector has rapidly declined, and the growing diversity in hotel ownership reflects the efforts of the Chinese government to reduce its holdings of hotels, particularly unprofitable properties. This government retreat from the hotel sector has created opportunities for the development of Chinese and international hotel chains in China.36 Currently, all of the world's top ten hotel groups have already set up shop in China.37 According to a recent report, popular hotel brand names such as Intercontinental, Ritz Carlton, St. Regis, Regent, Park Hyatt and Four Seasons have been particularly aggressive in the competition for market share in 32 Supra, note 28 at page 59. 33 Supra, note 16. 34 Zhang Zhijun, Analysis of the Operation and Management of Sino-Foreign Joint Venture Hotels in China (in Chinese), The Tourism Green Book 2002-2003, China Institute of Social Science. 35 Supra, note 34. 36 Supra, note 16. 37 These are Intercontinental Hotels Group, Wyndham Worldwide, Marriott International, Hilton Corporation, Accor, Choice, Best Western, Starwood Hotels & Resorts, Carlson Hospitality, and Global Hyatt (Hotel Online Special Report, "The 2006 World Ranking; 10 Largest Hotel Groups http://www.hoteland 20 Largest Brands", 8 June 2007, online.com/News/PR2007_2nd/Jun07_HotelRanking.html (visited on 20 August 2007)). 14 China.38 This shows that the hotel sector in China has gradually transformed from a State-controlled sector to an increasingly laissez-faire market. The same trend is seen in the development of the travel agency sector in China. As with the hotel sector, the travel agency sector is traditionally protected from foreign investors. Hence, FDI entry in this sector only started some ten years ago.39 During the initial years of FDI involvement, however, Sino-foreign joint venture travel agencies were only allowed to be set up at holiday resorts designated by the Chinese government.40 Based on these restrictions, the CNTA and the Ministry of Commerce ("MOFCOM") approved the first Sino-foreign joint venture travel agency, Yunnan Litian Travel Service, which was jointly funded by Dietherm Co. of Switzerland and the CTS, in 1998.41 Following China's accession to the WTO, the first foreign-controlled joint venture travel agency, TUI China Travel Company, was formally established in Beijing on 1 December 2003.42 At around the same time, JALPAK International (China) Ltd., the first wholly foreign-owned travel agency, entered China's tourism market. 43 From the ten years since China opened up its travel agency sector to foreign investors, the number of foreign-invested travel agencies in China has increased. As at May 2007, there were altogether 29 wholly foreign-owned and Sino-foreign joint venture travel agencies in China, of which 13 were based in Beijing.44 38 CNTA, "The Current Trends and Challenges in the Hotel Sector in China", 17 May 2007, http://www.ctha.org.cn/zuixinzixun/content.asp?newsid=2869 (visited on 28 November 2007). 39 Renminwang, "The Aggressive Trends of Foreign-Invested Travel Agencies" (in Chinese), http://www.lwcj.com/expert/user1/39988/archives/2005/1626.htm (visited on 21 November 2007). 40 Ibid. 41 Ibid. 42 The controlling party was German-based Touristik Union International which held 75% stake (ibid). 43 44 This was wholly-owned and managed by JAL International Travel Service of Japan (ibid.). Lotour, "2006 National Top Travel Agencies – The Increase of Foreign-Invested Travel Agencies (in Chinese), 20 July 2007, http://www.lotour.com/snapshot/2007-7-20/snapshot_74621.shtml (visited on 1 November 2007). 15 Further, in terms of geographical region, apart from the traditional tourism spots concentrated in the eastern coastal areas, China's western region45 has in recent times attained a high status in terms of tourism resources and is known to have the potential and foundation to develop tourism on a large scale.46 With the strategic implementation of the "Great Western Development Strategy" which was launched in 1998,47 investing in western China's tourism is expected to be the upcoming trend. Although infrastructure development and manufacturing were the primary targets of the plan, service industries, especially tourism, are finding new areas for investment.48 Hence, when the luxury resort operator Banyan Tree invested two of its nine internationally acclaimed spa resorts in western China in 2005 and 2006 respectively,49 it certainly sparked the interest in other investors to explore western China's abundant landscape resources and rich ethnic culture. Moreover, on 20 August 2007, China officially launched the "Northeast Area Revitalization Plan"50 which encouraged foreign funds and private capitals to invest in, inter alia, the service industry in the northeast region of China, including the tourism industry.51 This marks a shift of focus from familiar tourism destinations to an expansion of the tourism industry beyond the traditional confines. 45 This includes Gansu, Guizhou, Qinghai, Shaanxi, Sichuan, Yunnan, Guangxi, Inner Mongolia, Ningxia, Tibet, Xinjiang and Chongqing. 46 Supra, note 28 at page 70. 47 Ibid. 48 Ibid. 49 Banyan Tree Ringha (opened in 2005) and Banyan Tree Lijiang (opened in 2006). 50 Under this plan, foreign funds and private capitals are encouraged to participate in the reforming and reorganization of State-owned enterprises in various forms, and they will be entitled to the treatments to the original State-owned enterprises in bad debt cancellation after verification, interest exemption and deduction, land use and other related tax and credit policies. 51 Zhong Yi, "About Northeast Revitalization Plan" (in Chinese), China Business Law – Legal Resources, 27 August 2007, http://www.lawcase.org/archives/node/1 (visited on 21 November 2007). 16 1.4 Concluding Remarks Within a short span of 30 years, China's tourism has evolved from one of an essentially political nature to a profitable industry. During this period, the hotel sector and the travel agency sector, being the two main pillars of the tourism industry, have taken off alongside with the growth of China's tourism. Such unprecedented growth has sparked the interest in many commercial parties, including foreign investors, to seek business opportunities in this land filled with ample potential. Academics, too, have begun to develop new found interest in the area of tourism law. Increasingly, one sees writings by various commentators in this aspect, which only began to become abundant in the recent years, forming a new subject for legal studies.52 Although the development of tourism law as an individual body of law is only at its infant stage, its scope may be vast and the issues of contention manifold. Hence, it is necessary to define at the outset the boundaries of the present discussion in chapter 2, in order to present a more focused discussion. 52 Various textbooks were published in since the late 1990s on the topic of tourism law, including Tourism Regulations (in Chinese) by Lu Shiju (2003), Syllabus for Tourism Administration Law (in Chinese) by Xiang Sanjiu (2004), Tourism Policies and Regulations (in Chinese) by Chen Guosheng (2007) and a series of teaching materials compiled by Dong Yuming, Chen Yaodong and Meng Fanzhe (2006). 17 CHAPTER 2: 2.1 DEFINITION AND SCOPE OF DISCUSSION Introduction Much literature has now been written on Chinese tourism law from the perspectives either of the utilization of tourism resources, environmental enhancement, regulation of tourism sectors, commercial investments, protection of consumer rights, health and hygiene, immigration matters, insurance and/or dispute resolution. Hence, it can be seen that there are many perspectives from which this topic may be approached. However, it is not the intention of this paper to discuss each and every one of these aspects as aforesaid mentioned. In light of the increasing commercial interest shown towards the tourism industry, particularly by foreign investors as seen in the previous chapter, this paper will approach Chinese tourism law from a commercial perspective. In other words, from the standpoint of the tourism service providers, such as hotels and travel agencies, how will the current legal framework and the related legal problems of the tourism industry affect their business and investments? What are the proposals to improve the legal system in this area? On this premise, the following sections of this chapter define the key terminologies used throughout this paper and further streamline the intended scope of the present discussion. 2.2 Tourism and Tourist According to the UNWTO, tourism comprises the activities of persons traveling to and staying in places outside their usual environment for not more than one year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the places visited.53 According to the "Inquiry System for Tourism Statistics",54 a tourist is defined as a person who leaves a country or place of his usual residence to another country or place, and stay in the latter for a period of not more than 12 consecutive months, whose main purpose is not to obtain any economic 53 UNWTO, http://www.unwto.org/statistiques/tsa_in_depth/chapters/ch3-1.htm (visited on 17 August 2007). 54 Jointly issued by the CNTA and the National Bureau of Statistics of China and came into effect on 1 January 2004. 18 benefits but to achieve any of the following tourism objectives: recreation, entertainment, sightseeing, vacationing, visiting relatives and friends, seeking medical treatment, shopping, attending conferences or performing any economic, culture, sports and religious activities. This will exclude business or study-related traveling. Hence, it can be concluded from the above definitions that the concept of tourism comprises three basic features: (1) traveling to place(s) outside one's usual residence; (2) staying in the foreign place(s) for more than 12 consecutive months; and (3) the main objective of traveling is not to obtain any economic benefit. In this connection, the discussions in this paper on tourism will be restricted to domestic tourism (which is tourism performed by Chinese residents within China's boundaries); and international tourism in the form of inbound tourism (that is, the incoming tourism activities of foreign tourists to China) rather than outbound tourism (that is, the outgoing tourism activities of Chinese tourists to overseas destinations). 2.3 Tourism Industry and Tourism Sectors The tourism industry refers cumulatively to tourism sectors providing tourism products and services, which, in the context of China, consist mainly of the hotel sector, travel agency sector, travel transportation sector, entertainment sector, scenic resources sector and food and beverage sector. Besides, the growth of the above primary tourism sectors has spill-over effects on other secondary tourism sectors such as the insurance sector, finance (foreign exchange) sector and information services sector. Despite the importance of the many tourism sectors in the constitution of the overall tourism framework, particularly the hotel sector, the travel agency sector and the travel transportation sector (sometimes also known as the three pillars of the tourism industry), the discussion in this paper will center on the hotel sector and the travel agency sector. This is because the overall growth of these two sectors and the degree of openness of the same towards commerce and foreign investments have been more apparent, and therefore provide more bountiful resources for legal research. 19 2.4 Tourism Law and Legal Relationships Over the years, there has been much contention amongst academics as to the true meaning of tourism law. Generally, experts have formulated three different views in this regard: (1) tourism law refers to all the laws and regulations which regulate tourism relationships; (2) tourism law is a set of laws and regulations which regulate vertical and horizontal tourism relationships; and (3) tourism law comprises laws and regulations which regulate social relationships, in other words, the legal relationships in respect of tourism activities.55 Each of these formulations represents a specific concern of the authors who formulated them, but carries with it certain flaws as well. The first formulation above refers to tourism relationships without particularizing the types and nature of relationships intended. This is unsatisfactory as it may potentially render the scope of tourism law too wide to produce any meaningful discussion. The second formulation limits the relationships discussed to vertical and horizontal tourism relationships, but still commits the same mistake as the first formulation for being too unspecific, as the term tourism relationship is in itself an unsatisfactory formulation. Furthermore, the second formulation omits a third type of relationship which may be present, namely, international relationships between States. Last but not least, the third formulation refers to social relationships in tourism activities, but conveniently equates the same to legal relationships. This is logically unsound as the latter is, at most, a subset of the former. Moreover, all three formulations above seem to restrict tourism law to the laws and regulations passed in this regard, but there is arguably another body of "semi-law", comprising industry guidelines, international practice and local customs, which is also regularly referred to in practice. Bearing the above criticisms in mind, the term tourism law shall, for the purpose of this paper, mean a set of legal norms which regulate the various legal relationships in respect of tourism activities, including the tourism industry. These comprise relationships: (1) between a higher 55 Chen Yuansheng, Tourism Quality and Supervision (in Chinese), 2001, Hai Chao Press at page 127. 20 government body such as the State Council and a lower government body such as the CNTA and between government bodies and private tourism entities in the form of vertical legal relationships (see Chart 2 at chapter 3 below); (2) between private tourism entities and tourists, amongst different private tourism entities and amongst members of the same private tourism entity in the form of horizontal legal relationships (see Chart 2 at chapter 3 below); and (3) between tourists and the destination countries, between the destination countries and the home countries of the tourists56 and amongst countries which have entered into tourism-related bilateral agreements or international treaties57 in the form of international legal relationships. Understood in this sense, tourism law potentially encompasses all the legislations which govern tourism activities and the tourism industry in general, whether tourism-specific or not, such as the "People's Republic of China Contract Law" ("Contract Law"),58 as well as those targeted at specific tourism sectors, such as the "Regulations on the Administration of Travel Agencies".59 Furthermore, tourism law also includes those laws and regulations promulgated at the national level, as well as those at the local or provincial level,60 international treaties or conventions61 and arguably, industry guidelines, international practice and local customs. To the extent that this topic is approached from a commercial perspective, this paper mainly discusses vertical legal relationships and horizontal legal relationships in tourism activities and the tourism industry as defined above. Separately, as international legal relationships involve complicated matters dealing with international relations and public international law, they constitute 56 Yang Fubin, "The Study of the Subjects of Tourism Law" (in Chinese), September 2005, http://law.lawstar.com/txtcac/lwk/032/lwk032s700.txt.htm (visited on 17 August 2007). 57 Chen Guosheng, Tourism Policies and Regulations (in Chinese), 2007, Southeast University Press at page 1. 58 Adopted by the 2 59 Issued by the State Council on 15 October 1995 and amended on 11 December 2001. 60 Han Yuling, Syllabus for Tourism Law (in Chinese), 2004, Higher Education Press at pages 9 to 10. 61 Dong Yuming, Chen Yaodong and Meng Fanzhe, Review of the Main Issues in Tourism Law (in Chinese), 2006, Intellectual Property Press at page 2. nd th Session of the 9 NPC and came into effect on 1 October 1999. 21 a separate topic of legal discussion which is, at present, beyond the scope of this paper. Furthermore, for the avoidance of doubt, references in this paper to tourism law in the general sense, as defined in the foregoing, should be distinguished from the "People's Republic of China Tourism Law" or "Tourism Law", which relates to the draft legislation for the tourism industry. 2.5 Foreign Direct Environment Investment, Investment Environment and Legal Foreign direct investment, or FDI, means the investment of foreign assets (usually in the form of cash, shares, intellectual property, know-how and the like), which may be long term or short term, into domestic structures, equipment and organizations, but does not include foreign investment into the stock markets. 62 FDI in China may take one or more of the following forms: (1) establishing Sino-foreign joint venture entities such as the equity joint venture ("EJV") or cooperative joint venture ("CJV"); (2) establishing wholly foreign owned enterprises ("WFOE"); (3) setting up representative offices or branches; (4) acquiring shares of other Chinese entities; and (5) merger or acquisition of other Chinese entities. Notwithstanding the form of investment, the ultimate objective of the foreign investor in FDI is to acquire management right and/or control right in the investment entity, as a means to obtain economic benefits.63 In this paper, reference to FDI relates to foreign private investment, rather than State-owned investment, in the tourism industry and includes investment from Hong Kong, Macau and Taiwan. For the avoidance of doubt, it is not the intention of this paper to provide a full review of the FDI laws in China. Rather, as this paper is approached from a commercial perspective, any discussion of FDI laws is only intended to supplement the understanding of the legal positions of foreign investors, as part of a bigger commercial framework of China's tourism industry. 62 Econterms, http://economics.about.com/cs/economicsglossary/g/fdi.htm (visited on 21 August 2007). 63 Yu Jinsong, International Investment Law (In Chinese), 2003, Law Press at page 1. 22 Another important concept related to FDI is the investment environment, which means all the external factors and conditions which can potentially affect the utilization of foreign capital and the profitability thereof. 64 Although the investment environment of a host country can be affected by many physical and socio-economic factors,65 this paper will only cover the legal environment, which consists of, inter alia, the laws and regulations in force, the implementation and enforcement of the law, the transparency of and accessibility to the law, the judicial system and other alternative dispute resolution mechanisms such as arbitration and mediation. 2.6 Concluding Remarks In view of the foregoing, the discussions in this paper will bear the following themes: first, they discuss tourism in the context of domestic tourism and inbound tourism; secondly, they are approached from a commercial perspective, that is, from the standpoint of securing the commercial interests of tourism service providers, including foreign investors. In other words, this paper will only discuss vertical and horizontal legal relationships in the tourism industry and the tourism activities related to it; and lastly, they focus on two main tourism sectors, namely, the hotel sector and the travel agency sector. In terms of structure, this paper is divided into two main parts – the first part deals with the current status quo of tourism law, including the current legal framework and the problems faced by the tourism industry; while the second part deals with the proposed legal reform in the tourism industry. Hence, as a starting point, chapter 3 will review the legal frameworks of, generally, China's tourism industry; and specifically, its hotel and travel agency sectors. 64 Ibid. 65 Investment environment consists of physical factors (such as natural resources, natural environment and basic infrastructure) and social-economic factors (such as political environment, legal environment, economic environment, social conditions, culture and morality) (ibid.). 23 CHAPTER 3: 3.1 LEGAL FRAMEWORK OF CHINA'S TOURISM INDUSTRY Introduction Tourism law is a newly developed area of law in China. Although it does not have a long history, it has seen plausible advancements in the recent years.66 In this regard, there has been a myriad of differing views as to what constitutes Chinese tourism law. Even to date, consensus is hardly reached on the actual scope and contents of the legal framework of the tourism industry.67 Hence, this chapter provides: first, an overview of the Chinese legal system in general; secondly, a review of the legislative history of Chinese tourism law; and thirdly, a discussion on the current legal frameworks of the tourism industry and its two primary sectors, the hotel sector and the travel agency sector. 3.2 Overview of the Chinese Legal System First and foremost, a review of the overall legal system in China is imperative to the understanding of its tourism legal framework. In form, the Chinese legal system is much closer to the legal systems of continental Europe than to English common law, but at the same time contains substantial elements borrowed from the Soviet Union and inherited from traditional Chinese law.68 Technically, China rejects the notion of separation of powers between different branches of government in the traditional troika of legislation, executive and judiciary. In practice, however, a functional separation of authority is acknowledged.69 Separately, the Politburo Standing Committee 66 Supra, note 61 at page 15. 67 Ibid. 68 Donald C. Clarke, "The Chinese Legal System", 4 July 2005, http://docs.law.gwu.edu/facweb/dclarke/public/ChineseLegalSystem.html (visited on 21 November 2007). 69 Ibid. 24 of the Communist Party of China, which include of the top leadership in the Communist Party, has large influence in the decision and policy making of China. Constitutionally speaking, the National People's Congress ("NPC"), which may be viewed as the legislature, is deemed to be the "highest organ of state power".70 In reality, the position of the NPC is occupied by a permanent body known as the Standing Committee of the NPC.71 Amongst other things, the NPC has the authority to issue laws binding over all of China.72 When the NPC is not in session, the Standing Committee may enact amendments and additions to laws passed by the NPC.73 Hence, apart from the "Constitution of the People's Republic of China" ("Constitution")74 which is viewed as the highest source of law in the country, law which is to have general impact is enacted either by the NPC or its Standing Committee. Besides, the latter also enacts regulations, decisions and resolutions.75 As China is a unitary state, all executive power flows from the central government which sits in Beijing. Local governments may exercise certain executive powers, but only to the extent delegated by the central government.76 The State Council is the body responsible for carrying out the day-to-day functions of the Chinese government,77 and is further divided into various functional 70 Article 57 of the "Constitution". 71 Ibid. 72 Some other powers of the NCP include amending the Constitution, enacting laws, electing the President and Vice President of China, electing the President of the Supreme People’s Court, deciding questions of war and peace, and various removal powers (Articles 58, 62 and 63 of the "Constitution"). 73 Article 89 of the "Constitution". 74 th th Adopted by the 5 Session of the 5 NPC and came into force on 4 December 1982. subsequently updated on 22 March 2004. This was 75 "A Brief Introduction to the Legal System of China", http://faculty.cua.edu/fischer/ComparativeLaw2002/bauer/China-main.htm (visited on 21 November 2007). 76 Ibid. 77 The functions and powers of the State Council include the adoption of administrative measures, rules and orders, submission of proposals to the NPC, creation and execution of a plan for national economic and social development, conducting foreign affairs and concluding treaties and agreements with foreign nations; protection of the rights of Chinese nationals abroad, and exercising any other functions that the NPC may delegate to it (Articles 85 to 98 of the Constitution). 25 ministries and commissions. The State Council and the ministries and commissions directly under it, such as the CNTA, are vested with powers (granted by the NPC or its Standing Committee) to issue orders, directives and regulations within the jurisdiction of their respective departments.78 At the local level, too, the people’s congresses and the local people’s governments may enact local administrative rules and regulations,79 but these are inferior in terms of hierarchy to laws enacted at the central level by the NPC or its Standing Committee, and administrative rules and regulations promulgated by the State Council and its various ministries and commissions.80 The management structure of China's tourism industry is set out in Chart 2 below. Chart 2: Management Structure of China's Tourism Industry NPC and its Standing Committee State Council CNTA (administration directly under the State Council) Local Governments Local Tourism Administrations Tourism Private Entities MOFCOM and other Authorities National Tourism Associations Local Tourism Associations Horizontal Legal Relationship Direct governance Indirect governance Consumers, Employees, Other Tourism Private Entities and Organizations 78 Supra, note 28. 79 Article 99 of the "Constitution". 80 Article 79 of the "People's Republic of China Legislation Law" (adopted by the 3 NPC on 15 March 2000 and came into effect on 1 July 2000). rd Session of the 9 th 26 There are four levels of courts in China, namely, the Supreme People's Court which sits at the apex of the court structure; the Higher People's Courts at the provincial level; and the Intermediate and Basic People's Courts further down at the local level. 81 Unlike common law jurisdictions such as the United Kingdom ("UK") and the US, there is no strict doctrine of stare decisis or precedence in China. Hence, in theory, each Chinese judgment stands on its own and will not bind another court. However, lower people’s courts must follow the judicial explanations of the laws by the Supreme People’s Courts.82 Moreover, in practice, as litigants are generally limited to one appeal, on the theory of finality of judgment by two trials, higher courts may use the finality of their judgments on appeals as having a binding effect on the lower court that issued the first judgment or order.83 3.3 Evolution of the Chinese Legal Framework in the Tourism Industry In this regard, the evolution of the legal framework of China's tourism industry is driven by, inter alia, the overall development of the Chinese legal system as described above, China's political stance, and most importantly, market forces in the tourism industry. The study of the legislative history in this area is not an easy task, owing to the vast number of documents involved. Nonetheless, legal scholars have identified four distinct stages in the development of Chinese tourism law since 1949 to date.84 Thus, the following sections will discuss the distinct features of the legislations promulgated in each of these periods in order to demonstrate the development trend of the Chinese tourism legal framework for the past 50 years. 81 Currently, there are one Supreme People's Court, 31 High People's Court, 346 Intermediate People's Court and 3135 Basic People's Court in China. Additionally, there are a number of special courts dealing with specialist matters, for example, the military courts, forest courts, maritime court and railway transportation courts. The Supreme People's Procuratorate, military procuratorates and other special people’s procuratorates also constitute part of the Chinese judicial system. 82 Chinacourt, http://en.chinacourt.org/public/detail.php?id=24 (visited on 13 February 2008). 83 Supra, note 75. 84 Supra, note 2, Chapter 6 at Section 2. 27 3.3.1 1949 to 1978 – Limited Tourism Rules and Regulations In the 30 years preceding China's economic reform, there were no specific laws or regulations governing the tourism industry. 85 During this period, China's legal and economic frameworks were still in a stage of infancy. There was no sizeable tourism market to begin with as tourism was generally used as a diplomatic tool.86 Thus, the characteristics of the tourism rules and regulations promulgated during this time were that they were procedural in nature and issued on an ad-hoc basis to deal mainly with reception matters.87 As such, the contents of tourism regulations were mainly immigration matters and policies relating to the treatment of inbound foreign visitors to China, including the limitation on travel destinations, visa application and approval procedures, supply of raw materials to foreign visitors and foreign visitors' reception and fee arrangements.88 An example of such regulations is the "Regulations on the Administration of Immigration, Transit, Residence and Traveling of Foreigners in China", 89 which served as a starting point of the development of tourism legislation in China.90 In short, as tourism activities during this period were restrictive, there was no pressing need for extensive legal governance in this area. 3.3.2 1978 to Mid-1980s – Rules and Regulations to Promote the Tourism Industry As China's tourism industry began to pick up speed pursuant to economic reform, the period between 1978 (the start of China's "open-door" policy and economic reform) and the mid-1980s can be considered as the formative stage in the development of the tourism legal system. The development of China's legal system in all areas and the emergence of tourism as a new industry had 85 Supra, note 2, Chapter 6 at Section 2(1). 86 Supra, note 4 at page 14. 87 Supra, note 2, Chapter 6 at Section 2(1). 88 Ibid. 89 Adopted by the NPC Standing Committee and issued by the State Council in 1964. 90 Supra, note 2, Chapter 6 at Section 2(2). 28 also catalyzed the evolution of China's tourism legislation. Whilst China was aggressively developing its tourism industry, the construction of a specific legal framework for tourism during this period primarily centered on tourism policies and strategies for the promotion of tourism activities and the maximum utilization of tourism resources. 91 In this regard, the State Council had played an active role in the enactment of many tourism-related policies and regulations, as a measure to speed up the growth of the industry. For example, in 1985, the State Council enacted the first administrative regulations for the tourism industry, namely, the "Interim Regulations on the Administration of Travel Agencies", which marked a major breakthrough in the development of China's tourism legislation.92 At the same time, the involvement of various government ministries and commissions, particularly the CNTA and local governments in the development of tourism legislation also took a head start. For example, the "Notice Regarding the State Council's Approval of the China National Tourism Administration's Request to Promote the Operation and Management Methods of Jianguo Hotel, Beijing", announced on 24 July 1984, was one of the very first attempts by the CNTA to put to paper some fundamental guidelines relating to the operation and management of the hotel sector in China. 93 In other words, the transition of the tourism industry from a diplomatic tool to an industry which produced actual economic benefits had propelled the formation of a basic legal framework for the tourism industry. 3.3.3 Mid-1980s to Mid-1990s – Development of Tourism Rules and Regulations in All Aspects The mid-1980s to the mid-1990s was a relatively aggressive period for the development of tourism-related laws and regulations in China, both at the national and local levels. From the mid1980s to 1990, policy and strategy-related regulations, which were popular in the early 1980s, had been gradually replaced by administrative regulations which governed the day-to-day operation of 91 Supra, note 2, Chapter 6 at Section 2(1). 92 Ibid. 93 Supra, note 2, Chapter 6 at Section 2(3). 29 the tourism industry. 94 During this period, various regulations had also been introduced to accommodate new trends in the industry, such as the promotion of "border tourism", domestic tourism and outbound tourism, tourism safety, tourism education and the construction of "tourism software".95 At the same time, local governments all over China, especially the provincial and local governments of Beijing, Tibet, Shanxi and Heilongjiang, had been rather proactive in the implementation of existing tourism regulations, the establishment of new local regulations and the integration of the same with the national tourism legal framework.96 This laid the foundation for the territorial nature of Chinese tourism law in the different provinces, autonomous regions and municipalities. During the following period from 1991 to the mid-1990s, the tourism rules and regulations enacted had evolved to become more sector-specific. 97 More effort was also expended towards quality control and supervision of the various tourism sectors. For example, the "service quality cash deposit" system was introduced by the CNTA in the travel agency sector in 1995.98 Compared to the previous decade, the legislation of tourism rules and regulations during this period demonstrated a change in attitude which was only possible when both basic infrastructure and the socio-economic environment of the tourism industry had attained a certain level of maturity. 3.3.4 Mid-1990s to Date – Formation of Tourism Legal Framework In the ten years since the mid-1990s, the formation of a more concrete legal framework for the tourism industry became apparent. In order to catch up with the fast-changing landscape of the tourism industry, various existing rules and regulations were amended, updated and edited to 94 Supra, note 2, Chapter 6 at Section 2(4). 95 Ibid. 96 Ibid. 97 Supra, note 2, Chapter 6 at Section 2(5). 98 Ibid. 30 accommodate the recent developments. For example, the "Regulations on the Administration of Travel Agencies" was amended in December 2001 in order to replace the 1996 version.99 In the late 1990s, the CNTA was specifically tasked to carry out, inter alia, the planning and implementation of major industry policies, the construction of key tourism facilities and the supervision of industrial development, cooperation and exchanges with other countries. 100 Thereafter, the CNTA had established a series of departmental rules in the form of written orders targeted specifically at the management of travel agencies, FDI entry and quality control. To date, a series of 27 such orders have been passed, forming a unique set of tourism-related rules.101 At the provincial or local level, too, the development of local tourism legislations was unprecedented. Following the establishment of the provincial "Regulations on the Administration of the Tourism Industry" and the "Regulations on the Administration of Tourism" in Guizhou, Zhengzhou and Hainan respectively since 1995, the local people's congresses of other provinces, autonomous regions and municipalities have followed the same footsteps in promulgating similar regulations.102 Although such development is plausible from a legislative perspective, it has also resulted in the highly localized nature of China's current tourism legal framework, which inevitably gives rise to differences and inconsistencies across the various regions today. 3.3.5 The Proposed Draft "Tourism Law" Throughout the legislative history of China's tourism legal framework, one of the most laudable legislative moves which had taken place since the early 1980s is the research and drafting of the "Tourism Law" by the CNTA, the first draft having been submitted for discussion at the 99 Supra, note 2, Chapter 6 at Section 2(6). 100 Ibid. 101 CNTA, Departmental rules and regulations (in http://www.cnta.gov.cn/fgbz/more.asp?newsid=003002 (visited on 21 November 2007). 102 Supra, note 2, Chapter 6 at Section 2(6). Chinese), 31 executive meeting of the State Council in November 1985.103 Although this draft was rejected at that time due to inappropriate timing,104 it nevertheless demonstrated the drafters' recognition of the importance of a basic "Tourism Law", even at an early stage of legislative development in this area. On 23 June 1990, the CNTA organized a discussion forum between the leaders of seven provincial tourism administrations, in an effort to seek further views regarding the draft "Tourism Law".105 Thereafter, various surveys and research were carried out on this topic and the draft legislation was amended and fine-tuned many times to take into account recent developments.106 On 29 February 1992, the completed draft "Tourism Law" was finally submitted to the NPC for legislation. However, due to unspecified reasons, the draft "Tourism Law" was, once again, rejected.107 In 2000, 2005108 and 2007109 respectively, NPC delegates had repeatedly called for the reconsideration of the "Tourism Law"; however, no concrete results have been produced so far. One of the reasons for this reluctance to legislate new law may be the general perception that the current legal framework, which consists of a mixture of laws and regulations at various levels and in all areas, such as the "People's Republic of China General Principles of Civil Law" ("GPCL"),110 the "Contract Law" and the "People's Republic of China Law on the Protection of Consumer Rights and Interests" ("Consumer Protection Law"), 111 is sufficient to regulate the current tourism industry. The idea of a basic law in the form of the "Tourism Law" might sound 103 Supra, note 2, Chapter 6 at Section 2(5). 104 Ibid. 105 Ibid. 106 Ibid. 107 Ibid. 108 Supra, note 57 at page 4. 109 Supra, note 1. 110 Adopted by the 4 Session of the 6 NPC on 12 April 1986 and came into force on 1 January 1987. 111 Adopted by the 4 Session of the 8 NPC Standing Committee meeting on 31 October 1993 and came into force on 1 January 1994. th th th th 32 attractive in the early days of its inception, when specific laws and regulations in this area were still scarce. However, as time went by, more tourism-specific regulations such as the "Regulations for the Administration of Travel Agencies" and the "Regulations on the Administration of Tourist Guides"112 were enacted, and the CNTA is now empowered to issue departmental rules relating to any specific tourism sector whenever a need arises. Hence, there may be no real need at this time for a separate "Tourism Law", which may turn into a white elephant after all. In this regard, it is unfortunate that legal experts and the legislature share diverging views on this point;113 while the former generally supports the idea of a "Tourism Law", the latter has been reluctant to move the matter forward. Furthermore, due to the fast-changing nature of the tourism industry, any draft law presented for legislation may quickly become obsolete, especially in the light of China's WTO commitments in the tourism industry, which were fulfilled in various stages over the years. Some commentators even took the view that the lack of expertise in the area of tourism law is a reason for the delayed legislation of the "Tourism Law".114 In addition, due to the potentially overlapping contents of the "Tourism Law" with many other general laws, such as the "Contract Law" and the "Consumer Protection Law", it may be difficult to ascertain what contents are unique to the "Tourism Law" and what others should remain in the realm of the other general laws. It is well established that in the event of conflict between special laws and general laws, the former prevails. This means that the provisions of the "Tourism Law" would take precedence over other general laws which preceded the same, even though the latter may have been in use for a long period of time in China. Hence, the tedious and time-consuming task of unifying the provisions of the "Tourism Law" and other related general laws is a necessary consequence of the enactment of the "Tourism Law". In view of these considerations, there may, after all, be a high degree of inertia towards change and a strong temptation in the legal community to simply make do with whatever is currently 112 Issued by the State Council on 14 May 1995 and came into force on 1 October 1999. 113 Supra, note 57 at page 4. 114 Supra, note 57 at page 4. 33 available to solve the problems in the tourism industry today, rather than placing too much reliance on a draft legislation which has taken way too long to materialize. 3.4 Current Legal Framework of China's Tourism Industry From the legislative history of China's tourism law, one sees a constant shift of focus of the rules and regulations promulgated at the different periods – from those of general policies to promote tourism in the early days to those targeted at specific tourism sectors such as hotels and travel agencies; and starting from the central level and trickling down to the local and provincial level. Hence, it can be seen that the legal framework of the tourism industry which exists today is the result of half a century of legislative movements. From this evolution, too, one sees that the tourism legal framework is constantly transforming according to the needs of times. This sheds a positive light on the potential of the Chinese tourism legal framework to change towards the better in the future. As mentioned, many commentators have expressed a myriad of views with regard to what constitutes the current tourism legal framework. Generally, it is possible to classify the various documents forming this body of law into four main groups: (1) the "Constitution", which is the highest law of the land; (2) national laws promulgated by the NPC and its Standing Committee, such as the "GPCL", the "Contract Law" and the "Consumer Protection Law". This potentially also includes the draft "Tourism Law",115 which to date has not yet entered into force; (3) local laws promulgated by the local NPCs and their Standing Committees of provinces, autonomous regions and municipalities directly under the central government and bigger cities, such as the "Regulations for the Administration of the Tourism Industry" of Hubei,116 Anhui117 and Beijing118 respectively; (4) 115 Lu Shiju, Tourism Regulations (in Chinese), 2003, Wuhan University Press at pages 6 to 9. 116 Adopted by the 7 January 1999 117 Adopted by the 9 Session of the 9 Anhui Provincial People's Congress on 26 March 1999 and came into force on 1 May 1999. th th Session of the 9th Hubei Provincial People's Congress and came into force on 22 th 34 administrative regulations enacted by the State Council, such as the "Regulations on the Administration of Travel Agencies" and the "Regulations on the Administration of Tourist Guides"; departmental rules enacted by ministries or commissions directly under the State Council, such as the CNTA, which generally relate to the regulation of hotels, travel agencies and tourist guides, immigration matters, tourism safety, insurance matters, tourism complaints and dispute resolution;119 and local rules issued by the local governments of provinces, autonomous regions and municipalities directly under the central government and bigger cities. Additionally, many tourism sectors, notably the hotel sector, have come out with self-regulating guidelines, such as the "Industry Guidelines for Tourist Hotels in China",120 the "Service Etiquettes for China Hotels (Trial)"121 and the "Industry Guidelines for Hotels in Zhejiang Province (Trial)",122 which strictly speaking have no legal force, but nevertheless demonstrate the relevant sector's initiative to "self-help" when the law in this area is inadequate. From the above, it can be concluded that the Chinese tourism legal framework generally shows the following characteristics. First, it comprises an integrated body of law which borrows its sources from a plethora of intertwined laws, rules and regulations from all levels and sectors. There is, however, no basic law in the form of the "Tourism Law" which binds all these laws, rules and regulations as a whole. As a result, the interaction of these laws, rules and regulations brings multiple facets to the tourism legal framework. This leads to its second characteristic, that is, its manifold contents. It is observed that the current tourism legal framework encompasses a wide scope – ranging from the promotion of tourism to the utilization and preservation of tourism 118 Adopted by the 9 Session of the 11 Beijing Municipal People's Congress on 30 March 1999 and came into force on 1 June 1999. th th 119 Supra, note115. 120 Issued by the China Tourist Hotel Association on March 2002 and came into force on 1 May 2002. 121 Issued by the China Tourist Hotel Association and came into force on 11 October 2007. 122 Issued by the China Tourist Hotel Association of Zhejiang Province and came into force on 1 December 2003. 35 resources; and from the regulation of market order to the protection of the rights and interests of service providers and consumers.123 However, again, there is no central document which brings all these aspects together. This may also be a reason why academics in this area find it so difficult to view the topic of tourism law as an isolated, stand-alone subject.124 Thirdly, the majority of these laws, rules and regulations deal with procedural, rather than substantive matters. In other words, the current tourism legal framework is more concerned with vertical legal relationships than with horizontal legal relationships. This demonstrates a high level of State participation in the regulation of the tourism industry.125 Fourthly, there is a huge body of local regulations in the form of the "Regulations for the Administration of Tourism" which were enacted by the local people's congresses. These local regulations are very analogous to one another in terms of form and structure, although their contents may vary slightly according to the localities of the different provinces, autonomous regions and municipalities.126 Further, they are restricted in their application to their respective regions only. This reflects the strong territorial factor in the Chinese tourism legal framework. A reason for this phenomenon is the vast landscape and diverse cultural heritage of China. Due to geographical and social reasons, the unique features of the tourism industry in each province vary. As a result, it may be necessary to "custom-make" tourism legislations which suit the varying local or regional concerns. Fifthly; due to the unique features of the tourism industry, specialized regulations have been established to deal with matters which are peculiar to each tourism sector. Even then, there is still much discrepancy in terms of the degree of attention received by each tourism sector. For example, while the travel agency sector already has a relatively developed 123 Supra, note 57 at page 14. 124 Supra, note 61 at page 1. 125 Wang Lixia, "Preliminary Analysis of the Tourism Structure in China" (in Chinese), 1998, Social Sciences in nd Ningxia, 2 Edition. 126 Wang Kunxin, "Comparison of the Local Tourism Regulations" (in Chinese), 22 June 2006, http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A20066221033233800316 (visited on 22 November 2007). 36 body of its own rules and regulations,127 the same cannot be said of the hotel sector. Last but not least, many tourism rules and regulations are "interest-based". By "interest" one means economic interest.128 In other words, these rules and regulations are driven at generating profits for the tourism industry. This may partly be due to the characterization of tourism by the Chinese government as an industry which can yield economic benefits after the "second revolution",129 and partly also due to the increasing economic benefits which are actually realized by the tourism industry in recent times. The "privatization" of historical relics by some local governments, such as the recent proposed transfer of management rights of Qiao's Grand Courtyard in Shanxi by the Qixian local government to a private company, 130 falls squarely with the view that the tourism industry is considered a profitable industry in China. Such an act not only yielded much public outcry, but also constitutes a violation of the "People's Republic of China Law on the Protection of Cultural Relics" (the "Cultural Relics Law"). 131 Consequently, the Shanxi provincial government, via an official response, held that the proposed transfer is illegal132 on the grounds that it is inconsistent with, inter alia, Article 24 of the "Cultural Relics Law", which states that "State-owned immoveable cultural relics shall not be transferred or mortgaged…State-owned cultural relics protection unit shall not be privatized." All in all, owing to the integrated nature of the tourism industry and the above characteristics of the tourism legal framework, it may be difficult to discuss tourism law in isolation 127 Supra, note 101. 128 Zheng Liuyi, "Preliminary Analysis of Some Basic Problems of Tourism Laws" (in Chinese), 2000, Journal rd of University of Science and Technology Beijing(Social Sciences Edition), 3 Edition. 129 The former chairman of the Central Military Commission of the Chinese Communist Party, Deng Xiaoping showed his great support and expectation for the tourism industry in the national economy during a dialogue with the State Council on 1 June 1979, supra, note 57 at page 11. 130 Xinhuanet, "Shanxi Government Confirmed Transfer of Management Rights is Illegal" (in Chinese), 24 January 2008, http://news.xinhuanet.com/house/2008-01/24/content_7483268.htm (visited on 13 February 2008). 131 Adopted by the 5 NPC Standing Committee Meeting and came into force on 19 November 1982, and th revised by the 13 NPC Standing Committee Meeting on 28 October 2002. 132 Supra, note 130. th 37 without making reference to the particular tourism sectors. Hence, the following sections will further illustrate the current status quo of China's tourism law in the contexts of the hotel and the travel agency sectors. 3.4.1 Current Legal Framework of the Hotel Sector in China According to the "Star Rating Standard for Tourist Hotels",133 the term tourist hotels refers to premises which provide tourists with accommodation, restaurant and other related services in time units of "nights". 134 According to the "National Classification Standard for Hotels and Restaurants",135 hotels are defined as enterprises which provide consumers with accommodation, restaurant and other integrated services.136 In this regard, they may also be known as inns, motels, hostels, recreational clubs, centers, chalets and by any other names in accordance with different practice.137 Hence, it can be seen that the concept of hotels in China is really one of substance over nomenclature. Viewed in this light, the scope of the hotel sector in China may potentially be very wide, as facilities such as recreational clubs, which are not commonly perceived as hotels in layman terms, are also considered to fall under the ambit of such, as long as they fulfill the requirements set out above. However, there are other conditions which are important in this consideration as well, for example, whether such premises offer services to the public; whether they are private-owned; and whether they are profit-based. These other considerations are not apparent in the definitions outlined above, but may for the present purpose be presumed to be implicit, when one refers to the hotel sector in China.138 133 GB/T 14308-2003, issued by the General Administration of Quality Supervision, Inspection and Quarantine on 25 June 2003 and came into force on 1 December 2003. 134 Article 3.1 of the "Star Rating Standard for Tourist Hotels". 135 GB/T13391-2000, issued on the Ministry of Commerce and came into force on 22 April 2003. 136 Article 3.2 of the "National Classification Standard for Hotels and Restaurants". 137 Article 3.1 of the "Star Rating Standard for Tourist Hotels". 138 Supra, note 61 at page 116. 38 On this basis, the legal framework of the hotel sector comprises a set of legal norms which are concerned with regulating the legal relationships that may arise from the establishment, operation, change and termination of hotels in China. 139 These mainly consist of vertical legal relationships between the hotel and the State, particularly ministries and commissions directly under the State Council such as the CNTA; and horizontal legal relationships between: (1) the hotel and the consumers; (2) the hotel and its employees; and (3) the hotel and other private entities and organizations. Currently, there is no specialized basic law that regulates the hotel sector in China, although the administrative regulations and departmental rules enacted in this regard are abundant.140 Hence, generally, the above legal relationships are regulated by way of: (1) general laws such as the "GPCL", the "Contract Law", the "Consumer Protection Law" and the "People's Republic of China Anti Unfair Competition Law" ("Anti Unfair Competition Law"); 141 (2) administrative regulations targeting certain specific issues in the hotel sector such as the "Regulations Regarding the Administration of Security of the Hotel Sector"142 and the "Regulations on the Evaluation of Star-Rated Tourist Hotels";143 and (3) local rules and regulations such as the "Regulations Regarding the Administration of Security of the Hotel Sector" in Guangdong, 144 Sichuan145 and Beijing146 respectively. 139 Supra, note 57 at page 134. 140 Supra, note 57 at page 134. 141 Adopted by the 3 Session of the 8 NPC Standing Committee meeting on 2 September 1993 and came into force on 1 December 1993. 142 Approved by the State Council on 23 September 1987, issued by the Ministry of Public Security and came into force on 10 November 1987. 143 Issued by the CNTA on 22 August 1988 and came into force on 1 September 1988. 144 Adopted by the people's government of Guangdong province on 4 July 2006 and came into force on 1 September 2006. 145 Adopted by the people's government of Sichuan province on 6 July 1994 and came into force on 18 July 1994. 146 Issued by the people's government of Beijing municipality and came into force on 19 September 1990. rd th 39 In this regard, the legal framework of the hotel sector has often been associated with negative criticisms. Being part of a bigger industry, the legal framework of the hotel sector also demonstrates characteristics similar to those of the tourism industry in general, as seen in the previous section. However, one of the more distinctive features of this legal framework is the lack of high-level, specialized legislations. It is observed that the only hotel-specific regulations currently in force at the national level are, inter alia, the "Regulations Regarding the Administration of Security of the Hotel Sector" which deals with public security, and the "Regulations on the Evaluation of Star-Rated Tourist Hotels" with deals with quality of hotels.147 Some academics have even criticized that apart from the regulations governing star-rating standards, there is really no other regulation which can be said to be specific to the hotel sector at the national level.148 This brings out yet another negative characteristic of this legal framework, that is, the narrowness and inadequacy of its scope of coverage,149 because surely, the matters in need of legal governance in the hotel sector extend far beyond public security or star-rating standards only. Other than that, majority of the other rules and regulations in this area are considered to be either low-level (that is, in the form of local rules or regulations)150 or too general (not targeted at specific issues arising out of the hotel sector). Hence, given the dearth of proper law in this area, the regulation of the hotel sector relies heavily on industry guidelines and to a certain extent, international practice.151 In this connection, the very first industry guidelines for the hotel sector, the "Industry Guidelines for Tourist Hotels in 147 Zhang Jianzhong, "Preliminary Analysis of the Basic Principles and Main Contents of the Hotel Sector Legislation in China" (in Chinese), 24 November 2005, http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A20066211710576185733 (visited on 22 November 2007). 148 Supra, note 61 at page 125. 149 Zhong Chun and Du Dongya, "Thoughts Regarding the Construction of the Hotel Legal System in China" st (in Chinese), 2005, Hebei Law Journal,1 edition. 150 151 Ibid. Supra, note 61 at page 123. 40 China"152 issued by the industry representative, the China Tourist Hotel Association ("CTHA"), has since its inception helped clarified many uncertainties in the hotel sector, particularly in relation to the rights and obligations of hotels vis-à-vis the consumers and other areas of contention relating to the day-to-day operation of hotels.153 However, the primary criticism of this document is its lack of legal force, as the document only binds members of the CTHA and other hotels which voluntarily submit themselves to such guidelines, 154 but has no legal effect vis-à-vis the consumers and other parties. In the event of potential dispute, parties are still subject to Chinese law,155 which may or may not cover the issues at hand. Hence, viewed in this light, the "Industry Guidelines for Tourist Hotels in China" is, at most, a set of self-regulating industry guidelines. Further, the document has been criticized for being too limited in scope, as it failed to make provision for the regulation of the legal relationship between hotels and their employees,156 which is another important aspect of the hotel sector that is often overlooked. This criticism may be obviated to a certain extent by the recent promulgation of the "People's Republic of China Labor Contract Law" (the "Labor Contract Law"),157 insofar as the contractual aspects of employment relationship is concerned. Nonetheless, there may be other areas of employment relationship, such as tortious liabilities, which may not be covered by the "Labor Contract Law" nor the labor contracts established under it. Moreover, some academics have even criticized the "Industry Guidelines for Tourist Hotels in China" for lacking in specificity, as it is said to impose a universal standard on all hotels, regardless of their respective class and star-rating.158 Under the current framework, hotels in China 152 A copy of the "Industry Guidelines for Tourist Hotels in China" (in Chinese) is attached as Annex A herein. 153 Supra, note 61 at page 124. 154 Article 41 of the "Industry Guidelines for Tourist Hotels in China". 155 Article 40 of the "Industry Guidelines for Tourist Hotels in China". 156 Supra, note 61 at page 125. 157 Adopted by the 10 NPC Standing Committee Meeting on 29 June 2007 and came into force on 1 January 2008. 158 Supra, note 61 at page 125. th 41 are divided into three types, namely, star-rated hotels or tourist hotels, non-star-rated hotels and budget lodgings.159 In this regard, with all due respect to the advocates of the above criticism, it is unclear how the contents of the "Industry Guidelines for Tourist Hotels in China" may be tailored to accommodate these different types of hotels in China. Given the nature of the document, which essentially deals with basic rights and obligations, such as the consumer's right to privacy,160 it may seem illogical that, for example, the consumer's basic rights would be curtailed if the hotel is of a lower class. Take, for instance, Article 17 of the "Industry Guidelines for Tourist Hotels in China", which states inter alia that "hotels shall install double-locked safety boxes at the reception areas for storing valuable items of the hotel guests". If this provision is viewed as a requirement to install certain physical infrastructure, it may be true that this obligation may vary in accordance with the hotel involved, as higher-end hotels may have more means than lower-end hotels to provide for such facilities. However, this reading of the provision is flawed, as one should read between the lines to understand that it actually lays down a substantive obligation on the hotel to protect the personal belongings of its customers, and not literally to install safety boxes only. As such, it may be difficult to see how this obligation, which is so intrinsically linked to the basic functions of a hotel, should be anything but a universal standard to be applied across the hotel sector. This should arguably also be the basis on which the other provisions of the "Industry Guidelines for Tourist Hotels in China" with regard to information,161 personal safety162 and privacy163 are interpreted. Hence, it may be a mistake to read the "Industry Guidelines for Tourist Hotels in China" as intending to impose technical requirements on the hotel sector with regard to physical infrastructure or service quality. In reality, these aspects have already been dealt with by other regulations like the 159 Supra, note 61 at page 125. 160 Article 16 of the "Industry Guidelines for Tourist Hotels in China". 161 Articles 9, 11, 12, 14 and 25 of the "Industry Guidelines for Tourist Hotels in China". 162 Articles 12 to 15 of the "Industry Guidelines for Tourist Hotels in China". 163 Article 16 of the "Industry Guidelines for Tourist Hotels in China". 42 "Star Rating Standard for Tourist Hotels" and the "National Classification Standard for Hotels and Restaurants" in accordance with the different classes of hotels in China. On the other hand, as stated in the preamble of the "Industry Guidelines for Tourist Hotels in China", its function is to "protect the legal rights and obligations of hotels and consumers".164 On this premises, the "Industry Guidelines for Tourist Hotels in China" should be viewed as a complement to the current legal framework in relation to substantive legal rights and obligations, instead of requirements for physical facilities or service standards only. Hence, it may after all be an unfair comment to say that the "Industry Guidelines for Tourist Hotels in China" is too universal and fails to consider the difference in the classes of hotels in China, without first considering the real nature and function of the document. In short, given the inadequacy, generality and low-levelness of the rules and regulations in the hotel sector, it may be concluded that the hotel sector in China today is under-regulated. This is so in spite of the adoption of the CTHA's "Industry Guidelines for Tourist Hotels in China" in practice, as it has no real legal effect and only serves as a self-regulatory measure. Hence, the legal governance of the hotel sector in China may be said to be disproportionate to its economic importance and contributions to the overall tourism industry in China (see Chart 1 at chapter 1 above). 3.4.2 Current Legal Framework of the Travel Agency Sector in China According to the "Regulations for the Administration of Travel Agencies", travel agencies refer to enterprises which are established for the purpose of providing tourism services in return for a profit. The scope of activities include acting as agents for tourists on emigration, immigration and visa application matters, solicitation and reception of tourists, arrangement for meals and accommodation for the same and provision of other related services.165 Thus, it can be seen that the 164 Article 1 of the "Industry Guidelines for Tourist Hotels in China". 165 Article 3 of the "Regulations for the Administration of Travel Agencies". 43 profit-oriented nature of travel agencies is spelt out more explicitly in the legislation. Furthermore, it is noted that the tourism services provided by travel agencies may relate to domestic tourism, inbound tourism and outbound tourism. However, for the purpose of this paper, only the former two are discussed. Despite being a relatively new tourism sector which only began to take off in the last decade, and which occupy much less market share in the overall tourism context, the legal framework of the travel agency sector in China is surprisingly more advanced in comparison with that of the other tourism sectors, notably the hotel sector. While the sources of law in this regard are very similar to those of the hotel sector, the contents of the law are much more comprehensive. Generally, the regulation of the travel agency sector in China finds legal basis in: (1) general laws such as the "GPCL", the "Contract Law", the "Consumer Protection Law" and the "Anti Unfair Competition Law"; (2) administrative regulations such as the "Regulations for the Administration of Travel Agencies" and the "Regulations for the Administration of Tourist Guides"; (3) departmental rules promulgated by the CNTA such as the "Implementation Rules for the Administration of Travel Agencies"166 and the "Interim Rules for the Administration of Tourism Safety";167 and (4) local rules and regulations. These laws, rules and regulations together form a body of law that regulates the legal relationships concerned with the establishment, operation, change and termination of travel agencies, namely, the vertical legal relationships between travel agencies and the State; and the horizontal legal relationships between: (1) travel agencies and tourists; (2) travel agencies and employees; (3) travel agencies and tourist guides; and (4) travel agencies and other private entities and organizations. Being a subset of the tourism industry, the legal framework of the travel agency sector also bears many general features of the legal framework of the tourism industry as well as the hotel 166 CNTA Order No. 5, issued by the CNTA and came into force on 28 November 1996. 167 CNTA Order No. 1, issued by the CNTA on 20 February 1990 and came into force on 1 March 1990. 44 sector, as described above. However, the biggest difference between the travel agency sector and the hotel sector in this area is that the former already has in place a basic law which acts as the checks and balances for the activities within the sector. 168 In this regard, as early as 1985, the State Council had introduced the "Interim Regulations on the Administration of Travel Agencies", the predecessor of the current "Regulations on the Administration of Travel Agencies", which governed the licensing, day-to-day operation and dispute resolution in the travel agency sector. Furthermore, since the early 1990s, the CNTA had aggressively passed a series of departmental rules specifically targeted at the standardization of travel agencies across the country. Service quality and the protection of tourist's interests constitute the main themes of these rules. For instance, since 1995, the CNTA had implemented the "service quality cash deposit" system in the travel agency sector via the promulgation of the "Interim Regulations on the Service Quality Cash Deposit System of Travel Agencies", 169 the "Implementation Rules on the Service Quality Cash Deposit System of Travel Agencies"170 and the "Interim Measures on the Compensation of Service Cash Quality of Travel Agencies".171 Accordingly, under such system, each licensed travel agency is required to deposit a stipulated amount of money with the CNTA, for example, RMB 600,000 for Sino-foreign joint venture travel agencies,172 as cash guarantee in the event that it becomes insolvent or fails to deliver the expected service standards, causing the tourists to suffer a loss.173 Pursuant to this, the CITS had deposited RMB 1.6 million with the CNTA to facilitate settlement of disputes between the CITS and 168 It is impossible to reproduce all the rules and regulations related to the travel agency sector in this paper. However, a complete set of the administrative regulations and departmental rules issued by the CNTA referred to herein are available at CNTA (in Chinese), http://www.cnta.gov.cn/fgbz/index.asp (visited on 19 February 2008). 169 CNTA Order No. 2, issued by the CNTA and came into force on 1 January 1995. 170 CNTA Order No. 3, issued by the CNTA and came into force on 1 January 1995. 171 CNTA Order No. 7, issued by the CNTA and came into force on 27 March 1997. 172 Article 3 of the "Interim Regulations on the Service Quality Cash Deposit System of Travel Agencies". 173 Article 4 of the "Interim Regulations on the Service Quality Cash Deposit System of Travel Agencies". 45 tourists over, for instance, poor service.174 Moreover, the CNTA had also, through the enactment of departmental rules, attempted to regulate the quality of tourist guides and other travel personnel through the "Implementation Rules on the Administration of Tourist Guides", 175 the "Trial Management Rules on the Evaluation of Tourist Guide Grading Examination" 176 and the "Management Regulations on the Qualification of Managers of Travel Agencies". 177 Besides ensuring quality service of travel agencies, the CNTA had also laid down specific rules and regulations regarding insurance, which work hand in hand with the "service quality cash deposit" to provide maximum protection for the interests of tourists. According to Article 21 of the "Regulations on the Administration of Travel Agencies" and the "Interim Regulations on Travel Agencies Taking Accident Insurance",178 travel agencies operating in China are obliged to take up travel accident insurance for the tourists. Moreover, the "Implementation Rules on Travel Agencies Taking Liability Insurance"179 requires travel agencies in China to insure their travel activities and liabilities. Hence, it is now a requirement under Chinese law for travel agencies to take up at least two types of insurances, namely, the travel accident insurance and the travel liability insurance. From the above, it can be seen that comparatively, the contents of the legal framework of the travel agency sector are much more developed, cover more grounds and are more specialized. This may be attributed to a large extent to the more active involvement of the CNTA in driving the legal development of the travel agency sector in general. However, such high level of State participation also results in a correspondingly lower level of commitment by the industry 174 Supra, note 26. 175 CNTA Order No. 15, issued by the CNTA on 27 December 2001 and came into force on 1 January 2002. 176 CNTA Order No. 22, issued by the CNTA on 3 June 2003 and came into force on 3 July 2003. 177 CNTA Order No. 8, issued by the CNTA and came into force on 8 May 1997. 178 CNTA Order No. 9, issued by the CNTA on 13 May 1997 and came into force on 1 September 1997. 179 CNTA Order No. 14, issued by the CNTA on 15 May 2001 and came into force on 1 September 2001. 46 representatives, that is, the travel agency associations in the regulation of the travel agency sector in China. 3.5 Concluding Remarks In short, this chapter has demonstrated the evolution of Chinese tourism law over the past 50 years and discussed the current legal framework of the tourism industry, particularly in the contexts of the hotel and travel agency sectors. From this, it can be concluded that a distinct feature of the current tourism legal framework is the lack of a basic "Tourism Law" which binds the multiple aspects of the tourism industry together. This has, amongst other things, resulted in the manifold, disorderly and random qualities of the current legal framework,180 which have also trickled down to the individual tourism sectors. Thus, one sees some discrepancy in the amount of attention given to the regulation of the hotel and travel agency sectors respectively, which is disproportionate to their respective economic contribution and market share. Nevertheless, the legislative history of China's tourism law shows that the current legal framework is not immutable but is always subject to change. Hence, despite the many problems identified in this area, the general outlook remains optimistic. In light of the above, chapter 4 will discuss the current legal issues and problems faced by the tourism industry, particularly in the hotel and travel agency sectors. 180 Supra, note 57 at page 66. 47 CHAPTER 4: 4.1 LEGAL ISSUES RELATING TO THE TOURISM INDUSTRY Introduction As a starting point, academics have summarized four criticisms in relation to the legal framework of the tourism industry in China based on its current structure and composition as discussed in the foregoing chapter, namely, first, the lack of a basic law in the tourism industry; secondly, inadequacy of the contents of the existing tourism rules and regulations; thirdly, inconsistencies within the current tourism legal framework; 181 and lastly, difficulty in law enforcement.182 The combined effects of these factors resulted in a legal environment that is less than satisfactory in the tourism industry today. In this regard, it is argued that the lack of legal foundation in the form of "Tourism Law" is one of the root causes which bring about other identified legal problems in the tourism industry. All these legal problems will be further discussed in the following sections of this chapter in the context of real life issues seen in the hotel sector and the travel agency sector respectively. 4.2 Legal Problems in the Tourism Industry In the first place, it has been said that the entire tourism legal framework in China should, in theory, be constructed upon the basis of an organic law in the form of the "Tourism Law".183 In this sense, the "Tourism Law" is the fundamental document which sets out the primary objectives, principles, policies and guiding direction of legislation in the tourism industry. In other words, all tourism rules and regulations passed must conform to the "Tourism Law", in much the same way as 181 Supra, note 60 at pages 5 to 8. 182 Shan Wenhua, The Role of Law and Foreign Investment in China: View From EU Investors, 28 April 2005, Background Brief No. 239, East Asian Institute, National University of Singapore. 183 Han Yuling, "Preliminary Analysis of Tourism Legislation in China" (in Chinese), 20 April 2007, http://law.law-star.com/txtcac/lwk/032/lwk032s701.txt.htm (visited on 26 November 2007). 48 all laws enacted in China must conform to the "Constitution". Internationally, many countries that place emphasis on the development of tourism have established tourism laws as the basic law governing the industry,184 such as the "The National Tourism Policy Act of the United States", the "Basic Tourism Law of Japan", the "Tourism Law of Mexico", the "Tourism Law of Maldives" and the "Law for the Development of Tourism of South Korea".185 Take the case of Japan, for example, the "Basic Tourism Law of Japan" sets out in its preamble the intention "to re-define the direction of the development of tourism and to clarify the objectives of tourism-related policies".186 This served as the guiding principle upon which Japan's 76 tourism legislations, including the "Law for the Development of International Tourism of Japan", the "Travel Agency Law of Japan" and the "Hotel Law of Japan", were aligned.187 In the context of China, however, the legislation of the Chinese "Tourism Law" remains, to this date, a proposal only. From a jurisprudential perspective, this may result in the lack of a central theme or direct legal basis for existing or future tourism rules and regulations.188 From a practical perspective, too, the absence of the "Tourism Law" may be said to result in the lack of cohesiveness and uniformity in the present tourism legal framework. This, arguably, is also the trigger cause for the other legal problems identified at the beginning of this chapter,189 as discussed below. Secondly, in terms of the contents of the current tourism legal framework, it is noted that the existing tourism rules and regulations are mostly designed to govern vertical legal relationships, that 184 Zhang Liman, "Analysis of the Construction and Perfection of China's Tourism Legal System" (in Chinese), 2005, Journal of Guangxi Administrative Cadre Institute of Politics and Law. 185 Yang Fubin, A Collection of Tourism Laws and Acts of Western Countries (in Chinese), 2005, Social Sciences Academic Press (China). 186 Translated by Yin Zuoheng, Japanese Travel Law (in Chinese), 2005, Social Sciences and Academic Press (China) at page 3. 187 Supra, note 183. 188 Yuan Xiangzhu, "On the Reform and the Improvement of China's Tourism" (in Chinese), 26 September 2001, Journal of Guangxi Administrative Cadre Institute of Politics and Law. 189 Ibid. 49 is, the control and supervision of private tourism entities by the government.190 The regulation of horizontal legal relationships such as those between tourism service providers and consumers, which in practice constitute the bulk of tourism activities, is ironically insufficient.191 For instance, while the "Consumer Protection Law" caters for the rights of consumers in general terms, it does not target any specific situation relating to the tourism industry or any specific tourism sector.192 This is due to the unique nature of tourism products which may be amorphous and valued based on one's perception of what is enjoyable, such as scenery, comfort and services, as opposed to the actual value of the merchandise. Hence, the general stipulations of the "Consumer Protection Law" may not be sufficient to deal with the unique circumstances arising out of tourism activities and the tourism industry. A practical example of an area which has been overlooked is the rights and obligations of tourism service providers vis-à-vis the consumers in the contexts of tourism activities. Moreover, certain tourism sectors, such as the hotels, are under-regulated, as seen in the previous chapter. Such phenomenon is said to be caused, partly by the lack of detail in the existing rules and regulations, which often deal with the subject matters in a broad brush manner without setting out the particulars;193 and partly also by the lack of transparency in the legislation of such rules and regulations, as there used to be many "internal regulations"194 that were implemented by certain government departments which were not disclosed to the general public. 195 Although the State Council has in recent times taken proactive steps to eliminate such "internal regulations" at all levels, 190 Supra, note 125. 191 Supra, note 188. 192 Supra, note 184. 193 Supra, note 184. 194 These relate primarily to circulars issued by the Chinese Communist Party which are known in popular parlance in China as "hong tou wen jian" ("红头文件" which literally translates to "red head documents"). 195 Supra, note 184. 50 it may take some time before their effects are completely eradicated from the Chinese society.196 This is because directions from the central government to eradicate such "internal regulations" from top down may not have permeated to the different levels of local authorities at the grass root level. As result, there may have been orders to banish "internal regulations" in name, but local authorities may still perpetuate their usage in practice.197 Another major problem seen in the tourism legal framework is the inconsistency and confusion caused by the many interwoven laws, rules and regulations. For example, there are currently two different systems governing the rating of hotels, one laid down by the CNTA and the other by the MOFCOM.198 This shows a serious flaw in the tourism legal framework which was caused by overlapping job scopes and unclear jurisdictions of the various government departments. Moreover, it is said that many existing rules and regulations, when enacted, took an interim or provisional form and were originally meant to be a "stop gap" measure, for example, the "Interim Rules for the Administration of Tourism Safety" and the "Interim Regulations on the Service Quality Cash Deposit System of Travel Agencies". However, as time went by, no follow-up actions had been taken in respect of the same. As a result, many such rules and regulations, which still remain in force, may be outdated and inappropriate in the light of the changing landscape of the tourism industry.199 This is evident in the FDI regulations relating to the hotel sector and the travel agency sector pursuant to China's accession to the WTO. Furthermore, the situation is worsened by the many local regulations currently in force. In this regard, it has been said that the primary difference among the various local tourism rules and regulations is a matter of "degree".200 This is manifested 196 Wu Wenyuan, "Some Advice Regarding the Elimination of Redhead Documents" (in Chinese), 22 March 2007, http://www.zaobao.com/special/forum/pages5/forum_lx070322.html (visited on 26 November 2007). 197 Ibid. 198 Supra, note 147. 199 Supra, note 188. 200 Wang Kunxin, "Comparative Study of China's Local Tourism Regulations" (in Chinese), 22 June 2006, http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A20066221033233800316 (visited on 26 November 2007). 51 in two aspects, first of all, the degree of emphasis placed on the development of the tourism industry. For instance, under the "Regulations for the Administration of Tourism of Beijing Municipality", a "tourism industry development fund" is established for the development of the tourism industry in Beijing. 201 Such measure is also prescribed under the local regulations of Jiangsu and Guizhou respectively as a means to boost the local tourism scene.202 Comparatively, the provisions of other local regulations in other regions are vaguer in this respect and seem to place less emphasis on the promotion of local tourism in general.203 Secondly, the local tourism regulations vary in terms of the degree of governance exercised by the local governments. In the hotel sector, for example, while the local regulations of Beijing, Shandong and Liaoning prescribe detailed provisions regarding the operation, security, star-rating and management of hotels, other local regulations in other parts of China deal mostly with the star-rating system of hotels only.204 Consequently, there exists a great level of discrepancy in terms of the required standards of hotel management across the different regions in China. Last but not least, some academics have pointed out the difficulty in law enforcement as one of the major challenges facing China's tourism industry today.205 Traditionally, there has been a misconception that the importance of law in China is discounted in the light of its imperial history, and particularly after World War II.206 However, an empirical study conducted by Dr. Shan Wenhua in 2005 showed the contrary. This study revealed that the law had played a significant role in China's success in attracting foreign investments, relative to other factors such as market size, labor 201 Article 9 of the "Regulations for the Administration of Tourism of Beijing Municipality". 202 Supra, note 200. 203 Ibid. 204 Ibid. 205 Gao Shunli and Wang Jun, "The Current Situation, Trend and Strategies Relating to Tourism Law Implementation" (in Chinese), http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A20066221052443916494 (visited on 13 December 2007). 206 Supra, note 182. 52 costs, environmental costs and raw material supply.207 This means that the legal environment had trumped all other physical and socio-economic environment to become the first and foremost consideration of investors when deciding to do business in China and, mutatis mutandis, in the tourism industry. However, despite significant advancement in many respects, the study also showed that investors still lacked confidence in the legal system in China, especially in respect of the effectiveness of its law implementation. According to a respondent of the study, the "[K]ey issue is not only 'regulations', but their IMPLEMENTATIONS." Another respondent also commented that "[T]he legal environment is actually not that bad, the problematic part is the enforcement side."208 In this regard, it was found that laws were sometimes inaccessible and often subject to unexpected change.209 Inconsistency in the interpretation and implementation of the law by different governmental departments and in different regions has caused a substantial distrust in the law enforcement mechanisms. 210 Ineffective law enforcement not only influences investors' decisions to pump money into the tourism industry, but also the profitability of their business ventures. This is manifested in the context of unfair competition practices in the tourism industry. From the above, it can be concluded that the legal problems faced by the tourism industry today may, in one way or another, be attributed to the failure to enact a basic "Tourism Law" at the outset. This is because in the absence of clear stipulations regarding the guiding direction of tourism development, jurisdictions of the relevant government authorities and guiding principles of legislation in the tourism industry, the promulgation and implementation of rules and regulations in this area assumed an unsystematic and ad-hoc nature.211 Many tourism rules and regulations were therefore put in place in the form of "Regulations", "Interim Measures" or "Notices" just to address 207 Ibid. 208 Ibid. 209 Ibid. 210 Ibid. 211 Supra, note 188. 53 certain issues in the tourism industry as and when the need arose. 212 In other words, the law became a tool to patch deficiencies in the tourism industry in a piecemeal fashion, when in fact the proper approach would have been to set up a comprehensive legal framework right from the beginning. Such a myopic approach, as evinced by the prolonged delay to put together a basic "Tourism Law", may be said to be one of the root causes which brought on the other legal problems of the tourism industry as outlined above, namely, the inadequacy of the contents of tourism law, inconsistency within the tourism legal framework and to a certain extent, ineffective implementation of law.213 These problems will be further elaborated below in the contexts of: (1) the uncertainty of certain rights and obligations of tourism service providers vis-à-vis the consumers; (2) unfair competition and illegal practices in the tourism industry; (3) the dual systems of rating adopted in the hotel sector; and (4) the inconsistency of FDI regulations with the development trends of the tourism industry. 4.3 Uncertainty of Certain Rights and Obligations First and foremost, the rights and obligations of tourism service providers vis-à-vis the consumers are central to the discussion of tourism law, as they constitute the bulk of tourism activities in practice. Thus, this issue will be further examined in the context of some grey areas in the hotel sector and the travel agency sector respectively. Currently, there is no single document which defines the rights and obligations of hotels in China. However, as hotels are generally viewed as commercial enterprises, they may be derived from, inter alia, the "GPCL", the "Contract Law", the "Consumer Protection Law" and the "Supreme People's Court Judicial Interpretation on Some Issues Relating to the Applicable Law for Adjudicating Personal Injury and Compensation Cases". 214 Such derivation of the rights and 212 Supra, note 184. 213 The general recommendations with regard to strengthening the implementation of laws in China will be separately discussed in Section 5.5 herein. 214 Adopted by the 1299 Session of the Supreme People's Court's Adjudication Commission on 4 December 2003 and came into force on 1 May 2004. th 54 obligations on an ad-hoc basis invariably gives rise to many disagreements among academics as to the actual scope of the same.215 Nonetheless, some common rights of hotels vis-à-vis the consumers may include: the right to receive remuneration for services; the right to reject to entertain certain consumers;216 the right to prohibit illegal activities of consumers within the hotel premises; and the right to demand compensation for any loss caused by the consumers.217 On the other hand, the main obligations of hotel operators are said to consist of, inter alia: the obligation to treat all consumers fairly without discrimination; the obligation to provide contracted services; the obligation to protect the property and personal safety of the consumers; the obligation to inform consumers of the limitation on liability; the obligation to provide food and drinks; the obligation to provide safe facilities; and the obligation to respect and protect the privacy of the consumers.218 Additionally, it is said that the rights and obligations of the consumers in this regard correspond with those of the hotel's, in the sense that the hotel's obligations may be read as the consumer's rights, and the hotel's rights the consumer's obligations.219 The rough formulations above pose some difficulties in their actual application in practice, as they are couched in general terms only. Due to the speculative nature of the same, there exist many uncertainties as to their actual scope insofar as the resolution of legal disputes is concerned. One of these uncertainties relate to the hotel's right to charge the full room rates. In October 2004, several cases were reported regarding the alleged miscalculation of room rates by hotels in China, one of which was brought to a district court in Lanzhou 220 and another was lodged with the 215 Supra, note 61 at page 133. 216 For example, when the hotel is fully occupied or where a customer has been blacklisted by the hotel due to prior misbehavior. 217 Supra, note 61 at pages 133 to 137. 218 Supra, note 61 at pages 138 to 143. 219 Supra, note 149. 220 Wang Qun, "Upcoming Litigation that will Compel Hotels to Sign Contracts with Customers" (in Chinese), 28 October 2004, China Tourism News. 55 Consumer Commission of Guangzhou. 221 In both cases, the hotel patrons, who were Chinese nationals, had checked into their respective rooms around midnight but were asked to check out at noon the next day and pay the full room rate for their stay. In the latter case, the Consumer Commission of Guangzhou actually made a widely publicized decision that the calculation of rates for hotel rooms should be based on the unit of every 24 hours.222 In other words, if the customer had only stayed in the hotel for half a day (that is, from 12am to 12pm the next day), it would be unreasonable for the hotel to receive the full charge-out rate.223 Various arguments in support of this decision have been advanced. Briefly, it has been said that according to Article 154 of the "GPCL", the calculation of time periods in China is based on the "calendar years, months, days and hours" respectively. Accordingly, one day would entail 24 hours. Hence, the collection of full room rates by hotels can only be justified if it is based on actual 24-hour occupancy.224 Furthermore, it is said to be a violation of Article 24 of the "Consumer Protection Law" for hotels to impose unreasonable liabilities on the consumers without giving prior notice.225 Such practice is also said to constitute unfair contract terms under Articles 39 and 40 of the "Contract Law".226 221 Xu Jingsheng, "Why is the Check-Out Time for Hotels Fixed at 12pm?" (in Chinese), 13 October 2004, China Tourism News. 222 Liang Shuxin, "Is International Practice Unfair? Why does the Consumer Commission Only Listen to the Consumers?" (in Chinese), 21 October 2004, Ying Weekly. 223 Ibid. 224 Ibid. 225 Article 24 of the "Consumer Protection Law" states that: "[T]he operators may not make unfair or unreasonable regulations against the consumers in such forms as form contract, notice, statement or shop poster, or diminish or waive their due civil responsibility for infringing the consumers' lawful rights and interests. Where the form contracts, notices, statements or shop posters contain the content listed in the preceding paragraph, such content is null and void." 226 Article 39 of the "Contract Law" states that: "[W]here a contract is concluded by way of standard terms, the party supplying the standard terms shall abide by the principle of fairness in prescribing the rights and obligations of the parties and shall, in a reasonable manner, call the other party's attention to the provision(s) whereby such party's liabilities are excluded or limited, and shall explain such provision(s) upon request by the other party. 56 Shortly after this decision was rendered by the Consumer Commission of Guangdong, the CNTA saw it imperative to issue a clarification, stating that the fee calculation method adopted by the hotels in question was actually correct, thus overturning the Consumer Commission's decision. In this regard, the CNTA relied on international practice to justify its view.227 According to the UNWTO's "Collection of Domestic Tourism Statistics. Technical Manual No.3", customers who arrive at a hotel after midnight are deemed to have arrived on the previous day. This concept is also seen in Article 3 of the First Part of the "International Hotel Regulations" 228 issued by the International Hotel and Restaurant Association ("IH&RA"), which states that "[t]he contract of accommodation ends at midday on the day after the arrival of the guest, unless a contract for more than one day has been requested and accepted. Any contract for an indefinite period shall be considered as being for one day." This means that regardless of the time of check-in, as long as the customer spends the night in the hotel, a full day room charge will be imposed. Such international practice is deemed reasonable from a fairness and economic perspective. This is because once a room reservation is made for a particularly day, the hotel is obliged to reserve the same for the customer for one whole day (that is, from 12pm of that day to 12pm the following day) regardless of whether the customer eventually turns up early, on time, late, or at all. The economic value of the room, therefore, vests in that particular block of time. In other words, failing special arrangements to the contrary, the customer actually contracts for the block of time between 12pm on a day to 12pm on the next day to occupy the room. Standard terms are contract provisions which were prepared in advance by a party for repeated use, and which are not negotiated with the other party in the course of concluding the contract." Article 40 of the "Contract Law" states that: "[A] standard term is invalid if it falls into any of the circumstances set forth in Article 52 and Article 53 hereof, or if it excludes the liabilities of the party supplying such term, increases the liabilities of the other party, or deprives the other party of any of its material rights." 227 CNTA clarification (in Chinese), 24 November 2004, http://www.cntlaw.com/XXLR1.ASP?ID=5384 (visited on 7 September 2007). 228 Adopted by the IH&RA Council on 2 November 1981 at Kathmandu, Nepal. 57 In China, the State Council had, as early as 1978, set out rules similar to the above international standard in the "Regulations Regarding the Calculation of Days of Occupancy by Foreign Hotel Guests".229 Such rules, however, do not apply to Chinese guests in the context of domestic tourism. Moreover, the CTHA, having been a member of the IH&RA since 1994, had incorporated the concept behind Article 3 of the "International Hotel Regulations" into Article 10 of the "Industry Guidelines for Tourist Hotels in China", which clarified that hotel room rates are to be calculated based on a "nightly" basis. Accordingly, if a customer checks out after 12pm and before 6pm on the following day, extra half-day charge will be payable; if a customer checks out after 6pm on the following day, additional full day charge will be payable. Such provision is consistent with international practice and has, to a very large extent, clarified the issue of room rate calculation in China. However, as mentioned, the provisions of the "Industry Guidelines for Tourist Hotels in China" only apply to members of the CTHA or any other hotels on a voluntary basis.230 Thus, it serves more as a self-help measure to standardize hotel practices across China, rather than as the law. Another issue of contention relates to whether hotels have the right to restrict customers from bringing outside food and drinks into the hotel premises. Like the calculation of hotel room rates, this issue has not been addressed by any existing laws or regulations and has long been the issue of complaint by many Chinese consumers. 231 In this regard, Article 29 of the "Industry Guidelines for Tourist Hotels in China" provides that hotels may restrict customers from bringing outside food and drinks into the hotel premises, provided that the notice bearing such restriction is clearly exhibited. Although such restriction has been widely accepted by hotels globally, there still 229 The "Regulations Regarding the Calculation of Days of Occupancy by Foreign Hotel Guests" provides that regardless of the time of check-in, as long as the foreign guest spends the night in the hotel, a full day room charge will be imposed. If a foreign guest checks out after 12pm and before 6pm on the following day, extra half-day charge will be payable; if a foreign guest checks out after 6pm on the following day, additional full day charge will be payable. 230 Article 41 of the "Industry Guidelines for Tourist Hotels in China". 231 Supra, note 61 at page 136. 58 exists much reluctance to acknowledge the same in the Chinese society.232 Amongst the common complaints in this regard is that such restriction constitutes a violation of, inter alia, Articles 39 and 40 of the "Contract Law" as it is an unfair contract term;233 Article 9 of the "Consumer Protection Law" for it deprives consumers of the right to choose their own commodities or services;234 and Article 24 of the "Consumer Protection Law" as it imposes unreasonable demand on the consumers.235 These arguments are reinforced by the fact that consumers often have no choice but to purchase food and drinks from the hotel, which are normally more expensive than the retail prices. Hence, the restriction in Article 29 of the "Industry Guidelines for Tourist Hotels in China" may be abused by hotels to increase their business profits,236 which is said to be a violation of the principles of voluntariness, fairness, equality and honesty and credibility under Article 4 of the "GPCL" and Article 4 of the "Consumer Protection Law".237 On the other hand, however, advocates of Article 29 of the "Industry Guidelines for Tourist Hotels in China" take the view that this provision is not mandatory. This means that hotel operators 232 Supra, note 61 at page 136. 233 Supra, note 226. 234 Article 9 of the "Consumer Protection Law" states that: "[T]he consumers enjoy the right to choose the commodities or services of their choice. The consumers have the right to select independently the operators who provide commodities or services, to choose independently the varieties of commodities and the kind of services, and to decide independently to purchase a commodity or not and to accept a service or not. The consumers have the right to make comparison, examination and selection in independently choosing commodities and accepting services." 235 Supra, note 225. 236 Wen Lun, "Balancing of Interests – The Prohibition on Outside Food and Drinks" (in Chinese), 2002, th CYSW, 7 Edition. 237 Article 4 of the "GPCL" states that: "[I]n civil activities, the principles of voluntariness, fairness, making compensation for equal value, honesty and credibility shall be observed." Article 4 of the "Consumer Protection Law" states that: "[T]he operators and the consumers shall, in transactions, observe to the principle of willingness, equality, fairness and honesty and reputation." 59 may choose to impose such restriction or not according to market forces, and correspondingly, consumers would also be free to exercise their right of choice under Article 9 of the "Consumer Protection Law" in the selection of hotel based on this criteria.238 Moreover, this restriction may be seen as a way to protect other consumers' right to personal safety within the hotel premises, pursuant to Article 7 of the "Consumer Protection Law".239 This is because if consumers are allowed to freely bring and consume, for example, alcohol beverages in the hotel premises, it may be difficult for the hotel management to then monitor any illegal or harmful acts committed by such consumers under the influence of alcohol. Furthermore, although food and drinks sold in hotels are normally more expensive, the additional surcharge is justified by the ambience, lighting and décor provided by the hotel.240 In other words, there is a price to pay for enhanced enjoyment, which may not be readily seen from the value of the merchandise purchased. Hence, it would not be an unfair deprivation of the consumers' rights to prohibit outside food and drinks from hotel premises, as long as the consumers are well-informed beforehand in accordance with Article 8 of the "Consumer Protection Law".241 238 Han Yuling and Wang Rui, "Another Analysis on the Prohibition of Outside Food and Drinks" (in Chinese), September 2006, Journal of Beijing International Studies University, 131st edition at page 98. 239 Article 7 of the "Consumer Protection Law" states that: "[I]n purchasing and utilizing commodities or accepting services, the consumers enjoy the inviolable right of the personal and property safety. The consumers have the right to demand the commodities or services provided by the operators accord with the requirements of ensuring the personal and property safety." 240 Liu Wei, "Analysis of the Legal Problems Relating to Hotels' Restriction on Customers Bringing Food and th Drinks" (in Chinese), 2005, China Travel Hotel, 8 edition. 241 Article 8 of the "Consumer Protection Law" states that: "[T]he consumers enjoy the right to know the true situation of the commodities purchased and utilized and the services accepted. The consumers have the right, according to different situations of the commodities or services, to demand the operators to provide such relevant information as the commodities' price, origin of production, manufacturer, purpose, performance, specification, grade, major compositions, date of production, term of validity, certification of inspection, operation manual, after-sale service, or the services' content, standard and charge." 60 The above examples deliver a very important message, that is, domestic consumers in the Chinese tourism market, though rapidly expanding in numbers, have not yet familiarized themselves with international practice in this regard. Given that there are no clear laws or regulations (save for industry guidelines) which seek to resolve some of these rather sticky legal issues, tourism service providers, consumers and the government may all be placed in a difficult position when disagreements on these issues arise. In extreme cases, these situations may even give rise to lawsuits or administrative complaints. The question then is whether to follow international practice or to consider local sentiments, or both, in resolving these issues. Although the CTHA had put in laudable efforts in coming up with its own industry guidelines based on international practice, such guidelines have no legal effect when it comes to protecting the rights and liabilities of the hotels, as they are not binding on the consumers and the courts are not obliged to enforce them. It is, therefore, no surprise that industry players, when interviewed, had unreservedly expressed the hope for the provisions of the "Industry Guidelines for Tourist Hotels in China" to be given legal effect in order to confer more clarity on the currently blurred boundaries of the rights and obligations of hotels in China.242 Another reported case in this regard relates to the consumer's right to personal and property safety, which translates to the hotel's obligation to protect the same. On 23 August 1998, a lady by the name of Wang Han checked into the Galaxy Hotel, Shanghai at or about 2.40pm. Two hours later on that same day, Wang was found robbed and murdered in her hotel room. Her stolen personal belongings consisted of RMB 230,000 in cash, HKD 20 in cash and an Omega watch which cost RMB 7,140. Pursuant to that incident, Wang's parents lodged a claim with the Changning Basic Court in Shanghai against Galaxy Hotel for, inter alia, tort and breach of contract.243 The Basic Court found that although the hotel staff were negligent in carrying out their 242 243 Supra, note 221. Duo Mu, "Hotels to Bear Liability for Guests' Injuries?" (in Chinese), 8 http://www.cntlaw.com/xxlr1.asp?id=5301 (visited on 8 September 2007). November 2004, 61 patrolling duty at that time, there was nevertheless no direct causation between Wang's death and her loss of property and the hotel's negligence (as the murder and robbery were committed by a third party, who had since been sentenced to death). As a result, the claim for tort was denied. However, as there was a contractual relationship between the hotel and its guests, the hotel had breached its contractual obligation to provide 24-hour patrol service in order to ensure the security of the hotel premises. Such obligation was stipulated in the in-house "Galaxy Hotel Quality Assurance Terms". Consequently, the Basic Court awarded the plaintiffs RMB 80,000 in contractual damages.244 On appeal, the Shanghai No. 1 Intermediate Court upheld the Basic Court's decision but provided a different explanation for its ruling. It was said that apart from the express contractual terms stipulated by the hotel, such as the 24-hour patrol service, the hotel also had "ancillary contractual obligations" to protect the property and personal safety of the hotel guests. In this case, as the hotel had failed to discharge such "ancillary obligations" in a reasonable manner, it ought to pay the plaintiffs damages.245 From the case illustrated above, it can be said that the hotel's obligations to protect the property and personal safety of its guests are generally contractual in nature. Although the "Contract Law" was not cited by both courts in deciding the case, academics have assumed that since there are no specific provisions governing the hotel sector under the "Contract Law", the obligation of hotels to protect the property and personal safety of guests may be derived from the carriers' liability under the "Specific Provisions" of the "Contract Law".246 In this regard, Article 124 of the "Contract Law" provides that: "[W]here there is no express provision in the Specific Provisions hereof or any other law concerning a certain contract, the provisions in the General Principles hereof apply, and 244 Ibid. 245 Ibid. 246 Ibid. 62 reference may be made to the provisions in the Specific Provisions hereof or any other law applicable to a contract which is most similar to such contract"; and Article 302 of the "Specific Provisions" of the "Contract Law" states that: "[T]he carrier shall be liable for damages in case of injury or death of the passenger in the course of carriage, except where such injury or death was attributable to the passenger's own health, or the carrier has established that such injury or death was caused by the passenger's intentional misconduct or gross negligence…". Furthermore, Article 60 of the "Contract Law" provides that "[t]he parties shall abide by the principle of good faith, and perform obligations such as notification, assistance, and confidentiality, etc. in light of the nature and purpose of the contract and in accordance with the relevant usage." This provision arguably provides for the basis of the "ancillary obligations" in this case based on the principle of good faith, although the "Contract Law" is silent on the actual scope of such "ancillary obligations". Although the case has now been resolved by the court, the outcome of it is less than satisfactory. This is by no small part due to the lack of specific legal provisions defining the rights and obligations of hotels and consumers in China. By the same token, the non-binding nature of the Chinese court's decision means that the above decision will not serve to crystallize the rights and obligations of the hotel and the consumer in this regard. Moreover, the scope of the "ancillary obligations" of the hotels had not been clarified by the Intermediate Court. For example, do these "ancillary obligations" extend to visitors of the hotel guests? Do these "ancillary obligations" vary according to the different rating and classification of the hotels? To what extent will these "ancillary obligations" be obviated if the consumer had contributed partly to the default? Suffice to say that the scope of such "ancillary obligations" can be either very narrow or very wide in practice, depending on the facts of each case and the court's interpretation of the same. In this regard, it has 63 been said that some of the factors to be considered include the nature of the contract between the hotel and the consumer, the objectives of both parties in each case and industry practice.247 In practice, all these uncertainties above not only have legal implications, but also bring commercial repercussions. For example, the legal position as to the rights and obligations of hotels may affect the insurers' decision on whether to provide coverage in certain areas, the premium payable and the liability cap. This will also affect the way investors anticipate and apportion their legal and commercial risks when entering into a business venture in the hotel sector. Comparatively, the situation with regard to the travel agency sector in this area may be said to be more straightforward. This is because under Article 43 of the "Implementation Rules on the Administration of Travel Agencies", travel agencies are required to enter into written contracts with the consumers before the provision of travel services, stipulating arrangements with regard to itineraries (including transportation, travel destinations, accommodation, meals and entertainment standards and frequency of shopping trips), pricing and liabilities for breach of contract.248 This, in a way, crystallizes the important rights and obligations of the travel agencies and consumers right from the outset and helps reduce the possibility of dispute. These rights and obligations include the consumers' right to receive quality service,249 right to information,250 right to personal and property safety251 and the travel agencies' obligations to protect the same. Moreover, the "Model Travel Contract for Domestic Tourism" issued by the CNTA and the various model contracts introduced by the local governments of Beijing, Shanghai and Zhejiang respectively based on Chapter 7 of the 247 He Shengxi, "The Hotel's Obligations Towards its Guests" (in Chinese), 12 November 2004, http://www.cntlaw.com/xxlr1.asp?id=5324 (visited on 27 November 2007). 248 Generally, the term "travel contract" may imply five main categories of contract, namely, services contract (entered into between travel agencies and tourists), sale and purchase contract (entered into between travel agencies and hotels, transport companies, restaurants, entertainment spots and other related entities), agency contract, insurance contract and brokerage contract. The focus of this paper is the first type of contract, that is, the travel services contract. 249 Article 39 of the “Implementation Rules on the Administration of Travel Agencies”. 250 Articles 39, 40 and 42 of the “Implementation Rules on the Administration of Travel Agencies”. 251 Article 40 of the “Implementation Rules on the Administration of Travel Agencies”. 64 "Implementation Rules on the Administration of Travel Agencies" also play an important role in standardizing the tourism market and to a certain extent, crystallizing the rights and obligations of both the travel agencies and the consumers.252 However, some academics have criticized that the formulation of rights and obligations in Chapter 7 of the "Implementation Rules on the Administration of Travel Agencies" above is too general and do not cover many real situations that may arise in the travel agency sector in practice,253 for instance, the increasingly popular e-business model of travel agencies. Today, many of China's travel agencies have developed a presence in cyberspace and operate through the internet, alongside having a physical presence in China.254 For example, in the late 1990s, the head office of the CITS entered into a joint venture with a Hong Kong partner in launching its website and, by 1999, over half of the head office's businesses were conducted online. Pursuant to this, the China Youth Travel Service ("CYTS"), another well-established travel agency dating back to the 1970s, had also decided in 2000 to invest USD 12.05 million to develop its e-business. Furthermore, according to the "Interim Measures on the Establishment of Sino-Foreign Joint Venture Travel Agencies",255 one of the entry requirements for foreign investors to set up Sino-foreign joint venture travel agencies in China is the ability to provide internet booking facilities.256 This has also laid the foundation for the increasingly popular e-business model among travel agencies in China today. However, as it currently stands, despite the advent of the e-business era, the law with regard to the rights and obligations of persons who transact through the cyberspace is uncertain.257 For example, in the event that a website is "hacked" into, the tourism service provider is not only forced to cease 252 Supra, note 57 at page 33. 253 Supra, note 61 at page 31. 254 Supra, note 4 at pages 153 to 154. 255 Jointly issued by the CNTA and the MOFCOM and came into force on 17 February 2005. 256 Article 4(3) of the "Interim Measures on the Establishment of Sino-Foreign Joint Venture Travel Agencies". 257 Supra, note 61 at page 220. 65 part of its operations, credit card details and personal particulars of website users may also be stolen, resulting in financial losses to both the tourism service provider and the consumers. In such a situation, the apportionment of liabilities and losses becomes a key legal issue. However, in the absence of specific cyber laws or tourism regulations dealing with internet transactions, the determination of legal boundaries in this area would have to depend on the court's ability to draw analogies from related laws and regulations, such as the "GPCL", the "Contract Law" and the "Consumer Protection Law". Thus, there still remains a lacuna in the law in this area.258 Separately, although the written contract is stipulated as a legal requirement for the provision of travel services, not all travel agencies comply with the same in practice. A reported case involving an oral contract demonstrates this phenomenon. In September 2002, Zhang contacted Zhu from a Chinese travel agency to book his company retreat to Hainan at the end of the month. As deposit, he paid RMB 60,000 to the travel agency pursuant to Zhu's request. However, a day before the scheduled departure, Zhu informed Zhang that the trip had to be cancelled due to unforeseen difficulties in securing air tickets and accommodation. As a result, Zhang was compelled to organize the company trip himself under extremely tight timeline, and ended up with an expenditure which doubled his original budget. Pursuant to this, Zhang lodged a complaint with the Administration of Tourism Quality Supervision against the travel agency for fraud under Article 49 of the "Consumer Protection Law".259 The travel agency, in turn, based its defence on force majeure, the lack of a written contract between Zhang and the travel agency and Zhu's lack of authority to contract on the travel agency's behalf. Upon adjudication of the case, the Administration of Tourism Quality Supervision dismissed Zhang's claim on fraud, but held that the travel agency should be liable for breach of contract. In this regard, it was found that as the force 258 Supra, note 61 at page 220. 259 Article 49 of the "Consumer Protection Law" states that: "[A]n operator who has the fraudulent act in providing the commodity or service shall, according to the demand of the consumer, increase the compensation to the losses suffered by the consumer, the amount of increased compensation is one times of the commodity price or service charges that the consumer has paid for the commodity purchased or for the service accepted." 66 majeure events provided were real, there was no ground for any allegation of fraud in this case. However, despite there not being a written contract between the parties as required under the law, an oral contract was nevertheless formed between them. Furthermore, although Zhu was not a formal employee, he was viewed as an agent of the travel agency, his conduct would therefore bind the travel agency in any event. 260 Accordingly, the travel agency had breached its contractual obligations when it terminated the contract at the very last minute and was liable to pay Zhang 10% of the contracted sum as liquidated damages in accordance with Article 4 of the "Standard for Compensation under the Service Quality Cash Deposit System".261 In this case, it was rather fortunate that there was clear evidence supporting the assertion of an oral contract per Article 10 of the "Contract Law",262 notably the prepayment of deposit. The same conclusion, however, may not be reached in other cases where the evidence had not been preserved or was not as straightforward. From this example, it can be seen that the written requirement of the law and the actual compliance with it are, in fact, equally important, when it comes to the protection of the rights and obligations of tourism service providers and consumers in practice. This is because if the strict implementation of law is not upheld, any system of law, no matter how complete in writing, would at most be a paper tiger only. The issue of law enforcement will be further elaborated in the following section. 4.4 Unfair Competition and Illegal Practices Although China has seen encouraging growth and a steady expansion in the number of tourism service providers in recent years, many of the stories in newspapers and magazines about 260 Supra, note 57 at pages 47 to 48. 261 Issued by the CNTA and came into force on 1 January 2001. 262 Article 10 of the "Contract Law" states that "a contract may be made in writing, in an oral conversation, as well as in any other form." 67 them have unfortunately been negative. 263 Examples are reports of a chaotic market order, deteriorating service, cut throat competition, illegal collection of rebates, fraudulent advertisements264 and increasing complaints by tourists.265 These phenomena are best illustrated in the case of the travel agency sector.266 Accordingly, given the dangers that these problems may potentially pose to the sustainable growth of the tourism industry, the State Council and the CNTA have spared no effort in promulgating a series of rules and regulations aimed at correcting the market order, such as the "Regulations on the Administration of Travel Agencies" and its implementation rules, the "Regulations on the Administration of Tourist Guides" and its implementation rules and the "Regulations on the Prohibition of the Illegal Collection of Rebates and Tips in the Tourism Industry".267 Moreover, local governments have passed many rules and regulations to monitor the local tourism market, such as the "Regulations on the Administration of Tourism of Shangdong Province"268 and the "Regulations on the Administration of the Tourism of Anhui Province". In academic journals, too, papers prepared by scholars, researchers or industry experts have examined these problems and how they can be rectified. 269 However, despite considerable efforts at reform, the number one problem faced by China's tourism industry today, particularly the travel agency sector, is still a chaotic market structure, where unfair competition is said to have disrupted the market order and the profitability of businesses in this area.270 263 Supra, note 4 at pages 143 to 144. 264 Supra, note 57 at page 66. 265 Zhang Jianmei and Wei Guangping, "The Combination of Legal Management and Industry Discipline – The Inevitable Option for the Healthy Development of Travel Agencies" (in Chinese), 5 December 2004, http://www.cntalaw.com/XXLR1.ASP?ID=5404 (visited on 30 September 2007). 266 Supra, note 4 at pages 154 to 159. 267 Approved by the State Council on 2 August 1987, issued by the CNTA and came into force on 17 August 1987. 268 Adopted by the 14 Session of the 10 NPC Standing Committee Meeting of Shandong Province on 27 May 2005 and came into force on 1 August 2005. 269 Supra, note 4 at page 144. 270 Supra, note 4 at pages 154 to 155. th th 68 In this regard, unfair competition practices in the tourism industry are defined as conducts which may affect the legitimate interests of other tourism services providers and disrupt the tourism market order.271 The types of unfair competition acts are laid down in Articles 5 to 15 of the "Anti Unfair Competition Law". Some of these practices which are commonly found in the tourism industry include passing off, bribery, infringement of trade secrets, false publicity, sale of goods below the cost price, sale of goods with prizes attached, tie-in sales and defamation of other competitors.272 Notably, unfair competition practices in the tourism industry have often been associated with the intractable "price war" among tourism service providers. Although Article 11 of the "Anti Unfair Competition Law" and Article 33(4) of the "Implementation Rules on the Administration of Travel Agencies" make the provision of tourism services at a price below the cost price illegal, in practice, the race by tourism service providers to undercut one another is rather rampant in China. In an interview reported in the "Tourism Tribune", the president of the CYTS, Mr. Jiang Jianming, indicated that "undesirable price-cutting practices have become so rampant in the newly emerging but chaotic tourism market in China that nobody, not even the most authoritative persons, could play a decisive role in bringing about the radical reforms that are needed."273 For example, travel services are often offered by travel agencies at cut throat prices and further reduced simply to win over tourists from other travel agencies.274 In a reported case which happened during the Chinese New Year holidays in 2006, a travel agency had introduced a four-day-three-night tour package to Harbin – Xianshan – Benxi at a price of RMB 680. Immediately the day after, another travel agency replicated the same tour package but offered it at a price of RMB 580 only. The latter package 271 Supra, note 57 at page 66. 272 Supra, note 57 at pages 67 to 71. 273 Supra, note 4 at page 144. 274 Supra, note 61 at page 182. 69 naturally became more popular among domestic tourists. However, at the end of the day, tourists who had participated in the above tours found that the lower price offered by the latter package was deceiving, as the transportation, meals and accommodation provided under that package were all unsatisfactory. In that instance, the said travel agency had even failed to secure their return air tickets.275 In even more extreme circumstances, it was reported that the travel services market for inbound tourism had become so competitive that in some areas, notably the more popular tourist spots such as Guilin and Hainan, "zero quoted rates" or even "negative quoted rates" were often offered by travel agencies to attract clients.276 This means that a group of tourists could fly in to their respective destinations in China for the cost of airfare (sometimes for a cost lower than the airfare) only, while staying in the place for two to three nights free of charge for sight-seeing, accommodation and meals.277 The catch, however, was that the tourists would see some of the scenic spots, but spend most of their time being taken from one shop to another, as it was through the rebates collected from shopping that the travel agencies and tourist guides derived the majority of their income.278 In a particular case, it was reported that tourists were taken to shop five times in a single day; it is no surprise that such tour groups are often labeled "shopping groups" by tourists.279 The examples above demonstrate a strange phenomenon in the tourism industry today, where tourism service providers strive to outdo each other not in terms of the quality of services, but the lowering of prices. In the rush to enlarge or maintain market share, many tourism service providers, notably travel agencies, have no choice but to indulge in such unfair competition practices, 275 Supra, note 57 at page 70. 276 Supra, note 4 at page 155. 277 Ibid. 278 Supra, note 57 at page 70. 279 Ibid. 70 albeit illegal, in order to stay alive amidst the increasing competition. 280 Such practice is especially detrimental to reputable or foreign-invested travel agencies that refuse to participate in such competition as their wholesale operation costs are higher.281 This, understandably, is the primary reason for the reported lower profit returns in the travel agency sector in China as compared to other tourism sectors.282 Additionally, unfair competition practices such as the "price war" is made possible by the rebate system exercised by many tourism service providers. A common practice in this regard is the collaboration between travel agencies or tourist guides and retailers, where the former would bring tourists to the latter in return for a secret rebate. Under such arrangement, travel agencies are often induced to squeeze as many shopping trips into the tour itinerary as possible. In many instances it has even been reported that tourists were brought to shop directly upon their arrival, instead of checking into their hotels.283 In May 2005, the Department of Commerce of Xiamen uncovered a case where a company which organized the exhibition of the terra cotta warriors was found to give out 1/3 cash rebates to tourist guides in return for them bringing tourists to the exhibition. The rebates were not documented in the accounts of the company, nor were there any written agreements between the company and the tourist guides in question. Accordingly, the Department of Commerce ruled that such conduct was a form of bribery under Articles 8 and 22 of the "Anti Unfair Competition Law"284 and imposed RMB 30,000 of administrative penalty on the offenders.285 280 Supra, note 4 at page 155. 281 Supra, note 4 at page 155. 282 Supra, note 4 at page 156. 283 Supra, note 57 at page 68. 284 Article 8 of the "Anti Unfair Competition Law" states that: "An operator shall not practise bribery using money, valuables or other means to sell or buy goods. Where an operator secretly pays a kickback to the other party, be it an entity or individual, off the book, it or he shall be punished for offering a bribe; where the other party, be it an entity or individual, secretly accepts a kickback off the book, it or he shall be punished for taking a bribe. In the selling or buying of goods, an operator may express clearly its or his intention to offer a discount to the other party and pay a commission to the middleman. Where an operator gives a discount to the other 71 In practice, rebates are differentiated from discounts, commissions and tips, while the former is strictly prohibited, the latter are legal as long as they comply with the legal requirements.286 It is now an open secret that a primary source of income of tourist guides is the tips offered by tourists. In many parts of the world, it is common, and sometimes obligatory, for tourists to offer a certain amount of tips to the tourist guides as a token of appreciation.287 For example, it has been calculated that the average daily income of tourist guides which is derived from tips is approximately USD 160 to USD 200 in the US; USD 298 in Japan and USD 100 to USD 200 in the UK and Italy respectively.288 In the Chinese context, however, before amendments were made to the "Interim Regulations on the Administration of Tourist Guides", the collection of tips by tourist guides was strictly prohibited, even if the same was initiated by the tourists.289 The post-amendment "Regulations on the Administration of Tourist Guides", in a way, legalized the collection of tips by tourist guides, but with the condition that the tips are voluntarily offered by the tourists without any explicit or implicit suggestions from the tourist guides.290 However, despite advancements of the law in this area, the response from tourists, especially domestic tourists, in reality is disheartening. party and pays a commission to the middleman, it or he must enter the items in the book factually. An operator accepting a discount or commission must enter it in the book factually." Article 22 of the "Anti Unfair Competition Law" states that: "Where an operator practises bribery using money, valuables or other means to sell or buy goods, constituting a crime, it or he shall be prosecuted according to law for its or his criminal liability; where the act does not constitute a crime, the relevant control and inspection department may according to circumstances, impose a fine of more than RMB 10,000 yuan and less than RMB 200,000 yuan. Its or his illegal income, if any, shall be confiscated." 285 Supra, note 57 at pages 68 to 69. 286 According to Article 8 of the "Anti Unfair Competition Law", discounts and commissions must be entered into the accounts of both the provider and the recipient (supra, note 284). 287 Supra, note 265. 288 Ibid. 289 Article 18 of the "Interim Regulations on the Administration of Tourist Guides" states that "tourist guide who…receives tips…his illegal proceeds shall be confiscated, and he shall be liable for a penalty up to three times of his original receipts…". 290 Article 23 of the "Regulations on the Administration of Tourist Guides" states that "tourist guide who…explicitly or implicitly requests for tips from tourists…shall be liable for a penalty of RMB 1,000 to RMB 30,000…". 72 According to a survey conducted on travel agencies in Guangzhou and Hunan which openly promoted the system of voluntary tipping, it was found that not a single one out of ten groups of domestic tourists had willingly offered tips to the tourist guides. 291 Under such circumstances, tourist guides may have no choice but to revert to collecting rebates illegally from retailers or restaurants, or even "coercing" tourists to offer tips to them in return for better services. Furthermore, although the collection of tips by tourist guides are partly legalized, the collection of tips by hotel personnel, drivers, restaurant staff and other travel personnel is still strictly prohibited under the "Regulations on the Prohibition of the Illegal Collection of Rebates and Tips in the Tourism Industry".292 This double standard not only causes confusion, but is also contradictory to international practice. Separately, another common unfair competition practice in the tourism industry is the use false publicity to solicit clients. According to a market survey, 60% of the domestic tourists in China are found to rely on representations in advertisements when choosing their travel products.293 However, it was also found that many dishonest tactics had been employed by tourism service providers in these advertisements to mislead consumers. 294 For example, some hotels might represent that they were "three-star hotels providing four-star services", but the actual quality of the services rendered was far from that promised.295 Moreover, there were also smaller travel agencies which used misleading names such as "China Travel" or "National Travel", causing consumers to 291 Supra, note 265. 292 Article 4 of the "Regulations on the Prohibition of the Illegal Collection of Rebates and Tips in the Tourism Industry" states that: "Tourism staff shall not request for or receive tips from tourists, and shall not accept tips offered by tourists, in the course of their carrying out their duty…" 293 Liu Gansheng, Analysis of Cases on Tourism Disputes (in Chinese), 2004, China Travel and Tourism Press at pages 190 to 192. 294 Ibid. 295 Supra, note 57 at page 69. 73 believe that they actually operated on a large scale.296 In this regard, Article 9 of the "Anti Unfair Competition Law" prohibits tourism service providers from using advertisements or other methods to effect "misleading false publicity" as to the quality, composition, performance, utility, manufacturer and origin or goods or services. This provision, however, has been criticized as being ineffective in dealing with the current situation in the tourism industry, for it is targets primarily "false publicity". In reality, however, there are many publicity tactics in the tourism market today which are not strictly speaking "false", but nevertheless "misleading".297 In light of this fact, some academics have proposed that the provision be revised to provide for "misleading publicity" or "misleading or false publicity"298 in order to capture a wider scope. Unfortunately, the "Supreme People's Court's Judicial Interpretation on the Anti Unfair Competition Law"299 which was issued on 30 December 2006 did not seize the chance to clarify this issue. Apart from the unfair competition practices described above, the so-called "chengbao" system ("承包", or subcontracting system) is also a form of under-regulated activity which is not uncommon in the tourism industry today.300 What actually happens under this system is that a travel agency would be split up to several smaller agencies and the departmental managers would be allowed to use the name of the travel agency to pursue their short term interests.301 Although the "chengbao" system is strongly opposed by the CNTA for constituting a form of unregulated privatization, and may be prohibited under Article 18(4) of the "Regulations on the Administration 296 Supra, note 61 at page 175. 297 Kong Xiangjun, The Application and Reform of the Anti Unfair Competition Law (in Chinese), 1998, Law Press at pages 237 to 239. 298 Supra, note 61 at page 180. 299 Issued by the Supreme People's Court on 30 December 2006 and came into force on 1 February 2007. 300 Since the late 1990s, the so-called "chengbao" system has been used by many entrepreneurs to circumvent the various regulations in the travel agency sector, particularly the "Regulations on the Administration of Travel Agencies". This was mostly done by individual staff members (mostly departmental managers) of travel agencies who would reach an agreement with the general managers to meet a profit quota and who would then be given full charge of the operation and management of their departments (supra, note 4 at page 147). 301 Supra, note 4 at page 147. 74 of Travel Agencies" and Article 33(5) of its implementation rules, both of which state that travel agencies shall not "appoint units which do not belong to the travel agencies or individual agents (or disguised agents) to operate their travel business", the enforcement of law in this area has been criticized as being ineffective.302 According to Wang, the director of the Tourism Research Centre at the Shanghai Social Sciences Academy, "the 'chengbao' by individuals, a practice which was far from being standardized, was one of the root causes of unfair competition practices in the Chinese market, which remains uncured to this day."303 Another related problem is that the "chengbao" system, which allows individuals to subcontract with larger travel agencies and operate outside the regulatory system, may cause prices to be further reduced as the wholesale operation costs are lowered. As a consequence, the service quality of travel agencies may suffer further. In view of the foregoing, it may be concluded that the current state of the tourism industry, viewed from the perspectives of both the businessmen and consumers, is indeed a "lose-lose" situation where neither party stands to benefit at the end of the day. In this regard, it has been said that unfair competition in the tourism market today is caused by at least three factors: first, the lack of sophistication of consumers, who generally favor lower prices to quality assurance; secondly, the lack of transparency in the operation of private tourism entities resulting in rampant, unregulated activities; and most importantly, the poor implementation and enforcement of law in the tourism industry.304 This is because there are indeed written laws which regulate unfair competition in the tourism industry, as seen above, but these laws are often overlooked in practice. Further, according to a legal survey conducted on investors in China, ineffective law enforcement is also one of the major causes of distrust of investors towards the Chinese market.305 This, unfortunately, is clearly manifested by the flouting of law by private tourism entities and the 302 Supra, note 4 at page 147. 303 Ibid. 304 Supra, note 57 at page 70. 305 Supra, note 182. 75 above unfair competition practices in China's tourism industry today. These problems, if left uncured, would have detrimental effects on the sustainable development of the tourism industry. Thus, at present, the most urgent step China should take, in order to eradicate unfair competition and illegal practices in the tourism industry, is to further strengthen its overall law enforcement and implementation mechanisms, including the courts and bureaucracy, in addition to bringing the laws and regulations up to international standards.306 4.5 Dual Systems of Rating of the Hotel Sector Having examined in the previous sections some of the problems relating to horizontal legal relationships in the tourism industry, this section discusses the situation in relation to vertical legal relationships, using the rating and classification system of the hotel sector as a practical example. As mentioned, the hotel sector in China is generally divided into three categories, namely, star-rated hotels or tourist hotels, non-star rated hotels and budget lodgings. The first category of hotels is governed by the CNTA; the second category of hotels is governed by the MOFCOM; while the third category of hotels falls under the jurisdiction of the Government Offices Administration of the State Council.307 As a result of such division of authority, each governing body adopts its own rules, regulations and standards of governance, which is said to give rise to inconsistencies in practice.308 This is evidenced by the current dual systems of rating for star-rated and non-star rated hotels respectively. The star-rating system of tourist hotels in China only started in the late 1980s. Due to the rapid growth of the hotel sector since the 1980s, the CNTA first issued the "Regulations on the Evaluation of Star-Rated Tourist Hotels" and the "Standard for Star-Rated Tourist Hotels" in 306 Ibid. 307 Supra, note 147. 308 Ibid. 76 August 1988.309 These regulations were based on the blueprints of similar star-rating standards of developed countries, and marked the beginning of a systematic rating system for the hotel sector in China. 310 In 1993, the CNTA issued the "Star Rating Standard for Tourist Hotels" which was further amended in 1997 and 2003 respectively.311 Accordingly, as it currently stands, tourist hotels in China are divided into six star-ranks, namely, one-star, two-star, three-star, four-star, five-star and platinum five-star (latest addition) hotels, in ascending order of standard.312 On the other hand, the rating of non-star rated hotels is administered by the MOFCOM according to the "National Classification Standard for Hotels and Restaurants", under which hotels are divided into five classes, namely, "national special class, first class, second class, third class and fourth class", in descending order of standard.313 In other words, there is a separate, parallel rating system for hotels in China based on class, alongside with the star-ranks. Although this seems to create a clear demarcation of jurisdiction between the CNTA and the MOFCOM, in practice, such divide has resulted in some administrative difficulties.314 For example, certain borderline cases which fall short of one-star but nevertheless exceed the requirements of a national special class hotel may be denied jurisdiction by both the CNTA and the MOFCOM.315 In such cases, it is unclear where these hotels would stand in the overall classification framework. Furthermore, according to the "Notice Regarding the Transfer of the Powers of Examination and Approval of Hotels Below Four-Star"316 and the "Notice Regarding the Further Acceleration of 309 Supra, note 57 at page 138. 310 Supra, note 57 at page 138. 311 Ibid. 312 Article 3.2 of the "Star Rating Standard for Tourist Hotels". 313 Article 4 of the "National Classification Standard for Hotels and Restaurants". 314 Liu Shijun and Dai Bin, "On the Reform of Management System Caused by the Change in Environment in the Hotel Sector" (in Chinese), 23 May 2007, China Tourism Law. 315 Ibid. 316 Issued by the CNTA and came into force on 4 May 1994 (a copy of which (in Chinese) is attached as Annex B herein). 77 the Examination and Approval of Star Rated Hotels",317 the administrative powers of hotels above five-star now vest in the CNTA at the central level. For star-rated hotels which are four-star and below, the CNTA has assigned its administrative powers to tourism administrations of the various provinces, autonomous regions and municipalities directly under the central government. More specifically, the local tourism administrations of "tourist cities" are in charge of the examination and approval of three-star hotels and below, while the local tourism administrations of "non-tourist cities" are in charge of two-star hotels and below.318 The decentralization of power from the CNTA to the local governments was initially aimed at improving administrative efficiency, but nonetheless caused some negative effects in practice. In this regard, it has been criticized that under the current system, there exist discrepancies in terms of the ratio and distribution of star-rated hotels across the country.319 For example, as at the end of 2006, the number of star-rated hotels in Guangdong and Zhejiang constituted close to 20% of the total number of star-rated hotels in the whole of China.320 Moreover, four- and five-star hotels concentrated in the eastern part of China, making up 61.56% of the total number of four- and five-star hotels in China, but there was still, up until that time, no fivestar hotel in the more remote western part of China like Qinghai, Ningxia and Tibet.321 Some academics have attributed this phenomenon to the incoherence of approach adopted by the different local governments towards the star-rating system as described above.322 It has been said that due to the lack of centralized and regional trainings, the local governments of the different 317 Issued by the CNTA and came into force on 31 March 2000 (a copy of which (in Chinese) is attached as Annex B herein). 318 Articles 1 to 4 of the "Notice Regarding the Further Acceleration of the Examination and Approval of Star Rated Hotels". 319 Supra, note 147. 320 Supra, note 38. 321 Ibid. 322 Liu Shijun and He Jing, "Inquiries and Review of the Development Trends of China's Hotel Sector" (in http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A2006622134134705325 Chinese), undated, (visited on 28 November 2007). 78 provinces, autonomous regions and municipalities directly under the central government may have inconsistent understandings with regard to the requirements of the "Star Rating Standard for Tourist Hotels".323 Consequently, there have been circumstances where local government officials were found to adopt laxer standards than the written requirements of the "Star Rating Standard for Tourist Hotels" in the actual implementation of the star-rating system, resulting in some hotels receiving more stars than it would originally have deserved under the law.324 This, amongst other things, demonstrates the strong human factor in the implementation of the star-rating system in China. However, without discounting the merits of the above arguments, it may also be argued that the uneven geographical distribution of star-rated hotels in China is not solely caused by the inconsistency in the implementation of the star-rating system, but is also influenced by market demand and economic forces. As tourism activities in China traditionally concentrated in the eastern coastal areas, particularly Guangdong, Zhejiang, and Jiangsu, it is not surprising that the development of high-end hotels in these areas is more aggressive. However, following the rise of western China as the new tourism hotspot and the opening of new facilities such as the Qingzang railway in July 2006, the demand for four- and five-star hotels in these areas has heightened as well.325 Hence, the first five-star hotel in Tibet, the St. Regis Resort Lhasa,326 is expected to open for business in December 2009.327 Additionally, the entrance of the Kempinski Hotels into Guizhou in May 2007 marked the impending construction of the most luxurious hotel in western China.328 323 Ibid. 324 Ibid. 325 China Tourism News, "Five Star Hotels Enter Tibet" (in Chinese), http://news.veryeast.cn/news/l/20073/29/0732911182065888.htm (visited on 28 November 2007). 326 Xaoyao, "The First Five Star Hotel in Tibet" (in Chinese), http://www.xaoyo.com/Article/jdxjpd/200779111119015038.htm (visited on 28 November 2007). 327 St Regis Hotels and http://www.starwoodhotels.com/stregis/property/overview/index.html?propertyID=3129 November 2007). 328 (visited Resorts, on 28 Lotour, "Kempinski to Enter Guizhou and Become the Most High End Hotel in Western China" (in Chinese), http://www.lotour.com/snapshot/2007-5-30/snapshot_65903.shtml (visited on 28 November 2007). 79 These recent trends, arguably, may potentially cause a remapping of the geographical distribution of star-rated hotels in China. Apart from the uneven distribution of star-rated hotels in China, another problem relates to the benchmarks that are used to rate hotels in China. In this connection, both the "Star Rating Standard for Tourist Hotels" and the "National Classification Standard for Hotels and Restaurants" adopted by the CNTA and the MOFCOM respectively contain detailed requirements relating to physical infrastructure, such as floor area, number of restaurants, number of rooms and the like, but lack particularization in terms of the requirement for service quality.329 For example, it is not a requirement under the "Star Rating Standard for Tourist Hotels" that hotel staff be rated based on their work efficiency or courtesy. These values are, however, equally, if not more important than physical amenities. Comparing the Chinese standards with the certification standards used by western countries, the former seem to lag behind in terms of the need for quality service. For instance, the UK "Common Standards for Hotels and Guest Accommodations"330 sets out detailed requirements for hospitality and services, such as language proficiency, work efficiency, social skills and the ability to anticipate the needs of guests, in addition to physical amenities. This may serve as a yardstick for China to raise the standard of its hotels to the international standard in all senses, and not merely from a physical infrastructure point of view. Incidentally, it has been said that the rapid development of international hotel brands in China has played a positive role in elevating management and service standards of Chinese hotels to international levels.331 The issues relating to the development of FDI in the tourism industry in China will, thus, be discussed in the following section. 329 Supra, note 322. 330 This is a set of common quality standards agreed by the AA and the UK tourist authorities (VisitBritain, VisitScotland and VisitWales). 331 Supra, note 16. 80 4.6 Inconsistency of FDI Regulations with the Development Trends in the Tourism Industry Tourism is one of the earliest industries in China that attracted FDI.332 In the initial years of Sino-foreign collaboration, however, legal governance in the tourism industry was scarce.333 As a consequence, the self-regulation and experimentation of the early joint venture hotels, which was one of the pioneer projects in the tourism industry that brought in foreign monies, contributed a lot towards laying the foundation for the subsequent promulgation334 of the "People's Republic of China Sino-Foreign Equity Joint Venture Law" 335 in 1979, the "People's Republic of China ForeignInvested Enterprise Law"336 in 1986 and the "People's Republic of China Sino-Foreign Cooperative Joint Venture Law"337 in 1988. Traditionally, the "construction and management of high standard hotels and resorts" is listed as a "restricted" sector under China's FDI laws. 338 This means that foreign investors are permitted to establish, refurbish and manage high standard hotels and resorts in the form of the EJV or CJV only.339 However, upon China's accession to the WTO, the climate in this area seems to 332 Supra, note 28 at page 59. 333 Zhang Zhijun, "Analysis of the Operation and Management of Sino-Foreign Joint Venture Hotels in China" (in Chinese), The Tourism Green Book 2002-2003, China Institute of Social Science. 334 Ibid. 335 Adopted by the 2 Session of the 5 NPC and came into force on 1 July 1979; amended by the 3 th Session of the 7 NPC on 4 April 1990. 336 Adopted by the 4 Session of the 6 NPC and came into force on 12 April 1986; amended by the 18 th Session of the 9 NPC on 31 October 2000. 337 Adopted by the 1 Session of the 7 NPC and came into force on 13 April 1988; amended by the 18 Session of the NPC Standing Committee on 31 October 2000. 338 Foreign-invested projects are classified by industry sector as encouraged, restricted or prohibited (see the "Catalogue for the Guidance of Foreign Investment Industries 2004" which is now replaced by the "Catalogue for the Guidance of Foreign Investment Industries 2007" issued by the State Development and Reform Commission and the MOFCOM on 7 November 2007). 339 In practice, most hotel projects take the form of CJVs, as joint venture parties would enjoy the benefit of determining the establishment, operations, profit sharing and their other rights and liabilities by contractual means. In the late 1980s to early 1990s, various notices and opinions had been issued by the CNTA, the State Planning Commission, the Ministry of Foreign Trade and Economic Cooperation ("MOFTEC") and other government authorities in order to restrict the entry of FDI in the hotel sector. For example, the "Notice Regarding the Use of International Commercial Loans in the Construction of Tourist Hotels in nd th rd th th th st th th 81 have changed. According to Section 9(A)(3) of the "Schedule of Specific Commitments on Services":"Foreign services suppliers may construct, renovate and operate hotel and restaurant establishments in China in the form of joint ventures with foreign majority ownership permitted… Within four years after accession, wholly foreign-owned subsidiaries will be permitted." (emphasis added) Pursuant to the above, China has allowed wholly foreign-owned hotel subsidiaries to be established in China with effect from 1 January 2004 in realization of the principles of nondiscrimination,340 national treatment and market access under the "General Agreement on Trade in Services" ("GATS").341 Thereafter, hotel services are no longer subject to any further market access or national treatment restrictions. Since then, many hotels have been established in the form of the WFOE in China, one of the earliest entrants into the new market being the wholly American-owned Green Tree Inn Hotels based in Shanghai.342 China" issued by the State Council on 17 November 1986, the "Request Regarding the Strict Implementation of Approval Procedures for the Construction of Tourist Hotels in the Form of Equity and Cooperative Joint Ventures" and the "Notice Regarding the Strict Implementation of Approval Procedures for the Construction of Tourist Hotels in the Form of Equity and Cooperative Joint Ventures" issued by the CNTA and the State Planning Commission on 28 July 1988 and 13 April 1990 respectively. Accordingly, the practice in this area was for hotel projects (including the feasibility studies of the joint ventures) to be approved by the local planning commission, the local foreign investment authorities and the local tourism bureaus, before submission to the State Planning Commission, the MOFTEC and the CNTA for approval. The term for such ventures generally would not exceed 30 years, as extensions would not be approved by the MOFTEC except in very special circumstances. (Yves Dolais, "Tourism Law in China", June 1998, http://www.hotel-online.com/Trends/AsiaPacificJournal/July98_ChinaLaw.html (visited on 10 October 2007)). 340 Article 3 of the "WTO Protocol on the Accession of The People's Republic of China" provides that: "Except as otherwise provided for in this Protocol, foreign individuals and enterprises and foreign-funded enterprises shall be accorded treatment no less favourable than that accorded to other individuals and enterprises in respect of: (a) the procurement of inputs and goods and services necessary for production and the conditions under which their goods are produced, marketed or sold, in the domestic market and for export; and (b) the prices and availability of goods and services supplied by national and sub-national authorities and public or state enterprises, in areas including transportation, energy, basic telecommunications, other utilities and factors of production." 341 Sinomania, "The USA-China WTO Agreement: How Will it Affect Your http://www.sinomania.com/CHINANEWS/china-wto.html#top (visited on 28 November 2007). 342 MainOne, "The Rapid Growth of Green Tree Inn Franchise", 18 September 2006, http://news.mainone.com/zhuanlan/xinhuameitong/2/2006-09/56250.htm (visited on 28 November 2007). Business" 82 Regrettably, however, the revision of the 2004 version of the "Catalogue Guiding Foreign Investment in Industry" ("2004 Catalogue"), which culminated in the recent release of the latest "Catalogue Guiding Foreign Investment in Industry 2007" ("2007 Catalogue")343 on 7 November 2007, failed to take into account these developments. Despite the progression of China's FDI position in the tourism industry, the provisions of the "2007 Catalogue" with regard to the "construction and management of high standard hotels" remain unchanged. This means that the construction and management of "high standard hotels" in China are still restricted in form to the EJV and the CJV only. In this regard, although Article 142 of the "GPCL" states that in the event of contradiction between the provisions of domestic law and international treaties or conventions, the latter automatically takes precedence, it would nevertheless be in the interest of standardization and China's WTO commitments on non-discrimination, national treatment and market access that these principles be reflected in domestic laws. The failure to update the "2004 Catalogue" may raise the suspicion that after all these years, China still harbors the impression and the fear that "the wolf is coming".344 Nevertheless, it is submitted that it may be possible to reconcile the position under the "2007 Catalogue" with China's GATS obligations. In the first place, Section 9(A)(3) of the "Schedule of Specific Commitments on Services", read literally, only requires the opening up of the hotel market to sino-foreign joint ventures (with foreign majority ownership) and wholly foreignowned hotel "subsidiaries", this means that the WFOE must be established by a foreign parent. Accordingly, it appears that the hotel sector is not yet a "free for all" market in the technical sense, thus, some form of restriction on the establishment of WFOE is conceptually justifiable. The counter-argument is that in practice, the restriction to hotel subsidiaries is easily circumvent, as one 343 Issued by the State Development and Reform Commission and the MOFCOM on 7 November 2007 and came into force on 1 December 2007. 344 The phrase "the wolf is coming" ("狼来了") has been widely used by the Chinese community to describe China's accession to the WTO, in the sense that foreign industry players are seen as the "wolf" which will compete with Chinese nationals for market share in the national economy. 83 could establish a foreign company as the "parent" before setting up the "subsidiary" in China, although such practice may subject the applicant to scrutiny by the relevant authorities. Secondly, Section 9(A)(3) of the "Schedule of Specific Commitments on Services" should be read in conjunction with Section II(D)(a) of the same, which provides that "wholly foreign-owned enterprises are not permitted for high standard real estate projects, such as apartments and office buildings, but excluding luxury hotels." (emphasis added) It follows that China has committed in its accession agreement to allow WFOEs to develop "luxury hotels" but maintains restrictions on "high standard" hotels. Accordingly, it may be argued that although the "2007 Catalogue" continues to restrict FDI in relation to "high standard hotels", it does not mention "luxury hotels", meaning that WFOE may be permitted for the latter.345 In this regard, "high standard real estate projects" which includes "luxury hotels" is defined as "real estate projects with construction costs per unit two times more than the average construction costs per unit in the same city" under the "Schedule of Specific Commitments on Services". The definition and scope of "high standard hotels" under the "2007 Catalogue" – whether they co-relate to the definition of "luxury hotels" under the "Schedule of Specific Commitments on Services" – however, remain unclear. Hence, there is room to argue that "luxury hotels" and "high standard hotels" refer to different things, the former may be set up as WFOE in China but not the latter. Read in this light, the "2007 Catalogue" does not seem to contradict with China's GATS commitments. There is, however, a need to clarify the meaning of "high standard hotels" in China, if this view is adopted. Finally, another possible way to reconcile the provisions involves drawing a line between the real estate industry and the tourism industry, although such distinction may seem tenuous in practice. It is observed that under the "Schedule of Specific Commitments on Services", the development of "luxury hotels" falls under the heading "Real Estate Services" (where WFOE is 345 "China's 2007 Foreign Investment Guide", Jan/Feb 2008, The China Business Review, Volume 35, Issue 1 at page 16. 84 allowed),346 but there is a separate entry relating to the development of hotels and restaurants in general by foreign service suppliers under the heading "Tourism and Travel Related Services" (where wholly foreign-owned "subsidiaries" are allowed).347 On the other hand, the "construction and management of high standard hotels" under the "2007 Catalogue" falls within the heading "Real Estate Industry" (which is a restricted activity), but there is no mention of any hotel project development or provision of hotel services under any tourism-related heading in the "2007 Catalogue". Hence, a possible way to reconcile all these provisions is to argue that insofar as wholly foreign-owned real estate enterprises are concerned, they are allowed to construct and manage "luxury hotels" but not "high standard hotels" (assuming they refer to different things) as WFOE. However, foreign service suppliers (excluding those in the real estate industry) may be allowed to set up both "luxury" and "high standard hotels" as WFOE, as there is no restriction in the "Schedule of Specific Commitments on Services" as well as the "2007 Catalogue" on tourism service providers in this respect based on a literal reading of the documents. If this approach is adopted, it would be necessary to identify the principal businesses of foreign enterprises through their charters or memoranda of association, in order to ascertain their permitted scope of investment activities in China. A summary of the above arguments is produced in the table below. "Schedule of Specific Commitments on Services" "2007 Catalogue" Remarks Real Estate Industry "Luxury hotels" may be set up as WFOE. "High standard hotels" may be set up as EJV or CJV only. Foreign real estate enterprises may set up "luxury hotels" as WFOE and "high standard hotels" as EJV or CJV. Tourism Industry Hotel subsidiaries may be set up as WFOE. - Tourism service providers may set up "luxury" or "high standard hotels" as WFOE. 346 Section II(D)(a) of the "Schedule of Specific Commitments on Services". 347 Section 9(A) of the "Schedule of Specific Commitments on Services". 85 On the other hand, the "2007 Catalogue" makes no provision with regard to foreigninvested travel agencies. In fact, the development of FDI laws in the travel agency sector has been driven and influenced to a large extent by China's WTO membership. 348 However, despite the gradual opening up of the travel agency sector to FDI, the scope of activities of foreign-invested travel agencies has always been the subject of some form of restriction. For example, according to Article 32 of the "Regulations on the Administration of Travel Agencies", Article 11 of the "Interim Measures on the Establishment of Sino-Foreign Joint Venture Travel Agencies" and Article 10 of the "Interim Regulations on the Establishment of Foreign-funded or Wholly Foreign-owned Travel Agencies",349 foreign-invested travel agencies in China are only permitted to provide travel services in relation to inbound tourism and domestic tourism. Outbound tourisms (including those to Hong Kong, Macau and Taiwan), therefore, remain the monopoly of Chinese travel agencies. The law, apparently, has not stopped foreign-invested travel agencies from indirectly providing outbound tourism services to local tourists. A recent report has alleged that a wholly foreign-owned travel agency in China has been collaborating with its regional headquarters in Hong Kong to indirectly "transport" local tourists out of China, using Hong Kong as a base. 350 Although the accuracy of the 348 Before the late 1990s, the limited FDI in travel agencies, if at all, were restricted to holiday resorts designated by the Chinese government. On 2 December 1998, the CNTA and the MOFTEC adopted the "Interim Measures on the Establishment of Sino-Foreign Joint Venture Travel Agencies", which opened up the possibility of FDI in travel agencies other than those set up at stipulated holiday resorts. These measures, however, were fairly restrictive in many aspects. According to Annex 9 of the WTO "Protocol on the Accession of the People's Republic of China", upon accession to the WTO, foreign service providers who meet certain conditions would be permitted to provide services in the form of joint venture travel agencies in the holiday resorts designated by the Chinese government and in the cities of Beijing, Shanghai, Guangzhou and Xi'an. Accordingly, the State Council amended the "Regulations on the Administration of Travel Agencies" in January 2002 to comply with this requirement and other stipulations with regard to registered capital. On 12 June 2003, the CNTA and the MOFCOM jointly issued the "Interim Regulations on the Establishment of Foreign-funded or Wholly Foreign-owned Travel Agencies", under which wholly foreign-owned travel agencies would be permitted to operate in China, almost three years ahead of the stipulated WTO timeline. In early 2005, the CNTA further amended the "Interim Regulations on the Establishment of Foreign-funded or Wholly Foreign-owned Travel Agencies" to bring down the minimum registered capital requirement to RMB 2.5 million, and relaxed the restriction on geographic location, in an effort to comply with its WTO requirements. More recently, in January 2007, the CNTA announced that the removal of branch restriction and implementation of national treatment would begin with effect from 1 July 2007 ahead of time. 349 Issued by the CNTA and the MOFCOM on 12 June 2003 and came into force on 12 July 2003. 350 New Dimension, "Foreign-Invested Travel Agencies Gearing Up for Outbound Tourism Market", http://www.lwcj.com/expert/user1/39988/archives/2005/1623.htm (visited on 13 September 2007). 86 report remains to be examined, it has more or less been established that foreign-invested travel agencies have been preparing themselves for the relaxation of the law in order to get a share of the more profitable outbound tourism market.351 In one way or another, the limited scope of activities permitted for foreign-invested travel agencies in China has imposed undue restrictions on the operations of FDI in the travel agency sector. These limitations, no doubt, would also constitute a major investment consideration for potential foreign investors, as they directly affect the profitability of their business ventures. In some extreme cases, these limitations have even motivated these foreign-invested travel agencies to operate out of their permitted boundaries. Considering the chaotic situation China's travel agency sector finds itself in, it is not difficult to see the wisdom of some academics' comment that: "[T]he primary reason why improper competition exists in the travel agency trade lies in improper government regulations resulting in market failure. Add to this are the inherent special features of the travel agency trade, and you are face to face with an unwholesome situation where repeated prohibitions from the government fail to work. To remedy this situation, it is paramount for the government to relax its regulations." 352 However, given that China's travel agency sector has traditionally been considered a "governmentled" industry, 353 and China's WTO commitments on national treatment do not extend to the businesses and scope of activities of foreign-invested travel agencies, the possibility of any substantial relaxation of the current FDI model in the near future is rather bleak. That said, the decision on whether to further liberalize the travel agency market should not depend solely on the rigid stipulations of China's WTO commitments, in the sense that changes would only occur if they are required by international obligations, but rather, on the interplay of 351 Ibid. 352 Supra, note 4 at page 159. 353 Ibid. 87 domestic State policies, economic forces and market demand in the form of balancing of interests. The more pressing question, therefore, is whether the relaxation of the limitations on outbound tourism will effectively eradicate the illegal activities of foreign-invested travel agencies. In other words, if foreign-invested travel agencies are elevated to the same level playing field with Chinese travel agencies, would it make overall supervision more efficient and competition fairer, as the former would be allowed to operate outbound tourism "in the open" rather than "in the dark" or illegally? In this regard, any proposal to liberalize outbound tourism activities will no doubt be opposed vehemently by Chinese industry players, as they would much prefer to keep the monopoly of this lucrative market to them. Further, liberalization of outbound tourism may give rise to foreign exchange control issues, as there may potentially be no grip on the amount of Chinese Yuan that could flow out of China via tourism activities. Nonetheless, looking at the development trend in this area, the balancing exercise may eventually need to be performed, and local industry players may be compelled to rethink this issue, sooner rather than later. 4.7 Concluding Remarks The real life examples given above further reinforce the problems outlined at the beginning of this chapter, namely, the lack of a basic "Tourism Law", which in turn gave rise to other problems like the insufficiency of the contents of existing tourism rules and regulations, incoherence and inconsistency within the current tourism legal framework and poor law enforcement and implementation mechanisms. However, these examples are only tip of the iceberg. In fact, there are many other issues relating to, for instance, "time-sharing", complaint mechanisms and dispute resolution in the tourism industry which have not yet been touched due to space constraint. All these problems, taken together, result in a tourism market order that is in need of urgent remedy. Thus, legal reform in the tourism industry is imperative, not only to reconstruct the current market order and cure the existing problems, but also to lay a stable foundation for the sustainable 88 development of the tourism industry, as China strives to become the world's top tourism destination by 2020. Accordingly, chapter 5 will deal with some of the suggestions towards legal reform in the tourism industry today. 89 CHAPTER 5: 5.1 LEGAL REFORM IN THE TOURISM INDUSTRY Introduction According to a research report released by the UNWTO, in the course of developing tourism in a country, the State has at least four basic functions, namely, regulatory, legislative, planning and investment functions; and five fundamental objectives: first of all, the implementation of the right to rest and right to take vacation; secondly, the provision of tourism facilities; thirdly, the development of tourism sectors; fourthly, the promotion of humanities and culture; and lastly, the protection and preservation of the environment.354 All these, taken together, constitute the main pillars of tourism development by the State. Given the current state of the tourism industry in China, which is often associated with a chaotic market order and an imperfect legal system, the most imperative step at the moment to fulfill the above functions and objectives is to effect an all-round legal reform towards reinstating legal governance in the tourism industry.355 This means that the improvement of the legal system should be given priority over other strategies, such as the diversification of market segments and management methodologies, increased productivity or promotion of new technologies, 356 as the primary means to rectify the current market order and to bring on other socio-economic changes in the tourism industry. In this regard, it has been recognized by Chinese and foreign academics that legal culture is the dominant and leading culture which will eventually determine the form, direction and development of other cultures in a country.357 This may to a large extent be attributed to the supremacy of law conferred by Article 5 of the "Constitution", as well as the authoritative nature of 354 Supra, note 61 at page 30. 355 Ibid. 356 Supra, note 4 at pages 304 to 306. 357 Jiang Dehai, "Analysis of the Leading Functions Played by the Legal Culture On Other Cultures" (in th Chinese), 2006, Political Science and Law, 5 Edition, 142 at page 144. 90 the law.358 In other words, the formation of a concrete legal regime is the foundation upon which all other socio-economic reform could be effectively implemented. In light of the above, some suggestions for legal reform in the tourism industry are discussed in this chapter: first, the proposal to enact a "Tourism Law"; secondly, the proposal to enact a specific legislation for the hotel sector; thirdly, the proposal to implement standard form contracts in the tourism industry; fourthly, the proposal to strengthen overall law enforcement and implementation mechanisms; and last but not least, the proposal to enhance the roles of tourism associations in order to aid legal reform in the tourism industry. Thus, it can be seen that legal reform in the tourism industry is not a task which could be accomplished single-handedly by the State. Indeed, all concerned parties, including industry players, consumers and even non- governmental organizations, have a part to play in the overall reform process. The roles of each of these parties will become clearer in the course of the following discussions. Furthermore, comparative studies on the legal models of five foreign jurisdictions, namely, Mexico, Maldives, Russia, Singapore and Japan, in the tourism industry will be conducted in the course of the following discussions, with a view to identifying the deficiencies in the Chinese legal model and drawing lessons from foreign experience. This will hopefully provide some practical guidelines for future reform of the Chinese tourism legal framework which is necessitated, amongst other things, by the rapid developments and internationalization of the tourism industry in China. 358 Article 5 of the "Constitution" states that: "[T]he State upholds the uniformity and dignity of the socialist legal system. No law or administrative or local rules and regulations shall contravene the Constitution. All state organs, the armed forces, all political parties and public organizations and all enterprises and undertakings must abide by the Constitution and the law. All acts in violation of the Constitution and the law must be investigated. No organization or individual may enjoy the privilege of being above the Constitution and the law." 91 5.2 Proposal for a Basic "Tourism Law" To many academics and industry players, the promulgation of the "Tourism Law" is to be accorded top-notch priority in the legal reform of the tourism industry. During the 15th NPC conference which took place in March 2007, delegates of the NPC once again stressed the importance and urgency for the enactment of the "Tourism Law" which had been shelved for more than two decades.359 Over the years, too, academics and legal experts have contributed many views in relation to the structure, form and contents of the "Tourism Law", with the hope that a basic law would one day be put in place to rectify the current market order and bind the different segments of the tourism industry together.360 Indeed, it has been said that the promulgation of the "Tourism Law" is required as a matter of "necessity" and "viability":361 "[I]n the first place, the rapid development of the tourism industry over the past 20 years requires that the legality of tourism activities be reinforced; secondly, the integrated nature of the tourism industry calls for a unified legislation to monitor the interaction of tourism sectors and tourism regulations; thirdly, past experience showed that existing laws and regulations, such as the "Consumer Protection Law", are insufficient to deal with the many legal relationships and expediencies arising out of the tourism industry; fourthly, most provinces, autonomous regions and municipalities directly under the central government already have in place local tourism rules, which serve as first-hand materials for the enactment of the "Tourism Law"; fifthly, there are currently 330 existing rules and regulations in the tourism industry, which effectively laid the foundation for the drafting of 359 Supra, note 1. 360 Supra, note 61 at pages 33 to 36. 361 Supra, note 61 at page 32. 92 the "Tourism Law"; and lastly, the "Tourism Law" is required for the determination and standardization of national tourism policies."362 In other parts of the world, too, it is not uncommon that tourism laws were separately enacted as the basic legislation governing the tourism industry. This is especially apparent in countries that draw a large part of their national income from tourism activities, such as Mexico, Russia and Maldives. In the course of preparing for the "Tourism Law", one important element is to study the experience of other foreign legal models and adopt an open mind towards any change or reform. Although there is danger in adopting the law of another legal system entirely in the Chinese context, as each law carries with it a unique historical and socio-economic background, it nevertheless provides some practical examples of how tourism legislations have been implemented, successfully or otherwise, in other parts of the world. Thus, the tourism laws of Mexico, Russia and Maldives will be examined in this paper as a matter of comparative legal studies. First of all, the "Tourism Law of Mexico" can be said to be a legislation that is highly driven by economic needs. Back in the 1920s, the post-revolution Mexico had chosen tourism as a primary strategy for achieving modernization and economic development.363 The tourism industry has, since then, assumed great importance in the economy of the country. 364 In December 1979, Mexico enacted its first "Tourism Law", the result of which was the rapid growth of its tourism industry at a rate of 7% per year since 1994. 365 It is therefore not surprising that for nearly three decades thereafter, the Mexican government has viewed tourism as "one of the ways of taking the country out of poverty".366 Drafted at a time when the economy of the country depended highly on tourism, 362 Yang Zhigang and Gao Lijuan, "Preliminary Analysis of the 'Tourism Law'" (in Chinese), 2004, Journal of th Harbin University, 11 edition. 363 Tim Weiner, "On Tourism, Mexico Now Thinks Green", 31 August 2001, The New York Times, http://query.nytimes.com/gst/fullpage.html?res=9E02E6DC1330F932A0575BC0A9679C8B63&sec=&spon =&pagewanted=1 (visited on 19 November 2007). 364 Ibid. 365 Ibid. 366 Ibid. 93 the main themes of the "Tourism Law of Mexico" center around the promotion and development of the tourism industry.367 This can be seen from the legislative objectives of the statute, which place great emphasis on: (1) the planning and management of tourism activities; (2) the promotion of domestic and inbound tourism; and (3) the utilization of tourism resources.368 Accordingly, five out of eight chapters of the "Tourism Law of Mexico" are devoted to the above objectives. 369 The "National Tourism Development Fund", "Tourism Management Committee" and "Tourism Development Committee" were also set up under the law to achieve these purposes.370 Further, the statute introduces the concept of "society tourism", which basically translates to measures to involve the entire nation in the tourism industry, either as tourists or tourism service providers.371 Some of these measures include setting up special savings account for tourism372 and organizing tourism packages for different levels of the society, such as laborers, farmers, students, youths, teachers and government officials. 373 All in all, the "Tourism Law of Mexico" represents a policy-oriented document which is heavily geared towards the promotion of the tourism industry to realize economic benefits. As a result, there is not much emphasis on the regulation of horizontal legal relationships between tourism service providers and consumers.374 367 Supra, note 185 at pages 316 to 336. 368 Article 2 of the "Tourism Law of Mexico". 369 Chapter 2 (Strategy and Management of Tourism), Chapter 3 (Promotion of Tourists' Flow), Chapter 4 (Promotion and Development of Tourism Sales), Chapter 5 (Professional Organizations) and Chapter 7 (Society Tourism) of the "Tourism Law of Mexico", supra, note 185. 370 Articles 47 to 53, 54 to 61 and 62 to 68 of the "Tourism Law of Mexico". 371 Chapter 7 of the "Tourism Law of Mexico". 372 Article 90 of the "Tourism Law of Mexico". 373 Ibid. 374 The rights and obligations of tourism service providers vis-à-vis the government and the consumers are stipulated in Articles 74 and 75 of the "Tourism Law of Mexico". For example, it is stated in Article 75(11) that hotel operators shall display the internal regulations of the hotels which have been approved by the Ministry of Tourism at a noticeable position. This has dual effects, first, monitoring the internal regulations of hotels by the government; and secondly, raising the customers' awareness as to the terms that they are entering into prior to signing the contracts. 94 Incidentally, the tourism law of Maldives, like that of Mexico, is also an economic-driven legislation. Tourism is the most important economic sector in Maldives, contributing to approximately USD 400 million of national income per year.375 In 2006, tourism and other related services in the tertiary industry contributed to 28% of Maldives' GDP, showing a successful rebound from the damage caused by the tsunami attack in 2004. 376 Accordingly, the "Tourism Law of Maldives", which came into force in 1999, is essentially a sector-specific legislation.377 The statute lays down regulations relating to the registration and administration of the various tourism sectors, namely, scenic spots, 378 hotels and accommodations, 379 rental of pleasure-boats, 380 dock operation, 381 diving centers 382 and travel agencies. 383 Most importantly, the "Tourism Law of Maldives" replaced the former scattered rules and regulations on tourism by consolidating the laws relating to important tourism sectors in a single document. This effectively reduces confusion and makes law implementation easier. Furthermore, it can be seen that the nature of the statute is administrative, with much emphasis on the procedures to be followed by the tourism service providers, and is concerned primarily with the regulation of vertical legal relationships between the tourism service providers and the government, rather than horizontal legal relationships. On the contrary, the "Principles of Tourism Law of Russia" (the "Tourism Law of Russia") places a lot of emphasis on the wellbeing of tourists. Since the collapse of the former Soviet Union 375 US Department of States, "Background Note: Maldives", http://www.state.gov/r/pa/ei/bgn/5476.htm (visited on 19 November 2007). 376 Ibid. 377 Supra, note 185 at pages 295 to 306. 378 Articles 5 to 16 of the "Tourism Law of Maldives". 379 Articles 17 to 21 of the "Tourism Law of Maldives". 380 Articles 22 to 24 of the "Tourism Law of Maldives". 381 Articles 25 to 28 of the "Tourism Law of Maldives". 382 Articles 29 to 31 of the "Tourism Law of Maldives". 383 Articles 32 to 34 of the "Tourism Law of Maldives". July 2007, 95 in 1991, tourism in Russia has seen rapid growth in the years that followed.384 The UNWTO has even predicted that Russia will become one of the world's top ten tourism destinations in the year 2020. 385 However, according to a recent market report, the tourists' image of Russia has traditionally been unsatisfactory, as Russia is still considered by many as a dangerous destination to travel to.386 Hence, it came as no surprise that the "Tourism Law of Russia", which was enacted in 1996, places utmost importance on the protection of tourism safety and tourists' rights.387 According to Article 4 of the "Tourism Law of Russia", one of the main objectives in regulating the tourism industry is to ensure that the personal and property safety, right to rest, right to freedom of movement and other tourism related rights of the tourists are protected. These rights, which also extend to persons who are making preparations for the tour and persons who are transiting in Russia, are further elaborated in Article 6, namely, the right to necessary and reliable information, the right to freedom of movement, the right to tourism resources, the right to personal safety, consumer rights and property safety, the right to emergency medical assistance, the right to compensation for physical and mental damage, the right to legal and other emergency assistance and the right to communication. Correspondingly, tourists must also fulfill the obligations stated in Article 7 of the statute, that is, the obligation to respect the law, social system, traditions and religions of Russia, the obligation to protect the environment, historical and cultural relics of Russia, the obligation to respect immigration and transit rules and the obligation to protect the personal safety of other tourists. Furthermore, under the "Tourism Law of Russia", tourists are allowed to set up tourists' organizations in order to protect their rights and benefits. 388 The law also requires a special government department to be set up to assist tourists who have met with accidents or other 384 385 Travel and Tourism in Russia, October 2007, Euromonitor International at Executive Summary. Sergei Blagov, "Moscow Move Could Freeze Holiday Hopes", 11 December 2001, Asia Times, http://www.cdi.org/russia/johnson/5595-12.cfm (visited on 5 December 2007). 386 Supra, note 384. 387 Supra, note 185 at pages 236 to 247. 388 Article 12 of the "Tourism Law of Russia". 96 misfortunes during their stay in Russia.389 Hence, it can be seen that these provisions of the law are drafted principally to create a safe, secure and convenient environment for the tourists. Compared with Mexico and Maldives, where the main driving force of the "Tourism Law" is the realization of economic benefits, the "Tourism Law of Russia" is tilted more towards shedding the negative image of Russia as a dangerous tourism destination. This reflects the unique socioeconomic context of each country, with the resultant shift of focus of its tourism laws and policies. In view of the above, it can be concluded that the distinguishing features of the tourism law of each country studied – in the case of Mexico, it is the promotion of tourism; in Maldives, the regulation of tourism sectors; and in Russia, the protection of tourism safety and tourist's rights – are closely linked to the historical, political and economic contexts of each country. This shows that there is no one universal formula which may be applied across the board, as each statute was tailored specifically to serve certain legal and economic functions within a set societal context. Hence, taking into account China's market economy structure, the state of China's tourism industry today and the problems that the "Tourism Law" is expected to remedy, academics have concluded five basic features which may be incorporated into the Chinese "Tourism Law". Notably, the determination of what goes into the "Tourism Law" is a complicated issue which involves the interplay of many different considerations and balancing of interests at the legislative level, which may extend beyond discussions in legal journals. Nevertheless, the following suggestions represent some of the most important elements which are central to the legal reform in the tourism industry. First and foremost on the list are the basic objectives, principles and direction of China's tourism policies.390 These serve as the overarching themes that determine not only the contents of the "Tourism Law", but also of other tourism rules and regulations. They represent the ultimate aims of legal reform in the tourism industry and each tourism sector, in other words, the end results 389 Article 15 of the "Tourism Law Russia". 390 Fan Nengchuan, "New Developments of World Tourism and Basic Tourism Development" (in Chinese), st 2004, Tourism Science, 1 Edition. 97 expected from the legal reform. In the course of determining the above, the characteristics of the Chinese tourism industry and the current problems faced by the same constitute an important consideration. For instance, one of the most problematic aspects of the tourism industry today is the issue of honesty and credibility. Hence, it may be stipulated that the objective of the "Tourism Law" is to create a fair, just and honest market environment for the tourism industry. Secondly, the "Tourism Law" should designate the nature, functions and jurisdiction of the relevant governing authority,391 that is, the CNTA. In this connection, the administrative powers of other government bodies, such as the MOFCOM, should be narrowed to the minimal extent possible, in order to rectify the current problem of overlapping and unclear jurisdictions in the tourism industry. Thirdly, the legal boundaries of permissible tourism activities in each tourism sector need to be clearly defined. 392 This lays the legal basis for the promulgation of other specific regulations in each tourism sector, such as the "Regulations for the Administration of Travel Agencies". Fourthly, there should be stipulations regarding the rights and obligations of service providers and consumers in the tourism industry.393 In fact, this may be a good opportunity for the legislature to reinforce legal governance in relation to horizontal legal relationships in the tourism industry. Fifthly, pursuant to China's accession to the WTO, FDI has become an important component in the Chinese tourism framework.394 It is thus said that China's WTO commitments, such as the implementation of the principles of non-discrimination, national treatment and standardization in the hotel and travel agency sectors, need to be included as part of the "Tourism Law". 395 Last but not least, it is suggested that provisions regarding the protection and preservation of the environment be given 391 Supra, note 61 at page 34. 392 Ibid. 393 Ibid. 394 Ibid. 395 Supra, note 188. 98 emphasis in the "Tourism Law", 396 so that a beautiful environment may co-exist with the development of the tourism industry. Compared to the initial years of tourism development, the current state of China's tourism may be said to be rather advanced. Hence, the focus of China's "Tourism Law" should move away from one of tourism promotion like the "Tourism Law of Mexico", to one which serves to maintain the equilibrium between the economy, humanities and the environment. In addition to the above, given that China already has a body of interrelated rules and regulations governing different aspects of the tourism industry, bringing all these together is an equally important and demanding task, which involves, inter alia, revisiting all these rules and regulations to ensure that they are not inconsistent with the provisions of the "Tourism Law". This may also be a good time to update or replace those which have been rendered obsolete by the passage of time, or to reconsider the interaction of the same with other areas of law. For example, it has been said that the formation of travel agencies in China is mainly regulated by the "Regulations on the Administration of Travel Agencies" and its implementation rules, which shall not contradict with the provisions of the "People's Republic of China Company Law" ("Company Law")397 and the "Regulations for the Registration and Administration of Companies".398 However, in reality, it is observed that there exist certain inconsistencies between the travel agency regime and the general company law regime in terms of market entry requirements and approval procedures. 399 For example, it is stated under Article 26 of the "Company Law" that the minimum registered capital for a limited liability company is RMB 30,000. However, under Article 7 of the "Regulations on the Administration of Travel Agencies", an international travel agency needs to have minimum 396 Supra, note 61 at page 20. 397 Adopted by the 5 Session of the 8 NPC Standing Committee Meeting on 29 December 1993 and th th amended by the 18 Session of the 10 NPC Standing Committee Meeting on 27 October 2005. The amended version came into force on 1 January 2006. 398 Issued by the State Council on 24 June 1994 and amended by the State Council on 18 December 2005. The amended version came into force on 1 January 2006. 399 Supra, note 61 at page 35. th th 99 registered capital of at least RMB 150,000. Hence, the interrelation between these two regimes, amongst other things, needs to be reconsidered at this juncture in the interest of standardization. In other words, the promulgation of the "Tourism Law" is not a one-off effort. Viewed in this light, the "Tourism Law" is not the sole and universal remedy for all the legal problems faced by the tourism industry today, but rather the first step to kick-start a series of other legislative overhaul, as discussed in the following, which together may take years, if not decades, to complete. 5.3 Proposal for a Specific Legislation in the Hotel Sector Having established that the promulgation of the "Tourism Law" is the foundation of legal reform in the tourism industry, another important step in the reform process is to plug the gaps in the existing tourism legal framework. An area which stands out as being in need of perfection is the legal framework of the hotel sector. Despite encouraging growth seen in the hotel sector in the past two decades, the legal framework governing the same has been criticized as being regrettably "inadequate, low-level and outdated".400 This comment is not at all overstated, as it has been shown that the rules and regulations relating to the hotel sector cover only a very limited scope,401 with local rules outnumbering national regulations.402 Moreover, the "Industry Guidelines for Tourist Hotels in China" has not been conferred any legal effect; consequently, there remains a lacuna in the determination of rights and obligations arising out of tourism activities in the hotel sector. On the contrary, many other countries in the world have already established concrete legal regimes for the hotel sector. For example, although there is no specific hotel legislation in Germany, the "Civil Code of Germany" contains specific provisions which deal with the contractual relationships between consumers and hotels, and their respective rights and obligations.403 In the US, 400 Supra, note 149. 401 Supra, notes 147 and 61 at page 125. 402 Supra, note 147. 403 Chapter 4, Part 5 of the "Civil Code of Germany". 100 there is a series of case laws and statutes governing various aspects of the hotel sector, specifically the legal relationships between hotels and consumers, hotels and employees, their respective rights and obligations, taxation, anti-competition, licensing and others matters.404 In the Asian region, too, Singapore has also enacted specific statutes, namely the Hotels Act405 and the Innkeepers Act,406 for the hotel sector. In view of the above, many academics have called for legal reform in the hotel sector in China through the enactment of a sector-specific legislation, 407 in the form of the proposed "Regulations for the Administration of Hotels" or otherwise. Some academics even take the view that such hotel legislation is required in order to maintain sustainable growth of the hotel sector.408 Industry players, too, have expressed the hope that the legal boundaries of tourism activities in the hotel sector be more clearly defined, specifically, through giving legal effect to the provisions of the "Industry Guidelines for Tourist Hotels in China".409 In short, there are still many grey areas in the hotel sector which are under-regulated, and it is hoped that the promulgation of a specific hotel legislation may allay some of these concerns which have long been the subjects of legal debates. In this regard, the Singapore legal model serves as a good example of how legal relationships in the hotel sector may be effectively managed. Singapore adopts a two-pronged approach in the regulation of the hotel sector – on the one hand, the Hotels Act governs vertical legal relationships, that is, the legal relationship between hotels and the relevant government 404 Supra, note 147. 405 Chapter 127, 10 August 1956. 406 Chapter 139, 6 January 1922. 407 Supra, notes 61 at pages 129 to 130, 147 and 149. 408 Yuan Guohong, "Policies, Law and Legal Construction to Maintain Sustainable Growth of the Hotel Sector" th (in Chinese), 2000, Commercial Research, 11 edition. 409 Supra, note 221. 101 authorities; and on the other hand, the Innkeepers Act governs horizontal legal relationships, specifically, the rights and liabilities of hotels vis-à-vis the consumers. In the first place, the Hotels Act confers executive powers on the Hotels Licensing Board under the purview of the Singapore Ministry of Trade and Industry, which is responsible for matters relating to the licensing and control of hotels and lodging-houses.410 This means that unlike China, where the licensing of hotels is regulated as part of the general company law framework and the regulatory powers of the hotel sector are distributed amongst many different government bodies according to classification (for example, the CNTA for star-rated hotels and the MOFCOM for nonstar rated hotels) and at various levels (for example, local tourism administrations for star-rated hotels below four star), almost all forms of commercial accommodations in Singapore, with the exception of student hostels, residential clubs and other approved institutions,411 come under the jurisdiction of the Hotels Licensing Board only.412 On the one hand, the centralization of powers seen in the hotel sector in Singapore is made easy given the relatively small size and population of Singapore which facilitates central control. On the other hand, however, this showcases the clear division of jurisdiction and distribution of statutory job scopes amongst different government departments, which laid the foundation for effective and efficient government administration for which Singapore is famous. In this regard, given the vast landscape and huge population of China, the Singapore model may be modified in the Chinese context by allowing the CNTA to assign certain powers to the local tourism administrations for administrative convenience. However, the 410 The statutory functions of the Hotels Licensing Board include the registration of hotels, licensing of hotel managers, suspension and cancellation of license and certificate of registration, appeal procedures, classification and re-classification of hotels and supervision and inspection of hotels (Sections 5 to 10 of the Hotels Act). 411 Under Section 2 of the Hotels Act, a "hotel" is defined as including boarding-house, lodging-house, guesthouse and any building or premises which is not a public institution and which contains four or more rooms or cubicles, in which persons are harbored or lodged for hire or reward, and where domestic services are provided. 412 Section 41 of the Hotels Licensing Regulations (Chapter 127). 102 functions of the MOFCOM and other government departments should be reduced to the extent possible in order to minimize the negative effects of bureaucracy. In the second place, the Innkeepers Act imposes statutory limitation on the liability of hotels with regard to goods and property of the consumers. For example, under Section 3 of the Innkeepers Act, a hotel operator will only be liable up to SGD 500 for any loss of or injury to goods or property brought by a hotel guest into the hotel premises, save in the event of willful default or negligence of the hotel operator or its employees, or where the goods or property have been deposited expressly for safe custody with the hotel operator. In the latter case, the hotel operator may request that the value of the goods or property be declared prior to receiving the same for safe custody, and may refuse to receive any goods or property that exceed the value of SGD 5,000.413 Furthermore, subject to certain conditions being fulfilled, the hotel, in addition to an ordinary lien, has the right under the Innkeepers Act to sell by public auction any goods which may have been deposited with it or left in the hotel premises by the hotel guest, in the event that the latter is indebted to the hotel operator.414 In this regard, although the Innkeepers Act is rather limited in scope and does not address all kinds of horizontal legal relationships arising out of the hotel sector, this may be explained by Singapore's common law tradition, where the bulk of the rights and liabilities between hotels and consumers are rooted in common law principles and precedents, particularly in the areas of contract law and tort law. For example, in the case of Fleming John C and Another v Sealion Hotels Ltd [1987] SLR 328, the plaintiffs and their six-year old son took three rooms at the Hyatt Regency Hotel which was owned and operated by the defendant. During their one-and-a-half-month stay at the hotel their jewellery box went missing. Subsequently, the box was found, broken into and its contents stolen. The Singapore High Court, upon hearing the case, held that under common law, the hotel was an insurer of the property of its guests which was lost or 413 Section 4 of the Innkeepers Act. 414 Section 7 of the Innkeepers Act. 103 stolen within the hospitum of the hotel and was under strict liability to make good to its guests any damage to its guests’ property brought to the hotel as it would if the goods were lost. This means that such liability would arise without proof of negligence on the part of the hotel. Nonetheless, the High Court also recognized the limitation of liability imposed by Section 3 of the Innkeepers Act, albeit in that case the provision was not available to the defendant, as it had failed to exhibit a copy of the provision in a conspicuous part of the hall or entrance of the hotel, as a precondition under Section 5 of the Innkeepers Act. Notwithstanding the application of common law principles, the Innkeepers Act may serve as a good illustration of how rights and obligations in the hotel sector may be codified (especially with regard to limitation of liability), with an expanded scope, in the context of China. Having seen how vertical and horizontal legal relationships are regulated in Singapore through statutes in the hotel sector, in China, academics have generally suggested that the proposed hotel legislation encompass five basic themes, namely: (1) the legislative objectives; (2) the definition, classification and rating of hotels; (3) market entry requirements; (4) legal boundaries of permitted tourism activities in the hotel sector; and (5) the determination of vertical and horizontal legal relationships arising out of such tourism activities,415 especially the latter. More specifically, issues relating to, inter alia, check-in and check-out times, prohibition on the consumption of outside food and drinks and the extent of the hotel's liabilities need to be clarified as soon as possible in order to avoid any further dispute in these areas. Further, a fair amount of effort may need to be expended to marry the contents of the proposed hotel legislation with the "Industry Guidelines for Tourist Hotels in China". This is because many industry players are already familiar with the provisions of the latter, which were drafted based on Chinese laws and international 415 Supra, note 61 at page 129. 104 practice. 416 Ultimately, the objective of legal reform in this regard is to formulate a hotel legislation which manages to strike a balance between local customs and international practice. At the same time, in order to complete the reform process, it is said that additions may be made to existing laws in order to supplement any insufficiency in the current legal framework relating to the hotel sector.417 Currently, the consultation and drafting of the proposed "People's Republic of China Draft Civil Law" ("Draft Civil Law") is underway.418 This, it is said, may be a good opportunity to include a chapter or section in the "Draft Civil Law" that is devoted to the hotel sector, in much the same way as the "Civil Code in Germany" has, stipulating the treatment of horizontal legal relationships in the hotel sector.419 Further and in the alternative, the "Contract Law" may be amended to include some provisions relating to the hotel sector in the "Special Provisions" section of the "Contract Law". This will clarify the contractual relationships arising out of activities in the hotel sector, including those between hotels and consumers, hotels and employees and hotels and other private entities. In this connection, the use of contracts to regulate horizontal legal relationships in the tourism industry will be further discussed in the following section. 5.4 Proposal for Standard Form Contracts in the Tourism Industry The Chinese courts have established that the legal relationship between tourism service providers and consumers is mainly contractual in nature.420 Accordingly, short of drawing direct reference from the relevant laws, the travel contract is often the starting point in the determination of 416 417 418 419 420 Supra, note 61 at page 123. Supra, note 149. Xinhuanet, "Six Hot Topics for the Draft Civil Law" (in Chinese), 25 December 2002 http://news.xinhuanet.com/newscenter/2002-12/25/content_670101.htm (visited on 10 September 2007). Supra, note 149. Supra, note 243. Further, in a case involving an injured tourist, the determination of the liability of travel agency vis-à-vis the tourist has been stated by the Chinese appellate court to be contractual, rather than tortious in nature (CNTA (in Chinese), http://www.cntlaw.com/xxlr1.asp?id=5353 (visited on 2 September 2007)). 105 rights and liabilities arising out of tourism activities.421 Currently, it is observed that there are many different forms of travel contracts used by tourism service providers in each tourism sector across China. 422 In the travel agency sector specifically, it is said that although Article 43 of the "Implementation Rules on the Administration of Travel Agencies" prescribes the basic contents of the travel services contracts, the lack of detail and generality in scope leave the individual travel agencies with a lot of leeway for discretion.423 Consequently, there exist many different forms of travel services contract in the tourism market today which are not standardized and often drafted haphazardly. 424 In this connection, although the CNTA and some local governments have introduced sample travel contracts as the blueprints for travel services contracts in China, the applicability of the same is limited, as travel agencies generally prefer to adopt their own in-house contracts in reality.425 In certain circumstances, some travel agencies even operate without written contracts in violation of the rules.426 These situations are undesirable, as they invite disputes and render dispute resolution difficult. Further, as travel agencies are allowed to draft their own contracts in practice, many travel services contracts contain terms which are grossly unfair to the consumers. 427 For example, in many contracts, it is common to stipulate that if a consumer terminates the contract prematurely, he is to pay liquidated damages of up to 50% of the contracted sum; on the contrary, if it is the travel agency that breaches the contract, it only has to pay up to 10% 421 Supra, note 57 at page 31. 422 Generally, the term "travel contract" may imply five main categories of contracts, namely, services contract (entered into between travel agencies and tourists), sale and purchase contract (entered into between travel agencies and hotels, transport companies, restaurants, entertainment spots and other related entities), agency contract, insurance contract and brokerage contract. 423 Supra, note 57 at page 31. 424 Supra, note 265. 425 Supra, note 57 at pages 31 and 33. 426 Supra, note 57 at page 48. 427 Supra, note 57 at page 31. 106 of the contracted sum.428 Hence, in view of the above, some academics have suggested that the proposed "People's Republic of China Standard Form Travel Contract" be adopted in the tourism industry, notably the travel agency sector,429 as a way to standardize and regulate industry practice. Although the implementation of standard form contracts may entail a certain level of rigidity, and in reality, some tourism service providers may even abuse the non-negotiable nature of such contracts to increase their bargaining power vis-à-vis the consumers, standard form contracts are said to bring more advantages than disadvantages to the tourism industry, as they have the advantages of convenience and certainty, and effectively limit the degree of arbitrariness in contract-drafting.430 Thus, at this juncture, the "Standard Terms and Conditions for Travel Contracts in Japan" ("Japanese Standard Terms and Conditions") will be examined to show the treatment of travel services contract under the Japanese legal system. Like China, it is mandatory under Japanese law for travel agencies to enter into travel contracts with the consumers prior to the provision of travel services.431 In Japan, however, the contents of such travel contract are abundant and are specifically spelt out in the form of the "Japanese Standard Terms and Conditions" appended to the "Travel Agency Law of Japan". In this regard, the "Japanese Standard Terms and Conditions" is renowned for its wide scope of coverage and attention to detail.432 It provides, generally, for the rights and obligations of travel agencies and consumers (including both individual and group tourists), and specifically, situations relating to the formation, amendment and termination of contract, itinerary management, rights and obligations of contracting parties and the various compensation schemes for breach of contract – all in a fair amount of specificity. For example, in addition to the common boilerplate terms, the "Japanese Standard Terms and Conditions" has pre-empted specific situations 428 Supra, note 265. 429 Supra, note 57 at page 32. 430 Supra, note 57 at page 33. 431 Articles 12(2) to 12(4) of the "Travel Agency Law of Japan". 432 Supra, note 265. 107 relating to, inter alia, telephone reservations,433 force majeure,434 adjustment of contracted fees in the event of economic changes435 and detailed tabulated breakdowns of monetary compensations in the event of breach of contract.436 It is, therefore, not surprising that the "Japanese Standard Terms and Conditions" has been appraised by critics as one of the most complete and comprehensive contractual stipulations in Asia.437 Thus, it can be concluded that the requirements under the "Japanese Standard Terms and Conditions" are way more specific and comprehensive than those under Article 43 of the "Implementation Rules on the Administration of Travel Agencies", even the "Model Travel Contract for Domestic Tourism". In practice, too, a great majority of travel agencies in Japan have adopted the "Japanese Standard Terms and Conditions".438 Although some travel agencies have modified the "Japanese Standard Terms and Conditions" slightly to suit their special purposes, such instances are in the minority and these contracts need to be approved by the Japanese Ministry of Land, Infrastructure and Transport in order to be enforceable.439 As a matter of prudence, the "Travel Agency Law of Japan" also requires travel contracts to be displayed at noticeable and convenient locations at the places of business in order to reduce the possibility of dispute.440 In short, three features may be observed from the "Japanese Standard Terms and Conditions": first, it is a standard 433 Article 6 of the "Japanese Standard Terms and Conditions". 434 For example, acts of God, war, government order and when the personal safety of tourists is beyond the control of the travel agencies (Article 15(2) of the "Japanese Standard Terms and Conditions"). 435 The economic changes shall result in adjustments (usually increments) of transportation and accommodation costs (Article 13(1) of the "Japanese Standard Terms and Conditions"). 436 Compensation schemes in the event of cancellation of travel activities by tourists within specified time frames, that is, 20 days, one week, one day before and after the commencement of travel activities respectively for domestic tourism; and 40 days, 30 days, one day before, on the day of commencement of and after the commencement of travel activities respectively for international outbound tourism are set out in Tables 1 and 2 of the "Japanese Standard Terms and Conditions". 437 Supra, note 265. 438 Ibid. 439 Article 12(3) of the "Travel Agency Law of Japan". 440 Article 12(2) of the "Travel Agency Law of Japan". 108 contract applied across the board in the travel agency sector in Japan; secondly, it provides sufficient coverage, both in width and in depth; and thirdly, it is mandatory. Hence, bearing in mind the Japanese experience, the formulation of a standard form travel contract in China may be achieved progressively. The first step in this process is to supplement the existing laws with regard to travel contracts. Notably, the "Draft Contract Law (Request for Opinion)" had dedicated a special chapter to travel contracts, but this chapter was unfortunately deleted from the final "Contract Law" when it was promulgated in 1999.441 More recently, various proposals for a specific chapter on travel contracts have been raised in the draft opinions for the "Draft Civil Law". 442 Some academics have even suggested that a "Travel Contract Law" be specifically enacted for this purpose.443 However, the enactment of new law may not be a practical option if the same legislative objective can be achieved through amendments made to existing laws, for example, the "Implementation Rules on the Administration of Travel Agencies". In this connection, the "Implementation Rules on the Administration of Travel Agencies" may be enhanced in terms of the contents and requirements of travel contracts. In other words, instead of stipulating just the basic items that need to be included in such contracts, such as pricing,444 the provisions of the "Implementation Rules on the Administration of Travel Agencies" may be further particularized so that they also set out the minimum threshold required in respect of each of such items. This provides the legal basis for the next step, that is, the drafting of a standard form travel contract, which may be undertaken jointly by the CNTA as the regulatory authority, and the China Association of Travel Services ("CATS") as the industry representative. Such model contract should take into account local laws and international practice, as well as commercial considerations. 441 Supra, note 265. 442 Supra, note 57 at page 29. 443 Du Jun, "Analysis of Travel Contracts" (in Chinese), http://www.studa.net/jingjifa/061021/1137448.html (visited on 10 October 2007). 444 Article 43(2) of the "Implementation Rules on the Administration of Travel Agencies". 21 October 2006, 109 In terms of the application of the standard form contract, the standardization process may be a gradual one, starting with a voluntary "opt-in" system which allows travel agencies to voluntarily adopt the standard form contract; and as the market matures, it may be converted to an "opt-out" system, by which time all travel agencies would be required to adopt the standard form contract, unless there are justifiable reasons for any one travel agency to operate out of the normal regime. Alternatively, there could be a grace period of one to three years for the adoption of the standard form contract, after which all travel contracts in China should be standardized. Separately, as a provisional measure, China may follow the Japanese model and require that all travel contracts be submitted to the CNTA or the local tourism administrations for approval. Such requirements, although cumbersome at the outset, may eventually facilitate dispute resolution and the standardization of industry practice in the long run, and are therefore, a course worth embarking upon. 5.5 Proposal for Strengthening Law Enforcement and Implementation Mechanisms Apart from effecting reform with regard to the written requirements of the law, in practice, the construction of a good legal order through strengthening the law enforcement and implementation mechanisms is equally important to the success of legal reform in the tourism industry. According to the World Bank, an effective legal system normally has five features. 445 First, it provides a set of rules made known to the public in advance. Thus the law should be published, accessible and clear. Secondly, it relies upon rules which are actually implemented, not just "on the books". Hence, it takes into account the actual compliance with the law by the general public and the implementation of the law by the government in practice. Thirdly, it ensures that rules are consistently applied. The overlapping jurisdictions of different government departments and the 445 World Bank, Governance and Development, Washington DC, World Bank, 1992, at page 4. 110 discretionary power of government officials should, therefore, be limited to the narrowest field possible. Fourthly, there must be an effective, independent mechanism for dispute resolution. The judiciary must be protected from intervention by other branches of the government, so that the government itself can be the subject of laws. Further, the judicial process must not be incapacitated by physical constraints due to poor facilities, unreasonable delays, prohibitive cost or uncertainty. Last but not least, it has clear procedures for the amendment of rules, to prevent any arbitrary introduction or rejection of rules, and to clear out irrelevant rules. This means that the legislature and law-making bodies must comply with clear and defined guidelines in effecting legislative changes.446 In short, it can be concluded from the World Bank's criteria that the effectiveness of law enforcement and implementation is central to the construction of a good legal system. However, it can also be said that the Chinese law enforcement and implementation mechanisms, when measured against the World Bank's benchmarks, leave much room for improvement. 447 This has caused detrimental effects in the tourism industry which are manifested by, inter alia, unregulated trade practices and a chaotic market order. 448 Accordingly, the United Nations had singled out the "strengthening of the rule of law and of administrative systems" as one of the ten goals in China under the "United Nations Development Assistance Framework 2001-2005".449 In this regard, the United Nations deemed it "vital that China make more progress with respect to implementation and enforcement of existing laws"450 which, in the present context, are key to the tourism industry. It has been said that the problem of law enforcement and implementation in China is multi-faceted, and 446 Ibid. 447 Supra, note 182. 448 Supra, note 57 at page 66. 449 UNDAF, "Objective 10: 'Strengthen the rule of law, from legislation to law enforcement and throughout the administrative system'", http://www.unchina.org/goals/html/obj10_law.shtml (visited on 4 December 2007). 450 Ibid. 111 may in part be attributed to the Chinese political structure, corruption, lack of professional expertise within the judiciary, weak institutions and departmental and local protectionism.451 Furthermore, it is said that even when new laws are put in place to instill the rule of law, old practices, such as the absence of clear separation of function between the judges, the procurator and the defence counsel, have also hampered implementation of the same.452 Thus, a four-pronged reform process for the enforcement and implementation of law in China has been outlined by the United Nations, starting with an improved Chinese judiciary.453 In view of the changes the Chinese society is currently undergoing and the related risks of instability, it is essential that the law be seen to do justice. This, amongst other things, requires an independent judiciary, and professional judges and lawyers in sufficient numbers with the required capacity.454 Short of adopting the system of separation of powers, the above objectives could be achieved institutionally, by raising the status of courts and judges in relation to government departments and party officials; and financially, by increasing the salaries of judges and other key personnel.455 This might reduce their vulnerability to both administrative powers and private briberies.456 Moreover, as China had a long tradition of local governors also acting as local judges, current government officials tend to consider them in charge of everything in the localities, including the judicial matters. Such misconception is also ingrained in China's general public.457 Hence, politicians, as well as the general public, should be made fully aware of the importance of judicial independence in all aspects. Additionally, in Basic Courts of the various provinces and municipalities, most judges had not 451 Centre for East and Southeast Asian Studies, Lund University, "Implementation of Law in the People's Republic of China", http://www.ace.lu.se/o.o.i.s/6762 (visited on 4 December 2007). 452 Supra, note 449. 453 Ibid. 454 Ibid. 455 OECD Policy Brief, Attracting Investment to China, (September 2003), at page 7. 456 Ibid. 457 Supra, note 182. 112 received proper prior legal training, as most of them are former military officers and only few judges were university graduates who may or may not have a law degree.458 The situation seems to have been improved since the introduction of the national examination system to qualify judges and existing judges are now required to undergo legal training, yet there is still much room for improvement with regard to the overall quality of judges. 459 Hence, the qualification of judges should be enhanced by raising appointment threshold and intensifying professional training.460 This will hopefully contribute to a more conducive and efficient environment for dispute resolution the tourism industry. The second recommendation put forth by the United Nations is the enhancement of law enforcement mechanisms.461 Notably, it has been said that the "impressive new legislation enacted over the past two decades has made law enforcement a huge task."462 In this connection, it was reported that as at the end of 2001, there was a RMB 2.5 billion aggregate of un-enforced court rulings in China.463 Although the Supreme Court has made efforts to improve the enforcement record of court judgments over the years, the problem still exists as a huge back-log of unenforced cases cannot be dealt with overnight.464 In view of this, it is desirable that a national and regional mechanism be established to enhance the enforcement of courts decisions465 Moreover, institutional 458 Zhu Suli, Sending Law to the Country: An Inquiry into the Judicial System at the Grass Root Level (in Chinese), China Political Science and Law University Press (2000), at Chapter 10. 459 Ibid. 460 Supra, note 182. 461 Supra, note 449. 462 Ibid. 463 Ibid. 464 Supra, note 458. 465 Supra, note 182. 113 capacity, transparency, accountability and law enforcement capacity beyond the government need to be upheld.466 In the light of the current problems faced by the tourism industry, particularly unfair competition practices and non-compliance with existing regulations, government agencies involved in the implementation of law, specifically the CNTA and its under links, should be well empowered and staffed. For example, under the "Regulations on the Administration of Travel Agencies"467 and the "Implementation Rules on the Administration of Travel Agencies",468 the CNTA's supervisory functions include implementing the "service quality cash deposit" regime and conducting annual inspection on travel agencies to ensure compliance with service quality, tourism safety, pricing and financial management rules. These tasks require the proper division of labor between the CNTA and the various provincial or local tourism administrations in the country, as well as the appropriate supervision by the former on the latter, in order to ensure consistency in the implementation of the law. Government officials who are responsible for taking administration decisions at the ground level should also be well-trained and, if need be, regular courses and assessments, both at the central and regional levels, could be conducted to ensure that local government personnel are equipped with the necessary knowledge and skills in the implementation of tourism laws and policies. In addition to the above, the United Nations has also recommended raising the awareness of the general public on the concept of the rule of law as a value system, and both as a right and a duty, through education and awareness campaigns.469 Separately, there is also a need to identify better mechanisms for disseminating and enforcing new laws 470 that are key to tourism industry. Undoubtedly, achieving the above goals could be a painful and gruesome process. However, it is 466 Supra, note 449. 467 Chapter 5 of the "Regulations on the Administration of Travel Agencies". 468 Chapter 9 of the "Implementation Rules on the Administration of Travel Agencies". 469 Supra, note 449. 470 Ibid. 114 believed that such a painful course is worth taking, because it is in the interests of not only tourism entities, but even more so, the Chinese government and the tourists and consumers, that the law enforcement and implementation mechanisms in China be reformed, as they are the best reflection of the success of legal reform in the Chinese tourism industry. 5.6 Proposal for Enhancing the Roles of Tourism Associations Besides reforming the legal aspects of the tourism industry, which has been discussed at length above, the success of the reconstruction of the tourism industry depends, to a large extent, on extra-legal support drawn from within the industry and the tourism sectors, particularly nongovernmental tourism associations. Over the years, China's tourism trade associations have grown along with the in-depth development of national economical restructuring and the rapid progress of tourism.471 Initiated in the beginning of 1985, the China Tourism Association ("CTA")472 and the CTHA473 were formally established in January and February 1986 respectively. The former is a national tourism trade organization, a social body composed of tourism departments, departments closely related to tourism as well as tourism oriented experts and scholars. The latter is a national organization of the tourist hotel trade, with star-rated hotels as the main components.474 With the intensified reform of tourism management system and the vigorous development of tourism, both at the domestic and international levels, the formation and role of the tourism trade associations have increasingly drawn the attention of all the government departments concerned in the various 471 Tourism Industry Association, "China's Travel Trade Association: A Brief Account of China's Travel Trade Association", http://www.chinaetravel.com/survival/tindus.html (visited on 4 December 2007). 472 Approved by the State Council on 30 January 1986 and re-registered under the Ministry of Civil Affairs on 24 March 1999 for the tourism industry in China. 473 Established under the jurisdiction of the CNTA in February 1986 for tourist hotels in China. 474 Supra, note 471. 115 localities.475 Specialized trade associations such as the China Hotel Association ("CHA")476 for the hotel sector and the CATS477 for the travel agency sector were successively set up in recent years. According to academics, tourism associations, which serve as a bridge of communication between the government and private tourism entities, play an important role in tourism policy implementation.478 In this regard, tourism associations are expected to bring together the majority of the members of the tourism sector, and act as collectors of information and communicators with the members and the government. However, tourism associations in China have been criticized as not being tourism associations in the real sense, as they are viewed only as advisors to the central and local tourism administrations, and the chairmen of these associations are usually retired heads of tourism administrations. As a result, tourism associations in China have failed to serve as a channel of communication between the government and private tourism entities.479 Thus, in the absence of an effective bridge of communication in this aspect, tourism policy implementation in China has been concluded as a "top-down" and "trial and error-correcting" model. This means that tourism policy decisions are mostly shaped at the top level of tourism administration, which then implements the same and monitors the responses from the private tourism entities. In this connection, if there is no strong resistance, the implementation continues; if, however, resistance occurs, the government will revise the policy decisions and re-implement the same, which sometimes takes a long time.480 The implementation of the "Interim Regulations on the Administration of Travel Agencies" in 1985 without prior input from the industry representatives and the re-implementation of the same in the 475 Ibid. 476 Established under the jurisdiction of the Ministry of Civil Affairs and the State-owned Assets Supervision and Administration Commission of the State Council on August 2000 for the hotel sector in China. 477 Established under the jurisdiction of the CNTA and the Ministry of Civil Affairs on 24 October 1997 for the travel agency sector in China. 478 Hanqin Qiu Zhang, Ray Pine and Terry Lam, Tourism and Hotel Development in China: From Political to Economic Success, 2005, Haworth Press at page 115. 479 Ibid. 480 Ibid. 116 form of the "Regulations on the Administration of Travel Agencies" in 1996 is said to be an example of such "top-down" and "trial and error-correcting" model.481 Thus, the key action at present is to reconnect the missing link of communication through the realization of the functions of tourism associations in this regard. In addition to being a bridge of communication between the government and private tourism entities, tourism associations in China are also expected to fulfill their responsibilities in: (1) fostering communication, collaboration and cooperation amongst its members; (2) protecting members' rights and benefits; (3) promoting the implementation of tourism laws and policies; (4) monitoring and enhancing members' service quality; (4) regulating members' business activities (through the association's charter and articles of association); (5) standardizing members' business practices (through industry guidelines); (6) regulating unfair competition behaviors; (7) assisting in the settlement of disputes (amongst members and between members and other entities); and (8) liaison with other overseas tourism associations.482 Notably, if the above functions are fully performed by the tourism associations in China, it will certainly take the burden off the shoulders of the government and law enforcement bodies and make the task of law implementation in the tourism industry easier. However, as it currently stands, the actual contribution of tourism associations in China's tourism industry today leaves much to be desired.483 A comparison is made in this regard between the CATS and the Japan Association of Travel Agency ("JATA") of the travel agency sector in China and Japan respectively. In this regard, due to its young age and its heavy reliance on the CNTA, the operation of the CATS lacks independence in many ways, as it often refers to the CNTA for guidance and directions. Consequently, the actual functions performed by the CATS become limited to administrative matters only.484 Further, due to 481 Ibid. 482 Supra, note 265. 483 Supra, note 478. 484 Supra, note 265. 117 the lack of publicity and marketing efforts, the attractiveness and influence of the CATS within the travel agency sector in China is rather weak. Hence, it was reported that in 2004, only one out of four travel agencies in China were registered as a member of the CATS. 485 Some academics attribute this phenomenon to the lack of importance attached to tourism associations by the government and the general public in China. As a result, there is a common perception that tourism associations have no part to play in the regulation and development of the tourism industry.486 Such misconception, however, may be negated by the success stories of tourism associations in other countries, notably Japan, in securing an important position in the national tourism framework. In this regard, unlike China, where the CATS was formed on a voluntary basis, Chapter 3 of the "Travel Agency Law of Japan" provides the clear legal basis for the establishment of the JATA. More specifically, the law sets out the legal functions of the JATA, namely, first, handling complaints against travel agencies (including travel agencies which are not yet members of the JATA); secondly, conducting training for travel agencies; thirdly, handling debts matters between travel agencies and tourists or other related entities; fourthly, supervising the daily operations of travel agencies; and lastly, conducting market research, investigations, inquiries and promoting the travel agency sector in Japan.487 Thus, it can be seen that the scope of powers and authoritative functions of the JATA is very wide and is not limited to its members only. Moreover, due to its unique status as a private, non-governmental organization that is provided for under the law and sanctioned by the Japanese Ministry of Land, Infrastructure and Transport, the JATA exercises great influence within the travel agency sector in Japan.488 From its establishment in June 1959 up until June 2007, the JATA has a total of 1266 active members, 744 associate members, 102 allied 485 Supra, note 265. 486 Supra, note 61 at page 37. 487 Article 22(3) of the "Tourism Industry Law of Japan". 488 Supra, note 265. 118 members and 659 overseas allied members.489 In this regard, the organization structure of JATA is also more intact, starting with the general assembly, board of directors, secretariat, and extending to various functional committees 490 and regional divisions. 491 More importantly, in Japan, JATA membership is often perceived as a marker of identity and indication of one's credibility as a reputable business.492 Such notion is, however, foreign to China in the context of the CATS.493 In short, the Japanese experience proves that contrary to popular belief, it is indeed possible for tourism associations to occupy an important position in the growth of the tourism industry, provided that, first, the law confers legitimacy and autonomy to their existence and operations; and secondly, they are supported by majority of the industry players in the tourism industry. Thus, in view of the important functions of the tourism associations, some academics have suggested that China follow the Japanese example in legislating the formation, functions and operations of tourism associations and providing absolute autonomy to the same.494 Internally, it is high time that tourism associations adopted a more proactive approach in the realization of their regulatory, managerial, communicative, representative and supervisory functions. This means that governmental influence should be narrowed, and the scope of activities of tourism associations be expanded. For example, the periodic journals published by the CATS, the "Friends of Travel Agencies", display positive efforts in the promotion of communication and transmission of information within the tourism industry. Similar efforts should, therefore, be put into other aspects of the tourism associations' functions, including conducting training and education, promoting 489 About JATA, http://www.jata-net.or.jp/English/whats/wht1.htm (visited on 3 October 2007). 490 These include the domestic travel committee, outbound travel committee, inbound travel committee, fair trade practices committee, consumer claims settlement committee, compensation business committee, examination, training and education committee, legal affairs committee, managerial issues committee, social contributions committee, JATA organization structure and member services committee and public relations committee. 491 These include the Hokkaido, Tohoku, Kanto, Chubu, Kansai, Chushikoku, Kyushu and Okinawa divisions. 492 Supra, note 489 493 Supra, note 61 at page 37. 494 Supra, notes 265 and 61 at page 37. 119 tourism in the domestic and international markets, representing the tourism industry in dialogues with the government, enhancing service quality and regulating unfair competition practices in the tourism industry.495 However, these activities may only achieve their maximum desired effects if they are participated by majority of the industry players. Hence, one way to increase the attractiveness of tourism associations is to enhance the prestige of the association memberships, as an indicator of identity, recognition, business standard or credibility. This may induce more industry players to register as members of these tourism associations in order to increase the reputation of their businesses. In short, instead of concentrating on the reform of tourism law from within the legal framework only, it may be more beneficial to seek extra-legal assistance in certain aspects. In this case, tourism associations may provide the extra-legal solutions for the problems faced by the tourism industry today. This is because if each tourism sector is regulated from within and at the ground level to begin with, the task of unifying and reforming the tourism industry as a whole will be made easier.496 The ultimate objective in this regard is, therefore, to produce truly functional tourism associations, which can work hand in hand with the government towards overall reform of the tourism industry. 5.7 Concluding Remarks As mentioned at the beginning of this chapter, legal reform, although crucial, is not the only way to bring about changes in the tourism industry. Improvements in other aspects of the tourism industry, notably the economic structure, education and the tourism market's adaptability to globalization, are also essential to the wellbeing and sustainable development of the tourism industry as a whole. Due to the multiple-faceted nature of the tourism industry, the suggestions put forth in 495 Supra, note 265. 496 Supra, note 61 at page 37. 120 this paper, too, are not exhaustive, as legal reform in this area may take many different forms and permutations. Nevertheless, through studying the legal models of other countries in the tourism industry, one learns the more important lesson of adopting the critical attitudes of self-reflection, acknowledging the peculiarity and existing issues of the tourism industry in a given societal context and adopting an open mind towards change and reform. These attitudes constitute the guiding principles of legal reform and should be adopted by the State, industry players, consumers and tourism associations alike, throughout the process of perfecting the tourism law and tourism industry in China. 121 CONCLUSION The Lessons Learnt In the course of the foregoing discussions, this paper has presented an analysis of the current status quo, including some prominent legal problems, faced by the tourism industry today, as well as some proposals for legal reform. Undoubtedly, the discussions in this paper are not, and are not meant to be exhaustive, as they only cover the legal issues of the Chinese tourism industry from a commercial perspective, and particularly in the contexts of the hotel and travel agency sectors only. Consequently, issues relating to other areas of the tourism industry, such as environmental enhancement, outbound tourism and other secondary tourism sectors still leave much room for future research. Nevertheless, as demonstrated in the foregoing chapters, China's tourism has experienced great changes in the past 30 years, evolving from a virtually non-economic activity before 1979 to a major economic force in the national economy today. Three decades of development has yielded both positive experiences and hard lessons. On the one hand, China's political environment, travel infrastructure, diversity of tourist attractions, improving services and accession to the WTO have all come together to make tourism in China increasingly accessible to domestic and international tourists alike.497 On the other hand, China continues to encounter strong challenges in the areas of unfair competition, imperfection in the legal system and poor law enforcement. Fortunately, despite the many legal and socio-economic problems faced by the tourism industry today, in particular tourism private entities in the hotel and travel agency sectors, business goes on and aggressive development continues, albeit not without much looming uncertainty and voices of dissatisfaction. As the prolonged wait for the promulgation of the "Tourism Law" continues, China's tourism industry has no choice but to find ways to reconcile and make sense of the existing laws, administrative rules and regulations, industry guidelines and China's international obligations in the 497 Supra, note 4 at page 297. 122 tourism industry. Short of legislative overhaul which requires the leadership of the State, specifically the NPC or its Standing Committee at the central level, what industry players can contribute at this stage is to self-regulate via industry standards, standard form contracts or otherwise, while finding effective ways to make their voices heard. In this regard, tourism associations assume a central role as the industry regulator as well as the official channel of communication between the tourism industry and the State. The importance of extra-legal measures like the tourism associations should not be discounted or understated; but within the legal circle, academics, researchers and experts in the areas of tourism and tourism law should keep up the good work produced so far and publish more tourism-related reports and works, as a means of raising public awareness and providing professional opinions in these topics. These combined efforts will hopefully produce some encouraging results in the future. Undoubtedly, the realization of China's ambitious goal to become the world's leading tourism destination will require tough choices both by the Chinese government and its people from the inside, but it is also believed that overseas professionals and industry players have a positive role to play.498 The importance of continual collaboration and cooperation with the rest of the global village in the development of tourism499 should not be undermined in the era of globalization. Thus, one sees in the foregoing chapters repeated references to foreign tourism legal models as the subjectmatters of comparative legal studies in this paper. In spite of the valuable lessons drawn from overseas, it should be emphasized again that no two countries are identical insofar as their historical, geographical and socio-economic backgrounds are concerned. Thus, there should never be a wholesale transportation of the tourism legal model of another country to China, however successful its implementation may be in its home ground. Hence, what this paper eventually promotes is the 498 Wei Qian, "Tourism in China and Professionalism: An Insider's Perspective", 1999, Asia Pacific Journal of Tourism Research, Volume 4 Issue 1 at page 22. 499 Supra, note 4 at page 307. 123 critical attitudes of self-reflection, in-depth evaluation and open-mindedness towards change as the guiding principles of legal reform in China's tourism industry. The Road Ahead In October 2006, Beijing's Home Inn became the first Chinese hotel company to be traded on the NASDAQ. In early 2007, Shanghai's Jin Jiang Hotel Group was listed on the HKSE.500 What follows from these developments in the new millennium is the emergence of new investment and management methodologies like listing, consolidation, branding and specialization in China's tourism market, which adds a whole new dimension to the traditional understanding of China's tourism industry and the tourism law. The bad news, however, is that all these exciting developments are happening and will be ongoing without a concrete tourism legal framework first put in place. While China's economy continues to grow apace, its tourism industry may face greater opportunities as well as challenges like never before. Following changes in the global climate, China's tourism industry may need to overcome a whole host of new challenges, in addition to existing ones, in order to prosper and succeed in the 21st century. While global security and health issues heighten following events like the September 11 attacks, 2005 Bali bombings and SARS, tourism safety, security and health requirements have assumed paramount importance like never before in the history of global tourism. All these new challenges, coupled with other emerging challenges fueled by escalating oil and gas prices, energy issues, higher air fares, new technologies, time pressures and a growing demand for convenience,501 represent pressures on China's tourism industry to reflect on its past development experience and prepare itself for the next decades of challenges and growth. In the premises, a long-term, sustainable development approach which is supported by a concrete legal system is not only 500 Global Hotel, "Home Inn and Jin Jiang Rushed to List" (in Chinese), 5 April 2007, http://www.globalhotel.com.cn/zsynews/News_View.asp?NewsID=326 (visited on 3 March 2008). 501 Peter E. Tarlow, "Tourism in the Twenty-First Century", September/October 2002, The Futurist, Volume 36, Issue 5 at page 48. 124 essential to bring order to the current tourism market, but also to push domestic and international tourism development in China to new heights in the 21st century. During a speech made at the recent National Tourism Working Group Conference on 5 March 2008, the Chairman of the CNTA emphasized the need to reflect on the development experience of China's tourism industry for the past 30 years and seek urgent reform in, inter alia, the construction of a concrete legal system. One of the many recommendations raised is to step up research works regarding an integrated tourism legislation.502 This sheds a positive light on the State's commitment in perfecting the current tourism legal framework and hints at the possibility of an integrated tourism legislation being put in place, be it the "Tourism Law" or any other forms, in the near future. 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http://www.cnta.gov.cn/news_detail/newsshow.asp?id=A20066211710576185733 Zhong Yi, "About Northeast Revitalization Plan" (in Chinese), China Business Law – Legal Resources, 27 August 2007, http://www.lawcase.org/archives/node/1 134 ANNEX A "Industry Guidelines for Tourist Hotels in China" 旅游饭店行业规范 第一章总则 第一条为了倡导履行诚信准则，保障客人和旅游饭店的合法权益，维护旅游饭店业经营管理的正 常秩序，促进中国旅游饭店业的健康发展，中国旅游饭店业协会依据国家有关法律、法规，特制定 《中国旅游饭店行业规范》(以下简称为《规范》)。 第二条旅游饭店包括在中国境内开办的各种经济性质的饭店，含宾馆、酒店、度假村等(以下简 称为饭店)。 第三条饭店应当遵守国家的有关法律、法规和规章，遵守社会道德规范，诚信经营，维护中国旅 游饭店行业的声誉。 第二章预订、 第二章预订、登记、 登记、入住 第四条饭店应与客人共同履行住宿合同，因不可抗力不能履行双方住宿合同的，任何一方均应当 及时通知对方。双方另有约定的，按约定处理。 第五条由于饭店出现超额预订而使客人不能入住的，饭店应当主动替客人安排本地同档次或高于 本饭店档次的饭店入住，所产生的有关费用由饭店承担。 第六条饭店应当同团队、会议、长住客人签订住房合同。合同内容应包括客人进店和离店的时 间、房间等级与价格、餐饮价格、付款方式、违约责任等款项。 第七条饭店在办理客人入住手续时，应当按照国家的有关规定，要求客人出示有效证件，并如实 登记。 第八条以下情况饭店可以不予接待：(一)携带危害饭店安全的物品入店者；(二)从事违法活动 者；(三)影响饭店形象者；(四)无支付能力或曾有过逃账记录者；(五)饭店客满；(六)法律、法规规 定的其他情况。 第三章饭店收费 第九条饭店应当将房价表置于总服务台显著位置，供客人参考。饭店如给予客人房价折扣，应当 书面约定。 第十条饭店客房收费以“间/夜”为计算单位(钟点房除外)。按客人住一“间/夜”，计收一天房 费；次日 12 时以后、18 时以前办理退房手续者，饭店可以加收半天房费；次日 18 时以后退房者， 饭店可以加收一天房费。 第十一条根据国家规定，饭店可以对客房、餐饮、洗衣、电话等服务项目加收服务费，但应 当在房价表及有关服务价目单上注明。客人在饭店商场内购物，不应加收服务费。 135 第四章保护客人人身和财产安全 第十二条为了保护客人的人身和财产安全，饭店客房房门应当装置防盗链、门镜、应急疏散图， 卫生间内应当采取有效的防滑措施。客房内应当放置服务指南、住宿须知和防火指南。有条件的饭店 应当安装客房电子门锁和公共区域安全监控系统。 第十三条饭店应当确保健身、娱乐等场所设施、设备的完好和安全。对不按使用说明及饭店员工 指导进行操作而造成伤害的，饭店不承担责任。 第十四条对可能损害客人人身和财产安全的场所，饭店应当采取防护、警示措施。警示牌应当中 外文对照。 第十五条饭店应当采取措施，防止客人放置在客房内的财物灭失、毁损。由于饭店的原因造成客 人财物灭失、毁损的，饭店应当承担责任。由于客人自己的行为造成损害的，饭店不承担责任。双方 均有过错的，应当各自承担相应的责任。 第十六条饭店应当保护客人的隐私权。饭店员工未经客人许可不得随意进入客人下榻的房间，除 日常清扫卫生、维修保养设施设备或者发生火灾等紧急情况外。 第五章保管客人贵重物品 第十七条饭店应当在前厅处设置有双锁的客人贵重物品保险箱。贵重物品保险箱的位置应当安 全、方便、隐蔽，能够保护客人的隐私。饭店应当按照规定的时限免费提供住店客人贵重物品的保管 服务。 第十八条饭店应当对住店客人贵重物品的保管服务做出书面规定，并在客人办理入住登记时予以 提示。违反第十七条和本条规定，造成客人贵重物品灭失的，饭店应当承担赔偿责任。 第十九条客人寄存贵重物品时，饭店应当要求客人填写贵重物品寄存单，并办理有关手续。 第二十条客房内设置的保险箱仅为客人提供存放一般物品之用。对没有按规定存放在饭店前厅贵 重物品保险箱内而在客房里灭失、毁损的客人的贵重物品，如果责任在饭店一方，可视为一般物品予 以赔偿。 第二十一条如无事先约定，在客人结账退房离开饭店以后，饭店可以将客人寄存在贵重物品保险 箱内的物品取出，并按照有关规定处理。饭店应当将此条规定在客人贵重物品寄存单上明示。 第二十二条客人如果遗失饭店贵重物品保险箱的钥匙，除赔偿锁匙成本费用外，饭店还可以要求 客人承担维修保险箱的费用。 第六章保管客人一般物品 第二十三条饭店保管客人寄存在行李寄存处的行李物品时，应当检查其包装是否完好、安全，询 问有无违禁物品，并经双方当面确认后签发给客人行李寄存牌。 136 第二十四条客人在餐饮、康乐、前厅行李处等场所寄存物品时，饭店应当当面询问客人物品中有 无贵重物品。客人寄存的行李中如有贵重物品的，应当向饭店声明，由饭店员工验收并交饭店贵重物 品保管处免费保管；客人事先未声明或不同意核实而造成物品灭失、毁损的，如果责任在饭店一方， 饭店按照一般物品予以赔偿；客人对寄存物品没有提出需要采取特殊保管措施的，因为物品自身的原 因造成毁损或损耗的，饭店不承担赔偿责任；由于客人没有事先说明寄存物的情况，造成饭店损失 的，除饭店知道或者应当知道而没有采取补救措施的以外，饭店可以要求客人承担其所受损的赔偿责 任。 第七章洗衣服务 第七章洗衣服务 第二十五条客人送洗衣物，饭店应当要求客人在洗衣单上注明洗涤种类及要求，并应当检查衣物 状况有无破损。客人如有特殊要求或者饭店员工发现衣物破损的，双方应当事先确认并在洗衣单上注 明。 客人事先没有提出特殊要求，饭店按照常规进行洗涤，造成衣物损坏的，饭店不承担赔偿责任。 客人的衣物在洗涤后即时发现破损等问题，而饭店无法证明该衣物是在洗涤以前破损的，饭店承担相 应责任。 第二十六条饭店应当在洗衣单上注明，要求客人将衣物内的物品取出。对洗涤后客人衣物内物品 的灭失，饭店不承担责任。 第八章停车场管理 第二十七条饭店应当保护停车场内饭店客人的车辆安全。由于保管不善，造成车辆灭失或者毁损 的，饭店承担相应责任，但因为客人自身的原因造成车辆灭失或者毁损的除外。双方均有过错的，应 当各自承担相应的责任。 第二十八条饭店应当提示客人保管好放置在汽车内的物品。对汽车内放置的物品的灭失，饭店不 承担责任。 第九章其他 第二十九条饭店可以谢绝客人自带酒水和食品进入餐厅、酒吧、舞厅等场所享用，但应当将谢绝 的告示设置于有关场所的显著位置。 第三十条饭店有义务提醒客人在客房内遵守国家有关规定，不得私留他人住宿或者擅自将客房转 让给他人使用及改变使用用途。对违反规定造成饭店损失的，饭店可以要求下榻该房间的客人承担相 应的赔偿责任。 第三十一条饭店可以口头提示或书面通知客人不得自行对客房进行改造、装饰。未经饭店同意进 行改造、装饰并因此造成损失的，饭店可以要求客人承担相应的赔偿责任。 第三十二条饭店有义务提示客人爱护饭店的财物。由于客人的原因造成损坏的，饭店可以要求客 人承担赔偿责任。由于客人原因维修受损设施设备期间导致客房不能出租、场所不能开放而发生的营 业损失，饭店可视其情况要求客人承担责任。 第三十三条对饮酒过量的客人，饭店应恰当、及时地劝阻，防止客人在店内醉酒。客人醉酒后在 饭店内肇事造成损失的，饭店可以要求肇事者承担相应的赔偿责任。 137 第三十四条客人结账离店后，如有物品遗留在客房内，饭店应当设法同客人取得联系，将物品归 还或寄还给客人，或替客人保管，所产生的费用由客人承担。三个月后仍无人认领的，饭店可进行登 记造册，按拾遗物品处理。 第三十五条饭店应当提供与本饭店档次相符的产品与服务。如果存在瑕疵，饭店应当采取措施及 时加以改进。由于饭店的原因而给客人造成损失的，饭店应当根据损失程度向客人赔礼道歉，或给予 相应的赔偿。 第十章处理 第三十六条会员饭店违反本《规范》，造成不良后果和影响的，除按照有关规定进行处理外，中 国旅游饭店业协会将给予内部通报批评。 第三十七条会员饭店违反本《规范》，给客人的人身造成较大伤害或者给客人的财产造成严重损 失且情节严重的，除按规定进行赔偿外，中国旅游饭店业协会将给予公开批评。 第三十八条会员饭店违反本《规范》，给客人人身造成重大伤害或者给客人的财产造成重大损 失且情节特别严重的，除按规定进行赔偿外，经中国旅游饭店业协会常务理事会通过，将对该会员饭 店予以除名。 第十一章附则 第三十九条饭店公共场所的安全疏散标志等应符合国家的规定。饭店的图形符号应符合中华人民 共和国旅游行业标准 LB/T001—1995 旅游饭店公共信息图形符号。 第四十条会员饭店如果同客人发生纠纷应参照本《规范》有关条款协商解决；协商不成的，双方 按照国家有关法律、法规和规定处理。 第四十一条本《规范》适用于中国旅游饭店业协会会员饭店。尚未加入中国旅游饭店业协会的旅 游饭店可参照本《规范》执行。 第四十二条本《规范》自 2002 年 5 月 1 日起施行。 第四十三条本《规范》由中国旅游饭店业协会常务理事会通过并负责解释。 138 ANNEX B "Notice Regarding the Transfer of the Powers of Examination and Approval of Hotels Below Four-Star" 关于下放三星级饭店审批权限的通知 (1994 年 5 月 4 日 旅管理发[1994]215 号） 自 1988 年国家旅游局发布《中华人民共和国评定旅游涉外饭店星级的规定和标准》以来，我国旅游 饭店业有了飞跃的发展，在硬件标准化、软件规范化、管理科学化方面均已成为增进国际间交流、加 速社会经济发展、提高人民生活水平的不可忽视的推动力。而 1993 年 10 月由国家技术监督局发布的 《旅游涉外饭店星级的划分及评定》则标志着我国旅游饭店行业的工作已纳入标准化管理的法制轨 道。根据国办发[1994]57 号文件的精神，特通知如下： 一、国家旅游局下放三星级饭店审批权，各省、自治区、直辖市旅游局负责本地区一、二、三星 级饭店的评定与审批，评审资料报国家旅游局全国旅游涉外饭店星级评定委员办公室备案，星级证书 由各省、自治区、直辖市旅游局盖章，国家旅游局颁发星级标牌。 二、对三星级饭店不足五家的省、自治区旅游局，在评定本地区三星级饭店时，国家旅游局星级 评定检查员可参与协助，由省级旅游局审批，并报国家旅游局星级评定办公室备案。 三、为保持星级饭店水准，各省、自治区、直辖市旅游局至少每半年组织一次本地区星级复核工 作，表彰先进，儆惩滑坡，核查结果汇总后报国家旅游局星级评定办公室。 四、为方便各省、自治区、直辖市旅游局评定星级与发放证书，各省、自治区、直辖市旅游局可 根据需要一次领回一定数量的一、二、三星级饭店证书和标牌。 五、国家旅游局保留直接对所有星级饭店予以警告、降低、取消星级的权力。 六、此文自下发之日起执行。 一九九四年五月四日 "Notice Regarding the Further Acceleration of the Examination and Approval of Star Rated Hotels" 关于进一步加快饭店星级评定工作的通知 关于进一步加快饭店星级评定工作的通知 （2000 年 3 月 31 日 旅发[2000]023 号） 各省、自治区、直辖市旅游局： 为了贯彻落实 2000 年全国旅游工作会议精神，进一步转变工作职能，不断扩大饭店行业管理的 覆盖面，切实提高我国饭店业的经营管理水平，为实现向旅游强国跨越的宏伟目标更好地发挥保障作 用，国家旅游局决定，通过下放饭店星级评定权和实行饭店预备星级制度，进一步加快饭店星级评定 工作。现将具体工作意见通知如下： 一、下放饭店星级评定权 对于饭店星级评定工作实行分级管理，并分级下放饭店星级评定权。 1．国家旅游局负责全国饭店星级评定的领导工作，并具体负责全国五星级（含预备五星级）饭 店的评定与复核工作。 2．省、自治区、直辖市旅游局在国家旅游局指导下，具体负责本地区四星级（含预备四星级） 139 以下饭店的评定与复核工作，并向国家旅游局推荐五星级（含预备五星级）饭店。 3．计划单列市、副省级城市旅游局和地（市）级优秀旅游城市旅游局在各省、自治区旅游局指 导下，具体负责本地区三星级（含预备三星级）以下饭店的评定与复核工作，并向所在省、自治区旅 游局推荐四星级（含预备四星级）饭店。 4．非优秀旅游城市的地（市）级旅游局和县级优秀旅游城市旅游局在上级旅游局指导下，具体 负责本地区二星级（含预备二星级）以下饭店的评定与复核工作，并向上级旅游局推荐三星级（食预 备三星级）饭店。 二、实行饭店预备星级制度 为了加快饭店星级评定工作，从今年起，将实行饭店预备星级制度。 1．旅游涉外饭店开业或更新改造后，即可申报相应的预备星级。预备星级饭店的评定，由各级 旅游局按照工作权限，依据饭店星级评定标准和工作程序进行。对符合标准规定条件的预备星级饭 店，将颁发预备星级饭店证书。预备星级饭店证书需用镜框悬挂于饭店大堂明显位置。预备星级饭店 证书由国家旅游局统一印制，由具备相应预备星级饭店评定权的旅游局颁发。 2．预备星级饭店在开业一年后，应根据饭店星级评定标准，由各级旅游局按照工作权限与程 序，进行正式星级饭店的评定。达到标准的，可换发星级饭店证书，颁发星级饭店标牌，星级饭店标 牌由国家旅游局统一制作，由具备相应饭店星级评定权的旅游局颁发；不能达到标准的，限期一年内 进行整改，仍无法达到标准的，则取消预备星级饭店资格或进行降低星级饭店的评定。 三、加强饭店星级检查员队伍建设 建立结构合理、质量兼备、覆盖全国的饭店星级检查员网络，是加快我国饭店星级评定工作的关 键。 1．饭店星级检查员由饭店行业管理人员、旅游院校饭店专业教学研究人员、旅游饭店业协会成 员单位的专业人员共同组成。 2．饭店星级检查员分为国家级饭店星级检查员和地方级饭店星级检查员。饭店星级检查员采取 分级培训的方式。饭店星级检查员证书由国家旅游局统一印制。 国家旅游局负责全国饭店星级检查员培训的指导工作，并在全国范围内聘请国家级饭店星级检查 员，颁发国家级饭店星级检查员证书。 各省、自治区、直辖市旅游局根据工作职责与计划目标，培训地方级饭店星级检查员，颁发地方 级饭店星级检查员证书。 3．国家级与地方级饭店星级检查员每两年进行一次审核。对出现重大工作失误、领取检查员证 书后未评定和检查过星级饭店以及由于其他原因不再适宜承担饭店星级评定工作的检查员，不予通过 年审，并取消饭店星级检查员资格。 四、工作要求 1．加强复核 星级饭店复核工作是饭店星级评定工作的重要组成部分。为了巩固和提高我国饭店行业的管理与 服务水平，保持饭店星级评定工作的严肃性，各级旅游局应严格按照饭店星级评定标准及有关规定， 有计划、有重点地组织本地区星级饭店的复核工作。在复核工作中，要采取全面检查与重点抽查相结 合、明查与暗访相结合的方法，打破地域界线，开展联合、交叉复核。 2．工作时限 各级旅游局要从工作全局出发，本着积极主动为基层和企业服务的精神，按照规定的工作时限进 行饭店星级评定。 （1）正式星级饭店评定的工作时限是：接到饭店星级评定的申请报告后，应在一个月内派出饭 店星级检查员前往评定；对第一次星级评定未予通过的饭店，要加强指导，待饭店完成整改并接到饭 店整改报告后，应于一个月内派出饭店星级检查员进行第二次饭店星级的评定。 （2）预备星级饭店的评定应按照饭店星级评定标准，适当简化工作程序，具体工作时限是：接 到饭店预备星级评定的申请报告后，应于半个月内派出饭店星级检查员前往评定；对第一次预备星级 评定未予通过的饭店，要加强指导，待饭店完成整改并接到饭店整改报告后，应于半个月内派出饭店 星级检查员进行第二次饭店预备星级的评定。 3．工作目标 目前，全国星级饭店总数已达 3839 家，饭店星级评定率为 55%。为了使我国星级饭店的数量在三 140 年内达到 12 000 家，国家旅游局制定了各省、自治区、直辖市 2000～2002 年饭店星级评定计划目标 （见附件）。请各省、自治区、直辖市旅游局根据全国饭店星级评定工作的统一安排，制定符合本地 区饭店星级评定工作实际的具体实施方案，上报国家旅游局旅游涉外饭店星级评定委员会办公室。同 时，各省、自治区、直辖市旅游局要及时与国家旅游局沟通信息，按季度向国家旅游局通报本地区饭 店星级评定工作的进展情况。 4．上报备案制度 各级旅游局在饭店星级评定工作中，要严格遵守上报备案制度。 （1）各省、自治区、直辖市旅游局应将评定四星级（含预备四星级）以下饭店的批复与星级报 告书在一个月内上报国家旅游局旅游涉外饭店星级评定委员会办公室备案。国家旅游局保留对各省、 自治区、直辖市旅游局所评四星级（含预备四星级）以下饭店的否定权。 （2）各计划单列市、副省级城市和地（市）级优秀旅游城市旅游局应将评定三星级（含预备三 星级）以下饭店的批复与星级报告书在一个月内分别上报国家旅游局和所在省、自治区旅游局备案。 国家旅游局和所在省、自治区旅游局保留对各计划单列市、副省级城市和地（市）级优秀旅游城市旅 游局所评三星级（含预备三星级）以下饭店的否定权。 （3）非优秀旅游城市的地（市）级旅游局和县级优秀旅游城市旅游局应将评定二星级（含预备 二星级）以下饭店的批复与星级报告书在一个月内分别上报国家旅游局和所在省、自治区旅游局备 案。国家旅游局和所在省、自治区旅游局保留对非优秀旅游城市的地（市）级旅游局和县级优秀旅游 城市旅游局所评二星级（含预备二星级）以下饭店的否定权。 下放饭店星级评定权和实行饭店预备星级制度，是国家旅游局进一步加快饭店星级评定工作步伐 的重大决策，是进一步推动旅游饭店业加快与国际接轨、贯彻落实国务院领导提出的加强管理工作的 具体措施。各级旅游部门要高度重视和认真抓好这项工作，研究制定符合本地实际的工作方案，认真 组织实施，切实保证这一重大战役部署能够顺利实现。 特此通知。 附：各省、自治区、直辖市 2000～2002 年饭店星级评定计划目标 二 OOO 年三月三十一日 141 [...]... the extent that this topic is approached from a commercial perspective, this paper mainly discusses vertical legal relationships and horizontal legal relationships in tourism activities and the tourism industry as defined above Separately, as international legal relationships involve complicated matters dealing with international relations and public international law, they constitute 56 Yang Fubin,... ("Contract Law"),58 as well as those targeted at specific tourism sectors, such as the "Regulations on the Administration of Travel Agencies".59 Furthermore, tourism law also includes those laws and regulations promulgated at the national level, as well as those at the local or provincial level,60 international treaties or conventions61 and arguably, industry guidelines, international practice and local... legal research 19 2.4 Tourism Law and Legal Relationships Over the years, there has been much contention amongst academics as to the true meaning of tourism law Generally, experts have formulated three different views in this regard: (1) tourism law refers to all the laws and regulations which regulate tourism relationships; (2) tourism law is a set of laws and regulations which regulate vertical and. .. almost all travel agencies suffering from financial debts and increasing complaints from tourists There was, therefore, an urgent need for reform, marking the beginning of the third stage.25 Since 1992, the CNTA had taken a major role in regulating travel agency activities through a variety of legal and administrative measures.26 These efforts played a positive role in bringing order to the somewhat... Yunnan, Guangxi, Inner Mongolia, Ningxia, Tibet, Xinjiang and Chongqing 46 Supra, note 28 at page 70 47 Ibid 48 Ibid 49 Banyan Tree Ringha (opened in 2005) and Banyan Tree Lijiang (opened in 2006) 50 Under this plan, foreign funds and private capitals are encouraged to participate in the reforming and reorganization of State-owned enterprises in various forms, and they will be entitled to the treatments... 17 August 2007) 9 Supra, note 7 10 Chase Poffenberger and David Parry, "The New Face of Tourism in China", January/February 2007, The China Business Review, Volume 34, Issue 1 at page 12 9 insignificant beginning some 30 years ago, China now ranks among the top five world international tourism destinations and is number one among Asia Pacific countries.11 International organizations and experts have... physical factors (such as natural resources, natural environment and basic infrastructure) and social-economic factors (such as political environment, legal environment, economic environment, social conditions, culture and morality) (ibid.) 23 CHAPTER 3: 3.1 LEGAL FRAMEWORK OF CHINA'S TOURISM INDUSTRY Introduction Tourism law is a newly developed area of law in China Although it does not have a long... – the first part deals with the current status quo of tourism law, including the current legal framework and the problems faced by the tourism industry; while the second part deals with the proposed legal reform in the tourism industry Hence, as a starting point, chapter 3 will review the legal frameworks of, generally, China's tourism industry; and specifically, its hotel and travel agency sectors... period, China's legal and economic frameworks were still in a stage of infancy There was no sizeable tourism market to begin with as tourism was generally used as a diplomatic tool.86 Thus, the characteristics of the tourism rules and regulations promulgated during this time were that they were procedural in nature and issued on an ad-hoc basis to deal mainly with reception matters.87 As such, the... regulations were mainly immigration matters and policies relating to the treatment of inbound foreign visitors to China, including the limitation on travel destinations, visa application and approval procedures, supply of raw materials to foreign visitors and foreign visitors' reception and fee arrangements.88 An example of such regulations is the "Regulations on the Administration of Immigration, Transit, ... Exchange International Hotel and Restaurant Association "Standard Terms and Conditions for Travel Contracts in Japan" Japan Association of Travel Agencies "People's Republic of China Labor Contract... TOURISM LAW: CURRENT STATUS QUO AND PROPOSED LEGAL REFORM FROM A COMMERCIAL PERSPECTIVE CHAN LAI HING (LLB (Hons), NUS) A THESIS SUBMITTED FOR THE DEGREE OF MASTER OF LAW FACULTY OF LAW NATIONAL UNIVERSITY... date, the various tourism sectors are still regulated by a plethora of related laws, administrative rules and regulations, local rules and regulations and industry guidelines in a haphazard and