CHINA LAW DIGEST NEWSLETTER
Vol. 1, No.4 - April 16, 2002
TOPICS THIS ISSUE:
- Rules on Several Questions on Jurisdiction over Foreign Related Civil Commercial Litigation
- Regulations on Directing Foreign Investment Guidance
- Foreign Investment Industrial Guidance Catalogue (Revised 2002)
- Rules on Civil Litigation Evidence
Rules on Several Questions on Jurisdiction over Foreign Related Civil Commercial Litigation
Issue Date: February 25, 2002
Issue Body: Supreme Court
Effective Date: March 1, 2002
Summary:
According to Article 19 of the PRC Civil Procedure Law, the Supreme Court rules that foreign related civil and commercial cases shall first file with the following courts for first trial: 1) People's Courts in economic technology zones established by the People's Congress; 2) Intermediate Courts located in the capitals of provinces, autonomous zones and municipalities under the direct control of governments; 3) Intermediate Courts located in special economic zones; 4) other Intermediate Courts designated by the Supreme Courts; 5) High Courts.
Foreign related civil and commercial cases referred to in these Rules are 1) foreign related contact disputes and infringement; 2) disputes over Letters of Credit; 3) cases on revocations, affirmations and enforcement of international arbitration awards; 4) cases on the enforceability of arbitration clauses in foreign related civil and commercial cases; 5) cases on affirmation and enforcement of foreign court judgments and rulings.
For those who are not satisfied with the first instance trial rulings or judgments delivered by courts in economic technology zones, the local Intermediate Courts shall be the appellate courts. This rule does not apply to border trade disputes, foreign related real estate cases and foreign intellectual property cases.
Regulations on Directing Foreign Investment Guidance
Issue Date: February 21, 2002
Issue Body: State Council
Effective Date: April 1, 2002
Summary:
The regulations replaced the Interim Regulations on Directing Foreign Investment Guidance issued in 1995, which was updated to keep pace with China economic development. The major changes include: 1) restricted foreign investment projects are now classified with out-of-date technologies, projects adverse to resource saving and environmental improvement, and projects engaging in the exploration of particular mines requiring protective exploration.
The encouraged foreign invested projects, such as those engaging in large investments and long-term pay off periods, construction of energy, and transportation and public utilization, may enlarge their business scopes upon approval. Permitted foreign invested projects with 100% of product export rates are considered as encouraged foreign invested projects.
The previous 1995 regulations divided restricted foreign invested projects into type A and type B. Such classification was taken out in the new regulations. So did the requirements on the terms of equity joint ventures and ownership of fixed assets of Chinese parties in restricted foreign invested projects.
Foreign Investment Industrial Guidance Catalogue (Revised 2002)
Issue Date: March 4, 2002
Issue Body: State Planning and Development Commission, State Economic and Trade Commission and Ministry of Foreign Trade & Economic Cooperation (MOFTEC)
Effective Date: April 1, 2002
Summary:
This catalogue was amended dramatically to keep pace with China's economic development and China's commitments to WTO. A full copy of the English version of the Catalogue is available upon request.
1. Encouraged List
1) Risk exploration of petroleum and natural gas: limited to cooperation;
2) Exploration of low infiltrate oil and gas field: limited to cooperation;
3) New technology development and application on improving of crucial oil gathering: limited to cooperation;
4) New technology development and application on petroleum exploration; limited to cooperation;
5) Manufacturers of automobiles and motorcycles: foreign investment no more than 50%;
6) International maritime transportation business: foreign investment no more than 49%;
7) International container transportation: foreign investment no more than 50%; foreign parties will be allowed to hold controlling shares no later than 2002; wholly-foreign owned company (WFOE) will be allowed no later than 2005;
8) Road goods transportation companies: foreign parties will be allowed to hold controlling shares no later than 2002 and WFOEs no later than 2004;
9) Wholesale, retail and logistics
10) Accounting and auditing: limited to cooperation and partnership.
2. Restricted Catalogue
1) Cross-border bus transportation: allow foreign parties to hold controlling shares after 2002; WFOEs allowed after 2004;
2) Water transportation: foreign investment no more than 49%;
3) Railroad cargo transportation: foreign investment no more than 49%; foreign parties controlling shares no later than 2004; WFOEs no later than 2007;
4) Telecommunications Companies
a) Value-added services and paging services: foreign investment no more than 30%, 49% no later than 2002, 50% no later than 2003;
b) Mobile voice and data service: start from 2001, foreign investment no more than 25%, 35% no later than 2002, 49% no later than 2004 and WFOEs allowed no later than 2006;
c) Domestic and international business in basic telecom service: foreign investment allowed no more than 25% no later than 2004, 35% no later than 2006 and 49% no later than 2007.
5) Trading companies
a) Commission agent, wholesale (excluding salt and tobacco): foreign investment allowed no more than 50% no later than 2002, but excluding newspaper, medicine, pesticide, fertilizer, crude oil and finished oil; foreign parties controlling shares no later than 2003; WFOEs allowed no later than 2004, newspapers, magazines, medicines and pesticides allowed in 2004; fertilizer, crude oil and finished oil no later than 2006;
b) Retail (excluding tobacco): currently foreign investment allowed, excluding newspapers and magazines, medicines, pesticides, fertilizers and finished oil; foreign investment up to 50% no later than 2002, allowing newspapers and magazines; foreign parties controlling shares no later than 2003; WFOEs no later than 2004 and medicines, pesticides, and finished oil allowed; fertilizer allowed no later than 2006;
c) Franchising, wholesale and retail without fixed location: foreign investment allowed no later than 2004.
6) Distribution of audio-visual products: limited to cooperation, Chinese parties with controlling shares;
7) Goods leasing company
8) Agency
a) Shipping: foreign investment no more than 49%;
b) Cargo transportation (excluding post office services): foreign investment no more than 50% (express delivery service no more than 49%); foreign parties with controlling shares no later than 2002; WFOEs allowed no later than 2005;
c) Foreign investment no more than 49%; foreign parties with controlling shares no later than 2003; WFOEs allowed no later than 2005;
9) Insurance
a) Insurance companies other than life insurance: foreign investment no more than 51%; WFOEs allowed no later than 2003;
b) Life insurance: foreign investment no more than 50%;
10) Securities, securities investment fund management company
a) Securities companies: foreign investment no more than one-third allowed no later than 2004;
b) Securities investment fund management company: foreign investment no more than 33%; up to 49% no later than 2004;
11) Insurance broker: foreign investment no more than 50%; up to 51% no later than 2004; WFOEs no later than 2006;
12) Import and export products inspection, authentication and certification company: foreign parties with controlling shares no later than 2003; WFOEs no later than 2005.
Rules on Civil Litigation Evidence
Issue Date: December 21, 2001
Issue Body: Supreme People's Court
Effective Date: April 1, 2002
Summary:
The Rules was considered an important improvement to China's civil procedures regarding evidence rules. The Rules include 83 provisions divided into 6 parts on topics such as parties' burden of proof, the power of People's Courts to investigate and collect evidence, time limit of burden of proof and evidence exchange, cross-examination, review and evaluation of evidence.
The Rules list eight instances of tort under which the alleged tort-feasor shall bear the burden of proof. In cases where medical negligence is alleged, hospitals must now prove that there was no link between the medical treatment and the alleged injury and that no negligence was involved. This provision was designed to alleviate the burden on patients of proving hospital negligence without access to medical records. In labor dispute cases, the burden of proof has shifted to employers if the disputes are over dismissal, removal, termination, compensation deduction or calculation of working period.
Plaintiffs in China often find out themselves at a disadvantage in situations where the defendant hides key evidence and only discloses it during court proceedings, catching the plaintiff off guard. Under the new Rules, People's Courts will set time limits, and parties who fail to submit evidence within the limits will generally be barred from doing so if it leads to unfair surprise.
Article 73(3) allows using certain kinds of audio-visual materials that are obtained through legal methods as evidence in civil cases. Such materials shall be used along with other forms of evidence.
Lehman Lee & Xu
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