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Green 5 year plan

With the coming of 2010 and the new decade, China’s 11th five year plan (2006-2010) is drawing to a close. As Chinese officials begin to lay the ground work for the 12th five year plan, it is becoming apparent that protecting the environment is a top priority.

It seems that this new five plan aims to shift China into a more efficient, low emission, high growth economy. Experts say that the plan will attempt to reduce carbon emissions by up to 45% per unit of GDP by the year 2020 compared to 2006 levels

The plan will also endeavor to increase the total share of non fossil fuel based energy by 15% by the year 2020. It also aims to reverse the process of deforestation by increasing the total forest coverage by 40 hectares and increasing the total forest stock volume by 1.3billion cubic meters.

The plan will also set specific targets for different economic regions of China and thus will be capable of setting realistic goals instead of broad unattainable targets. In addition the plan will become domestic law and thus firms will be legally required to meet the reduction targets.

This move to reduce carbon emissions and protect china’s already fragile environment will undoubtedly have significant economic repercussions as energy intensive industries scramble to find ways to reduce their impact. However some experts estimate that environmental degradation currently costs the Chinese economy up to 8% of its GDP. While this move may force firms make painful modifications, it is undoubtedly beneficial, and necessary for China’s long term growth.

Perhaps more importantly this move indicates that China recognizes and is actively working to ameliorate its environmental problem. Furthermore it shows that China is picking up the mantle of one of the worlds largest economies and is dedicated not only to economic growth but doing it in a more responsible and sustainable manner.

-Alexander Pan

China Law 0 Comment February 4, 2010, 2:37 pm


More than 140 German investors have established their invested companies in Taichang, making it the most German- intensive investment destination in the Jiangsu province.

Recently, the local intellectual property office of Taicang carried out a survey among those German-Invested companies. The survey was sent to 100 companies, of which 58 responded.

Patents, trademarks and copyrights infringement and trade secret issues cause concern among foreign investors who want to transfer core technologies into China, according to a survey.

The Survey results show that only 17 companies, less than one third of the total 58 respondents, have applied for patents in China.

Of the 17 that did file applications, 11 were granted a total of 30 patents - seven for designs and 23 for utility models, a form of patent that legally protects rights to a product's shape and structure.

Cutting the investigation costs for collecting evidence, a requirement for filing an intellectual property infringement case, and shortening the time for patent application examination were other needs cited by survey respondents.

IP is one of Lehman, Lee & Xu’s founding and core practices. Our dedicated IP department deals with applications, and enforcement of patents, trademarks and copyright matters. Our commitment to one of our core practices is highlighted by our successful representation of clients, which recently included the Chinese branch of American online retailer Newegg.com Inc. Additionally, we strive to keep our clients and interested parties updated with IPR related news, and updates via our China IP Insights Newsletter. For further information on the scope of our IP services, or to subscribe to our IP newsletter please email mail@lehmanlaw.com.

China Law 0 Comment February 3, 2010, 7:20 pm

Shanghai: Hot property

The most expensive parcel of land on the Chinese mainland was sold for 9.22 billion yuan (US$1.35 billion) to Shanghai Zendai Property Ltd. to be redeveloped into commercial properties and office buildings. This 57,000 square-meter plot on the Bund in Shanghai was also bid on by 3 other Chinese conglomerates, including an entity consisting of China Enterprise, China Pacific Life Insurance and Taikang Life Insurance, as well as Shanghai New Huangpu Group, and finally another entity which included Shanghai Forte Land and Shanghai Fosun, with Shanghai Zendai Property Ltd. being the highest bidder. This area of the Bund is to be turned into a financial metropolis that will put Shanghai on the main stage of global finance. The project will require much capital and government cooperation, in which Shanghai Forte owner Guo Guanchang (the 37th richest person on the Chinese mainland) will take part in as an 8% shareholder. Estimated development plans include buildings as large as 270,000 square meters above ground and 100,000 meters of space underground. Construction of the primarily office-building structures is expected to begin between November 2010 and April 2011.

Scott Garner, Director of Lehman, Lee & Xu’s Shanghai office stated that “Similar to most other major cities in China, Shanghai is experiencing a wealth of development and investment being pumped into the city. Our dedicated Shanghai team offers a range of legal advice to both domestic and international companies, to aid them with their ventures and legal concerns in Shanghai.”

Having offices throughout mainland China, has allowed Lehman, Lee & Xu to promptly deal and assist with client’s queries throughout the country. Our Shanghai office, situated in the heart of the commercial and business district allows us to interact with our client’s on a face to face basis, and deal with any legal issues they may be experiencing.

Should you have any queries related to our Shanghai office, or any aspect of the scope of work Lehman, Lee & Xu performs, please contact us at mail@lehmanlaw.com...

China Law 0 Comment February 2, 2010, 5:25 pm

Conflict with new demolition regulations

The real estate development business in China is increasing at a feverish rate. Throughout most areas of Beijing, you are likely to witness some form of development taking place such, be it residential housing, or the construction of buildings for corporate and commercial use.

Article 13 of Constitution of the People’s Republic of China states the following:

“The State may, in the public interest and in accordance with law, expropriate or requisition private property for its use and shall make compensation for the private property expropriated or requisitioned.”

The above article outlines that the state may permit the destruction of private property if it falls within the public interest remit. However, new draft regulations appear to have been written which directly conflicts with Article 13.

No. 40 of the draft regulations states the following:

“to demolish housing for construction of non-public interest, the constructors, such as real estate developers, need to ask permission from related governments.”

If the new draft regulations came into effect without any revisions, it would appear to be going against the spirit of the Chinese constitution, whilst also opening up for the potential of thousands of residential housing to fall risk to real estate developers. As the regulations are still in draft format, China’s legislatures still have the ability to correct and amend such an anomaly.

The draft provisions have come under scrutiny from China’s academics.

Lehman, Lee & Xu will keep you updated with the end results of these draft provision.

China Law 0 Comment February 2, 2010, 5:10 pm

Combating counterfeiting in China

International branded drinks are being targeted by counterfeiters, as foreign brands increase in popularity in China.

The whiskey industry in particular has come under attack from counterfeiters. Currently, Chivas Regal is the leading imported whiskey in China. The Chinese Trade Mark Office (“CMTO”) having recognised the importance of the brand protected both ‘Chivas Regal’ and ‘Chivas’ as well known trademarks, with the former protected in both English and Chinese, the latter protected in English, under the PRC’s Trademark Law. The CMTO’s approval of the Chivas brand as a well known trademark in China allows for cross class protection, and is not merely limited to alcoholic beverages under Class 33.

In addition to affording such protection to the Chivas brand, China is also working in close connection with the Scotch Whiskey Association (“SWA”) who’s aim is to “promote, protect and represent the interests of the whisky industry in Scotland and around the world.” The CMTO has protected “Scottish Whiskey” as a collective trademark.

Article 16 of the PRC’s Trademark Law states the following:
“Where a trademark contains a geographic indication of the goods in respect of which the trademark is used, the goods is not from the region indicated therein and it misleads the public, it shall be rejected for registration and prohibited from use; however, any trademark that has been registered in good faith shall remain valid.”

This provision therefore prohibits counterfeiters from passing off spirits as Scottish Whisky where they have not been produced in Scotland.

The importance of protecting a company’s IP rights should be a number one priority even before taking steps to enter the Chinese market, since the PRC is a first-to-file jurisdiction. This means that the holder of a trademark for example in a foreign jurisdiction has no priority in PRC unless and until it has filed its marks. The sole exception is “well-known” foreign trademarks. Additionally, foreign companies should look at adopting a Chinese name for their company and/or brand. This can be beneficial for numerous reasons, such as increasing potential client base, by appealing to more in the Chinese market, and also to stop your competition from legally registering the new Chinese name of your company. The most prominent example was the registration of the “Starbucks” trademark by a Shanghai based café.

At Lehman, Lee & Xu our professional and dedicated IP department deal with such issues on a daily basis. Our years of experience, allows us to make a full and practical assessment as to the best course of action to protect our client’s business interests in China. Our prominence within the Chinese legal sector is evident in the numerous accreditations and awards received, with our IP practice being ranked as a Tier 1, and our lawyers recognised as leading lawyers within such fields. For further details related to our IP department, or if you have any legal queries please contact us at mail@lehmanlaw.com. ...

China Law 0 Comment February 2, 2010, 5:02 pm

Patent applications increase 18%

The State Intellectual Property Office (“SIPO”) recorded an 18% increase of patent applications from 2008 numbers.

From statistical data outlined on the SIPO’s website, 976,686 patent applications were received for the year 2009, where as 828,328 were received for 2008. The figure is the cumulative total for invention patents, utility models, and design patents, including both domestic and foreign applications.

Such data highlights the steady increase of domestic applications since 2006. Nearly 90% of the total number of patent applications received in 2009 were in respect of domestic filers, where as in 2006, this figure was only 82%.

As highlighted by some of our previous postings, China recently enacted the third amendment to the PRC’s Patent Law, which became effective on October 1, 2009. This amendment was in line with the National IP Strategy, which looked to revise and update China’s IPR regime.

IP is one of Lehman, Lee & Xu’s founding and core practices. Our dedicated IP department deals with applications, and enforcement of patents, trademarks and copyright matters. Our commitment to one of our core practices is highlighted by our successful representation of clients, which recently included the Chinese branch of American online retailer Newegg.com Inc. Additionally, we strive to keep our clients and interested parties updated with IPR related news, and updates via our China IP Insights Newsletter. For further information on the scope of our IP services, or to subscribe to our IP newsletter please email mail@lehmanlaw.com.

Further details can be located on the SIPO’s website at the following location: www.sipo.gov.cn...

China Law 0 Comment February 2, 2010, 10:04 am

Drug traffickers new target

Alarming tales of young Chinese women being targeted to traffic drugs into China are coming to light at an increasing rate.

What individuals believe to be a mere collection of packages for their “boyfriend”, in fact turns out to contain an illegal substance. More worryingly it appears that the problem is increasing through the use of the internet, and online dating. Most who are targeted claim that they are unaware that the packages contain any illegal content.

Monitoring the borders, China Customs deals with incidents such as these, and also the transportation of drugs through the postal and special delivery services.

During January to November 2009, China’s public security forces arrested 82,000 drug suspects, and cracked 70,000 drugs case. The year 2009 also attributed to Customs seizing over 2000 Kg of drugs through its effective monitoring of drug trafficking. The Chinese judiciary enforce a strict application of the law in respect of drug related offences.

China Law 0 Comment January 29, 2010, 8:05 pm

China Unlocks Door to Foreign Security Firms

As of 2010, foreign security firms are now allowed in China for general security services only, such as guarding of residential and office complexes. The regulation was issued by the State Council on October 13, 2009 and took effect on January 1, 2010. A spokesman for the Legislative Affairs Office of the State Council said the regulation is crucial to the high speed development of China’s security industry. As of today, many security guards in China are not registered with their local police departments and many guards have little or no training at all. China hopes to change this trend by allowing more sophisticated foreign firms to the market. The details of registering foreign security companies in Beijing have not been completely decided thus far. If interested in more details in regards to establishing a foreign security company in China, please contact the Chinese Ministry of Public Security or Lehman, Lee & Xu, a leading Chinese law firm with experience in both setting up foreign companies in China and the security industry. More information can be obtained at www.lehmanlaw.com. ...

China Law 0 Comment January 29, 2010, 6:55 pm

Drug Trafficking Cases Picking Up in China

According to the National Narcotics and Control Team, 2009 saw more drug cases and quantity of drugs than any other year in Chinese history. Chinese customs took control of 2,119.2 kilograms of drugs during its crackdown on drug trafficking. This figure is seen as 150 percent increase from 2008. 506 drug smuggling cases were brought before court with 553 suspects. The most common form of smuggling was through postal and express mail accounting for 151 of the cases. Baby diapers and auto axles were also used.

The largest case of the year was the result of a six month investigation that eventually lead to the arrest of 85 gang members on charges of producing and distributing crystal meth. Police destroyed 44 tons of raw materials that could be used to make crystal meth worth $318 million, and 900 pounds of ephedrine, a main component of methamphetamine, it said. They also destroyed eight illegal factories and confiscated 10 apartments and 21 cars belonging to the suspects.

The drug trade in China has flourished as social controls have been loosened over the last several decades. Government statistics put the number of known addicts at 1.2 million, including 700,000 heroin users, more than two-thirds of them being under the age of 35. ...

China Law 0 Comment January 28, 2010, 5:20 pm

Contradicting Policies

In an attempt to increase public transportation use in the capital city, Beijing will extend its rail and subway lines and open more express bus lanes in 2010. The end goal is to get 40% of Beijing’s commuters using public transportation this year.. 38.7% of the city’s residents used public transportation as their primary source of commute. The city government has approved a budget of 80 million yuan ($11.7 billion) for the construction of public transport facilities in 2010 alone. The lines will be extended by 140 km this year to 368 km and reach 561 km in 2015. An extra 800,000 vehicles were added to Beijing roads in 2009. The total number hit 4 million.

It appears the city’s plan to increase public transit goes in direct contrast to the country’s strong incentives to encourage the purchase of automobiles. 2009 saw extremely liberal policy incentives, such as subsidies and tax cuts, that helped the Chinese automobile industry grow 52.9% year-over-year with a total of 13.6 million automobiles purchased. As a result of such strong incentives, 2009 was the first year the United States was surpassed as the leading consumer of automobiles. As the Chinese market was skyrocketing, the American market sunk 21% to 10.4 million. Perhaps the incentives drew more attention than desired? I do not have the answer to that. But what I do know, the country of China and the city of Beijing are promoting contradicting policies.

China Law 0 Comment January 28, 2010, 5:19 pm

State Council to issue plan to address heavy metal pollutant concerns

Zhou Shengxian, Minister of Environmental Protection, has stated that by Jue 2010 a plan to control heavy metal pollution shall be released.

The urgency of the matter was highlighted when in 2008, 4035 people were found to have excessive lead in their blood, and a further 182 found to have excessive cadmium. The plan, undergoing review from the State Council, is likely to be issued before June, and will look to control and prevent the use of certain heavy metal pollutants. As part of the ministries procedure a list of industries involved with metals such as lead and mercury, and their locations shall be cultivated.

China Law 0 Comment January 28, 2010, 3:42 pm

New Master of European and International Law in China Offered at the China-EU School of Law, Beijing

A new one-year Masters program in European and International Law is being offered by the China-EU School of Law (CESL) in Beijing. Responding to the increase in demand for highly qualified legal expertise in matters of Chinese, European, and International law, this master’s program taught in English combines renowned international faculty from 15 Chinese and European universities in a competitive atmosphere. A joint project of the Chinese Government and European Union, the tuition is 60.000 RMB (about 6.000 EUR) for the entire program, with some scholarships available. The application deadline is April 20th. The application and more information can be found on the CESL website.

China Law 0 Comment January 28, 2010, 3:07 pm

IIT Avoided On Transfer Of Restricted Shares To Be Pursued

The “Circular on Strengthening the Administration of the Collection of Individual Income Tax on the Transfer of Restricted Shares” was released by the State Administration of Taxation (SAT) to explain the collection process of Individual Income Tax (IIT). It states that a taxpayer is required to pay an overdue tax bill if the amount deducted and withheld by the securities institution is less than the actual tax payment. Furthermore, it states that ITT on the transfer of restricted shares shall be deducted and withheld by securities institutions or declared for payment by taxpayers themselves. An application may be filed for settlement if there is a difference between the tax payable calculated on the basis of actual income and cost, and the amount deducted by the securities institution. Authorities shall repay a tax payable if it is less than the amount deducted and withheld by the securities institutions. If the tax payable is higher than the deducted and withheld amount, then the taxpayer shall pay an overdue tax bill.

Morgan Crank
Lehman, Le, and Xu...

China Law 0 Comment January 28, 2010, 11:12 am

Tax update: Rebate on R&B purchases of homemade equipment

The “Measures for the Administration of Tax Refunds for Purchasing Homemade Equipment by R&D institutions” (“the Measures”), issued by the State Administration of Taxation (“SAT”), and effective for a period from July 4, 2009, until December 31, 2010, addresses tax refunds R&D institutions are entitled to after making purchases of homemade equipment.

As outlined within the Measures, before the R & D institution can make an application for a tax rebate on the purchases of homemade equipment, a series of documentation is required in order to determine the amount due back. Firstly, the copies of the business licence copy is required, as well as the original and photocopies of the tax registration certificate, and also, evidence of the account for the tax rebate.

SAT’s Measures can be located at the following location: http://www.chinatax.gov.cn/n8136506/n8136593/n8137537/n8138502/9457640.html

China Law 0 Comment January 28, 2010, 10:49 am

Tax update: Rebate on R&B purchases of homemade equipment

The “Measures for the Administration of Tax Refunds for Purchasing Homemade Equipment by R&D institutions” (“the Measures”), issued by the State Administration of Taxation (“SAT”), and effective for a period from July 4, 2009, until December 31, 2010, addresses tax refunds R&D institutions are entitled to after making purchases of homemade equipment.

As outlined within the Measures, before the R & D institution can make an application for a tax rebate on the purchases of homemade equipment, a series of documentation is required in order to determine the amount due back. Firstly, the copies of the business licence copy is required, as well as the original and photocopies of the tax registration certificate, and also, evidence of the account for the tax rebate.

SAT’s Measures can be located at the following location: http://www.chinatax.gov.cn/n8136506/n8136593/n8137537/n8138502/9457640.html

China Law 0 Comment January 28, 2010, 10:49 am

Notice Concerning the Enforcement of the Amended Patent Law

The State Intellectual Property Office issued a notice concerning the Enforcement of the Amended Patent Law on the 29th of September 2009 in order to clarify the submission of patent applications and rules governing patent issues. When an applicant applies for both a patent of utility model and a patent of invention on the same day and in respect of the same invention, the statements must be filed separately to indicate that both patents in respect of the same invention have been submitted. Organizations or individuals who apply for a patent in a foreign country in respect of an invention or utility model created in China must apply in advance for a confidentiality assessment to be conducted by the SIPO and complete the required request form. An invention that is created based on genetic resources must complete the Source Disclosure Registration Form when applying for a patent in respect to the invention in order to explain the direct and original sources of its genetic resources. Where the applicant is unable to explain the original source, reasons must be given. New patent applications related to the above events as well as all request and registration forms filed after the application date must be delivered by the applicants in person or by post to the Patent Office under the SIPO. An applicant applying for a design must submit a description of the proposed design in writing, referencing the “Brief Description Design” (October 2009 version) or else the application will be rejected. Evaluation reports on patents of utility models and design will be conducted by the SIPO on any whose date of application is after 1 October 2009.

Morgan Crank
Lehman, Lee & Xu

China Law 0 Comment January 27, 2010, 2:42 pm

Tax updates: January 2010

Government benefits offered for new car purchases

Looking to buy a new passenger car with an engine capacity of 1.6L or less? Well as from January 1, 2010, such customers are eligible to benefit under the Notice on Simultaneous Entitlement of Subsidies for Car Replacement and Vehicle Purchase Tax Reductions, jointly issued by the Ministry of Finance and the Ministry of Commerce. The Notice allows purchasers to receive a subsidy when replacing their old vehicles. Additionally, the purchaser will be able to benefit from tax reduction also.

Administration of Accounting Firms

As from July 1, 2010, the Ministry of Finance’s new measures titled “Interim Measures on the Administration of the Office of Accounting Firms” (“the Measures”) shall become effective. The Measures differentiates between an office of an accounting firm, and an actual accounting firm. Additionally, the Measures also address issues regarding firm’s liabilities.

CICPA looks to the future

The Chinese Institute of Certified Public Accountants (“CIPCA”) are corresponding with local CPA institutions on the proposal of expanding the scope of services to include dealings with tax consultations, and judicial procedures. Comments are invited to be given by February 5, 2010.

Founded in 1988, the CICPA derives its statutory rights from the Law of the People’s Republic of China on Certified Public Accountants, the Charter of the Chinese Institute of Certified Public Accountants and other supplementary laws and regulations. CICPA’s responsibilities include; the review and approval of CICPA membership, the organisation of training activities; the organisation of annual reviews of the CPA qualification, and the monitoring and implementation of rules CPAs should adhere to.

The CICPA’s website can be located at the following location: http://www.cicpa.org.cn/english/

China Law 0 Comment January 26, 2010, 10:42 am

IPR Updates January 2010

Patent Law Enforcement Rules amended

The State Council have issued amendment rules pertaining to the enforcement of the PRC’s Patent Law. The release, titled “"Decisions of the State Council on Amending the 'Rules on Enforcing the Patent Law of the People's Republic of China’” shall be effective as of February 1, 2010.

One such amendment made to the enforcement rules, deals with Article 20 of the Patent Law. China made its third amendments to the PRC Patent Law in 2008 which became effective on October 1, 2009. Previous amendments took place in 1984, and 2000. The 2008 amendment came around through a voluntary need for change, in accordance with the State Council’s National Intellectual Property Strategy, rather than international pressure.

The State Council’s new release can be located at the following location: http://www.gov.cn/zwgk/2010-01/18/content_1513398.htm

Push for stronger copyright laws

IPR protection is a continual concern and a number one priority for China. It’s importance is evident by State releases, such as the National IP Strategy. Director General of the General Administration of Press and Publication (“GATT”) and the National Copyright Administration (“NCA”), Liu Binjie, expressed the need to push the need for reforms of copyright law in China. Currently, the PRC’s Copyright Law is lagging behind, with revisions having already been made in 2008 to the Patent Law, and the Trademark Law currently undergoing revisions.

GATT is the administrative agency in China responsible for the distribution of news, and internet publications. The two agencies are very active in the promotion of copyright issues. In October 2009, Liu Binjie met with Director General Francis Gurry of WIPO in Geneva, exchanging views on joint cooperation within the field of copyright.

China is a binding signatory to international conventions concerning the protection of copyright, including the Universal Copyright Convention (1952), and the Berne Convention (1979).

Outsourcing & data protection

The protection of private and confidential data should be an immediate priority when outsourcing to a third party. As from February 1, 2010 Chinese domestic companies shall be subject to a Ministry of Commerce and Ministry of Industry and Information Technology release which addresses the need to protect such data. The release outlines what is meant by confidential data, and steps required to be taken to ensure there are no breaches, or to limit the number of potential breaches by unauthorised personnel. ...

China Law 0 Comment January 25, 2010, 4:50 pm


Microsoft filed the lawsuit against Beijing Strong Well at the Beijing No. 1 Intermediate People’s Court on the ground of copyright infringement.

Microsoft claimed that Strong Well installed the Microsoft Windows XP and Microsoft Office 2003 on computers without their permission which Strong Well sold. Microsoft also proved that Strong Well had been continuously infringing their copyright by way of pirated software installation on computers, which caused huge amount of loss to Microsoft.

Strong Well argued that it had never manufactured or sold any assembled computers. Therefore, Strong Well prohibited its staff showing assistances to customers with installation of any software and advised to customers not to install any pirated software.

Later, It was proved that Microsoft own the Microsoft Windows XP and Microsoft Office 2003, released in the USA, which was also protected in China under the "Computer Software Protection Regulations". The court also found that the warranty cards issued by Strong Well included a word “Strong Well DIY-assembled computer (with computer case) guaranteed” even Strong Well argued in the court they sold only computer accessories.

After the Court held the case, Strong Well was found at fault and ordered to compensate for damages caused to Microsoft with the amount of RMB350000.

China Law 0 Comment January 25, 2010, 4:32 pm


Chinese police have concluded an investigation into a detained Australian Rio Tinto Ltd executive and three colleagues arrested on charges of infringing trade secrets and bribery and sent the case to prosecutors, the Australian government and Chinese state media said last Monday. Four Rio staff, including Australian citizen Stern Hu, has been in Chinese custody since July over accusations of illegally obtaining commercial secrets.

Rio Tinto and the Australian government have urged China to allow the four, including Stern Hu, an Australian citizen who headed Rio Tinto's iron ore business in China, legal representation and to handle the case in a transparent way.

Hu and the three other employees were detained last July on charges of bribery and commercial espionage during iron ore price talks. They were charged in August with paying bribes to obtain confidential information about China's steel industry.

A brief statement by Shanghai's public security bureau, carried by state news agency Xinhua late on Monday, did not specify on what charges the four might be tried. It noted they were investigated for infringing trade secrets and bribery.

"The case is now in the hands of the Shanghai People's Procuratorate (prosecutor) who will decide whether it should be brought to trial," said Australia's Department of Foreign Affairs & Trade (DFAT), after being notified by Chinese authorities.

“We are not in a position to say how long this phase of the case will take, and are not prepared to speculate about the outcome. Details of the actual charges are not likely to be known until the prosecutors have made their decision on whether the case should proceed to trial," DFAT said in a statement.
China is Australia's biggest trade partner, with trade worth $53 billion last year. Australia exported $15 billion worth of iron ore to China in 2008, or 41 percent of China's iron ore imports.

China Law 0 Comment January 22, 2010, 5:46 pm


Tsolmon Shar
China approved stock index futures, giving investors a tool to protect against losses and profit from any declines. Until now, Chinese investors could only profit from gains in equities.

Chinese government also approved margin trading and short selling, the China Securities Regulatory Commission said. According to Commission’s statement it may take three months to complete preparations for index futures.

Index futures are essentially agreements to buy or sell an index at a preset value on an agreed date. Investors can also borrow money to buy securities or borrow securities to sell under the business of margin trading and short selling.

“China has opened great opportunities for future investors in the stock market” said Mr. Edward Lehman, managing director of Lehman, Lee & Xu law firm, which is one of the largest commercial law firms in China maintaining offices in Beijing, Shanghai, Shenzhen and Hong Kong.

Analysts expect the new tools to improve liquidity by attracting more capital into the equity market as the government plans to cut back bank lending to 7.5 trillion yuan ($1.1 trillion) in 2010 from last year’s 9.21 trillion yuan.

Index futures are part of China’s push to make more investment options available in the world’s third-biggest stock market by value. China restricts overseas investors to buying B shares that trade in U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen. China’s A shares are mostly limited to local investors. Foreign ownership of fund management companies is restricted to 49 percent.

China Law 0 Comment January 22, 2010, 5:46 pm

Ed Lehman Named One of China's Top Immigration Lawyers.

Edward Lehman of Lehman, Lee, and Xu has been named one of the best Immigration lawyers in China by the International Legal Who's Who 2010. This award accompanies Mr. Lehman’s award from the same publication as one of China’s best Trademark lawyers and one of China’s best Franchise lawyers.

Who’s Who is an independent research firm that was named the Strategic Research Partner of the ABA Section of International Law, in addition to its position as Official Research Partner of the International Bar Association. The firm compiles thousands of nominations from clients and private professionals to determine the leading individuals in their respected practice areas. The winners were formally announced in theThe International Who's Who of Franchise Lawyers 2009....

China Law 0 Comment January 15, 2010, 3:25 pm

The Administrative Measures for the Establishment of Partnership Enterprises in China by Foreign Enterprises or Individuals

On August 19, 2009, Administrative Measures on the Establishment of Partnership Enterprises by Foreign Enterprises or Individuals ( 外国企业和个人在中国境内设立合伙企业管理办法, "FIP Measures" ) was issued by the State Council, which will be effective on March 1, 2010.

The key issues concerning the Measures

According to the FIP Measures foreign individuals or enterprises are allowed to establish a partnership with either foreign investors or Chinese individuals or enterprises. The FIP Measures also apply to individuals or enterprises from Hong Kong, Macao and Taiwan. Under the new rules, foreign individuals or enterprises can join to existing Chinese and Foreign partnerships as new partners.

Under the Partnership Law, partners are permitted to make capital contributions to the partnership in cash, in kind, by labor, by intellectual property, by land use rights or by other property rights. The FIP Measures regulates that the monetary contributions by foreign partners to the partnership must be convertible currencies or lawfully earned RMB. However, it is not stated in the FIP Measures whether foreign partners may also make capital contributions in the same way as their Chinese partners. There are also no requirements about the minimum capital contributions, the minimum ratio for monetary contribution and the time limit for contributions in the FIP Measures.

The FIP Measures authorizes the State Administration of Industry and Commerce (“SAIC”) and its local counterparts rule the establishment, amendment registration and termination of FIPs without approval by the Ministry of Commerce (“MOFCOM”).However, aside from the documents required by Measures of the People’s Republic of China for the Registration of Partnership Enterprises, a written proof of compliance with foreign investment policies is required to be submitted at the time of registration. Foreign individuals and enterprises should refer to the Foreign Investment Guidance Catalog before registering the partnership. If the partnership business is in an industry subject to government approval, such approval should be obtained by the partnership.

The Measures also provide on assignment an agent or representative for registration of the partnership at the local administrative department for Industry and Commerce.

China Law 0 Comment January 15, 2010, 11:04 am

China New Rules On Foreign Tax Credits

On December 25, 2009 the Ministry of Finance and the State Administration of Taxation have issued a notice clarifying issues concerning the foreign tax credit (FTC) mechanism.

According to the Notice, foreign source income, credible tax, and credit limitation with respect to each country or region must be separately calculated. In calculating taxable income, the expenses must be allocated between China-origin income and foreign-origin income (by country). The losses of a branch in a foreign country may not offset any income originated from China or income from other foreign countries. Such losses can be used to offset income from the same country in the current year and subsequent five years.

The Notice also regulates clearly on when a resident enterprise claims indirect FTC in accordance with the relevant provisions in the Enterprises Income Tax Law, the foreign- source investment income on which the claim is based refers to the dividend income such as share interest and bonuses derived from the shares it holds directly or indirectly in a foreign subsidiary of the designated tier, with the total shares held at 20% or more. For dividend income such as share interest and bonuses, FTC claims can be made on a tier by tier basis by enterprises down to the lowest tier subsidiaries.

The notice states that for any amount of income received by resident enterprises from countries or regions, which are signatory to tax treaties with the Chinese government, those are entitled to tax exemption or deduction treatment according to the tax law of the country or region concerned. The amount exempted or deducted is also eligible for tax exemption or deduction in China. It can be treated as offshore income tax actually paid by the enterprise in applying for tax credits....

China Law 0 Comment January 15, 2010, 10:27 am


Tsolmon Shar
Recent IP cases filed under the Chinese courts have shown that China is taking progressive measurements regarding the infringements of Intellectual Property Rights.

Recently, MAN Nutzfahrzeuge AG was compensated US$3 million based on the fact that Chinese company allegedly appropriated their IPR by copying the design of its Starliner bus.

Following on from the Starliner bus case, on 20 August 2009 a Chinese court sentenced four people to prison and imposed fines of $1.6 million against them for various counts of software copyright infringement. Hong Lei and Xianzhong, the founders of Chengdu Gongruan Networking Technology, were accused of operating the website which provided online downloads of pirated Windows XP software. The Business Software Alliance Group, which represents a group of technology firms including Microsoft, Intel and Adobe, first filed a complaint with the National Copyright Administration of China and the Ministry of Public Security about software named Tomato Garden.

On the flip side, not all IP related disputes which were brought to the court’s attention was ruled in favor of international parties. One such example whereby Chinese companies have won over their international peers was on 16 November 2009, where a Chinese court ruled against Microsoft on the grounds of an allegation of IPR infringement of a Beijing-based software company, Zhongyi Electronic, in its use of two Chinese fonts. The court decided that Microsoft’s use of those fonts in Windows 98, Windows 2000, Windows XP and Windows Server 2003 went beyond the original agreement between the two companies. As a result Microsoft was ordered to stop selling those operating systems in China.

In the future, disputes involving IPR infringement are likely to increase in China.

China Law 0 Comment January 15, 2010, 10:00 am

Hong Kong: Contracts

In order for a contract to become legally binding and effective, three important ingredients consisting of offer and acceptance, consideration, and intention to create legal relations are required.

The first two requirements are some what straightforward. One example of offer and acceptance could be where Party A agrees to fix Party B’s car for X dollars if Party B then agrees to this a legally binding contract has been formed. Consideration can be an exchange of anything of value between the two parties. The third requirement, intention to create legal relations, can either be clear and transparent, or not obvious at all. In the latter category, the reasonable persons test would be applied. In order to make it clear that there are no such intentions certain wording such as “subject to contract” are used.

Where parties do not intend to be bound by the content of their agreement phrases such as the one above are usually used to highlight this. The use of such phrases appears that there can be non reliance on agreement terms, a lack of enforceability options, and no liability arising from non performance however dicta from a 2003 case decided the Chancery Division of the United Kingdom’s High Court suggests otherwise. Sargant L.J. stated “Be sure that to protect yourself you introduce into any preliminary contract you may think of making the words ‘subject to contract’.” I do not say that the phrase makes the contract containing it necessarily and whatever the context a conditional contract. But they are words appropriate for introducing a condition, and it would require a very strong and exceptional case for the clear prima facie meaning to be displaced.” Confetti Records (a firm) and others v Warner Music UK Ltd suggests that the phrase “subject to contract” may be displaced only by a very strong and exceptional case. Sargant L.J. provides previous case law examples of Michael Richard Properties Ltd v. Corporation of Wardens of St Saviour’s Parish Southwark [1975], Alpenstow Ltd v. Regalian Properties plc [1985], and Cranleigh Precision Engineering Ltd v. Bryant [1965], as such examples whereby the phrase was displaced.

One example whereby the courts displaced such a phrase was in the case of Michael Richard Properties Ltd v Corporation of Wardens of St Saviour’s Parish Southwark. Here, the phrase had been typed by mistake into an acceptance letter. The courts held that since there was no room for further negotiations then the phrase could be displaced.

China Law 0 Comment January 15, 2010, 9:37 am

Article 50: Search engines and mobile phones

Sam Engutsamy, January 14 2010.

2009 saw the first full year of China’s AML in effect. During this period three private actions cases were decided upon by the courts in accordance with the powers granted by Article 50. This posting shall give a brief overview of the three private actions cases decided upon by the Chinese courts.

Tangshan Renren Information Co., Ltd (Renren) – Baidu Company (Baidu)
The first case filled under the AML dealt with allegations of dominant market position within China’s search engine market. Baidu takes the number one position as China’s most popular search engine with Google coming second. Renren paid fees to Baidu to have their website listed on search results. Higher fees allowed for higher and more noticeable rankings. Renren claimed that Baidu had a dominant position within China’s search engine market, as they felt that Baidu had restricted the Renren’s noticeability on search results. Baidu justified such actions on the basis that Renren’s website contained a number of links which were contrary to their policy. Renren sought reinstallement of their website, and compensation in the region of RMB 1,106,000 for loses incurred.

Beijing No. 1 Intermediate Court found in favour of Baidu, by concluding that Baidu’s actions did not amount to monopolistic behaviour. A lack of supporting evidence damaged Renren’s chances of success.

Beijing Sursen Electronic Technology (Sursen) – Shanghai Shanda Network Development (Shanda) and Shanghai Xuanting Entertainment Information and Technology Co (Xuanting)
Details of this case can be located under a previous post at the following location: http://blawg.lehmanlaw.com/english/archives/2009/11/10/698.html.

China Mobile
Briefly touched upon in my previous post, this case concerned a private action brought to the courts by a Beijing lawyer and customer against China Mobile. The basis of the case concerned two sets of fees China Mobile were imposing on their customers. The courts did not pass judgement on this case, as the two parties reached a settlement. The settlement included a payment to the customer which according to China Mobile was not compensation, but merely as a gesture of gratitude for bringing it to the companies’ attention.

China Law 0 Comment January 15, 2010, 9:18 am

New MOFCOM Measures become effective

On January 1, 2010 two MOFCOM regulations regarding the reporting of concentrations, and review of concentrations became effective. This posting shall give an overview of the two releases:

(1) Measures for the Reporting of Concentrations of Business Operators
These new Measures will have applicability to mergers of undertaking, acquisitions through shares or equities and acquisitions through contractual obligations. The draft version of the Measures contained definition of “control” and issues surrounding joint ventures, however both have been removed. The Measures provides details of what revenues are to be taking into consideration when assessing if the entity meets the threshold requirements. The Measures lay down the requirement that all documentation submitted to MOFCOM are required to be in Chinese.

Available in Chinese at: http://fldj.mofcom.gov.cn/aarticle/c/200911/20091106639149.html

(2) Measures for the Review of Concentrations of Business Operators
These Measures address the process MOFCOM may take during the process where an undertaking has satisfied the notification threshold requirements and submitted an application for review by the Ministry. The Measures promote and encourage voluntary submission of additional information

Available in Chinese at: http://fldj.mofcom.gov.cn/aarticle/c/200911/20091106639145.html

China Law 0 Comment January 15, 2010, 9:10 am

China faces renewed concerns after contaminated milk product are found

Actions have been implemented to bring criminal proceedings against Shanghai Panda Diary Co (“Panda”) after milk products were found to contain high levels of the chemical melamine. This recent discovery follows on from the 2008 incident where milk and infant formulas also containing melamine, affected over 300,000, led to the death of six infants, and led to a further 860 being hospitalised. In 2004, watered down milk led to the deaths of 13 infants due to malnutrition. China’s legislative response to the 2008 incident was the enactment of the Food Safety Law of the People’s Republic of China which became effective on June 01, 2009.

Melamine, a type of plastic, is known to lead to renal and urinary complication within humans and animals. Consequently, the use of melamine in food production is prohibited.

Since the discovery of melamine in Panda milk products, three executives were arrested, the company shut down, and a halt on their stocks. The forthcoming criminal case is likely to enact severe punishments. One such example of the stringent views the courts have adopted to such breaches of the law was in November 2009 where two milk producers were executed after selling contained milk.

For information regarding melamine please visit the World Health Organisation’s website at the following location: http://www.who.int/csr/media/faq/QAmelamine/en/

China Law 0 Comment January 15, 2010, 8:52 am


In October 2010, the International Telecommunication Union (ITU) is scheduled to release the 4G International Standard after a further test and evaluation of the proposals for 4G Standardization.

ITU recognized LTE-Advanced and 802.16m as international advanced 4G standard proposals among six 4G technology proposals, which were submitted from China, South Korea, Japan, the European Organization for Standardization 3GPP and the North American Organization for Standardization IEEE, in the ITU conference. Two selected technology proposals will be analyzed, assessed and tested by the ITU on next stage, according to its working plan.

Next year, three meetings will be held by the ITU. According to its requirements, each assessment team is required to submit a preparatory technical assessment record by February. A meeting will be held to discuss the relevant technologies in 802.16m submitted by IEEE in the U.S. A., in January. Then each assessment team will run a simulated system to test the proposed technologies and assess their performance by applying a set of object criteria. The assessment teams will be hold meetings and submit the second-round assessment result, in June next year. In October 2010, the ITU will announce the final assessment result of 4G standard in a meeting, in China. Relevant standardization organizations will then formulate more specific system standards according to the assessment result.

Mr. Edward Lehman, managing director at LEHMAN, LEE & XU, expressed his commitment to China 4G development that “Now China’s TD-LTE-Advanced is likely to become the World’s main standard for 4G communications. If the Chinese 4G technology becomes standard, it is great opportunity for Chinese companies to save a lot in terms of costs on Intellectual Property Rights”.
LEHMAN, LEE & XU Law Firm advises on and implements intellectual property management, monetization, and protection strategies for multinational companies which have valuable portfolios of Intellectual Property assets.

To learn more about the Lehman, Lee & Xu, please visit to website: www.lehmanlaw.com
10-2 Liangmaqiao Diplomatic Compound, No. 22 Dongfang East Road, Chaoyang District
Beijing 100600 China
Tel: (86)(10)-8532 1919 Fax: (86)(10)-8532 1999
Email: mail@lehmanlaw.com

China Law 0 Comment January 7, 2010, 10:18 am

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