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"The truth is rarely pure and never simple"

-Oscar Wilde

Capital punishment decreases nationwide

October 12, 2007 - by Maggie Xu

The country is expected to register its lowest number of death penalty in more than a decade, largely due to measures that have stripped all but the top courts of their powers to approve capital punishment for serious crimes

Although authorities do not provide figures on the number of executions carried out annually, the country's legal system had exercised caution this year in terms of capital punishment.

As of January 1 this year, only the Supreme People's Court (SPC) had the power to approve executions.

Death sentences across the country in the first half of this year "clearly continued" to decrease, compared with the same period last year.

Four categories of crimes can result in the death penalty, including murder, robbery, drug trafficking and intentional injury. This is very small number of death sentences for economic crimes now.

Last year, 889,042 people were convicted by courts at all levels on the Chinese mainland, and 153,724 received sentences of five years or longer. The SPC figures include life terms and executions.
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China Law 0 Comment October 12, 2007, 9:30 am

Chinese Industries Flex Their New-Found IPR Muscles

October 11, 2007 - by Eion Murdock

Normally when one hears of an intellectual property case in China, the assumption is that a Chinese company stands accused of copying. Recently however, Chinese enterprises have been borrowing something quite different from the west - the tactic of aggressive patent litigation in pursuit of market share.

At the end of last month, a court in Zhejiang province awarded local manufacturer Chint Group almost 335 million yuan in its patent infringement case against French rival Schneider Electric, the largest damages award ever made by a Chinese court for intellectual property infringement.

The sum of money involved is substantial, but may well be reduced on appeal. The trend it represents is far more important. In addition to securing and pursuing their own intellectual property rights, companies doing business in China must also manage the risk of infringement suits that may be brought against them. On the other hand, as more Chinese companies discover the benefits of respect for intellectual property, the outcome can only be positive.

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China Law 0 Comment October 11, 2007, 3:12 pm

Further Restrictions on China's Real Estate Market

October 11, 2007 - by Ryan Tang

Background

In view of the continuing expansion of investments and activities of foreign investors and real estate operators in China together with the ineffectiveness of Circular 171 (Jianzhufang [2006] No. 171, "Opinion on Regulating Approval and Administration of Foreign Investment in the Real Estate Market" ), the Ministry of Commerce (MOC) and the State Administration of Foreign Exchange (SAFE) recently issued two new circulars (Circular 50 and Circular 130) that take relatively drastic actions to discourage further foreign investment in the country's real estate market to temper the real estate market. Taken together, the two new circulars affect a number of critical areas, including project approval, the requirements necessary to form a project company, and project financing.

Circular 50 (Shangzihan [2007] No. 50, "Notice Governing Further Strengthening and Regulating the Approval and Supervision of Direct Foreign Investment in the Real Estate Sector" ) issued 23 May 2007 requires that all new foreign-invested real estate enterprises be approved by the national-level MOC. Circular 130 (Huizongfa [2007] No. 130) issued 10 July 2007 effectively provides that foreign-invested real estate enterprises will not be permitted to have any foreign debt. As a result, offshore funds can only be directly invested in the form of registered capital. Of course, local loans also may be used to satisfy the cash needs of a real estate project company.

Highlights of New Regulations

The key features of Circular 50 include:
(1) Introduction of stricter controls on foreign investment in high-end real estate projects and the acquisition of or investment in domestic real estate enterprises. "Round-trip" structures (i.e. structures where domestic Chinese investors use their overseas funds to make domestic investments) also will be tightly controlled.
(2) Emphasis on compliance with regulations for foreign-invested real estate enterprises. Approval to set up a foreign invested real estate company will be granted only if the investor has obtained land use rights or building ownership or has entered into a sale and purchase agreement to obtain such rights or ownership.
(3) Clarification that no investor in a joint venture can guarantee in any manner fixed returns to any parties in the venture.
(4)The local authorities must immediately file with MOC their approval granted to set up a foreign-invested real estate enterprise.

Consistent with Circular 50, the General Affairs Department of the SAFE has disclosed in Circular 130 a ...

China Law 0 Comment October 11, 2007, 2:02 pm

China's property law takes effect

October 11, 2007 - by Maggie Xu

China's Property Law that provides equal protection to both state and private properties was put into effect on 1,October 2007.

The law is regarded as a key step in the country's efforts to further economic reforms and boost social harmony.

The law contains 247 articles stipulating no units or individuals may infringe upon the property of the state, the collective and the individual.

To give equal protection to private property by law is in accord with the Constitution, the proposition of the Communist Party of China and people's common requests, according to Wang Liming, a professor of Renmin University of China who participated in the legislation process of the law.

In general, The law will inspire people's enthusiasm to create wealth and is helpful for them to fully enjoy the fruit of reform and opening-up.

However, the bill had met with doubts and opposition from people who argued private property should not be leveled with state property.

In response, senior legislator Wang Zhaoguo said during the parliamentary full session in March that it will be impossible to develop the socialist market economy or to uphold and improve the basic economic system of socialism if equal protection is not secured.


To attact public concerns over fraudulent acquisitions and mergers of state property, the law stipulates that illegal possession, sharing, and destruction of state property is prohibited. Those who cause loss of state property shall bear legal liability, according to the law.

The concept of improving the protection of private property was first brought up at the 16th National Congress of the Communist Party of China held in November 2002. In March 2004, the NPC adopted a major amendment to the Constitution, stating that people's lawful private property is inviolable.

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China Law 0 Comment October 11, 2007, 2:00 pm

Will Anti-monopoly law affect foreign investment?

October 10, 2007 - by Maggie Xu

Since anti-monopoly law published in August 30, 2007,many foreign companies show their great concern about whether foreign investment would be affected? A good news now heard from relevant authorities that the government will maintain its policy of encouraging foreign investment and the necessary security checks on foreign investment in domestic enterprises would pose no obstacles to the utilization of foreign capital.

The law requires checks on mergers of foreign and Chinese enterprises to
ascertain whether they affect national security.

A regulation issued by the State Council authorized government departments to initiate checks if the foreign firms "jeopardize national security or public interests" or "employ Chinese developed technology".

Another rule jointly published by six ministries and departments requires
foreign companies to submit to checks if they take control of a joint venture in one of China's key industries.

In addition, the law would prevent SOEs in monopolistic industries such as petroleum, telecommunications, mail services and tobacco from abusing their market dominance to lower services and disregarding the public interests.

China joins more than 80 countries in adopting an anti-monopoly law. Drafting of the law began in 1994.
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China Law 0 Comment October 10, 2007, 5:14 pm

Summary of the New Anti-monopoly Law

September 12, 2007 - by Greg

On August 30, 2007, the Anti-monopoly Law of the PRC (the "Law" ) was promulgated by the National People's Congress, to be effective August 1, 2008. The law is designed to protect the public and general interest of society.

Below, we summarize the relevant aspects of the Law:

As per Article 2, the Law regulates monopolistic conduct within the territory of the China, and monopolistic conduct outside the territory of China that has the effect of eliminating or restricting competition on the domestic market.

Monopolistic Conduct

The term "monopolistic conduct" includes:
1. Monopoly agreements reached between business operators;
2. Abuse of dominant market status by business operators; and
3. Concentration of business operators that may have the effect of eliminating or restricting competition.

The term "business operator" refers to a natural person, legal person, or any other organization that engages in the production or business of commodities or provides services.

Anti-monopoly Committee:

The State Council will establish an Anti-monopoly Committee, which will be responsible for organizing, coordinating and guiding the anti-monopoly work and performing the following functions:
1. Studying and drafting relevant competition policies;
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China Law 1 Comment September 12, 2007, 1:33 pm

Overview of China¡¯s New Labor Contract Law

August 13, 2007 - by Sandy Lin

After four readings, the long-anticipated and hotly-debated Labor Contract Law (¡°LCL¡±) was passed by the Standing Committee of the National People¡¯s Congress , the top legislature of China, on June 29th, 2007, and will come into effect on January 1st, 2008.
Before the passage of the LCL, China did not have one unified national law governing labor contracts, and various provisions in this regard used to be dispersed through many laws and regulations, at both national and local levels, with some inconsistencies and ambiguities. This has sometimes made it difficult for employers (in particular, those which are foreign-invested enterprises) to gauge their employment liability exposures and for employees to protect their employee rights and interests.
The LCL, hailed as a big improvement, has clarified issues such as the method of calculating severance pay, the length of probationary period, and the consequences of employers¡¯ refusal to sign written labor contracts, just to name a few. In general, the LCL is a laudable attempt to enhance the protection of individual employees, with also some new rights to employers, such as the introduction of cap for the calculation of severance pay and expanded circumstances for economic lay-offs.
The purpose of this article is to outline the most significant provisions of the LCL.
Conclusion of Written Labor Contracts
The LCL requires that, when hiring employees, or within one month after hiring employees at the latest, employers shall sign written labor contracts with their employees. An employer, who has signed written labor contracts with its employees after one month but within one year, shall pay a double salary to its employees affected; an employer, who has failed to sign written labor contracts with its employees within one year, shall be deemed to have signed open-ended labor contracts with its employees, which can only be terminated for cause.
These provisions are pro-employees in an attempt to prevent employers from refusing to sign written labor contracts with their employees, a circumstance where the workers would encounter difficulties in proving the existence of employment relationships with their employers and their remunerations for employment as well.
Open-ended Labor Contracts
The term ¡°open-ended labor contract¡± (or ¡°labor contract without a fixed-term) refers to a labor contract with an indefinite term. By contrast, a ¡°fixed-term labor contract¡± has a definite term specified by both parties.
There has been a common misconception among employers in China that an employer may terminate an open-ended labor contract with its employees at will due to the lack of a specified contract term therein. Employers must be aware that an open-ended labor contract will never expire because its term is indefinite, and an employer is not allowed to terminate an open-ended labor contract unless under very limited circumstances expressly stipulated in the Chinese law. Therefore, an open-ended labor contract provides extra protection to employees as opposed to a fixed-term one.
The LCL extends the circumstances where an employee may require the conclusion of an open-ended labor contract with his/her employer to the following:
1. the employee has already been working for the employer for 10 consecutive years;
2. When the employer initially adopts labor contract system or when a state-owned enterprise re-concludes employment contracts with its employees due to restructuring, the employee has already been working for this employer for 10 consecutive years, and will reach the statutory retirement age in less than 10 years; or
3. the employee has consecutively concluded two fixed-term labor contracts with his/her employer, and does not have any of the circumstances as set out in the LCL which can be used by the employer as legal reasons to refuse to sign a fixed-term labor contract.
Probationary Period

As an employer may terminate, virtually without cause, the labor contract with an employee who is still serving his/her probationary period, some employers have used abusively extended probationary periods to sack their employees unfairly.
To address this problem, the LCL links the length of probationary period to the term of labor contracts more clearly, and does not allow an employer to require the same employee to serve more than one probationary period. A probationary period is not allowed for a labor contract with a term of less than three months, and must not be more than one month if the term of the labor contract is between three months and one year, must not be more than two months if the term of the labor contract is between one year and three years, and must not be more than six months if the term of the labor contract is more than three years or the labor contract is open-ended.
The LCL also introduces three standards regarding salary payable to employees during the probationary period. According to Article 20 of the LCL, before the completion of his/her probationary period, the salary payable to the employee must not be lower than the minimum salary for the similar positions in the employer, or 80% of the salary as agreed in the employee¡¯s labor contract, and must also not be lower than the minimum salary of the city where the employer is located.
Non-compete Clause
The LCL reduces the maximum length of the non-compete obligations imposed on an employee from 3 years to 2 years. In addition, the LCL also makes it clear that the non-compete obligations shall only apply to those employees who are senior management personnel, senior technical personnel, or hold other positions which shall be subject to confidentiality obligations. During the non-compete period, an employee bound by non-compete obligations shall not work for any other employer which produces or provides products or services similar to those of the employer, or start his/her own business to produce or provide such products or services.
However, the LCL does not provide for the standards relating to the amount of economic compensation which an employer shall give an employee for his/her assumption of non-compete obligations. Neither does the LCL adopt guidance on the application of non-compete obligations in terms of applicable scope and geographical territory, leaving them to the mutual consent of the employer and the employee.
Economic Lay-offs
The LCL expands the circumstances under which an employer may lay-off its employees to include the situations where the employer has changed its operations and where there have been changes to the employer¡¯s economic conditions. The LCL also sets out certain new restrictions on economic lay-offs, and requirements for preferential retention.
Severance Pay
The LCL requires that an employer shall pay severance pay to an employee whose fixed-term labor contract expires, unless the employer offers to renew the employee¡¯s labor contract with conditions not less favorable to him/her than those in his/her current contract, but he/she refuses the renewal. This is one of the most significant changes to the original rules on the application of severance pay, and may serve to prevent employers from intentionally using fixed-term contracts to avoid giving severance pay.
It is also worth nothing that a cap, which is triple the average salary for the last year in the city where the employer is located, is introduced for the calculation of severance pay for employees with high salaries.
Collective Labor Contracts
The LCL allows workers to negotiate collective labor contracts with their employers through the trade union, and in enterprises where the trade union has not been established workers may elect their own representatives to negotiate a collective contract with their employers under the ¡°direction¡± of the higher-level branch of the All China Federation of Trade Unions.
After a collective labor contract has been concluded, it shall be submitted to the local labor administrative authority, and come into force unless the local labor administrative authority raises any objection to the collective contract within 15 days.
Labor Dispatch

Labor dispatch, not clearly regulated before the adoption of the LCL, has been found being used by some employers as a way to cut the direct employment relationships between them and employees dispatched by dispatching agencies to work for them, and thus make them escape paying statutory employment benefits or even remunerations to the dispatched employees on the ground that the dispatched employees were not hired by them.
As another significant change, the LCL sets out new nationwide rules to regulate labor dispatch. The LCL requires that a dispatching agency shall sign a fixed term contract with a term of more than two years with its dispatched employees and to pay salaries on a monthly basis. The LCL also restricts the use of labor dispatch arrangements to temporary, auxiliary or fungible positions, forbids entities to establish any labor dispatching agency to dispatch workers to work for themselves or their subsidiaries, and imposes a requirement for ¡°equal pay for equal work¡±.


http://blawg.lehmanlaw.com/english/uploadfiles/chinalaborlaw.jpg

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China Law 4 Comment August 13, 2007, 3:46 pm

Bankruptcy Law has brought tremendous influence to Civil procedure in Mainland of China

August 10, 2007 - by Kenan Jiang

The new Bankruptcy Law came into force as of June 1, 2007. The applying of the item of this new law will change many former legal opinions in laws as labour law , contract law, civil law, and civil procedure, etc. The influence the bankruptcy law has brought to civil procedure is obvious and important. Attorneys shall pay attention to this kind of change , otherwise mistake will happen in litigation processs or in contract drafting. Oppositely, If these change in laws can be taken advantage of, it will bring new idea and strategy for the triumph which seemed impossible in former time.

Here some examples.

When a bankruptcy application has been accepted by a court, three important changes will happen to the relevant civil procedure regarding to the litigation with the debtor., such as :

1.the procedures for execution against the debtor shall be suspended and the relevant measures for preserving the debtor's assets shall be released.


2.Any civil action or arbitration involving the relevant debtor that is in the process of trial shall be suspended.

3.The relevant debtor's civil action shall be only filed with the court which accepts this bankruptcy application

There are many new ideas we can draw from this

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China Law 0 Comment August 10, 2007, 1:42 pm

Lehman, Lee & Xu's English Translation of the New Labour Contract Law and Highlights

July 27, 2007 - by Greg

There has been substantial discussion about the labour contract law in the past few weeks. The firm has also taken substantial interest in the law, as it is set to affect all Mainland businesses starting January 1, 2008.

The firm has translated the Labour Contract Law into English which may be viewed here.

Additionally, you may also read an article highlighting the major changes in the law by clicking here.
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China Law 1 Comment July 27, 2007, 6:32 pm

Does China's New Labor Contract Law Better Protect Intellectual Property Owners?

July 20, 2007
A Letter From Edward Lehman


Foolish or insightful, an idiot or a visionary, I am the very first (and so far only) foreign intellectual property lawyer to be a resident in China for twenty years (Beijing and Shanghai), and the first (and so far only) foreigner to manage a Chinese patent and trademark practice in this great nation. I moved to Shanghai from my native Chicago at the behest of a large well known "white shoe" international law firm where I began my career as an associate to establish their China presence in hopes of one day dominating the China intellectual property market. I was sent because of my many years studying the Chinese language, my legal qualifications, and my family's long time multi-generational connection to intellectual property in the United States.

http://blawg.lehmanlaw.com/english/uploadfiles/eel3_31843.jpg


Boy, was I in for a surprise! I arrived two years after the first IP laws were written and implemented and only one patent and trademark agency existed in the country (now there are thousands). Further, the new laws were not that great and few people and MNC's were interested in protecting their IP rights in China anyway as the country seemed closed to the outside world and business here seemed unimaginable for most. However, I was that unusual mixture of young, enthusiastic, ignorant, and arrogant, so I plodded onwards to make my mark in the most populous county in the world.
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China Law 1 Comment July 20, 2007, 5:40 pm

IP Rights and the New Labour Contract Law

July 19, 2007 - by Greg Sy

In recent days, much attention has been paid to China's new Labour Contract Law, promulgated on June 29, 2007 and effective January 1, 2008. Though the law has been given attention for the benefits it will bring to the protection of Chinese workers, the law also provides protection for employers' intellectual property rights. As China is reputed for its theft of intellectual property, including business secrets and other proprietary information, the Labour Contract Law should provide additional protection for employers, both in terms of confidentiality and use of such confidential information through more explicit regulations on non-compete periods for former employees.

http://blawg.lehmanlaw.com/english/uploadfiles/china_labor150.jpg


Here are several important articles:
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China Law 1 Comment July 19, 2007, 2:08 pm

IP Rights and Trade Secret

April 3, 2007 - Hans Lesser

Summary: New provisions on trade secrets seek to minimize risk of infringement thus making potential enforcement easier.

Considered as one of the most important IP rights to be protected by any legal system, Trade Secrets (TS) are preserved in the Chinese Anti Unfair Competition Law (the Law). To augment the lack of protection, the Supreme People's Court issued last December, an Interpretation on some Issues Concerning the Application of Law in Trial of Civil Cases involving Unfair Competition (the Interpretation), reshaping the TS concept and clarifying their scope of application.

The relevance of this type of IP right is two-fold; first, it covers a broad scope of application, ranging from non registered Trademarks to confidential information where disclosure may cause a significant economic or commercial loss for the rights holder vis-a-vis their competitors. On the other hand, there is no time limitation on Trade Secret unlike other IP rights. Note that the Trade Secret loses protection if through independent research or reverse engineering, "confidential aspects" are revealed.

Previously defined by the Law, the Interpretation seeks to complete the concept of what can be legally comprehended as TS, indicating that to be considered as such, the following requirements must be met:
a) Be unknown to the public, which means that it must be hard to obtain by acquainted personnel in the field of expertise, discarding as such the information known by common sense, simple observation, or by public media channels.
b) Must posses some commercial value from which the holder can obtain economic benefit or commercial advantage.
c) Be effectively ensured by the owner with "confidentially measures", being sufficient for this purpose the restriction on the information access by means of establishing passwords or others, adopting provisions to secure the transfer of TS, celebrating some kind of confidentially agreement, etc.

In case that the TS is illegally obtained by means of coercion, theft, unauthorized disclosure or violating a contractual disposition, the affected can make a claim directly through the Intermediate People's Court, which will apply the regulations provided for Patent infringements to decide on the inflicted damage and their resulting compensation. The burden to prove that the previous requirements are met is carried by the Holder, who must present the court with all the true-life background information.

Another topic specially mentioned by the Interpretation is related to the Company's client list and related information, their consideration as TS, and the company employee's responsibility in case of disclosure. It is declared that unless otherwise stipulated by contract the usage of the company's client list for a former employee to retain or establish commercial relations would not be considered as a violate of TS and thus exempted from legal prosecution.

In the light of the rules set forth it is advisable for companies willing to protect their relevant information to celebrate confidentiality agreements with their employees as well as license contracts with their business counterparts. These provisions definitely will minimize the risk of infringement thus making easier the potential enforcement of TS. Note that according to drafts of new Antimonopoly Law the legal treatment of TS will not be affected.
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China Law 0 Comment April 3, 2007, 4:26 pm

Two Landmark Laws Adopted on Last Day of NPC

March 16, 2007 - by Will

The NPC had on March 16, 2007 adopted two landmark laws -- the Property Rights Law and the Enterprise Income Tax Law, at the closing ceremony of its annual session in the Great Hall of the People in Beijing.

With the adoption of the said Enterprise Income Tax Law, it signifies a phase-in end of superior treatments to foreign investors that had been the situation for almost 30 years since the opening up of China's economic policy in 1978. It will come into effect on January 1, 2008.

Amongst the highlights:-

Enterprise Income Tax Law (coming into effect on January 1, 2008):

(i) sets unified income tax rate for domestic and foreign companies at 25%; (note: at present, domestic companies are subject to the average corporate income tax of 25%, and FIEs are favoured with 15% average).

(ii) removal of certain tax incentives for the FIEs, such as pre-tax reduction and tax rebate for re-investment.

Property Rights Law (coming into effect on October 1, 2007):

(i) stipulates that "the property of the state, the collective, the individual and other obligees is protected by law, and no units or individuals may infringe upon it".

(ii) offers (allegedly in theory) equal protection to state and private properties in order to boost social harmony and enhancement of further economic reforms.

We are in the midst of procuring a copy of the full laws, and will seek to translate the same into English text for readers reference soonest. Watch out this space.

Meanwhile, you may click here for the breaking news.
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China Law 0 Comment March 16, 2007, 7:33 pm

Commercial Franchise Administration Regulation

March 1, 2007 - by Lily

The long-awaited Commercial Franchise Administration Regulation ("Regulation" ) was issued by the State Council on February 6, 2007 and will come into force as of May 1, 2007. The Regulation applies equally to foreign-invested franchisors and domestic Chinese franchisors. That is to say all commercial franchise activities within the territory of the People's Republic of China will be subject to the Regulation.

1. What is 'commercial franchise'?

The term 'commercial franchise' ("Franchise" ) as mentioned in the Regulation means that a franchisor, who owns business resources, such as registered trademark, enterprise logo, patent, know-how, etc., licenses or empowers a franchisee to use such business resources by signing a contract, and the franchisee should conduct the business in the uniform commercial mode as agreed in the contract and pay franchise fee to the franchisor.

2. The requirements of the qualification of a franchisor:

(i) The franchisor shall be an enterprise rather than a natural person.
(ii) The franchisor is capable to provide long-term business guidance, technology support and training services to the franchisee.
(iii) The franchisor shall have at least two direct-operation stores and its operation term should exceed one year when it conducts Franchise.

3. Information disclosure:

A franchisor shall provide authentic and accurate basic information and other materials concerning the franchised business operations and the text of franchise contract in written form 30 days before signing a formal Franchise contract. The basic information shall be disclosed by the franchisor include name, domicile, registered capital, business scope, IP rights, the involvement in lawsuits, etc.

4. Put on records:

The franchisor shall file the Franchise for records at the competent commercial authority of the PRC in 15 days since signing a formal Franchise contract for the first time.

5. The obligations the franchisee:

(i) The franchisee shall not license the Franchise to any third party without the consent of the franchisor.
(ii) The franchisee shall not disclose, use or allow others to use the franchisor's business secrets without the consent of the franchisor.

6. The Franchise contract:

(i) A Franchise contract shall be signed in written form, and shall include the necessary content.
(ii) The franchisee may terminate the Franchise contract unilaterally within certain period upon execution of such contract.
(iii) The Franchise term should not be less than three years unless the franchisee agrees otherwise.
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China Law 0 Comment March 1, 2007, 9:59 am

The Establishment of Anti-Money Laundering Law

January 10, 2007 - by Diana Wang

Money laundering is undeniably one of the biggest problems facing the Chinese economy today, actually it is a problem for any economy, however in PRC it seems this matter is at extremes.

There have been extraordinary stories. For instance the train shipment case, where cardboard boxes filled with 8 million RMB were transported daily to a Hong Kong bank from Luo Wu station in Shen Zhen for nearly a year. Not to mention that early December 2006, a probe into the falsification in business registration launched jointly by the Shanghai office of the central bank and other governmental agencies accidentally exposed the largest ever single money laundering case in the country's history, involving 5 billion RMB. It has also been reported that the amount of money being laundered has increased to about 2% of the PRC's GDP, which is over 200 billion RMB annually.

In 2002, the People's Bank of China (PBOC) began establishing Anti-Money Laundering Committees at executive levels to monitor and report suspicious transactions. This certainly helped with the crack down of money laundering cases. The 3 regulations, comprising of Financial Institution Anti Money Laundering Regulation, Rules for the Administration of Reporting Large Amounts of RMB and suspicious Payment Transactions and the Rules for Administration of Reporting Financial Institutions Large Amounts and Suspicious Foreign Exchange Capital Transactions, created a skeleton framework for the anti-money laundering reporting and information monitoring systems.
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China Law 0 Comment January 10, 2007, 3:36 pm

The New Partnership Enterprise Law of the PRC

December 7, 2006 - by Lily Han

Partnership Enterprise Law of the People's Republic of China ("2006 Amendment" ) was amended on August 27, 2006, which shall become effective on June 1, 2007. With 109 articles, the "2006 Amendment" is divided into six chapters, i.e., General Provision, General Partnership Enterprises, Limited Partnership Enterprise, Dissolution and Liquidation of Partnership Enterprises, Legal Responsibilities and Supplementary Provisions. In comparison with the current law, the "2006 Amendment" has the following noteworthy points:

1. Scope of Partners

According to the current law, all partners in a partnership enterprise shall be natural persons only. However, the "2006 Amendment" provides in Article 2 that natural persons, legal persons, and other organizations may establish general partnership enterprises and limited partnership enterprises. That is to say, legal persons and organizations are allowed to be partners in a partnership enterprise, nevertheless, wholly state-owned companies, state-owned enterprises, listed companies, and public service entities or social communities are not allowed to serve as general partners.

2. General partnership VS. Limited partnership

In accordance with the "2006 Amendment", partners in partnership enterprises are divided into two kinds: general partners and limited partners. Like the current law, a general partnership enterprise may be formed by general partners. The partners will bear unlimited joint and several liabilities for the debts of the partnership enterprise. However, the "2006 Amendment" introduces the concept of "limited partnership", which is to be formed by at least one general partner and limited partners. The general partner will bear unlimited joint and several liabilities for the debts of the limited partnership, while the liabilities of limited partners are confined solely to their capital contributions to the limited partnership. While it is reasonable for a third party to assume that a limited partner is also a general partner and hence plausible to transact with him, the limited partner will bear unlimited liabilities for such transaction as a general partner.

3. Special General Partnership Enterprises

For the purpose of reducing the risks of general partners in professional service institutions and developing professional service institutions, the "2006 Amendment" provides that a professional service institution, which provides its clients with paid services on the basis of professional knowledge and special skills, may set up a special general partnership enterprise. In a special general partnership enterprise, a partner or partners shall bear unlimited liabilities or unlimited joint and several liabilities for the debts incurred by the partnership enterprise due to his (their) intentional or serious wrongful act in his (their) practice. In such situation, other partners will be liable solely for the amount of their capital contributions to the partnership enterprise.

4. Income Tax of Partnership Enterprises

Under the "2006 Amendment", for production and business operation incomes and other incomes of a partnership enterprise, the partners are required to pay their respective income tax. In other words, there is no taxation at the partnership enterprise level. All profits of the partnership enterprise will be ¡°passed-through¡± and be attributed to the partners.

5. Bankruptcy of Partnership Enterprises

A partnership enterprise may go bankrupt under the "2006 Amendment". If a partnership enterprise is declared bankrupt by a court, its general partners are still subject to unlimited joint and several liabilities for the debts of the partnership enterprise.

6. Foreign Parties Participation
Foreign enterprises or individuals may set up partnership enterprises in China under the "2006 Amendment". The State Council is authorized to issue separate regulations that govern foreign-invested partnership enterprises.
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China Law 3 Comment December 7, 2006, 11:45 am

Draft Labour Laws-Red Light For Foreign Companies?

December 7, 2006 - by Rikin Patel

Those of us who maintain an active interest in the development of the Chinese legal system may well by now have heard of the reforms proposed in its labour laws of late. 'The Labour Contract Law of the People's Republic of China (Draft)' passed on 28 October 2005, and formally published on 21 March 2006 is set to come into force some time in May 2007.

A number of foreign multinationals have publicly threatened to withdraw from China should the Draft Law be implemented; since the publication of the Draft Law, it has been openly announced by many that there is a strong preference for the current labour law, 'The Labour Law of the People's Republic of China (1995)' alongside numerous local regulations, to remain unchanged.

Bodies such as The US-China Business Council (to name but one) have strongly denounced the Draft, asserting that "in practice...(the) provisions would result in the loss of rights rather than the gaining of rights", and that the "Draft Law's provisions requiring trade union involvement in certain areas could have the unintended consequence of harming employees' interests". Such views are shared also by the American Chamber of Commerce in Shanghai, and the European Union Chamber of Commerce in China, who collectively represent over 2000 foreign companies, including computer colossals Microsoft and Intel.

But not all institutions feel the same way. The International Textile, Garment and Leather Workers Federation (ITGLWF) has written to leading retailers asking them to support the reforms, and Wal-Mart, the American supermarket giant, for example, has already adopted policies in relation to trade unions that comply with the Draft Law. But then, Wal-Mart is learning from its rather costly mistakes in the US. It faced a spate of claims from employees for neglecting labour legislation in Pennsylvania, California and numerous other states (their bank balance was reduced by well over UD$200 million as a result).

So is all this protest merely in vain? Will the NPC really take heed to their cries of dismay?

I, personally, do not think so. The Draft brings about important changes that seek to close the vast differences between the rich and poor - and every journey begins with a single step. I would much rather see corporate - not countryman's - pockets get lighter, particularly in the case of China's underpaid and overworked labour force.

It is clear that labour law is a controversial area.

For now, we wait for the drafting process to end, and for ratification by the National People's Congress of the People's Republic of China (NPC) and the Standing Committee of the NPC, after which point we may consider the issues in more depth.
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China Law 0 Comment December 7, 2006, 11:22 am

100+ Beijing Lawyers Rendering Pro-Bono Advise

October 29, 2006 - by Will

According to a report from the Beijing Youth Daily, a group of Beijing based criminal lawyers volunteered their precious Sunday morning by participating in a street pro-bono legal consultations to the general public at Xidan Cultural Square. The said event was organized by the All China Lawyers Association.

The volunteer lawyers rendering advises with regard to criminal defense, procedures, trials as well as the rights of accused persons in general.

When interviewed, one of the organizers explained that the purpose of having such event is to raise the awareness of rights accorded to accused, for majority of the public are still pretty ignorant about the general criminal procedure in the mainland.

The theme of this event: "Understanding criminal defense, helping yourselves and others" includes activities like seminars, public lectures, entering to the community, one to one consultation from 9.00am to 4.00pm.

This is something which ought to be promoted amongst the legal practitioners, for law practice is not just about billable hours, it is good for the soul and mind of an individual being able to reach out to the society at large.

A big congratulations to those volunteers in sacrificing their precious time, a very noble deed worth learning!
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China Law 0 Comment October 31, 2006, 2:39 pm

TV station in court over IPR argument

GUANGZHOU: A local television station appeared in court yesterday for allegedly violating private intellectual property rights (IPR). The Guangzhou TV Station was asked to stop showing a popular TV beauty contest programme "Beauty in the Flower City" by Hua Cheng, who insisted he was the producer and owner of the programme.

"The programme has not been shown properly according to the initial plans and the station has violated the copyright," said Hua. Hua began working at the station in 1987, launched the programme in 1988 and left the station in 2000. "The programme was not assigned by the station and it was launched without any financial support from the station during the first session," Hua said. "I collected money through advertisements and produced the programme all by myself. As a result, it became a personal TV product," he insisted in Guangzhou Intermediate People's Court.

The station denied the charges in court yesterday, saying the programme's copyright should not belong to an individual. "The programme's copyright belongs to the station since Hua launched it in the name of the station," said lawyer Zhu Xiaobing of the station. According to Zhu, the station registered the programme's trademark in 2000.

However, the Guangdong Provincial Copyright Bureau said Hua registered the copyright of the programme in June this year.

The TV station was also asked by Hua to pay compensation of nearly 10 million yuan (US$1.25 million), believed to be the largest amount of its kind in the nation.

The court did not reach a verdict yesterday. "It was a typical IPR case involving trademark rights and a copyright dispute," said Zhou Yuzhong, a lawyer at a Guangzhou-based law consultation firm. According to Zhou, the programme should be thought of as a personal product if not supported financially by the station.
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China Law 1 Comment October 23, 2006, 2:20 pm

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