Watch Out the Email Sent to You, It May Cause You Lose Money

We have provided legal service for two foreign clients who experienced the same bad thing and lost a large amount of money in this year. It is quite necessary to write out the whole story to remind all businessmen of raising vigilance.
The client keeps a long and good business relationship with a foreign company and they always negotiate business such as the procurement contract and payment detail through email. In the middle of one negotiation, the other company sent an email saying that they had changed the bank account to receive the payment for their old bank account had something wrong. The client didn’t suspect at all, for the email address is quite similar to the other party’s and the staff member of the client didn’t notice the tiny difference. So, the client made payment to the new account given by the scammer, and obviously, it is quite hard and will take long to retrieve the money.
How did these scams happen? Per as our research and investigation, the scammers hacked the email box of the other party and got the information of the contract or the negotiation. Then, they established an email box of which the address was quite similar with the other party’s. When the real negotiation went into payment process, the scammers sent aforesaid email to the client and tricked the client to pay to the wrong account.
Damn scammers. We hope you never meet with such bad things and bad guys, and we also remind you to be vigilant with the email you received, especially when it contains information of bank account and payment, even it comes from an address which you totally trust. Double check the address.
If you are unlucky and already meet with a fraud, there is also a chance to retrieve the money and make the bad guys punished. Please never hesitate to come to us for legal help, we are experienced in that.

Published by Mike Wang on October 21st, 2016 tagged Uncategorized | Comment now »

Tips for Lending Money

Recently an upset young man called our firm for consultation, he mentioned he lent around RMB 50,000 Yuan to one of his so-called friend, however after many times of been refused by his friend to pay back the money, he came to our firm for help.

After further discussion, we found out the young man lent the money to his friend when they were together to play card during the Spring Festival of 2016 when they go back to home town to spent the holiday. He won a lot in the card game however his friend lost a lot, upon his friend’s ask he lent money to his friend and the total sum is around RMB 50,000 Yuan. However, he didn’t ask his friend to write a receipt of the loan nor he kept any other evidence to prove the loan.

We pointed out that it is very hard for the young man to win the case if he wants to bring the case to the court.
First, the law does not protect the loan for illegal activities. It’s obvious the young man’s friend lost the money on gamble and the young man knew about this. According to the laws in the case the lender knows in advance or should have known that the borrower will use the loan for illegal and criminal activities and still provides the loan, the lending contract( if exist) is invalid.

Second, there is no evidence to prove the loan such as a certificate of indebtedness, receipt, receipt for a loan or any other certificates of creditor’s rights as well as other evidence that can prove the existence of legal debtor-creditor relationships.

The advice from the lawyer is: do not lend your money easily to others, if you have to do this, following below tips:
1. Investigate the borrower’s credit record;
2. Value the borrower’s repayment ability;
3. Get to know the borrower’s true purpose of borrowing the money;
4. Always keep evidence for the loan to state clearly the basic information of the loan, such as the name of the both party, the amount of the loan, the time limit to payback the money, the purpose of the loan etc.

Published by Jacob Blacklock on October 20th, 2016 tagged Uncategorized | Comment now »

Recovering China Litigation Fees: To the Victor go the Spoils

Dealing with litigation matters, client’s are often concerned with paying required “litigation fees” in China, and specifically whether these fees may be recovered. To answer this question, the first thing is to know the statutory scope of “litigation fees”. In the Measures of the Payment of Litigation Fees promulgated by State Council in Dec. 19th, 2006, there are two types of “litigation fees” recognized in China:
I. Fees paid directly to the court:
(1) Case acceptance fee;
(2) Application fee;
(3) Expenses of the witness, interpreters, etc summoned to court.

II. Fees directly paid to a neutral institution appointed by the court, like an evaluation agency, authentication institution, translation agency etc.

These litigation fees are generally paid upfront by the parties when initiating or over the course of a litigation proceeding.

The importance of clarifying the scope of litigation fees lies in the fact that in civil legal proceedings, the losing party is the party responsible for bearing these litigation fees. These fees initially should be paid by the Plaintiff or the party submitting the application, however, they are not necessarily the ones finally bearing these costs. Taking case acceptance fee as an example, after the Plaintiff submits its Pleadings, the Plaintiff is then required to pay an acceptance fee to the court. Failure to pay the acceptance fee without reason will result in a determination that the pleading had been withdrawn by the Plaintiff. After the case acceptance fee is made, and assuming the Plaintiff wins the case, the court will rule that the Defendant must pay the cost of the case acceptance fee. The court will return the case acceptance fee to the Plaintiff and the Defendant has to pay the same amount to the court. For the other kinds of litigation fees, such as evaluation fee or authentication fee which are initially paid to concerned institution, instead of the court, the court will rule the losing party directly compensate the party submitting relevant application.

The short answer: If you win the case, you’ll get the money back.

The other important point is that the attorney fee is not covered by the litigation fees, therefore if you intend to have the other party compensate the costs for engaging attorneys, it should be separately and clearly stated in your pleadings and relevant evidence should be submitted to prove the truthfulness of these costs. Unlike the litigation fees, in legal practice, normally only partial amount of the attorney fees will be accepted by the court and finally awarded to be paid by the losing party.

Published by Tina Dong on October 19th, 2016 tagged Uncategorized | Comment now »

A Revision on Law of the WFOEs

A Revision to the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises (“WFOEs”) came into effective on October 1, 2016. A new article was added as Article 23, which stipulates that: Where the establishment of wholly foreign-owned enterprises does not involve the implementation of special access administrative measures prescribed by the State, the approval items stipulated in Article 6, Article 10 and Article 20 of this Law are subject to record-filing management. The special access administrative measures prescribed by the State shall be promulgated by or approved for promulgation by the State Council.
In the past, we usually followed the Catalogue for the Guidance of Foreign Investment Industries to define whether an industry is encouraged, restricted or prohibited to be operated by a WFOE, and then we would choose the right ones to build up the WFOE’s business scope. The formation or any change of WFOE’s business scope would have been approved by the State Council department in charge of foreign trade and economic relations or an agency authorized by the State Council. Normally, we had to submit the applications to both the commerce bureau and the AIC for approval and registration.
Now, the so called “special access administrative measures” in the Revision regulates and manages the industries in which the establishment of WFOEs is prohibited or restricted. The new Revision allows those WFOEs which intend to operate in the encouraged industries to only go through a record-filing procedure.
This simplifies the approval of foreign business investments and also eases the burden of the WFOEs with regards to making applications before different authorities for the same issue. Making foreign investments more convenient will help boost the economy. There is no doubt that the Revision is targeted at attracting more foreign investments.

Published by Christopher Fung on October 18th, 2016 tagged Uncategorized | Comment now »

Al in law firms and justice system

Artificial inteligence, the key to improving legal work and justice system
Artificial intelligence (AI) is the future of the legal profession. This, among other related topics, has been disccused during a conference specializing in the internet and law in Beijing, which took place this last Sunday and was jointly held by the Internet Society of China, All China Lawyers Association and Law Press China.
Taking advantage of the Internet to tackle cases and dealing with judicial affairs has been strongly approved by China’s legal industry. Robots are unlikely to replace lawyers in court, but they can prepare papers for hearings. Whilst not outside the realms of imagination, computers taking over legal reasoning tasks from human lawyers have yet to become reality. Partly this is because artificial intelligence has developed more slowly everywhere than the enthusiasts predicted. Another factor is the innate conservatism of the legal sector. However, there is every sign that a combination of technological advance and market pressure is about to push law firms into the AI age.
Professional services generally rely on a lot of data and information, and a relatively small amount of judgment. AI-based systems could carry out many of the tasks given to paralegals and junior associates. This has consequences for the shape of the industry and the career paths of those in it. A computer is as fresh and alert at 2am as it was at nine o’clock the previous morning, and this could mean a decline in the use of legal secretaries and the number of associates hired.
Even if objectively the system turned out to be not as expert as a human, some types of law firms might find the trade-off acceptable for some types of cases, as due diligence and litigation discovery software is already highly developed.
A more sophisticated use of AI is in providing strategic guidance. By instantly trawling through records of past cases, a system can find the optimum percentage at which an increased offer would lead to a settlement. Indeed, many Western insurance companies use such systems to settle personal injury claims.
The results of the analysis of a combination of different factors can be used to produce models able to predict the likelihood of cases being won or lost. These models will not replace a lawyer’s experience and judgment, but will provide an additional aid to them in a world where it is no longer good enough to take a case on with a 50 per cent chance of success and where fees are getting lower and lower.
As the Internet provides convenience for residents, it brings many changes for the legal industry, including not just law firms but also courts and prosecuting authorities.
Making use of the internet and big data to manage court affairs is also becoming more important for Chinese courts. This systems can help them make quicker and better decisions, improving the judicial efficiency.

“The fast developments in the network make several related industries booming, such as e-commerce, Internet finance and cybersecurity, but how to use laws or new-style legal ideas to handle new problems in the fields has been a big challenge for judicial insiders,” said Su Zelin, deputy director of the Commission for Legislative Affairs of the Standing Committee of the National People’s Congress, at this Sunday’s conference.

For example, to better analyze disputes and provide legal convenience for litigants, the top court established a database to collect litigations. 91 million cases and 44 million verdicts have been stored in it by now, and four open platforms have been set up already, including one for helping residents make lawsuits and one for looking up judgements.

The use of the internet also makes court work more transparent by receiving supervision from the public.

It was the second time that the country’s internet and legal industries held such activity, attracting hundreds of guests, such as Web enterprise engineers, lawyers and judges.

Published by Ines on October 17th, 2016 tagged Uncategorized | Comment now »

Things You Need To Know About Arbitration Agreement

Compared to court proceedings, arbitration is a commonly agreed convenient way to resolve commercial disputes. An Arbitral Award is final and binding, and cannot be appealed to court unless there is material defect in the award or a procedural defect in the arbitral proceedings described in the Arbitration Law.

When a dispute arises and one party has no intention to resolve it in a timely and efficient manner, such party can go to court challenging the validity of the Arbitration Agreement. This strategy which can be used to drag arbitral proceedings down, however not often used, as the Arbitration Law of the People’s Republic of China clearly stipulates and limits the factors making an Arbitration Agreement invalid. One of the factors we have seen a lot in practice is not having a chosen Arbitration Organization. In most cases, getting the chosen Arbitration Organization’s name wrong is the often seen cause, especially when such Arbitration Organization is a foreign facility. If there is a dispute over a wrongfully written name, it could be possible that the Arbitration Agreement is ruled invalid, if the dispute goes to court.

There is also choice of law issue when the arbitration agreement involves foreign factors. If there is no specific law chosen by both parties, the Arbitration Law of the PRC stipulates that the Arbitration Law of the chosen arbitration place should apply, in which case the applicable law could be foreign law. Many factors can impact the validity of the Arbitration Agreement, if you enter into an Arbitration Agreement with a Chinese company and choose the arbitration place within China, you need to have a Chinese lawyer to make sure the terms in such an agreement is valid under the Arbitration Law of the PRC, unless you have clearly chosen foreign law as the governing law.

Published by Tina Dong on October 14th, 2016 tagged Uncategorized | Comment now »

Can I Fire The Drunken Brawler Who Was Arrested?

One of our clients was trying to terminate one of its employees who had been held detention by the local Public Security Bureau for 3 days due to a drunken fight.

The client mentioned the intended reasons for the termination in the Terminate Notice are 1) the employee is subject to criminal liability in accordance with the law; 2) the employee has materially breached the client’s rules and regulations.

Thank goodness they send us the termination notice for review and we stopped the termination, as the reasons they intended to used were totally wrong.

First, “Hold Detention” by the Public Security Bureau and “Hold Criminal Liability” are different legal terminology. Generally speaking, “Hold Criminal Liability” means “Been sentenced to criminal penalty by the court”, it is the result of the whole criminal case procedure. As for “Hold Detention”, depending on the extent of potentially liability, there are two types of Detention, “Administrative Detention” and “Criminal Detention”. “Criminal Detention” is more serious and it is the triggering step of a criminal case. After we reviewed the documents provided by the client, in the “Detention Notice” issued by the Public Security Bureau, we pointed out that the employee was held on “Administrative Detention”.

Second, after we reviewed the client’s company documents and discussed matters with the client, we found that there were no company rules or regulations that granted the client the right to terminate the contract by the reason of the employee being held in detention by the public security bureau. The fact is, if the client had formulated the company’s rules or regulations using words like “the company has the right to terminate the contract where the employee is held in detention by the public security bureau” they would have been able to terminate

Following our review, our client asked us to help them re-formulate the company’s labor documents system to avoid such legal risks in the future. My advice for the day: if you want to fire an employee, do it carefully.

Published by Bonnie Zhang on October 13th, 2016 tagged Uncategorized | Comment now »

Border Protection of IP rights in China

China’s system of border protection for IPRs was established in 1995 with the adoption of the Regulation on Customs Protection of IPRs by the Chinese State Council. Since China is one of the main sources of counterfeit items globally, more and more IPR holders have over the last few years started using the mechanism of border protection in China as a first line of defense in order to stop the flow of counterfeits into the global market.
Since the establishment of the system of customs recordation on IP until now (May 7, 2014), the General Administration of Customs (GAC) examined and approved a total of 32,313 customs IP recordation applications, including 25,654 for trademarks, and 25,654 for copyrights and 1,674 for patents, until October, 2016.
The General Administration of Customs of China (GACC) has reported that customs officials across China made 27,000 border detentions of suspecting IP-infringing shipments in 2014. 97% of the shipments were being exported from mainland China. Compared with the year before, the number of seizures conducted has greatly increased.

These statistics show that China customs is becoming more active in IPR protection and local customs offices are even establishing specialized departments for IPR issues. IPR holders in China should take advantage of this trend of strengthening border protection. However, it could also lead to potential risks, if the IPR holder does not cooperate with customs in a correct manner or fails to respond in due time.
How to use Customs Recordal to protect IP more effectively?

Customs Recordal

• Under the Regulations Governing IP Right Customs Protection of China, the trademark owner can record its registered marks with the GAC. Trademark owners are highly recommended to record their trademarks with Customs since whether the mark is recorded makes a big difference.
• When making the recordal, it is better to inform Customs of the names of the granted licensees or distributors of the trademark owners, as well as the potential infringers.

Customs Training

• For those who suffer frequent infringements, it may be effective to send people to educate customs officers about their goods and how to spot infringing goods.

Customs Seizure

• If suspected infringing products are found during routine inspections of the goods for export and import, Customs will inform the trademark owner (or its agents) to verify that the products are infringing. The trademark owner may have to put up a bond if it applies for a temporary seizure against the suspected goods.
• After Customs detains the suspected infringing goods at the request of the trademark owner, the trademark owner is recommended to file a lawsuit.
• It is also important for the trademark owner to respond quickly to the requests of customs officers to encourage them to help find the counterfeits.
• If the infringing products are verified and confirmed to be counterfeit (and assuming that the owner of the goods does not institute a challenge), Customs will issue a penalty decision against the exporter.

Published by Christopher Fung on October 13th, 2016 tagged Uncategorized | Comment now »

Same old story…

Some clients recently consulted me regarding the formation of a WFOE in China. While the policy on this issue has changed since October 1, 2016, and the process seems to be simplified, our law firm has done some research on the new policy, and we have found that things are only a little better.

Why do we say this? Under the new policy, we still need to go to at least two administrative authorities, namely the commercial committee and the AIC. The only change in the incorporation process is that the approval procedures with the commercial committee have been made into a recordal system which means the required materials are reduced and the process is expedited.

According to the new regulations, the following documents still needed to be submitted for recordal with the commercial committee:
1. Name pre-approval letter or the business license of the company to be formed;
2. Commitment letter signed by the investor or its authorized signatory;
3. Power of attorney signed by the investor or its authorized signatory and the commissioned person’s ID;
4. ID of the investor;
5. ID of the legal representative of the company to be formed.

Analyzing the above listed materials, we can see changes. In particular, the recordal could be made after the formation of the company, something that is signified by the issuance of a business license. Compared with the old policy, the approval certificate and approval letter are the preconditions of applying for a business license. Additionally, some documents don’t need to be submitted, such as the feasibility report, articles of association, bank credit letter, documents on company’s premise, etc… But that doesn’t mean we don’t need to prepare such documents, because many of them still need to be submitted to the AIC.

In summary, some time is saved in the new process, but it still requires the same amount of effort from all parties involved.

For a company whose business scope includes import or export, there are other more complicated procedures to go through. Next time, we will talk about those procedures.

Published by Christopher Fung on October 12th, 2016 tagged Uncategorized | Comment now »

Cell phone or TNT???

Earlier today, Samsung Electronics Co., Ltd. announced that it had asked all global carriers to stop sales and replacements of their Galaxy Note7 cellphones and further requested all of its consumers with either an original Galaxy Note 7 or replacement Galaxy Note 7 to keep the device switched off and stop using it.
In fact, this is not the first time for Samsung to take action regarding its Note 7 products. Since August, lots of fires and explosions caused by Samsung Galaxy Note 7’s batteries have been reported worldwide. During September, Samsung has recalled 2.5 million Note 7 cellphones and exchanged new batteries for their customers. However, the replacement of the new battery did not prevent more accidents from happening. It was spotted that a Southwest Airlines flight 994 from Louisville to Baltimore was evacuated due to a “smoking” Note7 with newly replaced battery.
Apart from the battery problems, there might still be other defects inside the Note 7 cellphones, and there must be something wrong with Samsung’s internal quality control procedures. So far the product is under investigation, and no official report as to the cause of the defect has been released yet.
Well then, for those poor guys holding the Galaxy Note 7s, what should you do to safeguard yourself and get your money back? The most important thing for now is to switch off the device right away. As there is no official explanation as to the cause of fire or explosion, who knows when the device might go bang? If your device has already caused damage to you, go to the seller or the operator and claim compensation in accordance with the Law on the Protection of Consumer Rights and Interests, which confers consumers or other victims suffering from personal injuries or property damages due to defects of goods, the right to claim compensation either from the sellers or the manufacturers of the products. If you bought your cell phone from an online trading platform, you may claim compensation from the vendor of the goods. If the online trading platform cannot provide you with the real name, address and effective contact of the vendor, you may claim compensation from the operator of the online trading platform.
Samsung just promised to recall all the Note 7 cellphones sold within Mainland China. Consumers may either choose to return the Note 7 in exchange of other types of Samsung devices or to return the Note 7 for a full refund.
There is no doubt that Samsung will have to go through a tough period and suffer damage to their business reputation. We hope that every manufacturer can keep their products safe whilst innovating.

Published by Christopher Fung on October 12th, 2016 tagged Uncategorized | Comment now »