China updates

Arbitration & ADR

New Legislation Expands Labour Arbitration Commissions' Powers
  • China
  • 28 February 2008

The much-debated Labour Dispute Mediation and Arbitration Law allows labour arbitration commissions to issue decisions which are immediately legally binding and which cannot be appealed in some cases. The fact that local labour arbitration commissions will allow workers to submit cases to arbitration for free is likely to result in more labour disputes being brought before the commissions.

Agreement with Macau Facilitates Mutual Recognition of Arbitral Awards
  • China
  • 14 February 2008

China and Macau have signed an agreement to recognize awards made under their respective arbitration laws as being mutually legal and enforceable. A similar agreement is already in place between China and Hong Kong. The agreement applies to all arbitral awards made after December 20 1999.

Arbitrating China-Related Disputes Outside China
  • China
  • 04 October 2007

Arbitration is the preferred method of dispute resolution for foreign investors in China. For a variety of reasons, foreign parties also prefer to arbitrate outside China. However, the first question confronting a party that wishes to arbitrate China-related disputes outside China is whether Chinese law allows the parties to do so. The answer, at least for now, is a qualified 'yes'.

Bilateral Investment Treaties Offer Scope for Investors' Arbitration Claims
  • China
  • 13 September 2007

Bilateral investment treaties are gaining recognition as sources of protection for foreign investors, as they allow investors to bring an arbitration claim directly against a host country. Historically, Chinese bilateral investment treaties have granted foreign investors limited rights of recourse through arbitration, but a new generation of treaties grants greater rights.

Supreme People's Court: Validity of Agreements and Challenges to Awards
  • China
  • 21 September 2006

The Supreme People's Court has promulgated its long-awaited interpretation on arbitration law issues. The statement consolidates previous judicial interpretations, as well as providing additional guidance on two key issues: the validity of arbitration agreements and challenges to arbitral awards.


SGHA cannot protect ground handling companies as before
  • China
  • 08 July 2015

The Standard Ground Handling Agreement (SGHA) has been adopted for a substantial number of ground handling agreements between airlines and ground handling companies. Article 8.1 of the SGHA is typically used to exempt ground handling companies from liability for damages caused by them. A Shanghai High Court judgment has clarified significant issues relating to the interpretation of this article.

Air passenger bears consequences for lack of visa
  • China
  • 28 January 2015

Border entry and exit permissions are an important aspect of international air transport. A case before the Jingan District People's Court has confirmed that since the regulation of immigration is a government function, the passenger will bear the consequences if air travel is interrupted due to visa issues.

Court considers strange circumstances of lost luggage claim
  • China
  • 02 April 2014

When Austrian Airlines found the luggage of one of its passengers several months after it had gone missing, the passenger was notified to reclaim it. The passenger checked the luggage and found that all of the previously declared contents were intact. However, he then unexpectedly claimed that valuables worth Rmb200,000 were missing. The court considered the extent of the airline's liability in the subsequent compensation claim.

Air China triumphs in ticket re-issuing dispute
  • China
  • 30 October 2013

The courts recently found in favour of Air China in a dispute arising from the re-issuing of the return portion of a ticket. They held that it was legal for both parties to agree to re-issue the ticket and extend its validity period, and therefore both parties should have acted according to the amended contract. As the passenger did not take the re-issued flight as agreed, he was responsible for the consequences.

Passengers blacklisted by airline after claiming damages for flight delay
  • China
  • 15 August 2012

A recent decision by a Chinese low-cost carrier to blacklist passengers who demanded and obtained compensation for an extended flight delay has been the subject of much public debate. The airline has confirmed that it has blacklisted the passengers for their unruly behaviour. But questions have arisen as to whether airlines have the right to create blacklists or otherwise refuse to admit passengers.


Regulator urges directors to take responsibility for reputational risk management
  • China
  • 27 November 2009

The China Banking Regulatory Commission's guidelines on reputational risk management in commercial banks apply to all Chinese commercial banks, banks established through equity joint ventures and foreign-invested banks. They require banks not only to integrate reputational risk management into their corporate governance and overall risk management, but also to minimize adverse effects on the public and society.

China Pilots Renminbi Cross-Border Trade Settlement
  • China
  • 23 October 2009

In an attempt to strengthen China's economic exchange with foreign countries, the government announced the launch of a renminbi cross-border trade settlement pilot programme, for which the People's Bank of China and ministerial authorities have issued implementing regulations. The scheme will affect background clearing between Chinese and foreign banks.

CBRC Tightens Regulation of Sub-debt Financing
  • China
  • 09 October 2009

With Chinese banks' loan business growing rapidly - along with fears of inflation - the China Banking Regulatory Commission has released a consultative note on a draft circular on capital replenishment mechanisms. The draft circular indicates the government's intention to tighten capital adequacy ratio requirements for Chinese banks and to curtail bank lending.

China and Hong Kong Sign Currency Swap Agreement
  • China
  • 22 May 2009

The People's Bank of China and the Hong Kong Monetary Authority have signed a currency swap agreement which enables short-term liquidity support to be provided to the mainland operations of Hong Kong banks and the Hong Kong operations of mainland banks, as necessary.

New Multi-currency Cross-Border Payment Arrangement
  • China
  • 22 May 2009

The People's Bank of China and the Hong Kong Monetary Authority have announced a multi-currency cross-border payment arrangement between the mainland and Hong Kong. The arrangement covers cross-border payments and settlement in four currencies.

Capital Markets

New Rules on Foreign Investment in Chinese Securities Companies
  • China
  • 17 June 2008

After a two-year moratorium on the establishment of, and investment in, Chinese securities companies, the new Rules on the Establishment of Securities Companies with Foreign Equity Participation and their subsidiary provisions demonstrate the government's encouraging, if cautious, approach to creating a clearer regulatory framework and enabling a gradual opening of the industry to foreign investors.

Company & Commercial

Foreign-Invested Commercial Enterprises: New Establishment Rules
  • China
  • 27 October 2008

The Ministry of Commerce has recently decentralized its approval powers with respect to foreign-invested commercial enterprises, delegating the power to approve the establishment of and changes to such enterprises to its provincial counterparts. The provincial governments are eager to attract foreign investment and the change should make it much simpler to establish a foreign-invested commercial enterprise.

Opinions Issued on Foreign Investment Enterprises
  • China
  • 26 June 2006

Various government departments have jointly issued Implementing Opinions on Certain Questions Concerning the Laws Applicable to the Administration of the Approval and Registration of Foreign Investment Companies. The opinions restate much current law but also aim to clarify certain principles in China's foreign investment regime that overlap or conflict with the revised Company Law and the Company Registration Regulations.

New Company Registration Regulations
  • China
  • 02 May 2006

The amendments to the Regulations on the Administration of Company Registration bring the rules into line with the newly amended Company Law and clarify various points related to registration. They also increase the financial penalties for non-compliance which may be imposed on companies and their directors.

Liaison Offices: A Thing of the Past
  • China
  • 06 March 2006

A number of local administrations for industry and commerce in China have stopped accepting applications to register liaison offices and will not renew existing registrations. Foreign-invested enterprises that have used liaison offices to minimize tax liability may wish to evaluate the options offered by a branch structure.

Personal Liability of Company Directors
  • China
  • 26 September 2005

As individual members of a corporation's decision-making body, directors do not usually bear personal liability for the actions of the corporation. Nevertheless, in certain circumstances directors can be personally liable for damages to others as well as to the company itself. A director may even bear criminal liability in some situations.