China updates

Arbitration & ADR

Are recordings made without counterparty's consent admissible as evidence in arbitration?
  • China
  • 21 March 2019

It has long been disputed whether video or audio recordings can be admitted as evidence in arbitration where they are made without the counterparty's consent. Although the general attitude in this regard has become more relaxed, such private video and audio recordings are not an effective form of evidence, as the counterparty may dispute them for many reasons. Thus, in order for recordings to be accepted as evidence, a number of factors should be considered.

Effects of unauthorised agency on arbitration agreements
  • China
  • 18 October 2018

The Changsha Intermediate Court recently ruled on whether the arbitration clause in a share transfer agreement had a binding effect on the petitioner – who was a controlling shareholder of a public company – and a company to which he had intended to transfer his shares. The validity of the arbitration clause hinged on whether a director of the public company who had signed the share transfer agreement on the petitioner's behalf could express the petitioner's intention to arbitrate.

Arbitration clause not binding on insurer by way of subrogation
  • China
  • 14 October 2010

It is generally accepted that when a claim or a debt is assigned, the arbitration agreement attached thereto is also assigned. However, the Supreme People's Court has opined that an arbitration clause contained in a contract for carriage of goods by sea was not binding on an insurer that stepped into the shoes of the insured consignee by way of subrogation.

When is a dispute an inheritance dispute?
  • China
  • 05 August 2010

The Supreme People's Court recently issued a direction that an arbitral award should be refused recognition and enforcement as the arbitration concerned an inheritance dispute and was therefore not arbitrable. However, a request for a declaration of title to a 50% equity share in a company by way of succession could be characterized as a commercial matter.

Award by truncated tribunal refused recognition and enforcement
  • China
  • 27 May 2010

The Supreme People's Court has upheld the Chinese courts' first decision on an arbitral award issued by a truncated tribunal. Recognition and enforcement were refused in accordance with Article V(1)(d) of the New York Convention. However, Chinese arbitration law and practice do not absolutely reject an arbitral award issued by a truncated tribunal.


Aviation

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.

Outcry over new passenger and airline levy
  • China
  • 16 May 2012

A controversial civil aviation development charge is being imposed on every air passenger in China and every Chinese airline. Many commentators have questioned the need for, and the legitimacy of, such a charge, arguing that with tax revenues of Rmb1 trillion in 2011, the government does not lack capital for large-scale aviation infrastructure.

Recordation of IDERAs - a checklist for airlines
  • China
  • 15 February 2012

China signed the Cape Town Convention and protocols in 2001, but it was not until 2009 that the Civil Aviation Administration of China issued rules for the recordation of irrevocable deregistration and export request authorisations (IDERAs) and the deregistration of aircraft by IDERA holders. Chinese airlines and their foreign creditors should be aware of the application process and the documents required.

Airspace opens up for general aviation
  • China
  • 22 December 2010

Along with planned aircraft standards for use in general aviation, the joint opinions on the administration of low-altitude airspace, which were issued by the State Council and the Central Military Commission of China, are encouraging signs for the Chinese general aviation industry.

Tax authorities provide exemptions for Taiwanese airlines
  • China
  • 06 October 2010

The Ministry of Finance and the State Administration of Taxation have released a circular which exempts Taiwanese airlines engaged in flights across the Taiwan Strait from business and corporate income tax on income derived from China. The exemption applies retrospectively to taxes paid by Taiwanese airlines on such income since June 2009.


Banking & Financial Services

FX margin trading prohibited
  • China
  • 22 January 2019

The State Administration of Foreign Exchange recently found 600 websites guilty of illegally providing foreign exchange (FX) margin trading services. The high yields associated with such high-risk investments have led many countries to introduce strict regulations. In China, the financial regulatory authorities have clarified that no legal institutions can conduct FX margin trading business and that those who break the law in order to engage in such business may incur administrative or criminal penalties.

New regulations promote issuance of panda bonds
  • China
  • 19 October 2018

The People's Bank of China and the Ministry of Finance recently issued the Interim Measures for the Administration of Bond Issuance by Overseas Institutions in the National Inter-bank Bond Market. Among other things, the new measures further clarify the qualification, application procedure, bond issuance, registration, custody and settlement and information disclosure requirements for overseas institutions that issue so-called 'panda bonds'.

PBOC issues new compliance requirements for cross-border financial network and information services
  • China
  • 24 August 2018

The People's Bank of China recently issued a notice to strengthen the provision of cross-border financial network and information services. The notice includes a number of compliance requirements concerning the provision and use of such services, including with regard to overseas providers, domestic users and industry self-discipline.

CBRC issues new circular to regulate private lending
  • China
  • 08 June 2018

The China Banking Regulatory Commission's Circular on Matters concerning Regulating Private Lending and Maintaining Economic and Financial Order recently came into effect. The circular was formulated in accordance with various laws and measures and establishes the basis for clarifying credit rules and prohibiting illegal private lending. According to government officials, the circular will be implemented in three stages.

CBRC publishes new rules on equity management of commercial banks
  • China
  • 06 April 2018

The China Banking Regulatory Commission (CBRC) recently issued its Interim Measures for the Equity Management of Commercial Banks. The measures have tightened the CBRC's regulation of the information disclosure and reporting requirements imposed on material shareholders that have a significant impact on the operation and management of commercial banks established in China.


Competition & Antitrust

Supreme Court: first judicial interpretation on private anti-monopoly litigation
  • China
  • 24 May 2012

Since the Anti-monopoly Law came into force in August 2008, civil anti-monopoly cases have become increasingly prominent. The first Supreme People's Court interpretation on the issue - revised following public consultation - covers a number of significant aspects, including the filing of lawsuits, jurisdictional issues, plaintiffs' standing and the relationship between public enforcement and private litigation.

Key online players in Rmb150 million dispute over abuse of dominance
  • China
  • 17 May 2012

The Guangdong Superior People's Court has heard a claim that Tencent, which operates instant messenging service Tencent QQ, allegedly used its dominant position in the messaging software and services market to force users to uninstall software supplied by anti-virus software company Qihoo 360. However, the two sides disagree on the relevant market, the relevant market share data and the existence of a dominant position.

Hubei Yihua investigation: doubts remain over reports of alleged fine
  • China
  • 26 April 2012

A number of sources in China's mainstream media reported earlier in 2012 that the National Development and Reform Commission had imposed a Rmb10.2 million fine on Hubei Yihua Chemical Industry. However, the company has announced that the reports are untrue. Competition law practitioners await an announcement from the commission with interest - whatever the inside story of the case proves to be.

Regulator imposes further conditions on Western Digital/Viviti deal
  • China
  • 29 March 2012

Three months after imposing conditions on Seagate's acquisition of Samsung's hard drive business, the Ministry of Commerce has published another conditional clearance of a concentration in the hard disk industry, this time involving Western Digital and Viviti Technologies. At 11 months from initial filing to final decision, the process was even longer than the seven-month wait in the Seagate/Samsung transaction.

Record fine for price monopoly
  • China
  • 22 March 2012

The National Development and Reform Commission recently issued the biggest fine - Rmb10.2 million - since the implementation of the Anti-monopoly Law in 2008. The decision makes a significant statement about China's economic priorities and the importance of reform within its monopolised industries.


Corporate & 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.