The entering into force of CIETAC (China International Economic and Trade Arbitration Commission) new arbitration rules on 1 May, 2012 has prompted a fierce dispute between CIETAC Beijing and its Shanghai Sub-Commission (CIETAC Shanghai).

CIETAC Shanghai has publicly refused to apply the new arbitration rules. It has also announced the adoption of its own arbitration rules and list of arbitrators.

CIETAC Beijing has strongly condemned this move by CIETAC Shanghai.  In particular, CIETAC Beijing has underlined that CIETAC Shanghai (like CIETAC Shenzhen) is a sub-commission and, as such, an arbitration body subject to CIETAC Beijing. (CIETAC Beijing’s statements are available on Continue reading

New CIETAC Arbitration Rules: a Step Forward to CIETAC Internationalization?

CIETAC – the China International Economic and Trade Arbitration Commission – is the best known Chinese arbitration body. When it comes to the choice of an arbitration body, for foreign companies doing business in China, CIETAC is usually a viable alternative to well-established international arbitration institutions (such as the Hong Kong International Arbitration Centre, the Singapore International Arbitration Centre and the Arbitration Institution of the Stockholm Chamber of Commerce).

CIETAC has recently revised its 2005 arbitration rules (“2005 Rules”). The revised arbitration rules will come into force on 1 May 2012.

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Franchising: a Reform on the Way?

China FranchisingIn China, franchising involves a company (franchisor) granting the use of certain intellectual property rights and business resources to another company (franchisee), by contract. The franchisee conducts its business activities using the intellectual property rights and business resources licensed by the franchisor. The franchisee pays a fee to the franchisor as consideration for the use of the intellectual property rights and, in general, the use of a business model for selling goods or providing services.

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When It is Time to Move

In China, for companies (and even for people) the time to move is often unexpected. For instance, the local government may give notice to a company to move within six months. There could be many reasons for this sort of notice. However, it is often due to the intended construction of a public building or residential project on the land where the company is currently located. Such situations are fairly common because of the continued expansion of urban areas in China.

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Investment Incentives in China: 10 Points to Be Aware of

In China, local governments often offer tax incentives and other incentives to attract investors. These incentives are subject to limitations and, at times, may involve “hidden costs” for the investor. These limitations or “hidden costs” are not usually disclosed to the investor. The following ten points should be kept in mind upon evaluating the investment incentives in China.

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New China Foreign Investment Catalogue

The new China Foreign Investment Catalogue (外商投资产业指导目录) was published on 29 December 2011. The new Catalogue will come into force on 30 January 2012 and will replace the 2007 Catalogue. The new Catalogue (like the previous ones) was issued by the National Development and Reform Commission (NDRC) and the Ministry of Commerce. The Catalogue classifies foreign investments in China into three categories: encouraged, restricted and prohibited investments. Investments not included in any of these three categories are to be considered permitted.

Encouraged investments are favored by, among other things, a fast track approval process. On the other hand, restricted investments are subject to additional limitations or requirements.

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Civil Litigation in China: Notable Practices

China civil litigation proceedings and the conduct of Chinese judges can often seem very authoritative, almost intimidating. In reality, much of Chinese civil litigation procedure is not as clear-cut or well-defined as it may appear. These ambiguities may pose problems for parties unfamiliar with civil litigation in China. Outlined below are some of the key areas of Chinese civil litigation proceedings which require your attention.

First, in China, briefings and arguments from either party involved in a proceeding may be submitted to the judges during the hearing within tight time constraints. Consequently, parties may be surprised when new documents or requests appear during the hearing, and lawyers must be ready to deal with unexpected new information or circumstances on the spot. In most Western jurisdictions such information or requests must be submitted at certain times beforehand so each party can adequately prepare for the hearing. This Chinese litigation practice may create uncertainty for the parties involved, hindering their capacity to represent themselves to the best of their ability.

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Unexpected Visits: an Old Method for Credit Recovery

In China, it is not unusual for companies to receive unexpected visits when Chinese New Year approaches.

Last year, for example, a couple of weeks before Chinese New Year, a foreign-invested company located in a Shanghai industrial park happened to receive a visit from a dozen people.

Wondering why these visitors had shown up on his doorstep, the company manager realized that they wanted him to settle an outstanding bill for certain renovation work. In fact, their employer told them that their outstanding salaries and year-end bonuses could not be paid because of this foreign-invested customer.

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