Haworth & Lexon Law Newsletter (55)

§News of Haworth & Lexon

¨         Partner Dermot Zhang and Rafer Young of the Firm Gave a Debating Speech to Audience in the American Chamber of Commerce in Shanghai regarding Landlord Versus Tenant Rights, at JW Marriott Hotel      

Invited by the American Chamber of Commerce in Shanghai (Hereinafter referred to as “Amcham”), Mr. Dermot Zhang, our Partner/Attorney, and Mr. Rafter Young, our foreign legal consultant, delivered a debating speech regarding Landlord versus Tenant Rights at JW Marriott Hotel on the evening of 21 Apr. 2006.

The debate model was adopted to clearly demonstrate issues focusing mainly on the validity of the Letter of Offer, conclusion of a lease agreement, main rights of landlord and tenant, first refusal right, establishment of price, landlord's responsibility in relationship with neighboring landlords and its tenant, noise pollution, usual remedies of tenant etc.

The representative of the counter party is Partner David Liu, from Bryan Cave LLP. During the Q & A section, Mr. Dermot Zhang comprehensively delivered his answers and suggestions based on his extensive experiences.

This speech was organized by the Real Estate Committee of Amcham. During the debate, the moderator was Ms. Nicole Paulson Washko, General Manager of Pricoa Consulting (Shanghai) Co., Ltd. of the Pricoa Financial Group. The anchor was Mr. Michael T. Hart, Assistant Director of Jones Lang Lasalle in north Asia region.

As one of the biggest chambers in Asia, The American Chamber of Commerce in Shanghai was originally established in 1915, and was resurrected in 1987, currently enjoying 1300 company members and 3000 individual members.


§Latest Laws and Regulations


¨         Circular of State Administration for Industry and Commerce, Ministry of Commerce, China Customs and State Administration of Foreign Exchange on Printing and Distributing “Implementing Opinions on some Issues on Application of Laws in Examination, Approval and Registration of Foreign Invested Companies”

State Administration for Industry and Commerce, Ministry of Commerce, China Customs and State Administration of Foreign Exchange printed and distributed “Implementing Opinions on some Issues on Application of Laws in Examination, Approval and Registration of Foreign Invested Companies” on April 24, 2006.

The Opinions says that limits on the registered capital of a one-man limited company set up by a foreigner or a foreign entity shall be in accordance with the provisions of Company Law, and the one-man company set up by a foreigner shall also comply with the limitation on one-man company provided by Company Law. However, a wholly foreign-owned Company set up before January 1, 2006 will be maintained, unless it changes its registered capital or makes investment.

The Opinions provides that in a Sino-foreign joint venture or a Sino-foreign contractual limited liability company, its board of director shall be the authority of the company, and its structures shall be provided in its articles of association in accordance with “Sino-foreign Equity Joint Venture Law”, “Sino-foreign Contractual Enterprise Law” and “Company Law”.

The Opinions provides that creditability certificate will not be requested when a company applies for registration of establishment or change of share transfer.

The Opinions allows a foreign-invested company makes investment in China immediately after its establishment, and it will be no longer necessary for the Administration for Industry & Commerce to issue a creditability certificate.

The Opinions has specific provisions on time limits for contribution of a foreign-invested limited liability company. While the contribution is made in one payment, it shall be made within 6 months after its establishment. While it is made in installments, the first contribution shall not be less than 15% of what the shareholder subscribed for, and it shall be fully contributed within 3 months after the establishment of the company (which is a variation of Article 26 of Company Law). However, the remaining capital shall be made according to Company Law and other relevant laws and regulations. The contribution made by joint stock companies limited shall be in accordance with the regulations of Company Law.

The Opinions provides that if a shareholder invests with assets other than in currency, in kind, in intellectual property and in land use right, they shall be assessed and verified by assessment organs lawfully set up in China, and when the contribution is really made, it shall be verified by verification organs set up in China and the verification certificate shall be issued by the verification organ. Where shareholders of Sino-foreign limited liability companies invest in non-monetary assets such as in kinds or in intellectual properties according to Sino-foreign Equity Joint Venture Law, the prices may be discussed and decided all the parties to the Joint Venture.

The Opinions also provides on matters when foreign-invested companies apply for registration of changes and filing for record.

The Opinions provides if a foreign-invested company sets up or repeals its branchit may apply to the company registration authority where the branch is to be located; If an examination and approval procedure is otherwise required, it shall apply for registration within 30 days after the examination and approval. The Administration for Industry & Commerce shall no longer register for any representative offices proposed by foreign-invested companies. Changing or renewing procedures shall not be carried out for the representative offices that have been registered before, and they may be repealed or they may apply to be upgraded to branches after expiration. Company registration authority will inspect and punish whoever does business in the name of a representative office.


¨         Regulations of Supreme Court on Issues of Application of “Company Law” (1)

The Supreme People’s Court promulgated “Regulations of the Supreme Court on Issues of Application of “Company Law” (1)” on April 28, 2006, which came into force on May 9, 2006.

The Regulations confirms the principle of non-retrospection. It points out that if a civil case has not been ruled or has been newly filed after the implementation of the Company Law and the civil action or event happened before the implementation of Company Law, the then current laws and regulations and judicial explanations shall apply. But if the then current laws and regulations and judicial explanations keep silent on it, then the provisions of Company Law shall be referred to. The Company Law shall not be applied to the re-trial of the cases which have been finally decided before the implementation of Company Law.

The Regulations points out if the period that the shareholders bring actions to the court because of convening procedure or voting means of the shareholder meeting or the board of directors’ meetings, or actions arising from failure to come into share purchasing agreements exceeds 60 days provided by Company Law, the court shall not accept them.

According to the Regulations, the period of at least 180 days under Article 152 of Company Law that a shareholder filing a suit shall hold the shares for at least 180 days shall be calculated until the time that the shareholder brings the action to the court.


¨         Rules on Management of Issuance of Securities by Listed Companies

China Securities Regulatory Commission promulgated “Rules on Management of Issuance of Securities by Listed Companies” on May 6, 2006, and the Rules begins to be implemented on May 8, 2006.

The Rules have specific provisions on the conditions of public issuance of securities. It not only addresses explicitly for the general conditions, such as wholesome organizations, good operation, continuous profitability and good financial conditions, but provides for the issuance of shares and transferable debts. The Rules provides for the conditions on non-publicly issued shares in Chapter 3.

About the procedure of issuance of shares or transferable debts, the Rules sets up specific examples on matters decided by the board of directors or the shareholder meetings, and also provides for the examination and approval procedure of China Securities Regulatory Commission.

In addition, the Rules provides for information disclosure duty of the listed companies, and that all the directors, supervisors, management, recommending institutes and recommending representatives shall warrant and agree to take liabilities for the prospectus for public issuance. The Rules also provides that the certified accountants, asset assessors, creditability rating persons, lawyers and the firms where they are, who submit the special documents, shall take liability for the trueness, veracity and fullness of the documents they have issued.


¨         Notice of State Administration of Foreign Exchange on Adjustment of Administration Rules on Foreign Exchanges on Current Accounts

The State Administration of Foreign Exchange (Hereinafter referred to as “SAFE”) promulgated “Notice on Adjustment of Administratioin Rules on Foreign Exchanges on Current Accounts” on April 13, 2006, which begins to be implemented as of May 1, 2006.

According to the Notice, it is not requested to be approved by SAFE for the opening, changing or closing up of the foreign-exchange current accounts by domestic entities. The Notice also increases the limit of foreign exchanges that may be reserved in the current account of foreign exchanges, which will be decided according to 80% of incomes of current accounts and 50% of payouts from current accounts of the last year.

The Notice also simplifies the certificates of sales and payments of foreign exchanges for trades; for example, it provides that if the amounts paid to a foreign entity are less than USD50,000, or less than USD5,000 to a foreigner for service trades, the purchasing and payment procedures may be completed only by contracts or invoices.

The Notice relaxes the purchasing rules for domestic people, and the yearly amount for each person is USD20,000 or its equivalent. If it exceeds the amount above, it shall be carried out only after the bank examines and approves the real demanding certificates according to the foreign exchange administration regulations.


§ IP Cases

¨         Individuals may take Joint Liabilities While a Company Commits Infringement

Beijing Chaoyang District People’s Court made the first ruling in the case Beijing Five Star Qingdao Beer Co., Ltd. vs. Beijing Juding Jinmai Beer Sales Co., Ltd. (Hereinafter referred to as “Juding Company”), Mr. Zhang Yan, Mr. Zhang Min, Beijing Kangyada Packing and Printing Co., Ltd. and Hebei Binyang Group Shanhaiguan Ox Beer Factory regarding a trademark infringement dispute on March 20, 2006, which held that the infringement was established, and Zhangyan shall take personal liability for it.

The plaintiff stated that he had the exclusive using right for the character trademark “five stars” (Wu Xing) (Hereinafter referred to as “five star trademark”) and the figure trademark of the five stars (Hereinafter referred to as “five star figure trademark”). In 2003, Juding Company and Mr. Zhang Yan committed a series of infringement in order to gain unlawful profit. They made beer which used the five star trademark and the five star figure trademark without the permission of the Plaintiff and acquired the unlawful proceeds of RMB 518728.33. So the above five defendants infringed the exclusive using right, and the infringement had been confirmed by the criminal judgment made by Runzhou District People’s Court of Zhenjiang City, Jiangsu Province (Hereinafter referred to as “the Criminal Judgment”). 

The Defendant Mr. Zhang Yan defended that it was wrong for the plaintiff to sue him. The Criminal Judgment only recognized that the crime was committed by a unit, not by a person, so it is Juding Company who should be liable for the infringement, not him. In the criminal case, the court had ruled for a penalty of RMB 300000, which should be deducted from the loss of Five Star Beer Company.

The court held that the criminal judgment recognized that Mr. Zhang Yan, Mr. Feng Xiaofeng and Juding Company committed joint crimes, not the unit crime said by Mr. Zhang Yan. Mr. Zhang Yan had two identities, one is as a natural person and the other is as a legal representative. So the key to confirm whether Mr. Zhang Yan committed infringement was to confirm whether “Mr. Zhang Yan had personal behavior in production and sales of fake five star beers”. Mr. Zhang Yan had personal behavior besides the unit behavior of Juding Company: the cause of infringement was that the Plaintiff owed product payment to Beijing Longguyan Trading Co., Ltd., whose legal representative was Mr. Zhang Yan; during the process of making cans, Mr. Zhnag Yan was in the name of the manager of “Shuanghesheng Beer Company” and he also signed the can-making contract in the name of “Shuanghesheng Beer Company”; the payment gained from the sales of five star beers was not made into the account of “Juding Company”, but that of Mr. Zhang Min, and then was transferred to the account of Mr. Zhang Min’s sister. Furthermore, the criminal judgment held that Mr. Zhang Min and Juding Company committed joint crimes.

In summary, the court held that during the whole infringement process, there exists individual behavior of Mr. Zhang Yan, so he should take the relevant liabilities.


¨         Changing Procedure shall be carried out in time if the Name of the Holder of Trademark has been changed

Beijing No.1 Intermediate People’s Court made a ruling in the case of Shanghai Overseas Joint Stock Company vs. Guangzhou Zuozhi Shoe Co., Ltd. regarding dispute of use of trademark contract on December 12, 2005, which held that the contract should be repealed and the Defendant should compensate US$200,000 for the loss suffered by the plaintiff.

The Plaintiff stated that the Defendant and the Plaintiff signed a “Use of Trademark Contract” on January 1, 2003, which allowed the Defendant to use exclusively the trademark “Huli’ao” (the trademark registration number was 1343428), and the term of use was from January 1, 2003 to December 31, 2007. The Defendant should pay US$250000 to the Plaintiff until October 1, 2005. After the contract was signed, the Plaintiff fully performed its obligations accordingly. But the Defendant refused to perform its obligations and owed US$250,000.

The Defendant defended that the registered holder of the trademark was (Switzerland) Shanghai Overseas Trade Company, but the licensor of the contract was the Plaintiff. So the name of the Plaintiff was different from the name of the registered holder. According to Article 40 of Trademark Law, only the registered holder had the right to license, so this contract is null and void.

The court ascertained that the Plaintiff was the same subject as the registered holder of the trademark, (Switzerland) Shanghai Overseas Trade Company, and it only changed the name of the company. So it had exclusive use right of the trademark, and it had the right to license others to use the registered trademark. The contract was valid. But since the Plaintiff had not changed the registered holder with China Trademark Bureau, while it changed the name of the company in 1999, and it did not explain to the Defendant for this matter. Furthermore, it had not filed the contract for record according to Trademark Law, so it had to bear some liability for this dispute. So the court made the aforementioned judgment.


¨         If a trademark is Recovered after Repealing, it shall Come into Force only after Public Announcement

Beijing No.1 People’s Court made the first ruling in the administrative case of Shenzhen Anjier vs. Trademark Appraisal Commission of State Administration for Industry and Commerce on November 30, 2005, with Wenzhou Anjier Co., Ltd. as the third party, which repealed the “Ruling on Trademark Dispute about No. 1193030 Trademark ’ANGEL’ made by the Defendant.

The Plaintiff stated that it had acquired the trademark “Anjier” on April 28, 1998 from the previous right holder (the trademark was registered on July 1, 1997, and the third party applied for the disputed trademark “ANGEL” in 1997 and had been approved.) According to the 797th issue “Trademark Announcement” published on August 28, 2001, the disputed trademark had been repealed by the Defendant by Ruling No.1283 made on May 8, 2001. So the Trademark Appraisal Commission violated the judicial procedure when it ruled on the disputed trademark again.

The Defendant defended that a person who was not involved in the case had registered the trademark “Tianshi” (in English means Engel) on non-alcohol drinks, but he had lost its exclusive right because he had not renewed when the trademark expired on November 29, 1999. So there was no conflict between “Tianshi” and the disputed trademark. The Defendant had once made the final ruling No. 1283, which wrongly inferred the void trademark of “Tianshi” to repeal the disputed trademark. Therefore, the Defendant made a Case Conclusion Notice on June 9, 2003 to cancel the Ruling No.1283 and the disputed trademark had been held.

The court held that from the fact of Case Conclusion Notice No.1049, the main content of it was to maintain the exclusive right of the disputed trademark. But the Defendant had not provided any evidence to prove that the disputed trademark had been announced after it had been recovered. But before that, it had been publicly announced whether it had been registered or repealed. It is known to all that, as a private right, the acquirement and execution of the exclusive right of a registered trademark had great effect on the public, so there was a public announcement procedure provided in the Trademark Law. But Notice No. 1049 was not publicly announced after it was made, so the effect of its recovery should not affect the public. As there was a defect in the procedure, the conditions for maintaining the disputed trademark had not been fully satisfied. Therefore, the ruling No. 1651 was cancelled because it lacked factual bases, and violated the procedure.


¨         Storing Data on Server without Permission Constitutes Infringement upon Copy Right of Works

Beijing No. 1 People’s Court made the first ruling in the case of Electronic Magazine Press of China Science Periodical (CD Edition) vs. Beijing Jincheng Guodao Science and Technology Co., Ltd. regarding copyright dispute on March 25, 2006, which requested the Defendant to delete the data stored in its server and compensated RMB 100,000 for the loss incurred by the plaintiff.

     The Plaintiff stated that it had published “China Science Periodical (CD Edition)”, which had been approved by General Administration of Press and Publication, and it provided information services by “China Science Periodical Database” in internet. So the Plaintiff had the copyright to the database. The Defendant had illegally acquired the data from the database and stored it in its server, and provided information services to the users by internet, which seriously infringed upon the lawful right of the Plaintiff. So it requested the court to order the Defendant to stop infringement and make compensations.

The Defendant defended that the database stored in its server was actually a content of titles, not content of articles. There was no copyright to the titles. At the same time, the Plaintiff was not the writer; the Plaintiff lacked the capacity to be the plaintiff. Additionally, the Defendant held that the titles stored in its server were only for its internal study, not for being provided to users, even for any sales. So the Defendant requested the court to repeal the plaintiff’s petition.

The court held that the nature of the behavior of storing, without permission of the Plaintiff, the database, which the Plaintiff had copyright in its server, was copying the database. So the behavior infringed the copyright of the Plaintiff, and the Defendant should bear the liability of stopping infringement and making compensations. But the present evidence owned by the Plaintiff could not prove that the Defendant provided database to its users by internet. So it was improper to use the number of words in the infringing database as the basis to calculate the compensations. In the end, the court decided on the compensation amount in consideration of originality, license fee of the Plaintiff, number of the infringing works stored in the server of the Defendant, the nature of infringement and reasonable litigation cost.


¨         Excessive Issuance Without Permission Constitutes Infringement

Jiangxi Higher People’s Court made the final ruling in the case of Guangdong Dasheng Culture Communication Co., Ltd. (Hereinafter referred to as “Guangdong Dasheng”) and Guangzhou Radio & TV Press vs. Mr. Haicheng Wang, Mr. Haixing Wang and Ms. Haiyan Wang regarding copyright dispute on March 24, 2006. Jiujiang Century Liansheng Supermarket Co., Ltd., Nanchang Department Store Joint Stock Company and Chongqing Sanxia CD Development Co., Ltd. (Hereinafter referred to as “Chongqing Sanxia”) were the Defendants in the first instance. The final ruling cancelled the first ruling and held that Guangdong Dasheng Culture Communication Co., Ltd., Guangzhou Radio & TV Press, Chongqing Sanxia CD Development Co., Ltd. shall stop infringement, and it also judged that Guangdong Dasheng Culture Communication Co., Ltd. and Guangzhou Radio & TV Press shall compensate RMB 150,000.

One of the arguments in this case was whether excessive issuance of CDs constituted infringement, since the defendant had acquired permission for issuance for a certain amount.

The court held that though some of the CDs issued and copied by Guangdong Dasheng, Guangzhou Radio & TV Press, Chongqing Sanxia had been authorized by Music Copyright Society and were paid rewards, the excessive ones had not been authorized, nor had they been paid rewards. So the infringement was established.


¨         Market shall Assume Liabilities for the Trademark Infringement Committed by the Dealers under its Management where the Market does not Perform its Management Duty

Beijing No. 2 Intermediate People’s Court made the ruling of the first stance in the case Louis Vuitton Malletier vs. Beijing Chaowaimen Department Store Co., Ltd. regarding trademark infringement and unfair competition on April 17, 2006, which ruled that the Defendant shall stop infringement and make compensations to the Plaintiff.

The Plaintiff stated that it was the lawful holder of a series of trademarks of “LV”, which were very famous. After investigation, the Plaintiff found that at the leather and bags zone of the lower ground of “Chaowaimen Shopping Center”, managed by the Defendant, there were many sales which counterfeited the registered trademark “LV”. So they infringed the exclusive use right of the Plaintiff. What is more, after the Plaintiff sent a letter of attorney to the Defendant for the above infringement, there were still many actions of infringement in “Chaowaimen Shopping Center”, which reflected the severity of the degree of the defendant’s fault.

The Defendant defended that it had demanded the dealers and placarded the government’s notes, so it had fulfilled its duty and should not take any liabilities.

The court held that in the leather and bags zone opened by “Chaowaimen Shopping Center”, there were many sales of counterfeit goods. As the founder of the Shopping Center, the Defendant had the obligation to manage and supervise the market, especially forbid and stop making and selling fake goods. But the evidence provided by the Plaintiff showed that the Defendant’s fault was severe, so it should be held that the Defendant facilitated selling infringing goods, which infringed the Plaintiff’s exclusive use right. At the same time, though the Defendant knew that there should be no fake goods sold in the market, he still put on the advertisement for them, so as to make the public know that there were such goods sold in the market. So the behavior constituted unfair competition and the Defendant should bear the relevant liabilities.

However, the court did not support the Plaintiff’s requests for apology from the defendant, because the infringement was only to the assets, not to persons.


§ Analysis of Laws

¨         Circular of the Supreme Court on Printing and Distributing Summary of the Second National Working Conference on Foreign-related Commercial and Maritime Trials

Last issue of the newsletter simply introduced “Summary of the Second National Working Conference on Foreign-related Commercial and Maritime Trials”, printed and distributed by the Supreme Court on December 26, 2005. Now it will be expounded here.

There are thirteen parts in the summary which stipulate the application of laws when trying foreign-related commercial and maritime cases.

Part 1. On jurisdiction, it stipulates on foreign-related financial cases, joint venture contracts, effect of foreign arbitration, foreign-related guarantee contract and “principle of forum non-convenience” and “non-exclusive jurisdiction”.

For example, whether the disputes of Sino-foreign equity joint venture and Sino-foreign contractual enterprises, or contracts relating to share transfer in Sino-foreign equity joint venture, Sino-foreign contractual enterprises and wholly foreign-owned enterprises, the places of performance of contracts shall be the registered places of the foreign investment enterprises, so the courts at those places have jurisdictions over the above contracts.

In relation to foreign arbitrations, if there are valid arbitration agreements between the parties that hold that all the disputes arising from or in relation to the agreement shall be settled by arbitration, then the court has no jurisdiction for any infringement disputes arising in the process of executing and performing the contract.

On the issue of “non-exclusive jurisdiction of some foreign courts” provided in some foreign-related contracts, the Summary stipulated that non-exclusive jurisdiction of a foreign court does not exclude the jurisdictions of courts in other countries.

Part 2. Regarding the parties, the Summary clearly stipulates on matters such as the capacity of parties, foreign parties and power of attorney:

The Summary stipulates that entities that are set up in China by foreign enterprises and have business licenses have the capacity to be the parties of a lawsuit, but when the entities can not independently assume liabilities, the foreign enterprises may be added as the joint defendants. Representative offices set up by foreign enterprises in China have no capacity to be the parties of a lawsuit and the foreign enterprises that set up the representative offices shall join the lawsuit as parties.

In relation to power of attorney from the foreign parties, if it is made abroad, then the parties shall go through such procedures as notarization, attestation etc. If it is signed before the persons of the court who are handling the case, then the aforementioned procedures are not required, but the parties have to submit their personal certificates to certify they are the lawful parties to sign the documents. If it is signed in China, it is sufficient to be notarized by Chinese notaries public. If the foreign parties authorize others in a package authorization, the notarization and attestation is not requested in the second instance or re-trial.

Part 3. The Summary specifically provides on how to send legal documents under different circumstances

When the courts deliver legal documents to the parties who have no domiciles in China, it may directly deliver to their agents ad litem, or their representative organs in China. If the foreigners, people without nationality or legal representatives or other managers of foreign companies, enterprises or other organizations are in China, the court may directly deliver the documents to them. Serving by leaving rejected legal processes at the place of abode is applied when the courts deliver the documents to the agents ad litem, legal representatives or managers, representative offices and other branches who have the right to accept the documents.

As to delivery to Hong Kong and Macau, it shall be handled according to the arrangements made between the Supreme Court and the courts of Hong Kong and Macau.

Part 4. The Summary gives guidance on matters such as evidence made abroad, foreign audiovisual data, new evidence and appraisal.

The Summary points out that, if the evidence is made abroad, whether it needs notarization and attestation or not, the courts shall organize the parties for cross-examination.

If the evidence submitted by the parties does not belong to new evidence but the court thinks it may affect the judgment, the cross-examination shall be done. Even in a trial by default, the court shall examine the evidence submitted by the plaintiff.

Part 5. The Summary has 12 articles on application of laws on foreign-related commercial contracts.

The Summary clearly provides that it allows the parties to choose governing law of contracts clearly at the time of or after performance of contracts. But it will have no effect if it aims to avoiding the application of compulsory provisions or lex prohibitiva.

If the governing law is a foreign law, but it can not be ascertained, then the court may apply laws of China.

The Summary also provides on how to decide the laws of the closest places of international goods sales contract, processing contract and such other contracts. For example, a leasing contract of the movable shall be governed by the laws of the place where the lessor is domiciled, a loan contract shall be governed by the laws of the place where the lender is domiciled, a guarantee contract shall be governed by the laws of the place where the guarantor is domiciled and a commission contract shall be governed by the laws of the place where the agent is domiciled.

The Summary also clearly points out that as to transferring contracts of shares in Sino-foreign equity joint venture, Sino-foreign contractual enterprise and wholly foreign-owned enterprises, if they are entered into between Chinese parties and foreign parties and are performed in China, laws of China shall be applied.

Part 6 is on judicial review on international commercial and maritime arbitrations

When examining the validity of a foreign-related arbitration agreement, the law which is agreed by the parties to be applied to disputes shall not be used to decide on validity of the arbitration agreements. The laws used to decide on the validity of the arbitration shall be as follows in sequence: the laws which are clearly defined by the parties in the contracts, the laws of the places where the arbitrations are conducted, and the laws of the place where the court is located, namely laws of China.

In deciding whether the arbitration clause is valid, if only an arbitration rule is agreed upon, it shall be deemed that the parties have no agreement on arbitration organs, unless the parties have supplementary agreements or the arbitration organs can be defined according to the arbitration rule.

When the parties choose more than two arbitration organs or there are more than two arbitration organs at the places they choose, the parties shall choose one by agreement. The arbitration agreement is invalid if such agreement can not be reached.

The arbitration clause is independent from other clauses of the contracts. Its validity shall not be affected even the contract is not entered into, or becomes invalid after execution, or is changed or terminated or rescinded after its effectiveness, or it is repealed or is ruled to be valid.

When examining a foreign-related arbitration award, the Summary provides that courts shall apply different laws in examination according to different foreign factors.

The Summary also provides on how to examine arbitration awards made in foreign countries.

Part 7 is on disputes in foreign investment enterprises

Both contracts of shares transfer in Sino-foreign equity joint venture, Sino-foreign contractual enterprises and wholly foreign-owned enterprises, and contracting contracts of Sino-foreign equity joint venture and Sino-foreign contractual enterprises shall be submitted to the authorities for their approval. If they are not approved before the debating of the first-instance trials, they have no effect. The courts shall rule that the faulty parties make compensation to the others for the losses incurred.

The shareholders and their ratios of shares of foreign-invested enterprises shall be decided according to the names of shareholders and ratios shown on the approval certificates. If a person not recorded on the certificates requests for its shareholder state and shares, it shall fall in the scope of administrative review or administrative litigation. If the party insists on lodging a civil litigation to the court, the court shall reject its petitions. However, if he requests the other shareholders in foreign-invested enterprises to pay him the related interest, the dispute is within the scope of civil litigation and the court shall accept it.

Shareholders of foreign-invested enterprises may ask courts for distribution of profits, with the foreign-invested enterprises as the defendants.


Part 8 is on restrictions on leaving China

The Summary points out the court may adopt some measures to restrict the following four kinds of persons from leaving China. For example, those who have unsettled foreign-related commercial dispute cases, parties or legal representatives of the parties of unsettled cases, or those who may evade litigation or evade performance of their duties.


Part 9 is on disputes arising from delivery of cargo without presentation of original B/L

The Summary restates the duty of carriers to deliver the cargo against presentation of original B/L, otherwise they may assume the liability of compensation, and they can not refer to the provisions of restriction of compensation liabilities. The carriers shall take liability for delivery without original B/L if they make antedated B/L or advanced B/L, and deliver the goods against fake original B/L.


Part 10 is on disputes of marine insurance contracts

The Summary provides that the Insurance Law of PRC shall be applied to accidents happening on establishments of harbors and docks, while the Maritime Law of PRC shall be applied if a ship is collided with a dock, and the insurer executes its right of subrogation. The Summary makes limitation on the policy holders’ duty of making true representation, namely if the insurer knows or shall know that the policy holder does not fulfill this duty, the insurer shall not refer to this as a reason to terminate the contract. During vessel voyage insurance, the insured vessel shall be proper for sail at the start of voyage, otherwise the insurer shall be exempted from its liability for compensation from the violation thereof.


Part 11 is on disputes arising from ship collisions

The Summary makes provisions on ship collision dispute cases, which excludes the application of the Maritime Law of PRC to collision between the river crafts. But Maritime Law of PRC applies when a military ship or government ship, which is doing commercial activities, collides with the ship defined in the Maritime Law of RPC. “Principles of Civil Law: and “Rules of Supreme People’s Court on Compensation for Assets Damages in Trial of Vessel Collision and Contacts Cases” shall be applied to define rights and obligations of the parties and the scope of damages.


Part 12 in on disputes of oil pollution damages caused by a vessel

“1992 International Convention on Civil Liabilities for Oil Pollution Damages”, “Maritime Law of PRC”, “Ocean Environment Protection Law” and other administrative rules shall apply if disputes rising from oil pollution damages.


Part 13 is on miscellaneous issues.

The Summary also provides that for commercial and maritime cases relating to Hong Kong, Macau and Taiwan, if the Summary has no specific provisions, the provisions of the Summary may be referred to.