If you've already read the news this morning, you would have heard that 'Google citing a cyber attack' is threatening to pull out of China.
Read the article on NY Times here:
http://www.nytimes.com/2010/01/13/world/asia/13beijing.html
Read the official Google Blog statement here:
http://googleblog.blogspot.com/2010/01/new-approach-to-china.html
What is most interesting to me, is that Google is attempting to put a 'human rights' spin citing that the recent attacks:
'presented a challenge to the company’s guiding zeitgeist, “Don’t be evil.”' and that... 'The company said it would try to work out an arrangement with the Chinese government to provide an uncensored Internet — a tall order in a country that heavily filters the Web — but that it would close its offices in China if its demands were not met.' (NY Times)
The comments on the NY Times and those from human rights activists further applaud and challenge Google to take this step, in the name of human rights. But I think readers overseas who have not spent a considerable amount of time in China, or learning about China, including diplomacy, political agendas, etc. have clearly missed the point. And lets face it, not many countries have a clear conscience when it comes to human rights. Our own American companies are doing some very questionable things when in China and around the world. And continuing to point fingers neither has or neither will ever be effective.
As for Google, what exactly is happening to their China operations fiscally speaking? And is this the real impetus for their threat to pulling out? Are there protectionism issues from the Chinese side? (of course!). I think a more wholesome discussion is required rather than pinning this whole issue to human rights.
Lastly, I am not going to discuss China's human rights issues, or how far they have come or digressed. The important issue is looking at the NOW- and how can we work with the governments of nations around the world, through education, dialogue, etc. instead of rubbing against the grain. An organization that comes to mind that has really understood this concept is International Bridges to Justice (http://ibj.org/).
Anyway, I am interested to see how this PR stunt will unfold and invite any comments.
Tuesday, January 12, 2010
Wednesday, December 23, 2009
PRC Tort Liability Law Comming to Save the Environment
The National People's congress is still working on the draft of the PRC Tort Liability Law - which is an essential law that should be introduced to China's Civil Code. Currently tort related provisions are found in laws such as (1) the PRC Civil Law, (2) the PRC Law on Protection of Consumer Rights and Interests, (3) the Environmental Protection Law, etc., but there is no unified set of rules yet.
The draft law is similar in sense to Western tort legislation in that it outlines rules for fault and non-fault tort liabilities. The draft is quite comprehensive and covers issues regarding medical torts, accidents, product liability, environment, etc.
There is a special section titled "Environmental Tort Liability" which is an especially important piece of legislation at this time.
The draft states that Persons who pollute the environment and cause damage shall bear tort liability. This is a major change from previous environmental tort provisions under PRC law, because under existing legislation persons bear liability if they violate environmental laws/regulations, and if such laws were not violated then the person would be exempt from tort liability. The scope of liability under the draft law has been considerably broadened. That means that even people complying with environmental laws could be held liable if they do pollute and damage the environment! Good news.
Burden of Proof rests on the person suspected of pollution in proving their is no causal link between their actions and the damages. Furthermore if more than one person/party is involved, then comparative fault will be used looking at the type of pollutants and the amount involved.
The draft also creates joint liability between creators of pollution and third parties who actually cause the damage. This is a signal for corporations not only to clean up their acts, but also to better manage and oversea third parties who are in charge of clean up and disposal, or otherwise face serious consequences.
It is nice to see the Chinese legislatures handling the matter of environmental pollution seriously. What remains to be seen is how much of a deterrent effect the actual penalties will have...
Monday, November 30, 2009
The PRC Contract Law - (Part 3) As deep as it gets.
Below are some practical constraints and best practices with respect to the PRC Contract Law. Although quite general, some of the issues below also apply to many other transactions under PRC law.
IIII. Practical Constraints
• China does not follow a system of judicial precedent, and without a case law system it can be difficult to resolve complex contract issues. **(However judicial interpretations by the PRC Supreme Court are binding.)
• There is no formal system of discovery in China, therefore gathering and compelling evidence can sometimes be mission impossible.
• Judgements in PRC courts are often political and protectionist.
• In many cases, the laws that apply to a particular contract case can be found in many different places, often with no translations, and these laws regularly are in conflict.
IIV. Best Practices
• At the drafting stage it is important to gather as much information from the local party as possible.
• Independent legal advice from local Mandarin speaking lawyers is advisable if you do not have relevant expertise in a particular area.
• In the event of a dispute, arguments should be based on the legal framework and the principles of the law, rather than its application through cases.
• When conflicts between PRC laws exist, it is prudent to follow the law or regulation issued by the higher decision making body.
IIII. Practical Constraints
• China does not follow a system of judicial precedent, and without a case law system it can be difficult to resolve complex contract issues. **(However judicial interpretations by the PRC Supreme Court are binding.)
• There is no formal system of discovery in China, therefore gathering and compelling evidence can sometimes be mission impossible.
• Judgements in PRC courts are often political and protectionist.
• In many cases, the laws that apply to a particular contract case can be found in many different places, often with no translations, and these laws regularly are in conflict.
IIV. Best Practices
• At the drafting stage it is important to gather as much information from the local party as possible.
• Independent legal advice from local Mandarin speaking lawyers is advisable if you do not have relevant expertise in a particular area.
• In the event of a dispute, arguments should be based on the legal framework and the principles of the law, rather than its application through cases.
• When conflicts between PRC laws exist, it is prudent to follow the law or regulation issued by the higher decision making body.
Sunday, November 29, 2009
Help, what is my severance pay?
If you are entitled to severance pay, how exactly is it calculated in the PRC?
In the PRC, severance pay is calculated in a bifurcated manner. The old labor law (“Old Law”) applies to the term of employment before January 1, 2008 and the new PRC Labor Contract Law (“New Law”) applies to the period from January 1, 2008.
1. For term of service after January 1, 2008.
According to the New Law, severance pay is generally 1 month’s salary for each year of employment (or ½ month salary for employment of less than 6 months).
“Monthly Salary” = the employee's average monthly salary in the preceding 12 months prior to termination, which includes base salary and also any bonuses, allowances, subsidies, etc.
**If however, the Monthly Salary is more than three times the average monthly salary of all employees in the jurisdiction (“Average Local Salary”), then the Monthly Salary will be capped at 3x the Average Local Salary. For example in Shanghai the Average Local Salary in 2008 was RMB 3,292, and three times that equals RMB 9,876. Therefore, suppose your monthly salary is RMB 35,967 a month from January 1, 2008 – January 1, 2009, your severance will be capped at RMB 9,876.
2. For term of service before January 1, 2008.
According to the Old Law, the term of employment before this time period is not subject to the Average Local Salary cap. Therefore, employees fair much better with regards to severance pay for the term worked prior to January 1, 2008. So following the example above, you will be able to use your Monthly Salary (i.e., RMB 35,967) to calculate severance pay.
(***this is not legal advice! talk to a friendly lawyer friend -- you may also be able to get more or nothing at all, depending on your individual circumstances)
Deeper into the PRC Contract Law (Part 2)
II. Formation of contracts under PRC law
Structurally, the Contract Law, like many other laws on contracts, is divided into three sections:
(1) General Provisions;
(2) Specific Provisions; and
(3) Supplementary Provisions.
In the Contract Law, there are many black letter provisions that are common to contract laws in other jurisdictions. But there are also certain provisions that may come as a surprise to foreign practitioners which will be discussed in more detail below.
In Writing means a memorandum of contract, letter or electronic message (including telegram, telex, facsimile, electronic data exchange and e-mail), etc. which is capable of expressing its contents in a tangible form -- ***therefore an email may be considered a proof of writing and be used to conclude a contract.
Choice of Law - In contracts with a foreign element, the parties may choose the law for dispute settlement. In the absence of a stated law, the law of the jurisdiction with the closest connection to the contract will apply.
Structurally, the Contract Law, like many other laws on contracts, is divided into three sections:
(1) General Provisions;
(2) Specific Provisions; and
(3) Supplementary Provisions.
In the Contract Law, there are many black letter provisions that are common to contract laws in other jurisdictions. But there are also certain provisions that may come as a surprise to foreign practitioners which will be discussed in more detail below.
In Writing means a memorandum of contract, letter or electronic message (including telegram, telex, facsimile, electronic data exchange and e-mail), etc. which is capable of expressing its contents in a tangible form -- ***therefore an email may be considered a proof of writing and be used to conclude a contract.
Choice of Law - In contracts with a foreign element, the parties may choose the law for dispute settlement. In the absence of a stated law, the law of the jurisdiction with the closest connection to the contract will apply.
****Notable Exceptions: PRC law applies in specific cases such as: (1) Sino-foreign cooperative joint venture contracts; (2) Sino-foreign equity joint venture contracts.
III. Recent clarifications on the Contract Law
III. Recent clarifications on the Contract Law
(i) Second Judicial Interpretation and the Recent Judicial Direction on Contracts
24 April 2009 the Supreme People's Court (the "SPC") issued a second judicial interpretation re "Interpretation on Several Issues Concerning the Application of the PRC Contract Law" (the “New Interpretation”);and on 7 July 2009 the Supreme People’s court issued the Direction on Dealing with Several Issues in Civil and Commercial Contract Disputes (“Direction”), for more guidance on how lower PRC courts should apply the Contract Law.
Highlights include:
Introduction of a “Change of Circumstances” rule - According to Article 26, of the New Interpretation, where a change of circumstances has occurred due to various reasons enumerated in the Article such as, material objective changes, unforeseen circumstances, or unfairness, etc., the party affected may apply to the court for amendment or termination of the contract. **It should be noted that courts will proceed with this issue with caution in order to maintain fairness and not overly hinder freedom of the market economy.
Liability for failure to carry out formalities to effectuate a contract – such as failure to complete government registrations, etc., can subject the offending party to relevant expenses. For foreign parties who often depend on the Chinese party to the transaction to complete government registrations/filings/approvals, etc., this may be a valuable tool - however in practice I can't imagine negotiations would go very well if this rule was sprung up on the Chinese party. But at least we know its there.
Liquidated damages may be adjusted by the courts to the actual losses suffered by the party – but in no event shall be more than 30% of the actual losses suffered by the party. **The principals here are fairness and good faith.
Standard Form Contracts and Exemption of Liability Clauses– here the contract provider must use reasonable efforts to draw attention of the other party to clauses in which it attempts to limit its liability. **Reasonableness will be based on, among others, font size, typeface, and other sufficient markings. Failure to do so, may allow the court to rescind the contract.
Fingerprints may be recognized as fulfilling the requirement of “signing” or “sealing” the contract.
Place of Signing may be determined according to the place agreed by the parties, even if it is not actually signed there, or if it is signed in different places or no location is specified, the final signing place will be recognized.
In absence of a writing or oral agreement, actions by parties may be sufficient to conclude a contract unless laws or regulations otherwise provide.
If a contractually named principal begins performance of a contract but has no power of agency in the contract, the contract will nevertheless stand effective.
The New Interpretation, still remains quite general in parts, but should nevertheless provide more guidance to contracting parties and in some respects reinforces the Supreme People’s Court’s desire to allow the free will of contracting.
That's all for now visit again for an even deeeper look... (and remember this is for reference only and not legal advice)
Wednesday, November 25, 2009
Deep into the PRC Contract Law (Part 1)
This is an important area of law to understand for all parties doing business in the PRC.
I. Legislative Overview
(i) Background
• As a trading nation which functioned under a strictly planned economy, China had no need to have an established system of law for centuries. However, with the opening of the PRC and the altering of trade culture, the legislature quickly realized a need for laws on contracts to provide structure and guidance to the mounting complications arising in trade related transactions.
• Prompted by such circumstances, the National People’s Congress, passed the following three laws on contracts in the early 1980’s:
1 Economic Contracts Law of the PRC (1981);
2 Law of the PRC on Economic Contracts Involving Foreign Interests; and
3 Law of the PRC on Technology Contracts.
These three-piece laws on contract were largely inconsistent and overlapped in many areas while offering little guidance for complex contractual cases. The purpose of the second law on the list was to promote foreign trade and investment, and for the first time in PRC history incorporated Western notions of freedom to contract and party autonomy.
(ii) Promulgation of one uniform contract law in 1999
Initiated by further globalization in the 90's, the State Council undertook a major overhaul to further reform this area of law – which resulted in the promulgation of the ‘PRC Contract Law’ (1999) (the “Contract Law”) - which repealed the former three laws – and was an overt effort by the government toward "protecting the legitimate rights and interests of parties to contracts, maintaining socio-economic order and promoting socialist modernization”.
The Contract Law is a hybrid of key concepts from Common Law and Civil law jurisdictions.
The Contract Law is not comprehensive in itself, and other laws which must be referenced include:
I. Legislative Overview
(i) Background
• As a trading nation which functioned under a strictly planned economy, China had no need to have an established system of law for centuries. However, with the opening of the PRC and the altering of trade culture, the legislature quickly realized a need for laws on contracts to provide structure and guidance to the mounting complications arising in trade related transactions.
• Prompted by such circumstances, the National People’s Congress, passed the following three laws on contracts in the early 1980’s:
1 Economic Contracts Law of the PRC (1981);
2 Law of the PRC on Economic Contracts Involving Foreign Interests; and
3 Law of the PRC on Technology Contracts.
These three-piece laws on contract were largely inconsistent and overlapped in many areas while offering little guidance for complex contractual cases. The purpose of the second law on the list was to promote foreign trade and investment, and for the first time in PRC history incorporated Western notions of freedom to contract and party autonomy.
(ii) Promulgation of one uniform contract law in 1999
Initiated by further globalization in the 90's, the State Council undertook a major overhaul to further reform this area of law – which resulted in the promulgation of the ‘PRC Contract Law’ (1999) (the “Contract Law”) - which repealed the former three laws – and was an overt effort by the government toward "protecting the legitimate rights and interests of parties to contracts, maintaining socio-economic order and promoting socialist modernization”.
The Contract Law is a hybrid of key concepts from Common Law and Civil law jurisdictions.
The Contract Law is not comprehensive in itself, and other laws which must be referenced include:
a. PRC Civil Code;
b. PRC Supreme Court interpretations and administrative regulations;
c. District level, city level, provincial level and national level rules, ordinances, guidelines, etc.; and
d. Specific laws such as, PRC Law on Chinese-Foreign Equity Joint Ventures (2001).
(iii) Legislative developments of the PRC Contract Law
PRC Contract Law (effective October 1, 1999)
Interpretation of Issues relating to the PRC Contract Law (Supreme Court, effective December 29, 1999)
Interpretation of Issues relating to Construction Contracts (Supreme Court, 2005)
Interpretation on Several Issues Concerning the Application of the PRC Contract Law (Supreme Court, April 24, 2009)
Direction on Dealing with Several Issues in Civil and Commercial Contract Disputes (July 7th, 2009)
Come back next week for a closer look!
Wednesday, October 21, 2009
Complying with the FCPA in China
What is the FCPA and why should you be concerned?
The US Foreign Corrupt Practices Act – governs the offering of bribes to foreign government officials to further business interests. China, which shouldn't come as a surprise, falls under the catagory of high risk jurisdictions. Even though the act of gift giving is customary in Chinese culture and business transactions, the giving of certain gifts will run afoul of the FCPA. The US Department of Justice and the Securities Exchange Commission have been stepping up their investigation and punishment of FCPA violations. "If we call them before they call us, it's not where they want to be." (DOJ spokesperson).
Who does it apply to?
(a) Issuers of public securities or those required to regularly report to the SEC, even PRC companies listed in the US.
The US Foreign Corrupt Practices Act – governs the offering of bribes to foreign government officials to further business interests. China, which shouldn't come as a surprise, falls under the catagory of high risk jurisdictions. Even though the act of gift giving is customary in Chinese culture and business transactions, the giving of certain gifts will run afoul of the FCPA. The US Department of Justice and the Securities Exchange Commission have been stepping up their investigation and punishment of FCPA violations. "If we call them before they call us, it's not where they want to be." (DOJ spokesperson).
Who does it apply to?
(a) Issuers of public securities or those required to regularly report to the SEC, even PRC companies listed in the US.
(b) US citizens, US permanent residents (i.e., green card holders)
(c) Business entitites established in the US or those with a principal place of business in the US (and their senior officers, directors, shareholders or employees)
(d) Foreign businesses or nationals (that cause an indirect or direct corrupt payment in a US territory)
(e)Foreign Subsidiaries of US companies (US companies will be held liable if they authorize, direct or approve of noncompliant activity by their subsidiaries, this also includes situations where they were not actually aware but should have known)
Elements
(1) Giving or Offering
• includes an offer, a promise to pay or payment of anything of value
(2) Anything of Value
• the giving of anything of value includes particularly creative means beyond the obvious exchange of money such as: low interest loans, assistance to get jobs or into educational institutions, credit cards, gym memberships, payment for weddings, holidays etc., and even nonmonetary gifts such as sexual favors, etc. Just use your imagination.
(3) To a “Foreign Official”
• in China this includes: a member/candidate/official of a political party, any officer or employee of the PRC government, a public international organization, or any department, agency thereof, or any person that acts in an official capacity, and also includes employees of State-owned enterprises.
(4) Directly or Indirectly
Means also giving something of value to any person - while knowing that such thing of value will be Given or Offered to a Foreign Official. Knowing includes not only actual awareness or a firm belief, but also a high probabilty that such circumstance will occur or that it exists. Concious disregard is not a defence.
(5) With a Corrupt Intent
• i.e., for the purpose of influencing the Foreign Official in the furtherance of an act or decision in their official capacity or inducing a Foreign Official to use their influence over a foreign government or instrumentality in order to affect its acts or decisions.
(5) To Further Business Objectives
What is allowed under the FCPA?
The FCPA does allow payments to Foriegn Officials for the purpose of performance or expediting a routine government action, examples of which include: obtaining permits, licenses, police protection, utilities supply, etc. The focus here is ROUTINE - and means actions that are commonly or ordinarly performed by such Foreign Official. And small nominal gifts are ok too (ask your lawyer what is ok)
Penalties
The penalties for FCPA violations are very very high. And include criminal fines of ($2 million for corporations, and $100k for individuals with a possibility of 5 years prison sentences) and civil fines of $10k for corporations or individuals, not to mention companies run the risk of loosing important licenses, permits or qualifications for continuing their business operations.
See WSJ Article - http://tinyurl.com/r2urug
Final words - do your due dilligence - the DOJ, SEC or your coroporate board will never critisize you for doing tooo much DD.
The FCPA does allow payments to Foriegn Officials for the purpose of performance or expediting a routine government action, examples of which include: obtaining permits, licenses, police protection, utilities supply, etc. The focus here is ROUTINE - and means actions that are commonly or ordinarly performed by such Foreign Official. And small nominal gifts are ok too (ask your lawyer what is ok)
Penalties
The penalties for FCPA violations are very very high. And include criminal fines of ($2 million for corporations, and $100k for individuals with a possibility of 5 years prison sentences) and civil fines of $10k for corporations or individuals, not to mention companies run the risk of loosing important licenses, permits or qualifications for continuing their business operations.
See WSJ Article - http://tinyurl.com/r2urug
Final words - do your due dilligence - the DOJ, SEC or your coroporate board will never critisize you for doing tooo much DD.
Check out FCPA BLOG - for all the naughty news - http://fcpablog.blogspot.com/
**this is not legal advice
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