New Rules on the Litigation of Cases Involving Foreign Investment Enterprises

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In a new effort to bring clarity to regulations on the trial of cases involving Foreign Investment Enterprises (FIEs) in China, the Supreme People’s Court, the country’s highest court, implemented on August 16, 2010 Provisions on Issues Concerning Trial of Cases Relating to Foreign Investment Enterprises (I) (the “Provisions”). The Provisions deal mainly with cases involving such FIEs as contractual joint ventures, equity joint ventures and wholly foreign owned enterprises. The most important of the Provisions concern the following:

Contract Approval

The Provisions provide that a contract entered into in the course of setting up or altering the status of an FIE be valid and enforceable only upon necessary government approval. Without this approval, such a contract will be treated by a court as invalid, except for the contract provisions on the parties’ obligation to apply and receive approval, which shall be valid and enforceable. In addition, when an approved, thus valid, contract has supplementary provisions, these supplementary provisions do not need government approval to be valid, if they do not constitute “significant and substantial modifications” to the contract.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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