The Supreme People’s Court Requests Public Opinions for A Judicial Interpretation on How to Adjudicate Disputes Involving Foreign Funded Enterprises

 

On November 25, the Supreme People’s Court issued a judicial interpretation on the Rules Pertaining to Issues on Adjudicating Disputes Involving Foreign-Funded Enterprises (Draft) which covers a wide variety of issues.

The Rules predominantly refer to how to deal with the following issues:

1)   Affirmation of the validity of contracts made in the establishment or alternation of foreign-funded enterprises without formal examination and approval;

2)   Breach of  contract relating to funds or conditions under which cooperation is agreed;

3)   Disputes pertaining to stock transfer contracts of foreign-funded enterprises;

4)   Disputes pertaining to stock pledge contracts of foreign-funded enterprises;

5)   The legal relationship of entrusted investment;

6)   The legal relationship of nominal investment;

7)   Disputes arising from the providing of false material;

8)   The application of laws for contracts made in the establishment of a foreign funded enterprise by two or more foreign investors.

Pursuant to the Rules, contracts made by foreign-funded enterprises that have been established or altered without examination and approval by competent authorities will be confirmed to not come into force. In the case of a Sino-foreign equity joint venture contract or a Sino-foreign contractual joint venture contract one party should provide funds or cooperative conditions in the form of land or building. The aforementioned assets should thus be under new ownership after the conclusion of the contract. Should one party fail to meet these requirements it will be judged to be in breach of contract. Commitments made between the two parties should be thus; one party invests and shares the stockholders’ equity while the other is regarded as the nominal stockholder of a foreign-funded enterprise. These commitments will be deemed valid provided they do not violate Chinese Laws, breach compulsory provisions or conflict with public interest.

(Source: The Xinhua Net)