China Laws and Regulations Update in May 2019

1.Governmental Investment Rules

Promulgated by the State Council

Document number: G.L.No.712

Promulgation date: 5 May 2019

Implementation date: 1 July 2019

The Rules clarifies the definition, scope, decision making process, annual investment plan, implementation, supervision and management and legal liability connected with government investments. According to the Rules, government investment funds should be used in non-profit services, public infrastructure, agriculture and rural areas, ecological and environmental protection, significant technological advancement, social administration, national security and other public areas, mainly in non-business projects. All investors should be treated equally when allocating government investment funds. Discriminatory conditions are forbidden. (Source: Website of the State Council)

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Conditions You Should Meet for Free Use of Alibaba Fonts

Alibaba recently published a new type of fonts known as “Alibaba Puhui” and announced that its customers and people around the world are authorized to use the fonts for free. Actually, there are many legal risks in use of fonts. Let me tell you how to avoid or reduce these legal risks.

1.You can only use Alibaba Puhui fonts and cannot change them.

The legal statement on the platform of Alibaba fonts has made it clear that the fonts are free and can be used for commercial purposes but cannot be used by violating a law or published without due authorization. More importantly, Alibaba hasn’t given users the right to modify the fonts, unlike Siyuan fonts, another type of free open source fonts. The above legal statement[1] is as follows.

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China Laws and Regulations Update in April 2019

1.The Trademark Law of the People’s Republic of China

Co-promulgated by the Standing Committee of the National People’s Congress

Promulgation date: 23 April 2019

Implementation date: 1 November 2019

The main contents of this amendment are: 1. new regulations on bad faith registration: refusal of trademark registration applications for a purpose other than use of the trademark and including “trademark registration applications for a purpose other than use of the trademark” as a valid reason for claiming trademark opposition or invalidity; 2. giving more serious punishment for infringement of proprietary rights in the trademark by increasing the multiple used to calculate the amount of damages for a malicious infringement of proprietary rights in the trademark from larger than one but smaller than three to larger than one but smaller than five and increasing the upper limit on legal damages from RMB three million to RMB five million. (Source: Website of the National People’s Congress)

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Discussion of New Uses of the “Safe Harbour Principle” Based on Recent Cases

Article Fourteen of the Rules on Protection of the Right to Disseminate Information on the Internet provides that “a person may send a written notice requiring providers of storage space, searches, links and other internet services relating to a work, performance or audio or video product that the person believes infringes their right to disseminate information on the internet or causes their electronic information about management of their rights to be removed or changed remove or invalidate links to the work, performance or audio or video product”. Articles 22 and 23 of the Rules further provide that storage space, search, link and other internet services providers who have performed the removal obligations under the notice from the information owner do not need to pay compensation.

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China Laws and Regulations Update in March 2019

1.The Foreign Investment Law of the People’s Republic of China

Co-promulgated by the National People’s Congress

Promulgation date: 15 March 2019

Implementation date: 1 January 2020

This law will replace the Sino-Foreign Joint Venture Law, Foreign Funded Enterprise Law and Sino-Foreign Business Cooperation Law to be the legal basis for foreign investment in China. According to this law, organizational forms and structures of foreign funded businesses and their course of action should be governed by the Company Law, the Partnership Law and relevant laws, provided that foreign funded businesses set up before the implementation of this law may continue existing in their original organizational form. Foreign investment means direct or indirect investment made in China by natural people, businesses or other organizations in foreign countries, including establishment of a new business, merger and acquisition, creation of a new project and other forms of investment; Capital contributions, profits, capital gains, earnings relating to assets disposal, royalties from licensed use of intellectual property rights, legal redress or compensation, earnings relating to liquidation, etc. can be transferred in RMB into China or transferred in foreign currency out of China. The Chinese government protects intellectual property rights of foreign investors and foreign funded businesses and legal interests of people owning or relating to these intellectual property rights. The Chinese government implements the pre-establishment national treatment and negative list system for foreign investments and follows the principle of treating foreign and domestic investors equally when supervising and administering foreign investments. Foreign investments that will or may affect the national security will be inspected. (Source: Website of the National People’s Congress)

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The Effect of GDPR on Chinese Businesses

(By Lisa Li)The EU General Data Protection Regulation (“GDPR”) affects a broad range of people outside the EU. Certain Chinese businesses are very likely to be bound by GDPR. This article briefly discusses how GDPR affects Chinese businesses and what Chinese businesses should do to comply with GDPR.

1.The Application of GDPR to Chinese Businesses

This is a matter of applicability. GDPR applies to the following people.

(a) People established in the EU who control or process data and process personal data while doing business regardless of where these data are processed.

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China Laws and Regulations Update in February 2019

1. Announcement on Publishing the Regulations on Overseas Inspection of Medicine and Medical Instruments

Promulgated by the State Administration for Market Regulation

Document number: No.101 in 2018 by the State Administration for Market Regulation

Promulgation date: 26 December 2018

Effective date: 26 December 2018

The Announcement states that overseas inspections are conducted for medicine and medical instruments that have been marketed or are proposed to be marketed and that overseas inspections do not only include inspections in places where production is being performed but mean inspections in places where research, development or production is being performed. Matters to be investigated are decided by considering risks in registration, supervision, examination, inspection, reporting, adverse effect, etc. of medicine and medical instruments as required for risk control. (Source: Website of the State Administration for Market Regulation)

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Comments on Important Clauses in the Legal Interpretation (II) of Construction Work Contracts (First Part)

(By Shi Weidong)On 4 January 2019 the Supreme Court of China promulgated the Legal Interpretation (II) of Issues Concerning the Application of Laws Relating to Construction Work Contract Disputes (“Interpretation II”) .

The promulgation of the Interpretation II marks the first time in the past fourteen years that the supreme court gives a detailed explanation of laws relating to construction work contracts since the Legal Interpretation (I) of Issues Concerning the Application of Laws Relating to Construction Work Contract Disputes (“Interpretation I”) was carried out on 1 January 2005.

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Responsibilities of “Old” Company Founders for Capital Contributions

(By Tian Shanshan) The Chinese Company Law and legal interpretations thereof provide that founders are responsible for paying in full their capital contributions. However, should founders of a company be responsible for paying in full their capital contributions if the company was established before the Company Law 2005 took effect, the first law setting forth responsibilities of a company’s founders for paying in full their capital contributions? Another issue in this case is how to define the founder’s responsibilities and protect the creditors’ interests. Legal authorities didn’t deal with this issue in the same way.

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China Laws and Regulations Update in December 2018

1.Patent Agent Regulations

Promulgated by the State Council

Document number: No.706 State Council Order

Promulgation date: November 19th, 2018

Effective date: March 1st, 2019

The Regulations sets forth patent agent responsibilities for their signature, stating that patent agents should be responsible for patent cases they have signed to handle. In addition, it contains details of patent agent aid services and encourages patent agencies to provide aid services for small businesses and low-income people, advising on patent applications and their legal rights. (Source: Website of the State Council)

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Comments on the Preliminary Process for Filing Infringement Action Against False Statements in the Registration-Based Case Filing System

(By Li Xiang)Article Six of the Regulations of the Supreme People’s Court on Hearing Civil Compensation Cases Arising from False Statements in Securities Markets (“Regulations”) states that “courts should accept and hear litigation cases brought by investors claiming damages for themselves arising from a false statement on the basis of decision made by an administrative authority or a criminal court”. According to this, administrative or criminal punishment is the preliminary process for filing a civil compensation case arising from a false statement.

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Application of Laws on Non-Competition Clauses (Part II)

(By Lisa Li) The following is Part II of the topic on application of laws on non-competition clauses from perspective of Chinese employment law.

1.Termination of non-competition agreement

Article 4 of the Judicial Interpretation IV stipulates that if there are non-competition obligations and compensations agreed in the employment contract or confidentiality agreement, the employer’s failure to pay the compensations for three months will entitle the employee to request terminating the non-competition agreement. In accordance with the wording of these provisions, the employee has the right to request terminating the non-competition agreement, however the non-competition agreement shall not end automatically. However, local practice varies from place to place; even the same court rendered different judgments for similar cases according to the search conducted by the author.

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China Laws and Regulations Update in August 2018

1.Decision to Amend the Provisional Rules on Filings of Establishment and Change of Foreign Funded Enterprises

Promulgated by the Ministry of Commerce

File number: No.19 MOC Order in 2018

Promulgation date: 29 June 2018

Effective date: 30 June 2018

The Provisional Rules states that in order to establish a foreign funded enterprise or change a domestic enterprise into a foreign funded enterprise by merger, acquisition, absorption, combination, etc. by filing as required by the Provisional Rules, filings of establishment of the foreign-funded enterprise shall be submitted online during the establishment and change recordation processes of the administration of industry and commerce and the market supervision and regulation department and the recordation authority shall begin the recordation process upon and inform the investor of receipt of the filings transferred by the administration of industry and commerce and the market supervision and regulation department. If the foreign-funded enterprise or its investor delays in submitting or has a material omission in its filings, the commerce department should give an order to correct it within a limited period of time. A fine of less than RMB 30,000 should be payable for a failure to correct it as required or a serious misconduct. (Source: Website of the Ministry of Commerce)

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China Laws and Regulations Update in July 2018

1.Circular on Promoting Economic Growth by Actively and Effectively Using Foreign Funds

Promulgated by the State Council

File number: No.19 issued by SC in 2018

Promulgation date: 15 June 2018

Effective date: 28 April 2018

The Circular states that the foreign funds “regulatory system” reform will continue. Provincial governments are responsible for approving and administering the incorporation and change of any foreign-funded company with a total investment of less than USD 1 billion in items on the negative list for admittance of foreign investment funds. Local governments are encouraged to attempt an intensive reform of the administrative permit system. Foreign-funded companies outside the negative list can complete the recordation and the AIC registration formalities through “one-stop” service. (Source: Website of the State Council)

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Application of Laws on Non-Competition Clauses (Part I)

(By Lisa Li) In accordance with relevant laws of People’s Republic of China (“PRC), judicial interpretation by PRC Supreme People’s Court, judicial interpretation by local Superior People’s Courts and local regulations and based on the author’s research into and analysis of over two dozens of litigation cases from Shanghai and Beijing etc, the author elaborates on the application of laws on non-competition clauses from the perspective of Chinese employment law practice. The following is Part I of this topic on application of laws on non-competition clauses.[1]

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