China Law Insight : China Law Insight: China Commercial and Intellectual Property Lawyers and Attorneys, Full Service Law Firm: King & Wood

According to Chinese media reports last year, six children died and nearly 300,000 others were sickened after consuming milk powder containing melamine, a toxic industrial chemical that was added to show a higher protein level in the milk powder. The melamine contamination of dairy products was discovered to be widespread. Concerns about food safety have surfaced in China long before the melamine dairy scare: sub-standard baby milk produced in Anhui, Longkou noodles containing lead from Shandong, fake alcohol in Guangdong, soy sauce made from human hair (still not clear how that works in practice), eggs with melamine – this list is long and a cause of grave concern to Chinese consumers.

This unrest in relation to food safety led to an Asian Development Bank policy note being delivered to the PRC State Council in 2007. The policy note was the result of a technical assistance project between the PRC State Food and Drug Administration and the World Health Organization. The note was generally positive and commented favorably on the great efforts made by the PRC government to improve food safety. Despite some progress, problems remained – in particular in respect of inter-agency coordination and the lack of a framework law in respect of food safety. The latest milk powder problem may have been the catalyst that further sped up the introduction of the new law.

As such, the PRC Food Safety Law was approved by the National People's Congress (NPC) on February 28, 2009, and provides a legal basis for the government to strengthen food safety control "from the production line to the dining table."
 

The law which goes into effect on June 1, 2009, consolidates hundreds of regulations and standards covering China’s 500,000 food-processing companies and promises tougher penalties for producers of tainted products.

Mark Schaub, Partner, FDI

• Print
• Comments
• Trackbacks
• Share Link

A. General Devolution to Lower Levels

China's Ministry of Commerce (MOFCOM) has continued their trend of further delegating approval competency to lower governmental levels. This delegation of approval competency to local authorities will greatly accelerate the approval process for foreign invested projects.

MOFCOM issued, on March 5 the Notice on Improving the Examination and Approval over the Foreign Investment (the “Notice”) which simplifies the approval process through the following means:

1. In the Notice, MOFCOM delegates its approval competency under certain conditions:

FIEs falling within encouraged sectors (regardless of investment amount) which were previously approved at the central MOFCOM level can now be approved by MOFCOM counterparts at the provincial level, vice-provincial city level (1), or national economic development zone level. It is important to note that the usual threshold of USD 100,000,000 total investment does not apply to encouraged sector projects. Accordingly, the basic policy is that encouraged projects can be approved locally except for some specific exceptions such as central government reliant projects (2) or FIEs governed by specific rules or industrial policies.

A basic rule has always been for amendments to FIEs to be approved by the original approval authority. The Notice changes this by allowing FIEs originally approved by MOFCOM to have subsequent commercial changes approved by MOFCOM’s local counterparts except for capital increases which require National Development and Reform Commission approvals or share transfers which result in a transfer of the controlling interest to the foreign shareholder.

The Notice also largely devolves approval competency for mergers and acquisitions of domestic companies by foreign investors and FIEs to local authorities. Projects falling within encouraged or permitted sectors can be approved locally if the transaction amount is below USD 100,000,000. Local approval can also be obtained in restricted categories if the transaction amount does not exceed USD 50,000,000. It is important to note that in respect of acquisitions the Notice states that competency shall be determined by reference to the transaction amount not total investment. However, it is important to note that this devolution of authority does not waive approval requirements in respect of the Chinese Securities Regulatory Commission (CSRC) or the state-owned assets supervision and management authorities. Accordingly, in many sensitive cases central level approvals will still be required. Similarly, strategic investments in listed companies will still need MOFCOM level approval.
 

Mark Schaub, Feng Xin, Duncan Hwang of King & Wood's Foreign Direct Investment Practice

• Print
• Comments
• Trackbacks
• Share Link

The third amendment of the Patent Law of the People’s Republic of China (“New Patent Law”) was passed on December 27th 2008, and will come into effect on October 1st 2009. The New Patent Law will impact the legal administration of and court rulings on patents as follows:

A、Affirmed the "Plea of Free Prior Art"

The New Patent Law expressly affirms the “plea of prior art” concept that has frequently been raised in patent infringement law suits. Prior to this, the court was very cautious in applying such a principle due to the lack of a fully recognized legal basis. However, the specific conditions and standards for its use, which have been widely debated among professionals, have not yet been clarified. For example, whether this concept is only applicable to literal infringement cases, or does it also apply to equivalent infringement cases. We look forward to having a unified resolution through judicial interpretation in the future. This change enables quick closures to cases which were filed maliciously and lacking solid grounds.
 

Mia Qu/Melody Shi/Nick Wang of King & Wood's Patents Practice

• Print
• Comments (1)
• Trackbacks
• Share Link

On Monday 23 February 2009, the Tribunal de Grande Instance of Paris in France heard an urgent application by a team of Chinese lawyers for an injunction to prevent the auction by Christie’s of two controversial ancient Chinese relics. It was not in dispute that the two bronze sculptures, one of a rat’s head and another of a rabbit’s head, had been looted by Anglo-French troops from the Old Summer Palace in Beijing during the Second Opium War in 1860 and had until recently been part of the collection of the late Yves Saint Laurent. The Tribunal nevertheless rejected the application. Subsequently, on Wednesday 25 February 2009, the sculptures were auctioned off for 14 million euros each to then-anonymous telephone bidders. The controversy is ongoing.
This incident demonstrates the legal difficulties faced by China generally in the retrieval of similarly looted, stolen or otherwise illicitly exported cultural artifacts from abroad. At present, China adopts the following three approaches in respect of such items:
 

1. repurchasing the items;
 

2. seeking the return of the items as gifts;
 

3. seeking the return of the items through diplomatic maneuvers or through the efforts of non-governmental organizations.
 

This appears to be the first time that China has attempted to seek repatriation of looted cultural property by means of litigation.
 

Ariel Ye, Dong Ping, and Yang Weiguo of King & Wood's Cross-border Dispute Resolution Practice

• Print
• Comments (2)
• Trackbacks
• Share Link