China Law Insight : China Business and Intellectual Property Lawyers & Attorneys : King & Wood Law Firm : IP, Arbitration, Litigation, Securities, Foreign Investment

King & Wood's IP Legal Group in Beijing

The Domain Name Dispute Settlement Center of CIETAC was established in December, 2000, and began operation on July, 2005, as the Internet Disputes Settlement Center. This Center accepts cases including cybersquatting of domain names (disputes on Chinese domain names, e.g. ".cn", and top-level general domain name, e.g.".com"), cybersquatting of general websites, wireless websites, text message websites, etc.

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Malicious litigation is broadly thought to be using a legal right to litigate to protect an interest when no substantive right has been violated. Currently, Chinese law does not provide any specific provisions on how to determine whether a party has abused its right to litigate, nor does the law define the concept of malicious litigation. Moreover, Chinese law does not provide specific remedies for a victim of malicious litigation to repair the damages suffered from a malicious litigation.

By Xu Jing, Partner at King & Wood's Intellectual Property Group

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Chinese outbound investment has grown rapidly in the last few years, particularly in the energy, mining, banking, IT and creative industries. On August 18, 2009 China Petroleum & Chemical Corporation (Sinopec) announced the USD 7.2 billion acquisition of the Swiss Addax Petroleum Corporation. This was the largest international acquisition by a Chinese company to date. Additionally, CNPC has made several large international acquisitions - for example, in May, 2009, CNPC acquired a 45% stake in Singapore Petroleum for USD 1.2 billion while companies such as China Minmetals, China Nonferrous Metals, Baosteel, and ICBC have also made significant outbound investments recently. With the increasing internationalization of Chinese companies, commercial disputes are almost inevitable. In our experience, when dealing with international arbitration and litigation proceedings, we see Chinese companies employing a number of different strategies:

By King & Wood's Cross Border Dispute Resolution team

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Apart from judgments dealing with divorce and custodial issues, only a small number of published cases have been identified involving attempts to enforce monetary judgments entered in China in U.S. courts. A recent decision from the Central District of California is a landmark in the recognition of Chinese decisions.

By Ge Yan, Partner, Cross Border Dispute Resolution

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A Chinese company's top executive is usually the company's legal representative, and he or she is legally entrusted with the company seal, which is the company's official symbol. The company seal provides the legal capacity to make and execute agreements, provide guarantees, transfer assets, and legally bind the company. When a legal representative is replaced, the displaced legal representative must return the company seal to the company so that the new legal representative can represent the company. However, if the displaced legal representative refuses to return the seal, the company could be liable for all the agreements that the former legal representative binds the company to. In other words, even if the articles of association can be used to remove an executive it does not necessarily mean that the foreign investors have been able to regain control of the company in practice. Therefore, retrieving the terminated legal representative's unlawfully held company seal is an important step toward the foreign investors recapturing control of the company.

By Zhang Shouzhi, Xu Xiaodan and Li Xiang, King & Wood's Cross-Border Dispute Resolution Practice, Beijing

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With the increased popularity of the Internet, web-based information is frequently used as evidence in judicial proceedings in China. In most cases, the web-based information is stored inside a web server in the form of electronic data. When submitted to a Chinese court as evidence, the web-based information must be downloaded in the presence of a notary public in order to verify its authenticity.

By Xu Jing, Partner at King & Wood

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From 2003-2007, over US$100 billion poured into China via offshore structures in tax havens like the Cayman Islands. Much came from global institutional investors who tasked alternative investment managers with allocating a percentage of their portfolios to high-yield opportunity funds, emerging markets and real estate.

Everyone wanted a piece of the “China Dream,” but in recent months they have woken up to deteriorating economic conditions. Institutional investors are forcing redemptions of their investments from high-yield, high-risk markets.

Jack Rodman, Senior Advisor to King & Wood\'s International Debt/Restructuring Practice

Summarized from Mr. Rodman's article for China Economic Review, May 2009.

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Often, when Chinese lawyers deal with foreign-related cases they see the term "attorney-client privilege" in the foreign lawyer issued legal opinions and memorandums. Furthermore, many foreign lawyers would like to know if their communication with the Chinese lawyers they work with is provided the same amount of protection as their communication with their clients.

Black's Law Dictionary defines attorney-client privilege as a client's right to refuse to disclose, and to prevent anyone else from disclosing, confidential communications between him or her and his or her attorney. This privilege prevents attorneys from disclosing their communications with their clients. Furthermore, this protection prevents any other party, including, the attorney from using any information that could be considered "attorney-client privilege" as evidence in a litigation. However, there are exceptions. For example, an attorney has a duty to disclose privileged information if the disclosure is related to criminal activities. The attorney-client privilege was established to encourage honest communication between an attorney and his or her clients. This opportunity for honest communication will reduce the chance that a client will intentionally or unintentionally engage in an illegal activity due to ineffective communication with his or her attorney.

Gui Hongxia and  Li Xiang of King & Wood's Dispute Resolution Group

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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

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Stellar Megaunion Corporation ("SMC") was in serious debt, as it could barely repay its liabilities. New World China Land ("NWCL"), which was seeking an opportunity to go public, proposed to acquire SMC as a shell company which has no assets, but is publicly listed. To achieve this goal, NWCL conducted several rounds of negotiations with SMC's creditors to settle SMC's debts and clear the roadblocks for the acquisition. However, the parties were unable to make much progress in the negotiations due to the large number of SMC's creditors involved. As SMC needed to solve its debt crisis as soon as possible and its negotiations with NWCL were deadlocked, the company decided to reorganize to completely release itself from the heavy debt burdens in a short period time.

SMC's Reorganization
A. Reorganization initiated by SMC's creditors
As SMC failed to repay it debts due, a third party creditor petitioned the proper Intermediate People's Court (the "Court") to reorganize SMC. The Court accepted the petition on March 11, 2008 ([2008] Yusanzhongbozi No.1).

B. Confirmation of Creditors' Rights
According to the proposed reorganization plan the administrator of SMC (the "Administrator") submitted to the Court and the first SMC creditors' meeting, 70 creditors filed claims and the total value of confirmed claims was nearly RMB 2.5 billion. [continue reading to find out the outcome]
 

Liu Yanling, Partner and head of King & Wood's Bankruptcy, Restructuring & Insolvency Practice.

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On May 26, 2008, the China Trademark Review and Adjudication Board (“TRAB”) of the State Administration for Industry and Commerce (SAIC) made a decision in favor of Changyu Winery Group, upholding its exclusive use of the mark “cabernet” in Chinese （“解百纳”） as a registered trademark. The decision further found that Changyu established “解百纳”  as one of its trademarks through its use and did not consider “解百纳” the generic name for these cabernet grape varieties.  This means other wineries such as China Great Wall Winery, Dynasty Fine Wines Group Limited and Yantai Weilong Grape Wine Co. are prohibited from using the mark “解百纳", which may certainly cause damage to these wine makers in marketing their products.

This dispute mainly focuses on the following two issues:

1. Whether “解百纳” directly indicates the main raw materials and the characteristics of the products and accordingly should be considered a generic term for certain wine products;

2. Whether Changyu obtained the characters “解百纳” through its long term use.

Ting Xu, Associate, Trademark Department

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Finally, it seems that the first light of dawn in a quieter world has been shown to people who have been continuously bombarded by anonymous messages or phone calls via mobile and other communication channels for private tutoring, apartment sales, and insurance.

On the 25th of August 2008, the 4th Conference of the Standing Committee of the 11th National People’s Congress (NPC) deliberated on The 7th Amendment to the PRC Criminal Law (draft). The Draft is the first time a proposal for providing protection of personal information by imposing criminal charges for violations on such information was put forward. This has raised broad public attention at all levels.

Li Yongmei, associate, Domestic Dispute Resolution

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On March 30, 2008, a notice was issued by the Supreme People’s Court adjusting the standards for jurisdiction of the high people’s courts and the intermediate people’s courts.The adjustment will reduce dramatically the number of first instance cases tried by the high people's courts and the Supreme People's Court, however, it will lead to a huge burden on the basic people’s courts and accordingly the intermediate people’s courts will also see their caseloads increase for cases of second instance. In other words, after the implementation of the new standard, most civil and commercial cases of first and second instance will be charged to the basic and the intermediate people’s courts.The new standard came into force from April 1, 2008...

Liu Jun, King & Wood's Guangzhou Office, Domestic Dispute Resolution

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As of August 1^st, Hong Kong and The Mainland were able to recognize and enforce commercial contracts, in accordance with the “Jurisdiction Agreement”  stated in “Arrangement between the Mainland of China and the Hong Kong Special Administrative Region Courts for Mutual Recognition and Implementation of Judgment on Civil-Commercial Cases under Agreement Jurisdiction." 

By Xu Xiaodan, King & Wood's International Litigation & Arbitration Group

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The “Law of the People’s Republic of China on Mediation and Arbitration of Labor Disputes” (“the New Law”) came into force on May 1, 2008. This promulgation has introduced many innovative concepts to Chinese law. The most notable change was the extension of the statutory period for filing arbitration applications in labor disputes.


By Xu Xiaodan,  King & Wood's International Litigation & Arbitration Group.

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Successfully handling rejection reviews, based on a prior similar mark, in the past has proven difficult.  Rather than simply giving up registration of an important trademark, recent China Trademark Review and Adjudication Board (TRAB) decisions indicate that an effective alternative for applicants is trying to reach a co-existence agreement with the owner of the cited mark.  If there is a slight difference between the preliminarily rejected trademark and the cited mark, and the marks do not cover identical goods or services, a co-existence agreement could become “a must” for overcoming a preliminary official rejection.

Recently we received a favorable decision for a client from the TRAB on a trademark rejection review. Since the rejected trademark and the cited mark differed only in one of ten letters and the two marks also covered similar goods, we expected the board to reaffirm the previous rejection based on Chinese trademark examination criteria. The obvious deciding factor resulting in a favorable review was the Co-existence Agreement entered into by our client with the owner of the cited mark. The co-existence agreement in essence consented to the registration and use of the trademark by our client in China.

Written by Zhu Fangjin, Associate, Trademark Group

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Lacking knowledge of and exposure to China's judicial and arbitrational system, foreign companies usually worry about dispute resolution clauses more than any other clause in a contract. Deciding which arbitration tribunal and what arbitration rules to specify becomes a sensitive and important aspect of contract negotiations for wholly foreign owned entities ("WOFE") and cooperative joint ventures ("CJV").

Contracts in which one party is a foreign entity will contain foreign elements, allowing the parties to choose their jurisdiction without restriction under PRC law. The parties to such a contract may decide at their discretion whether to choose an arbitration tribunal within China or in another country, or resort to ad hoc arbitration to resolve disputes.

A WOFE or CJV established or to be established by a foreign company in China is generally regarded as a Chinese company under PRC law. Therefore, under PRC law, the contracts for the transactions carried out by a WOFE or CJV do not involve any foreign elements. If the contracting parties in a transaction between PRC entities choose a foreign arbitration tribunal, Chinese courts may hold the arbitration clauses in the contract void on the basis that the parties intend to elude PRC law. Therefore, it is recommended that a WOFE or CJV shall appoint a Chinese arbitration tribunal in contracts which do not contain a foreign element.

By Huang Tao, Partner and Dai Yue
* Dai Yue is an associate of King & Wood's Litigation & Arbitration Group in Beijing.

CONTINUE READING... 
CONTINUE READING IN CHINESE...中文

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