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

1. Wang Haiyang case;
 
In Wang Haiyang vs. Hainan Kaidi Network Information Co., Ltd. [(2011) guminchuzi. No.399], the first instance court found that the defendant online BBS owner was subjectively at fault in refusing to delete online posts of an offensive and libellous nature regarding the plaintiff despite the plaintiff's various oral pleas and rendered a decision favorable to the plaintiff by citing Article 101 of the General Principles of the Civil Law of the PRC and Sub 2, Article 36 of the Tort Law of the PRC. However, the court did not address the issue of whether the defendant was a tortfeasor. It also denied the plaintiff's compensation claim.
 
Both the plaintiff and the defendant appealed to the Henan Kaifeng Intermediate People's Court. The appellate court held that the defendant's refusal to delete the posts in question without reasonable grounds constituted tortious conduct as against the plaintiff by infringing the plaintiff's and plaintiff family's rights of reputation under Article 101 of the General Principles of the Civil Law of the PRC and Sub 2, Article 36 of the Tort Law of the PRC. The court ordered in its decision dated Dec. 19, 2011 that the defendant should make a formal apology on its website to the plaintiff according to Sub 1, Article 120 of the General Principles of the Civil Law of the PRC and pay compensatory damages of RMB5,000 to the plaintiff for emotional distress that he and his family suffered from the tort, which is calculated based on the standard set by Article 10 of the Interpretation of the Supreme People's Court on Several Issues about the Trial of Cases Concerning the Right of Reputation (1998).
 
For your reference, the English versions respectively of the General Principles of the Civil Law of the PRC and the Tort Law of the PRC can be found at below links:
 
http://english.mofcom.gov.cn/aarticle/lawsdata/chineselaw/200211/20021100050859.html
 
http://www.procedurallaw.cn/english/law/201001/t20100110_300173.html
 
The English version of the Interpretation of the Supreme People's Court on Several Issues about the Trial of Cases Concerning the Right of Reputation can be found at http://eng.chinalaw.com.tw/law/display.asp?id=6673&keyword=. However, the full text is only available to existing users.
 
2. We have not noticed any significant changes to the court's interpretations of the right to privacy and right of reputation since the Wang Fei case that was decided in late 2008.

Hope the above helps. Thank you for your inquiry.

Furthermore, Article 7 of the Provisions notes that said indicative cases are released so that "People's Courts at all levels should refer to the indicative cases …. when reviewing similar  cases at trial".[2]   The Supreme People's Court, in a recent statement during a press conference noted that such "indicative" cases should be "refer[red] to" by the lower courts in "similar cases", but that it is not an absolute requirement that the lower courts cite the "indicative" or guideline case. [3]  In addition, during said press conference, the Supreme People's Court noted that High People's Courts may release "reference cases" which are "representative and instructive", but that "such cases should not be named as "indicative cases and should not be quoted in the verdict".[4]   Such establishes a hierarchy for case guidance to the lower courts, including the statutory law, the "indicative cases" of the Supreme People's Court, and "reference cases" of the High People's Courts.  Recently, the Supreme People's Court published an "indicative" or guideline case which provides the lower courts with guidance on the above-noted issue, as follows.

The case at issue involved a contract dispute whereas Plaintiff, Wu Mei (a scrap paper collection company) sued Defendant, Xicheng Paper Co., Ltd. (hereinafter referred to as "Xicheng") in the People's Court of Dongpo District, Meishan City (hereinafter referred to as the "First Instance Court") in Sichuan Province over contract breach of a sales/purchase contract between the parties, alleging that Xicheng had breached their contract by failing to provide payment for the scrap paper provided.[5]    The Defendant appealed to the Intermediate People's Court, but the Appeal was later withdrawn after the parties had reached a settlement privately, without the Appellate Court's mediation.  Subsequent to the settlement agreement being signed and the Appeal being withdrawn, Wu Mei alleged that Xicheng had breached the settlement agreement and, as such, Wu Mei applied to the First Instance Court for enforcement of the First Instance Judgment, but Xicheng applied to the Intermediate Court to challenge the enforcement of the Judgment.[6]   It was noted by the Appellate Court that the settlement agreement at issue was not reached through the Court's mediation, that this agreement established new rights and obligations upon the parties, and, also, that this agreement stipulated that the parties gave up the right of appeal.[7]

The key issue which was considered by the Appellate Court and which the Supreme People's Court believed warranted clarification is whether if one party does not fulfill its obligations under a private settlement agreement which includes a withdrawal of an Appeal, should the First Instance Court upon application enforce the First Instance decision?  Relevant law can be found in Article 207 of the Civil Procedure Law of the P.R.C. which states that "….[i]f one party fails to fulfill the settlement agreement, the People's Court may, at the request of the other party, resume the enforcement according to the original and effective legal document."[8]   It is worth noting, however, that the settlement agreement in Article 207 refers to a settlement agreement reached as part of the Court enforcement procedures and, therefore, it is not applicable to the case at issue, which involved a private settlement. However, as per the rationale prescribed in said Article, it can be deduced that breach of a private settlement agreement (i.e. a settlement reached without the Court's mediation) can be grounds for a First Instance court to enforce its decision which, in the absence of an Appeal, was a final and effective decision, as was the argument of the Plaintiff in this case. 

In addition, Article 212 of the Civil Procedure Law of the P.R.C. notes that "… [a]ll parties shall comply with a mediation agreement or other legal documents that are to be enforced by a People's Court.  If a party refuses to comply, the other party may apply to the People's Court for enforcement."[9]    Please note, however, in regards to Article 212, this only references a "mediation agreement or other legal documents that are to be enforced by a People's Court" and does not make specific reference to a private settlement agreement reached outside the auspices of the Court's mediation.

Two points stand out in the Appellate Court's ruling the guideline case.  Firstly, the Court was clear that this applied to cases, such as this, where there was no mediation by the Court in the settlement agreement and, secondly, this applied to cases, such as this, where the rights and obligations of the parties were changed relative to the original contract in dispute.  As stated by the Appellate Court (with Chinese language to English language translations provided herein):

"The party should have known the consequence of withdrawing the appeal in the Second Instance of Trial in that, upon the approval of withdrawal of the Appeal by the Second Instance Court, the judgment rendered by the First Instance Court is a final judgment and shall be binding and enforceable. Though the parties reached a settlement agreement, said agreement reached between parties without the People's Court's confirmation and issuance of the Court's mediation order.  As such, said private settlement agreement can not be the basis to request the Court to enforce. The party breaching this private settlement agreement violates the principal of acting in good faith. Therefore, the request of the breaching party of not enforcing the First Instance Judgment due to the conclusion of the private agreement shall not be supported by the Court.[10]

Such private settlement and changing of duties/obligations is not uncommon in contract dispute settlements between parties, but, when choosing to take such a course of action, parties should understand the associated consequences.   Consideration should be given in regards to the advantages/disadvantages of both private settlement negotiations and mediation by the Court, as well as the impact of the imposition of new duties and obligations upon the parties to the settlement agreement.  In regards to the former issue (i.e. court mediation), if a court-mediated settlement is reached, as per Article 212 noted above, a court could directly enforce the settlement agreement.  In cases such as the guideline case, private settlements outside of the court's mediation cannot be directly enforced by the court and will have to be dealt with as a separate contract dispute if breach should be claimed.   In regards to the latter issue of the imposition of new duties and obligations upon the parties in the settlement agreement, the Appellate Court is making clear that the Court is not in a position to enforce a settlement agreement where new duties/obligations beyond the scope of those described in the contract in dispute are imposed upon the parties as said agreement is "not relevant to the litigation" .[11]  

As such, parties must weigh the certain advantages of settlement agreements reached through the mediation of a dispute by the court (including but not limited to the direct enforceability of a settlement agreement) with the possible limitations of scope of rights and obligations which may apply to a potential settlement agreement.   The Supreme People's Court, by providing the above "indicative" or guideline case, is making clear its position on the matter and, as such, relevant contract dispute settlements under P.R.C. law will be expected to comply with the associated guidelines.

Note: this publication is for informational purposes only and it does not in any way constitute a legal opinion.

[1] Art. 1 of the Supreme People's Court's Provisions on Case Guidance Work (released November 26, 2010), found at http://vip.chinalawinfo.com/newlaw2002/slc/slc.asp?db=chl&gid=143870 (last visited on January 6, 2012) (English language Translation).

[2] Id. at Art. 7.

[3] Law-star.com, posted December 22, 2011, referencing statements made on December 20, 2011, found at http://www.law-star.com/cacnew/201112/1545074371.htm (last visited on January 6, 2012) (English language translation).

[4] Id.

[5] Wu Mei v. Xicheng Paper Co., Ltd.  Fa(2011)No. 354    法〔2011〕354号
Found at http://www.chinacourt.org/html/article/201112/21/472159.shtml (last visited on December 27, 2011) (English language translation).

[6] Id.

[7] Id.

[8] Art. 207 of the Civil Procedure Law of the People's Republic of China, promulgated and effective on April 9, 1991, Amended on October 28, 2007 (English language translation).

[9] Id. at Art. 212.

[10] Supra at 5.

[11] Id.

b. Answers of the Supreme People's Court and Supreme People's Procuratorate on Several Issues Concerning the Implementation of Supplementary Provisions on Punishing Corruption and Bribery Crime(2) provides:

"unhandled cases of committing repeated crimes of graft means where a grafter commits two or more graft practices but neither receives criminal punishment (including immunity from prosecution and exemption from criminal sanctions) nor receives administrative sanctions. The calculating of the amount of graft shall comply with the period of prosecution in criminal law, the amount of corruption within the period for prosecution should be on a cumulative basis. Expiry of the statute of limitations period has shall not be counted in the amount of corruption."

B. Judicial Practice

Based on the second paragraph of Article 383 of Criminal Law, the principle of penalties for the crime of bribery is:" Toward those who have committed repeated crimes of graft, all amounts of graft of unhandled cases are to be added in meting out punishment." There are two controversial issues, the first is about the different interpretations of "repeated crimes" and the second is about the different interpretations of "unhandled". It is unclear whether "unhandled" refers to: (1) not having received criminal punishment and not having received Chinese Communist Party ("CCP") discipline and administrative sanctions, or (2) only to not receiving criminal punishment. There are no clear definitions about the above issues in PRC criminal laws. According to the PRC government's anti-corruption policy and provisions "in lighter cases, they will be given administrative action to be decided by the unit to which they belong to or the higher administrative authority" in item 4 of Article 383 of the Criminal Law, "repeated crimes" and "unhandled" may be understood as neither receiving criminal punishment nor receiving CCP discipline and administrative sanctions or refers only to not receiving criminal punishment in judicial practice.

There are the following different circumstances in judicial practice:

a. Repeatedly accepting bribes, each constituting a criminal offence

If repeated crimes are committed within the time limitation of criminal prosecution and have not been punished (including criminal punishmentand administrative sanctions), the bribery amount will be cumulatively calculated.

b. Repeatedly accepting bribes, some cases constituting criminal offences

The bribery amount has legal risks to be cumulatively calculated if the repeated crimes are conducted within the time limitation of criminal prosecution and have not been punished. For those who have not constituted criminal offences, there have been cumulative calculation cases in judicial practice, such as accepting small gifts on holidays.

c. Repeatedly accepting bribes, none of those cases constituting criminal offences separately. But those cases could be considered criminal offences by cumulative calculation.

This is the most controversial case. Firstly, "unpunished crime" includes criminal punishment and administrative sanctions. There are legal risks for considering these cases as commercial bribery by cumulative calculation. Secondly, in criminal law theory, the "Xu Xing Crime" means that repeated acts constitute crimes by cumulative calculation even though each act cannot be considered a criminal offence. Thirdly, in judicial practice, there are many criminal offences in accepting bribes if the cumulative amount meets the bribery crime standard. In brief, there are still legal risks to be convicted commercial bribery crime by cumulative calculation on this occasion.

II. Cumulative Calculation of Commercial Bribery Amount in Crime of Offering Bribes

A. Legislation

a. Article 11 of the Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on Filing and Prosecution of Criminal Cases Governed by Public Security Authorities (II)(3) provides," in the case of offering bribes to employees of companies, enterprises or other units for illegitimate benefits(4), cases shall be filed to prosecute the party concerned for individuals offering amount of over RMB10,000 and for units offering amount of over RMB200,000."

b. Article 1 of the Provisions of the Supreme People's Procuratorate on Offering Bribes Filing Standard(5) provides," any person who offers money or property to a state functionary in order to gain illegitimate benefits shall be considered as offering bribes.

Such a person may be charged with the above criminal offense if he/she:

i. Offers bribes of RMB 10,000 or above;

ii. Offers bribes of less than RMB 10,000, but with one of the following circumstances: (1) in order to gain illegitimate benefit; (2) offers bribes to 3 people and more; (3) offers bribes to party and government officials, judicial officers, administrative law enforcement officials; (4) offers bribes causes great damages to national or public interests.

c. Article 13 of the PRC Criminal Law provides," however, if the circumstances are obviously minor and the harm is not serious, the act shall not be considered a crime."

B. Judicial Practice

According to the above-mentioned provisions, the criminal offence filing standard of the bribery crime is based on the amount standard and other standards in judicial practice.

There are following circumstances in judicial practice for offering bribes:

a. Repeatedly offering bribes, constituting criminal offences every time

If the repeated crimes are conducted within the time limitation of criminal prosecution, the bribery amount will be cumulatively calculated in conviction and sentencing.

b. Repeatedly offering bribes, some cases constituting criminal offences

The bribery amount has legal risks to be cumulatively calculated if the repeated crimes are conducted within the time limitation of criminal prosecution.

c. Repeatedly offering bribes, none of those cases constituting criminal offences separately. But those cases could be considered criminal offences by cumulative calculation.

There are risks for commercial bribery amount to be cumulatively calculated in such circumstance.

In summary, the most tricky issue in judicial practice is to consider whether the nature of the act falls within offering bribery. "Any person who offers money or property to a state functionary in order to gain illegitimate benefits shall be considered as offering bribes." If the actor do not have the illegitimate benefits purpose (giving gifts on holidays) or the property offered is intangible (offering job opportunity), such act shall not be considered as offering bribes. If the act is considered as offering bribes and the case constitutes criminal offence, there is a high risk it will be grounds for conviction as a commercial bribery crime.

Notes:

1、The Criminal Law of the People's Republic of China was revised on 25 February 2011 and became effective upon promulgation by the National People's Congress.
2、Answers of the Supreme People's Court and Supreme People's Procuratorate on Several Issues Concerning the Implementation of Supplementary Provisions on Punishing Corruption and Bribery Crime was promulgated on Nov 6, 1989 and came into force as of the promulgation date.
3、The Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on Filing and Prosecution of Criminal Cases Governed by Public Security Authorities (II) was promulgated on May 7, 2010 and came into force as of the promulgation date.
4、"Illegitimate benefits" means that the actors are seeking benefits which are against the law, administrative regulations and policies, and requesting the state functionary or relevant agency to provide assistance and convenience against the law, administrative regulations and policies.
5、The Provisions of the Supreme People's Procuratorate on Offering Bribes Filing Standardwas promulgated on December 7, 2000 and came into force as of the promulgation date.

（2）《最高人民法院、最高人民检察院关于执行<关于惩治贪污罪贿赂罪的补充规定>若干问题的解答》（2）规定：“多次贪污未经处理，是指两次以上（含两次）的贪污行为，既没有受过刑事处罚（包括免予起诉、免予刑事处分），也没有受过行政处理。累积计算贪污数额时，应按刑法有关追诉时效的规定执行，在追诉时效期限内的贪污数额应累计计算，已过追诉时效期限的贪污数额不予计算。”

2、司法实践

根据刑法第三百八十三条第二款的规定，受贿罪的处罚原则为：“对多次受贿未经处理的，按照累计受贿数额处罚。” 该规定存在两个有争议的问题，一是何谓“多次”，二是“未经处理”是既包括未经刑罚处理也包括未经党纪、行政处理，还是只指“未经刑罚处理”，立法和刑法解释对此都没有明确的规定。但是，根据国家对商业贿赂犯罪严厉打击的刑事政策，以及《刑法》第383条第4项“情节较轻的，由其所在单位或者上级主管机关酌情给予行政处分”的规定，“多次”和“未经处理”在司法实践中存在被理解为只要是未经行政处理或刑罚处理的多次贿赂行为都应当累计计算。而且，司法实践中已经出现这样的案例。

司法实践中，通常有如下情形：

（1）多次受贿，每次均达到刑事立案标准

此种情形下，只要没有超过追诉时效，且未经处理（包括未经行政处理和刑罚处理），都会被累计计算。

（2）多次受贿，有些达到刑事立案标准，有些没有达到刑事立案标准

此种情形下，只要没有超过诉讼时效，且未经处理（包括未经行政处理和刑罚处理），都存在被累计计算的风险。虽然对于没有达到立案标准的是否应该被累计计算存在争议，但是鉴于中国打击腐败的政策原因，司法实践中，已经发生将逢年过节所收小额礼品也计算为受贿数额的案例。

（3）多次受贿，每次单独均没有达到刑事立案标准，但是累计计算可达刑事立案标准

这种情况是最具有争议的，但是，鉴于：

第一，“未经处理”存在被理解为包括未经行政处理和刑罚处理两种情形，对于多次受贿但每次均没有达到立案标准的情形，也存在被累计计算的法律风险。

第二，在刑法理论上，有“徐行犯”的法律概念，指的是，虽然每次行为单独均不构成犯罪，但是多次行为加在一起已经达到定罪的标准，也应按照犯罪处理。

第三，司法实践中，已经存在多次受贿但每次均没有达到立案标准，累计计算达到刑事立案标准被定罪的案例。

因此，此种情形下，虽然每次受贿行贿单独均不构成犯罪，但是累计计算达到立案标准的，存在被按照犯罪处理的法律风险。

二、行贿罪累计计算问题（行贿犯罪的立案标准存在“数额标准”和“非数额标准”两个标准）

1、法律规定

（1）《最高人民检察院公安部关于公安机关管辖的刑事案件立案追诉标准的规定（二）》（3）第十一条规定：“为谋取不正当利益（4），给予公司、企业或者其他单位的工作人员以财物，个人行贿数额在一万元以上的，单位行贿数额在二十万元以上的，应予立案追诉。”

（2）《最高人民检察院关于行贿罪立案标准的规定》（5）第一条规定：“……行贿罪是指为谋取不正当利益，给予国家工作人员以财物的行为。 …… 涉嫌下列情形之一的，应予立案：A．行贿数额在一万元以上的；B．行贿数额不满一万元，但具有下列情形之一的：（a）为谋取非法利益而行贿的；（b）向三人以上行贿的；（c）向党政领导、司法工作人员、行政执法人员行贿的；（d）致使国家或者社会利益遭受重大损失的。 ……”

（3）《刑法》第十三条规定：“……但是情节显著轻微危害不大的，不认为是犯罪。”

2、司法实践

根据上述法律规定，司法实践中，行贿犯罪的刑事立案标准除了数额标准之外，还存在非数额标准，例如，行贿数额虽不满一万元，但是符合“为谋取非法利益”、“向三人以上行贿”等情形的，应予立案。所以，未达立案标准，指的是，既不满足数额标准（行贿一万元以上），也不满足非数额标准（行贿数额虽不满一万元，但是具有“谋取非法利益”、“向三人以上行贿”、“向党政领导、司法工作人员、行政执法人员行贿”等情形）。

对于行贿罪而言，通常要考虑如下情形：

（1）多次行贿，每次均达到立案标准

此种情形下，只要未超过诉讼时效，在定罪量刑时，行贿数额会被累计计算。

（2）多次行贿，有些达到立案标准，有些即使累计计算也没有达到立案标准

此种情形下，只要未超过诉讼时效，对于达到立案标准的，数额会被累计计算。

（3）多次行贿，每次单独均没有达到立案标准，但是累计计算达到立案标准的

这种情况是最具有争议的，但是，此种情形下，存在被累计计算的法律风险。

综上所述，司法实践中，对于行贿犯罪而言，最主要的是要考虑行为的定性问题，看当事人的行贿是否属于“行贿行为”，即“为谋取不正当利益，给予国家工作人员或非国家工作人员以财物”的行为。如果行为人不具有“谋取不正当利益”的目的（如过节时的礼尚往来行为，因不具有谋取不正当利益的目的，不能被认定为属于“行贿行为”），或者给予被请托人的不属于“财物”（如提供就业机会等），行为人的行为就不属于“行贿行为”。如果行为人的行为被定性为“行贿行为”，同时又达到了立案标准，就具有较大的风险被认定为行贿犯罪。

注释：

1、《中华人民共和国刑法》，全国人民代表大会通过，于1997年10月1日起生效实施，2011年2月25日修正。
2、《最高人民法院、最高人民检察院关于执行<关于惩治贪污罪贿赂罪的补充规定>若干问题的解答》，1989年11月6日发布，自发布之日起生效实施。
3、《最高人民检察院公安部关于公安机关管辖的刑事案件立案追诉标准的规定（二）》，2010年5月7日发布，自发布之日起生效实施。
4、“谋取不正当利益”，是指谋取违反法律、法规、国家政策和国务院各部门规章规定的利益,以及要求国家工作人员或者有关单位提供违反法律、法规、国家政策和国务院各部门规章规定的帮助或者便利条件。
5、《最高人民检察院关于行贿罪立案标准的规定》，2000年12月22日发布，自发布之日起生效实施。

1. If the domain is not yet registered:

Importance of domains in China – Chinese consumers, especially the younger generation, increasingly turn to the internet for information. A failure to secure the proper domain names may prevent a business from leveraging an important forum to provide information to its customers, damage brand reputation, dilute trademarks or confuse customers. Domain name registration is relatively inexpensive and easy.

Registering a ".com.cn" or ".cn"  domain – Companies actively doing business in China are recommended to consider registering their domain name in the ".com.cn" and ".cn" domains in addition to the common ".com" domain. It is easy to search the database of the China Internet Network Information Center ("CNNIC") to establish whether domain names are still available for registration.

Internet Keywords – More common in China than in Western countries is the registration of internet keywords in China (i.e. words that can be typed into the navigation toolbar directly – often the actual company name).  Internet keywords are commonly called "General Website Addresses". Such internet keywords can greatly facilitate Chinese-speaking consumers who wish to find your company but have difficulty recalling long English domain names.

2. If the domain name is already registered by a third party

If an important domain is already registered by a third party then you will need to file a complaint or file suit against the registered party according to Articles 5 or 15 of the Measures of the China Internet Network Information Center for Resolving Domain Name Disputes to cancel or transfer the domain name registration.

You will need to challenge the domain registration through a Dispute Resolution Institute authorized by CNNIC (CIETAC and HKIAC are authorized by CNNIC to solve the dispute of .cn domain names) or take legal action against the owner of the domain names in question.

3. If important Internet Keywords have been registered in the name of a third party

If a third party has applied to register important Internet Keywords (i.e. the company's name) then it may be sufficiently serious enough to challenge such application and register the Internet Keywords according to the Measures of General Website Address Registration Dispute.

You may challenge the internet keywords registration through a Dispute Resolution Institute authorized by CNNIC (CIETAC is a CNNIC-accredited institute to solve the dispute of internet keyword registration), or bring an action before the court against the registered owner of the internet keywords in question.

If a company has no plans to do business in China currently, the company may simply ignore a third party registration. However, companies should nonetheless consider whether another party's registration and use of such domain name will damage the company's brand reputation, dilute its trademark or confuse its customers.

一、 概述

有新法的支持者认为：目前越来越多的企业依靠信息技术改善其经营管理及提高生产效率。在某些行业内，信息技术产品和服务的采购成本甚至可能占到其总资本开支的绝大部分。但是，当这些企业必须同一些使用非法的信息技术产品的公司进行竞争时，就可能因为采购合法信息技术产品所导致的相对较高成本而处于竞争劣势。该新法或可帮助在华盛顿州销售或许诺销售产品的制造企业解决这样的不正当竞争问题，改善竞争环境。

根据该新法规定，满足以下条件就将构成产品制造商（不论是否位于美国境内）的不正当竞争：（1）产品制造商在经营活动中使用了未经授权的软件或硬件（产品以下或称“IT产品”）；（2）所生产的产品（或包含所生产部件的最终组装产品）有在华盛顿州售卖或者许诺销售行为（以下简称“涉案产品”）；（3）且和在同一州内售卖或许诺销售的同类产品存在商业竞争关系。

根据该法规定，IT产品的范畴相当广泛，凡是企业在生产经营中所利用到的所有软件或硬件信息技术产品，都可能落入其范畴，具体包括各类计算机软件（操作系统、应用软件、办公软件、服务器软件、管理软件、财务软件等）、服务器、网络设备等等。而所谓涉案产品，因为涵盖了所有成品和将该制造商制造的产品作为组成部分的最终产品（有些种类的产品被排除在外），也使得其范围变得非常广泛。

此外，值得注意的是，不仅在生产经营过程中直接使用未经授权的软件或硬件制造产品会触及新法，该法还把“使用”范围扩展到经销、物流、仓储、及市场推广环节。例如，如果一家公司在市场推广时使用某未经授权的软件制作宣传广告，或在销售后使用盗版软件进行会计入帐，该等行为皆可构成新法所禁止的不正当竞争。

根据该新法的规定，两类主体可以针对以上不正当竞争行为提起诉讼，一是华盛顿州的司法总长，二是符合一定条件、受不正当竞争行为影响而蒙受一定经济损失的同业生产商。

如果胜诉，新法提供了多种法律救济手段，包括禁止销售令、对涉案产品的扣押令，承担胜诉方的诉讼及律师费用，经济赔偿（包括最高可达三倍于正常损害赔偿的惩罚性赔偿）。

此外，因为预见到多数侵权制造商不在美国直接经营，在美国也没有可供执行的资产，新法还规定可以追加州内销售涉案产品的第三人为共同被告，并向该第三人追偿。但是新法对追加第三人有一定的条件限制，其中包括该第三人和侵权制造商有直接合同关系、且年经营总额在5000万美元以上。另外，该第三人还受新法下的“安全港条款”保护，可以通过证明其已采取了合理的防范措施来免除法律责任，例如以合同形式要求其上游供货商不得使用未经授权的软件或硬件，并存在确实的合规审查机制。

新法在美国零售界和IT界都引起了不小的反响。不仅是华盛顿州，类似的新法在路易斯安娜州也已经通过。不排除会有更多的州陆续采纳类似法案。如果有更多的州实行这类新法，则将会对包括中国制造商在内的全球制造类企业产生更为广泛的影响。

二、 对中国制造企业的影响之分析

虽然目前该新法颁布不久，且尚未发生任何依据此法提起的诉讼。但是，根据该法案的内容，可以预见该法案将产生多方面的影响。详述如下：

1. 法案为合法IT产品提供商提供了有利机会

虽然新法明文规定，一般情况下IT产品的知识产权人不得作为原告直接提起诉讼，但是，由于该新法的内容，在客观上导致众多IT产品提供商获得了有利的推动制造类企业使用真品和正版产品的机会。

根据该新法规定，在起诉人提出诉讼之前，有关IT产品的权利人必须向侵权制造商发出符合规定的通知书，收到该通知后制造商可在90天内进行合法化。只有在超过时效仍未纠正的情况下，该制造商才可以被起诉。

因此，IT产品权利人的行动事实上起着至关重要的作用。如果IT产品的权利人没有发送符合要求的通知，并给予该等制造商90天的宽限期，诉讼就会因缺少前提条件而难以启动。相反，如果制造商能够获得由IT产品权利人出具的的足够的购买凭证和正版证明，也能使制造商免于卷入相关诉讼。

2. 中国制造商的全球竞争对手将可能伺机而动

对于视中国的制造企业为主要竞争对手的其他国家的制造企业，包括来自发达国家和其他新兴市场国家的竞争者，很可能会充分利用该新法的规定，伺机提起诉讼案件，阻却竞争者的商品在实施此类法律的州销售，抢占市场份额。

3. 在美国的上游进口商及分销商将设法转嫁法律风险

根据新法的规定，虽然原告一方可以在诉讼中追加州内销售涉案产品的第三人为共同被告，并向该第三人追偿，但是该等第三人享有“安全港”保护。也就是说，在满足以下条件的情况下，该等第三人可以免于被诉：

（1） 其在自己的企业行为规范或与制造商之间签订的其它书面文件中，要求该等制造商遵守相关法律、并禁止其在制造过程中使用盗版或非法的信息技术产品，并且在IT产品权利人发送通知后或诉讼程序中积极行动，从制造商处获得正版化的证明或停止向其采购；

（2） 对于新法实施前180天就已经与制造商签署协议的，虽然协议中没有以上禁止制造商使用盗版或非法信息技术的内容，但也在IT产品权利人发送通知后积极行动，获得制造商正版化证明或停止向其采购；

（3） 通过其它措施要求向其供货的制造商遵守新法，如定期进行审计、或要求第三方对制造商进行审计、将违反新法列为违约情形等等。 以上规定事实上是要求销售商提高对其供应商的控制和要求，促使供应商采取行动符合新法的要求。因此，在美国的进口方及分销商可能根据此规定向其制造商施压、或停止采购、或在与制造商的协议谈判中提出新的要求，转嫁自身的法律风险。

4. 重要国际客户将可能提高对供应商的考核和控制

目前很多大型国际客户都有完备的供应商行为准则，对其供应商的行为进行细致地规范和控制，如劳工保护或者环境保护方面的要求，确保其符合美国的相关法律的规定，并确保其不会因供应商的行为而导致自身的法律风险。

新法实施后，可以预见将有更多的大型采购、销售企业会相应调整和修改其针对供应商的行为准则，将使用合法的信息技术作为其合格供应商的条件之一，并可能有针对性地设立供货商IT产品合规审查机制（"software license compliance audits”），聘用第三方IT顾问公司对上游供货商进行软件和硬件许可完备性的审查。

5. 某些特定行业的中国制造企业可能具有更高的风险

如本文所介绍，根据新法的规定，除海外制造商的同业竞争者外，华盛顿州的司法总长也可能代表政府针对海外制造商提起诉讼。这就意味着，对于某些特定行业，如果国际间的行业竞争处于异常激烈的状况，或在以美国为主要出口销售市场的同行业者遭受到异常严重的竞争威胁以至于引起政府关注时，都可能率先爆发该新法下的诉讼。这些行业内的制造商将可能面临比其它行业更高的法律风险。

6．新法也给做好自身合规工作的中国制造企业提供了保护和扩大市场份额的机遇

新法并没有对能够提起诉讼的企业有任何地域限制，也不要求其在美国有实体或者直接的经营活动，但是要求只有自身在使用IT产品方面完全合规的企业才有资格起诉。所以如果中国制造企业能够确信其使用的IT产品完全合法，并且由于其他竞争对手仍存在使用非法IT产品的行为而在实施新法的州处于不利的竞争地位（特别是产品价格方面），此类中国制造企业完全可以拿起法律武器，在这些州发起诉讼，维护自身合法权益，保卫甚至积极主动的利用法律手段扩大其市场份额。

三、 建议

中国经济已经处于全面转型的时期，从而逐渐摆脱完全依赖低成本低附加值的外向型经济的发展模式。中国的制造企业也有必要在发展过程中加强对国际市场政策法律环境的了解，并采取行动适应日趋严格的要求。

鉴于此次美国华盛顿州新法所带来的法律风险，中国的出口产品制造商可能需要考虑进行定期的内部IT合规审查，对公司的软件和硬件产品的使用和许可的完备性作全面检查。由于新法不要求起诉方证明制造商有主观故意，所以因公司内控不严而使用盗版软件或假冒硬件也会产生法律责任。如果存在主观故意，更可能会承担一般民事赔偿数额三倍的惩罚性赔偿。

公司内部的IT合规审查并不是一个简单的从上而下的工作检查。公司管理层可以建立一个反馈机制，通过和雇员的交流，了解审查的执行情况，吸收改进意见。由于公司IT软硬件使用会随经营模式和产品类型而改变，持续且完善的反馈机制能让公司更快的对IT合规审查作出必要的调整。在定期审查的同时，对基层雇员的IT合规培训也必不可少。在生产和经营工作第一线的员工因为直接和各类IT软硬件接触，能及时提供第一手的相关信息。培训方式不一定只是传统的讲座，平时不定期的向全公司发送“小贴士”电子邮件能及时地向员工提供最新的合规咨讯。

如果公司在审查中发现使用的某些IT软硬件产品没有足够的许可或超出了许可范围（如违反许可使用面向个人用户的家庭版软件或者超出许可数量在额外的计算机设备上装载购买的商业软件产品），在补充购买合适的许可或产品以补足差额的同时，也要做好购买凭证的保存工作，同时对审查的方式、结果、以及纠正的过程要作全面的内部纪录。如果日后收到知识产权权利人基于新法发出的通知书，公司能够及时提供充足的真实书面证据来证明自己已有合法且足够的IT许可。

此外，公司可以考虑任命专门的中层管理人员兼职负责IT合规审查和培训，并将企业的IT软硬件采购并入到合规负责人的日常审查工作中，确保在购买IT产品时做到完全合规，并且确保及时更新和续展有使用期限的IT产品的使用许可或采购新的合法产品。

如果公司收到IT产品权利人基于新法发出的通知书，应当重视并认真对待，尽量能快速准确地在新法要求的时间内做出有效的回复，并积极与权利人进行有效的沟通。

结语

对中国企业来说，因违反美国法律在美国遭遇法律诉讼已不再陌生。从早些时候的联邦贸易委员会337程序调查，到今年年初爆发的中国在美上市公司的集体被诉，这些前车之鉴都给积极进取中的中国企业以警示。对于中国企业来说，为实现国际化和市场的扩展，遵从和符合目的地国法律已经成为一项不得不直面和重视的问题。另外，中国企业也应当更多的学会利用国际或者当地的法律和保护机制积极主动地维护自身的合法权益和市场份额，不应对竞争对手的非法活动置之不理或者纵容默许。从积极的方面看，这也必将促使中国的优质企业在压力和动力的双重作用下以更快的速度完成国际化进程，熟悉国际贸易中的游戏规则，并熟练参与其中，并逐渐形成低成本之外的核心竞争优势并积极维权，从被动挨打到主动出击。

Extra-judicial mediation has been established for a long time and widely accepted in practice. It can be informal or hosted by a professional mediation institution. The nature of disputes which are capable of being settled by mediation can be civil, commercial and administrative. Generally speaking, extra-judicial mediation has three distinct aspects: first, party autonomy is highly respected. It is the parties' decision whether to submit their dispute to mediation and the scope of the dispute to be mediated. The mediator must respect the parties' will and never force them to make a decision. Second, mediation is a totally independent proceeding. It is not a part of a judicial procedure and its existence and rules do not rely on other legal proceedings. Third, unlike a court judgment or an arbitral award, the result of an extra-judicial mediation is not enforceable. Last, the submission to mediation is made without prejudice to the parties' rights to seek further legal relief from the court or arbitration.

I. The typical forms and main features of extra-judicial mediation

Currently, China has not established unified extra-judicial mediation legislation; the relevant provisions are scattered through various laws, regulations and rules. Therefore, there is no uniform classification of extra-judicial mediation. However, according to the Several Opinions on Establishing and Improving the Resolution System for Disputes by Linking Litigation and Non-litigation Cases (1) ("Several Opinions") issued by the Supreme People's Court, typical forms of extra-judicial mediation include: people's mediation, commercial mediation, administrative mediation, employment dispute mediation and industry mediation.

A. People's Mediation

People's mediation is the most widely-used and most distinctive mediation in China. People's mediation is carried out by people's mediation committees to help parties voluntarily reach settlement agreements through consultation by persuasion, guidance and other methods. People's mediation can resolve property and personal disputes.

People's mediation committees are self organized groups and are widely established throughout the country. According to the Law of the People's Republic of China on People's Mediation (2), village committees and residents' committees must establish people's mediation committees while enterprises and public institutions may establish people's mediation committees as needed. It is reported that at the end of 2010, the number of people's mediation committees was 818,100, the number of mediators was 4,668,900, and the number of cases resolved by people's mediation exceeded 8,418,400.(3) No fees may be charged for mediation by the people's mediation committees. The government at or above the county level must give support and guarantee the work of people's mediation which is financed by local village and residents' committees.

In order to address the enforceability of agreements reached at people's mediation, the Supreme People's Court issued the Several Provisions of the Supreme People's Court on Procedures for Judicial Confirmation of People's Mediation Agreements (4) ("Several Provisions") in March 2011. This provides an effective means to make mediated agreements enforceable, and standardizes procedures for judicial confirmation. The Several Provisions sets out the jurisdiction of the court, the application procedure, for the judical confirmation of settlement agreements reached during people's mediation. As long as the court has confirmed the agreement, a party can apply to the same court to enforce it if the other party refuses to perform either completely or partially. It is worth noting that the people's court does not charge parties for the trial of confirmation cases. The details of the judicial confirmation mechanism will be discussed later in this article.

B. Commercial Mediation

Commercial mediation refers to mediation conducted by professional commercial mediation institutions of civil disputes between natural persons, or organizations(5). Commercial mediation, known for its efficiency and flexibility, is the most professional form of extra-judicial mediation. Currently there is no specific law regarding commercial mediation, and the mediation institutions themselves make their own rules. In China, there are two main kinds of mediation institutions: one is derived from arbitration institutions – such as the Beijing and the Guangzhou Arbitration Commissions which both provide independent mediation services. The other kinds are independently established mediation institutions, e.g., the China Council for the Promotion of International Trade ("CCPIT") (also known as "China Chamber of International Commerce") Conciliation Center ("CCPIT Conciliation Center"). After more than 20 years of development, the CCPIT Conciliation Center has now become the most famous commercial mediation institution in China. Over 40 sub-council conciliation centers have been set up in provinces, municipalities and autonomous regions throughout the country, constituting a nationwide conciliation network. Meanwhile, the CCPIT Conciliation Center has also successively signed cooperation agreements and established cooperative relations with relevant institutions in countries and regions such as the United States(6), Germany(7), France, Sweden, Italy, Canada(8), Korea(9), and Japan. This article uses the Conciliation Rules of the CCPIT Conciliation Center as an example of the commercial mediation system in China.

Any commercial dispute can be submitted to commercial mediation. The parties may apply for mediation by submitting a written request whether or not they have a written mediation agreement. When the request for mediation is accepted, the parties appoint their mediators, which can be chosen from a list of mediators provided by the CCPIT Conciliation Center. Generally, the panel for a case consists of two mediators, unless the parties agree on the appointment of a sole mediator or the CCPIT Conciliation Center considers it beneficial to add one more mediator to the panel. During mediation, the mediators can meet each party separately or together. If the parties reach a settlement agreement, upon their request, the mediators may record the agreement with their signatures and the official seal of the CCPIT Conciliation Center. The settlement agreement is like a civil contract, which cannot be enforced as easily as a court order.

Where the parties are not able to settle, the CCPIT Conciliation Center specifically restricts the mediation proceeding from being used in other judicial proceedings. Article 29 of the Mediation Rules of the China Council for the Promotion of International Trade/China Chamber of International Commerce (10)("Mediation Rules") provides that if mediation is unsuccessful, the mediator shall not participate in subsequent arbitration of the same dispute unless the parties agree otherwise. Article 31 of the Mediation Rules says that, if the mediation is unsuccessful, no party may, in following proceedings of the same dispute, take any proposal or suggestion, which is put forward, recommended, recognized or readily accepted by the mediator or any party during the course of mediation, as the basis for appeal or defense.

C. Administrative Mediation

There is no particular definition of administrative mediation which generally refers to mediation activities hosted by administrative organizations. The scope of administrative mediation is very wide. In general, disputes that can be submitted to administrative mediation fall into two categories: one includes administrative or civil disputes between a person, an entity and an administrative organization, and civil disputes about the governance duties of administrative organizations between persons or entities.

The most frequently-seen examples of administrative mediation include: (1) mediation hosted by local government, e.g., the mediation of disputes about rural land use issues by the government at the village level, or relating to land expropriation and housing demolition; (2) mediation hosted by the Administration for Industry and Commerce departments over contracts; (3) mediation conducted by police over public security and traffic accident cases; and (4) mediation conducted by the marriage registration office.For example, regarding marriage registration mediation, Article 32 of the Marriage Law of the People's Republic of China (11)provides that if one party alone desires a divorce, the organization concerned may carry out mediation or the party may appeal directly to a people's court to start divorce proceedings.

There is no unified legislation governing administrative mediation. Besides the two main administrative procedure laws which touch upon administrative mediation, i.e., the Administrative Litigation Law of the People's Republic of China (12) and the Law of the People's Republic of China on Administrative Reconsideration (13), mediation is also regulated in specific rules regarding employment, social security, public security, medical care and health, natural resources, environmental protection, public transportation, quality monitoring and control and other civil affairs. For instance, Article 9 of the Law of the People's Republic of China on Penalties for Administration of Public Security(14) provides that, "in respect of acts against the administration of public security, such as brawling and damaging or destroying another person's property, which are caused by civil disputes, if the circumstances are relatively minor, the public security institute may deal with them via mediation"; Article 46 of the Regulations on Handling Medical Accidents(15)states that "either the medical institution or the patient may, through consultation, settle disputes on civil liability such as compensation for medical accidents; if they are unwilling or fail to consult, may apply for mediation to the health administration department, or may directly bring a civil lawsuit before the People's Court."

D. Employment dispute mediation and industry mediation

The Law of the People's Republic of China on Mediation and Arbitration of Labor Disputes (16) effective May 1, 2008, specifically addresses employment dispute mediation. In a case where there is a dispute between the employer and the employee, either party may apply for mediation to an employment dispute mediation commission established within an enterprise, the local level of the people's mediation committee or other bodies with employment dispute mediation functions established in towns or villages or districts. A party may apply for labor dispute mediation in writing or orally. If a settlement agreement has not been reached within 15 days from the date of the receipt of application for mediation, either party may apply for arbitration. For the purpose of clarity, mediation is not a necessary step for the settlement of employment disputes, and one can immediately apply for arbitration.

Industry mediation is conducted by industrial associations over complaints against their member's industrial activities. One of the most common is conducted by the China Consumers' Association for disputes between consumers, manufacturers and retailers.

Notes:

1、The Several Opinions on Establishing and Improving the Resolution System for Disputes by Linking Litigation and Non-litigation Cases was issued by the Supreme People's Court on August 4, 2009.
2、The Law of the People's Republic of China on People's Mediation was adopted at the 16th session of the 11th Standing Committee of the National People's Congress on August 28, 2010, and was effective on January 1, 2011.
3、Wang Gongyi, People's Mediation is a Crucial Mechanism for Resolving social Disputes, Judicature of China, Vol 8, 2005.
4、The Several Provisions of the Supreme People's Court on Procedures for Judicial Confirmation of People's Mediation Agreements was adopted at the 15th Meeting of the Judicial Committee of the Supreme People's Court on March 21, 2011 and was effective on March 30, 2011.
5、Jia Kun, Who Moved the Cheese of Commercial Mediation in China-On the Obstacles and Prospective of Development of Commercial Mediation in China , Commercial Mediation and ADRby the CCPIT Conciliation Center, page 33, Vol. 44.
6、Sino-US Commercial Dispute Conciliation Center
7、Beijing-Hamburg Conciliation Center
8、CCBC-CCPIT Joint Conciliation Center
9、Sino-Korean Commercial Dispute Conciliation Center
10、The Mediation Rules of the CCPIT/China Chamber of International Commerce was adopted at the First Chairman's Session of the 6th Meeting of the Mediation Center under the China Council for the Promotion of International Trade/China Chamber of International Commerce on January 5, 2005.
11、The Marriage Law of the People's Republic of China was adopted at the 3rd Session of the 5th National People's Congress on September 10, 1980, and was amended according to the Decision on Amending the Marriage Law of the People's Republic of China adopted at the 21st Meeting of the Standing Committee of the Ninth National People's Congress on April 28, 2001.
12、The Administrative Litigation Law of the People's Republic of China was adopted at the Second Session of the 7th National People's Congress on April 4, 1989, and was effective on October 1, 1990.
13、The Law of the People's Republic of China on Administrative Reconsideration was adopted at the 9th session of the ninth National People's Congress on April 29, 1999, and was effective on October 1, 1999.
14、The Law of the People's Republic of China on Penalties for Administration of Public Security was adopted on August 28, 2005 at the 17th session of the Standing Committee of the 10th National People's Congress of the People's Republic of China on August 28, 2005, and was effective on March 1, 2006.
15、The Regulations on Handling Medical Accidents was promulgated by the State Council on April 4, 2002, and was effective on September 1, 2002.
16、The People's Republic of China on Mediation and Arbitration of Labor Disputes was adopted at the thirty-first session of the tenth Standing Committee of the National People's Congress on December 29, 2007, and was effective on April 1, 2008.

一、非司法体系下调解的主要类型与特点

我国对非司法体系下的调解尚未形成统一的立法，相关规定多散见于各部门规章，因此对其的分类并没有统一的标准。根据最高人民法院的2009年制定的《关于建立健全诉讼与非诉讼相衔接的矛盾纠纷解决机制的若干意见》（1）（“若干意见”），典型的调解类型包括：人民调解、商事调解、行政调解、劳动调解以及行业调解等。

1、人民调解

人民调解是我国最有特色也是运用最广泛的调解制度，是指人民调解委员会通过说服、疏导等方法，促使当事人在平等协商的基础上自愿达成调解协议，解决民间纠纷的活动。人民调解的对象是民间纠纷，既包括财产关系的纠纷，也包括人身关系的纠纷。其调解机构则是人民调解委员会。人民调解委员会遍布全国各地，是最广泛的群众自治组织。根据《中华人民共和国人民调解法》（2）的规定，村民委员会和居民委员会设立人民调解委员会，企业事业单位根据需要设立人民调解委员会。据统计，截止到2010年底，全国人民调解委员会达81.81万个，调解员达466.89万人，全国调解民间纠纷案件841.84万件。（3）人民调解委员会调解纠纷不收取费用。人民调解工作所需的经费由县级以上的人民政府予以支持和保障，村民委员会和居民委员会为人民调解委员会开展工作提供办公条件和经费。

为了规范经人民调解委员会调解达成的民事调解协议的司法确认程序，最高人民法院于2011年3月制定出台了《关于人民调解协议司法确认程序的若干规定》（4）（“若干规定”），明确规定了当事人申请确认调解协议的管辖法院、申请程序、法院的受理范围、审查内容、审查期限等等，人民法院作出确认决定后，一方当事人拒绝履行或者未全部履行的，对方当事人可以向作出确认决定的法院申请强制执行。值得一提的是，人民法院办理人民调解协议司法确认案件，不收取费用。

2、商事调解

商事调解是指平等主体的自然人、法人和其他组织之间因民商事交易而产生纠纷，为解决纠纷，双方自愿将争议提交至中立的专业性商事调解组织，在调解员的主持之下达成争议各方一致同意的解决问题的方案的行为和过程。（5）它以当事人自愿为前提，程序便捷、处理过程灵活，在中立的专业商事调解组织协助下进行，是非司法体系下调解制度中最专业的一种调解制度。目前尚没有针对商事调解的专门立法，相关制度主要反映在调解机构的调解规则中。目前国内调解机构有两种模式：一种是由仲裁机构发展而来，例如北京仲裁委员会、广州仲裁委员会都提供独立的调解服务；另一种则是独立设立的调解机构，如中国国际贸易促进委员会（中国国际商会）调解中心。后者已经成为中国最具有代表性的商事调解机构，在全国各省、市、自治区设有四十余家分(支)会调解中心，形成了覆盖全国的调解网络。同时，中国国际贸易促进委员会（中国国际商会）调解中心在国际上还与美国（6）、德国（7）、法国、英国、瑞典、意大利、加拿大（8）、韩国（9）、日本等国家的调解机构签订有调解合作协议，共同发展国际商事调解事业。本文主要以中国国际贸易促进委员会（中国国际商会）调解中心（“调解中心”）为例对中国商事调解制度进行介绍。

商事调解争议的范围主要包括贸易、投资、金融、证券、知识产权、技术转让、房地产、工程承包、运输、保险以及其他商事、海事等领域的争议。当争议产生时，不论当事人之间是否存在书面的将争议提交调解的协议，均可向调解中心申请调解，申请时须提交调解申请书。调解申请受理后，当事人需要选定调解员，既可以从调解中心调解员名册中选定，也可以另行约定。一般来说，有两名调解员，由当事人双方各选定一名调解员，除非当事人同意共同选定独任调解员或调解中心认为增加一名调解员更有利于调解。调解过程中，调解员既可以单独会面各方，也可以同时会面各方。经过调解，如果当事人达成了和解协议，由当事人在和解协议上签字。应当事人的要求，调解员可以根据和解协议的内容，作出调解书，由调解员在调解书上签字并加盖调解中心的印章。和解协议及调解书具有民事合同的性质，没有强制执行力。

对于调解不成功的情形，调解中心特别设定了调解程序与其他救济程序的隔离规则，避免了诉讼或仲裁程序中调解的“信息对称、人员重复”的弊端。《中国国际商会调解规则》（10）（《调解规则》）第29条特别规定：“如果调解不成功，调解员不得在其后就同一争议进行的仲裁程序中担任仲裁员，但当事人同意者除外。”《调解规则》第31条规定，“如果调解不成功，当事人均不得在其后就同一争议进行的仲裁程序或诉讼程序及其他程序中，引用调解员和各方当事人在调解程序中提出过的、建议过的、承认过的和表示过愿意接受的任何以达成和解为目的的方案和建议，作为其申诉或答辩的依据。”

3、行政调解

我国对行政调解并没有统一的定义，通说认为行政调解是指在行政机关主持下进行的调解活动。根据其概念可以看出，行政调解的范围非常广泛，概括起来主要包含两大类：第一类为公民、法人和其他组织与行政机关之间发生的行政争议或民事纠纷；第二类为公民、法人和其他组织相互之间发生的属于行政机关管理职责范围内的民事纠纷。

常见的行政调解包括：（1）基层人民政府主持的调解，例如，乡镇人民政府对农村土地承包经营纠纷的调解、对征地拆迁纠纷的调解等；（2）合同管理机关主持的调解，如工商行政管理机关对法人、个人合伙、个体工商户、农村承包经营户以及其他经济组织相互之间发生的合同争议的调解；（3）公安机关对治安案件和交通案件的调解；（4）婚姻登记机关的调解，如《中国人民共和国婚姻法》（11）第32条规定：“男女一方要求离婚的，可由有关部门进行调解或直接向人民法院提出离婚诉讼。”

目前我国并没有出台统一的关于行政调解的法律法规。除了《中华人民共和国行政诉讼法》（12）、《中华人民共和国行政复议法》（13）等专门的程序法对行政调解有所涉及外，行政调解的依据大多散见于劳动和社会保障、公安、医疗卫生、自然资源、环境保护、公共交通、质量监督、民政等方面的法律、法规、规章和其他规范性文件中。例如，《中华人民共和国治安管理处罚法》（14）第9条规定：“对于因民间纠纷引起的打架斗殴或者损毁他人财物等违反治安管理行为，情节较轻的，公安机关可以调解处理”；《医疗事故处理条例》（15）第46条规定：“医疗事故的赔偿等民事责任争议，医患双方可以协商解决；不愿意协商或者协商不成的，当事人可以向卫生行政部门提出调解申请。”

4、劳动调解与行业调解

我国于2008年5月1日起开始实施的《中华人民共和国劳动争议调解仲裁法》（16）对劳动争议的调解问题做出了专门规定。劳动者与用人单位之间发生争议时，可以提交企业劳动争议调解委员会、基层人民调解组织或者在乡镇、街道设立的具有争议调解职能的组织调解。劳动调解的申请既可以书面形式提出也可以口头形式提出。劳动调解的解决时限是15日。自劳动争议调解组织收到调解申请之日起15日内未达成调解协议的，当事人可以依法申请仲裁。需要特别注意的是，调解并非解决劳动争议的必经程序，但劳动仲裁是解决劳动争议的必经程序。

行业调解是指，行业性社会团体及其分支机构设置行业调解委员会，对于会员之间及会员与非会员之间发生的、具有行业特点或者和行业活动有关的争议进行的调解。典型的行业调解例如消费者协会对发生于消费者与生产者、销售者之间的争议进行的调解。

注释：

1、《关于建立健全诉讼与非诉讼相衔接的矛盾纠纷解决机制的若干意见》2009年8月4日由最高人民法院发布。
2、2010年8月28日第十一届全国人民代表大会常务委员会第十六次会议通过，自2011年1月1日起施行。
3、王公义：《人民调解制度是解决社会纠纷的重要法律制度》，载《中国司法》2005年第8期。
4、2011年3月21日最高人民法院审判委员会第1515次会议通过，自2011年3月30日施行。
5、贾坤：《谁动了中国商事调解的奶酪——简论中国商事调解之制约因素及发展展望》，载《商事调解与ADR》第44期第33页，中国国际贸易促进委员会中国国际商会调解中心主办。
6、设立了中美商事调解中心。
7、设立了北京－汉堡调解中心。
8、设立了加中联合调解中心。
9、设立了中韩商事争议调解中心。
10、2005年1月5日，中国国际贸易促进委员会、中国国际商会调解中心第六届第一次主席会议通过。
11、1980年9月10日第五届全国人民代表大会第三次会议通过，2001年4月28日第九届全国人民代表大会常务委员会第二十一次会议《关于修改〈中华人民共和国婚姻法〉的决定》修正。
12、1989年4月4日，中华人民共和国第七届全国人民代表大会第二次会议通过，自1990年10月1日起施行。
13、1999年4月29日，中华人民共和国第九届全国人民代表大会常务委员会第九次会议通过，自1999年10月1日起施行。
14、中华人民共和国第十届全国人民代表大会常务委员会第十七次会议于2005年8月28日通过，自2006年3月1日起施行。
15、2002年4月4日国务院公布，自2002年9月1日起施行。
16、2007年12月29日，中华人民共和国第十届全国人民代表大会常务委员会第三十一次会议通过，自2008年5月1日起施行。

In the above case, if the potential problems can't be found and resolved timely in the due diligence investigations, the acquirer may be at risk of breach of contract liability after the acquisition.

VI. The Transfer of IP Assets after the M&A

The transfer of IP assets is a critical step in the acquisition process. Even though agreements have been reached in the transaction documents, problems may still arise during the performance.

Case 6: A company purchased the intangible assets of a related and famous franchisor whose primary business is in products and services for parents of young children. The intangible assets include brands, training courses, tutorials, and more. The transfer of the IP assets were listed and enumerated in the agreements. However, during the performance of the agreements, a dispute arose because the list only showed the title of the assets to be transferred. During performance, both parties had quite different understandings of the listed assets.

Usually, if the IP assets to be acquired involve trademarks, patents and registered copyright works, the transfer procedures are comparatively simple. However, if some IP know-how without related certificates or copyright works without registration are involved, complications arise. It is better for the two parties to reach an agreement on these issues during the due diligence investigations and clarify the carrier of these intangible assets.

VII. The Transitional Arrangements for the Transfer of IP Assets

With respect to some registered IP rights, despite the simple transfer process, the length of time for transfer should be taken into consideration. For example, it takes 10-12 months to complete the assignment of a registered trademark and 1-2 months to complete the assignment of a patent or an application for a patent in China. During the transition, the two parties should consider how to agree on the rights and the obligations of both parties to make sure the IP rights can be enjoyed and executed favorably in the transition.

VIII. The Risks and Liabilities of IP Infringement

During M&A, the analysis and evaluation of the risks of IP infringement is an important part of an IP due diligence investigation. Many transnational companies seek to acquire Chinese companies with the intent to use them as global production bases to sell their products to markets outside China. Therefore, we have to carefully evaluate the risks of infringement existing in the current business of the target to avoid significant potential losses in the future.

Case 7: Through fierce competition, a world-renowned investment bank succeeded in investing in a leading company in the new energy industry. The company was very promising since it was the leader in the emerging industry. However, the company was charged with patent infringement for listing one of its main technologies as acquired through a license. Complications arose because the licensor believed the company exceeded the extent of its license to sell the products overseas, didn't disclose financial documents for audits and didn't pay a sufficient license fee. The two parties became entangled in a prolonged dispute and the schedule for listing was repeatedly delayed.

Investment banks, PEs and venture capitals are usually not keen on specific due diligence investigations on IP because the capital for investment flows in and out quickly. Because of the fast paced environment of these companies, long-term management is rarely sought. However, as the IP scandal of the companies to be listed intensified, the SFC paid more and more attention to the IP issues. Unfortunately, such cases are increasingly common.

Case 8: A world-renowned pharmaceutical company intended to purchase the rights to of a newly developed drug achievement. Since the IP rights were the core assets to be acquired, the pharmaceutical company authorized us to carry out the IP investigations, including research on current patents and analysis of non-infringement. Through the analysis, we found that the implementation of the new drug achievement was based on several preexisting patents which included several improvements over the preexisting patents. However, the new drug achievements owned novelty and inventiveness all over the world. If the company wanted to commercialize and produce the new drug, they needed to either acquire the licenses of the preexisting patents or wait for the expiration of these patents. However, these preexisting patents were only authorized in certain countries and regions including China, Europe and the US. Through several rounds of internal negotiations, the company finally decided only to purchase licenses of the technology in a region of Southeast Asia. This was done so the technology could be placed in commercial service immediately without having to purchase licenses, since preexisting patents hadn't been applied for in these regions.

In the above case, IP lawyers can assist the clients not only in finding existing infringement risks in the M&A, but also in determining the best business solution for specific clients.

Conclusion

Because of the intangibility of active M&A activities, IP assets are easily neglected and can become a controversial issue. However, most of these issues can be identified and solved in due diligence investigations so as to avoid pitfalls. This can save enterprises large costs of solving potential disputes after the fact.

以上案例中，如果不能及时在尽职调查中发现和解决上述问题，则可能造成收购方在完成收购后发生违约的法律风险。

六、并购后知识产权资产的移交和转让

在资产收购的交易中，知识产权资产的移交和转让是一个十分关键的环节。有时，即使是在交易文件中进行了相关约定，仍可能在后续的履行过程中产生问题。

案例六：某企业收购了一个著名的从事儿童早教特许经营企业的相关特许经营的无形资产，包括品牌、培训课件、教程等。协议中列明需要进行相关知识产权资产的移交和转让，并通过清单方式进行列举。但是，在协议履行过程中，因为清单上仅仅是简略列明了移交的标题内容，双方对此的理解又有较大偏差，遂发生争议。

通常，如果被收购的知识产权资产涉及商标、专利、已登记著作权的作品等，移交和转让过程会比较简单。但是，如果涉及的是一些没有相关权利凭证的专有技术、未经登记的著作权作品等，则很容易出现问题。这些都最好在尽职调查阶段就能在双方间达成共识，并将这些无形资产的载体加以明确。

七、知识产权资产转让过渡期的安排

对于经过登记的一些知识产权资产，虽然在移交和转让过程中比较简单，但却要考虑完成移交和转让的时间问题。例如，目前我国完成一个注册商标的转让手续可能需要10~12个月时间，完成一个专利或专利申请的转让手续需要1~2个月时间。并购交易双方还需要考虑在这一转让过渡期内，如何约定双方的权利和义务，确保在此期间内能够顺利享受和执行该等知识产权。

八、知识产权侵权风险及责任

在进行产业收购的时候，知识产权侵权风险的评估和分析是知识产权尽职调查的一个重要内容。不少跨国公司在中国寻求收购目标，拟将其作为全球生产基地，其产品可能销售到中国之外的更多市场。这就不得不慎重评估被收购对象目前经营中可能存在的侵权风险，以避免今后发生重大损失。

案例七：一家国际著名的投资银行，在激烈竞争中成功投资一家国内某新能源行业的领军企业。该企业所在领域属于新兴市场，企业本身又系龙头企业，前景十分看好。然后，就在上市准备阶段，该公司突然被控专利侵权，原因是该公司所使用的一项主要技术系通过许可方式获得，而许可方认为该公司超过许可范围将产品销售到海外市场，未按合同要求公开其财务资料供审计，且并未按照合同约定足额缴付许可费。由于双方达不成一致，遂陷入旷日持久的纠纷，而上市日程也因此一再推迟。

投资银行、私募股权基金和风险投资通常并不热衷于进行非常详尽的知识产权尽职调查，因为其投资具有快进快出的特点，并不谋求长久经营。然而，随着拟上市公司的知识产权门事件愈演愈烈，证监会对知识产权问题也越来越关注和谨慎。以上例子恐怕将不再是偶然发生的个案。

案例八：一家国际知名的制药企业拟收购某公司新近研发出来的新药成果。由于知识产权是收购的核心资产，该制药企业委托我们进行了深入的知识产权调查，其中包括对于现有专利的检索和拟收购技术的不侵权分析。通过专利分析发现，虽然该新药成果具有世界范围的新颖性和创造性，但是其实施却依赖于几个在先专利，即，其为几个在先专利的改进成果，如要进行商业化生产，必须获得几个在先专利的实施许可，或等待其到期失效。但是，这几个在先专利仅在中国、欧美等一些主要国家和地区获得授权。经过多轮内部论证，该企业最终决定仅购买该技术在东南亚某区域的许可，在该等地域内几个在先专利并未进行申请，不需要购买许可，可以立即投入商业运营。

在上述案例中，知识产权律师不仅可以协助客户发现收购中可能存在的侵权风险，并且可以根据其商业目标尽量找到最佳的解决方案。

结语

在活跃的收购兼并活动中，知识产权资产常常因其无形性而成为一个容易忽略或引发争议的问题。这些问题如果能在尽职调查阶段就被发现并加以妥善解决，就能避免很多事后的纠纷和争议，并为企业节省处理纠纷和争议而产生的巨额成本。

一、明确公司设立过程中债务的责任主体

在公司设立过程中，发起人以自己或公司名义对外签订合同的情况较为常见，但对由此产生的债务由谁承担，《公司法》未作规定。为降低交易成本，加强对合同相对人利益的保护，司法解释（三）采用外观主义标准（3）确定责任承担原则，即以谁的名义对外签订合同，就由谁承担责任，但规定两项例外：发起人以自己名义订立的合同，如果公司成立后确认该合同或者公司已实际成为合同主体，合同相对人可以要求公司承担责任；发起人为自己利益以公司名义订立的合同，由发起人承担责任，但相对人为善意时除外。

二、界定非自有财产出资行为的效力

对出资人用自己不享有处分权的财产进行出资的行为，司法解释（三）未一概否认其效力，而是采纳物权法的善意取得制度（4）。对出资人用贪污、挪用等犯罪行为所获的货币出资的，采取拍卖、变卖该股权的方式补偿受害人损失。这有利于维持公司资本、保障交易相对人利益和维护公司债权人利益。

三、确立非货币出资到位与否的判断标准及救济方式

《公司法》允许股东用非货币财产出资，但没有规定非货币财产出资的相关标准及程序，司法解释（三）规定：(1)在未评估作价的非货币出资财产价值与应出资额不确定是否一致的情况下，由法院委托评估机构进行评估；(2)对于权属变更需经登记的非货币财产，确立了权属变更登记（5）和实际交付并重的判断标准，规定既需要办理权属变更登记，又需要实际交付公司使用；(3)出资人可以无权利瑕疵和无权利负担的其他公司股权出资，但需要履行评估、股权转让手续。

四、细化瑕疵出资（6）的民事责任

出资义务是股东对公司最基本的义务，股东未尽出资义务既损害公司利益，又损害公司债权人利益。司法解释（三）详细规定了瑕疵出资的民事责任，既有利于督促股东全面履行出资义务，又赋予权利人主张权利明确的法律依据。

1、拓宽出资民事责任的主体：有限责任公司发起人未出资，其他发起人承担连带责任；股东增资未尽出资义务，违反勤勉义务的董事、高管人员应承担相应责任；协助股东抽逃出资的其他股东、董事、高管人员或者实际控制人，应承担连带责任；第三人代垫资金协助发起人设立公司后抽回出资，第三人应承担相应责任；瑕疵出资的股东转让股权，受让人对此知道或应当知道的，受让人应承担连带责任。

2、明确请求股东履行出资义务承担出资责任的主体范围，包括公司、公司其他股东和公司债权人。

3、明确股东未尽出资义务或抽逃出资时的责任范围，包括出资本金和利息，且限制瑕疵出资股东以诉讼时效进行抗辩。

五、首次明确限制瑕疵出资股东的股东权利和取消其股东资格

对拒不履行出资义务的股东，是否可以限制其股东权利，甚至取消其股东资格，《公司法》未予明确。对此，司法解释（三）有突破性规定：对瑕疵出资的股东，公司可以根据公司章程或股东会决议对其利润分配请求权、新股优先认购权、剩余财产分配请求权等股东权利作出相应的合理限制；有限责任公司的股东未履行出资义务或者抽逃出资，经公司催告仍未缴纳或返还出资，公司可以股东会决议解除该股东的股东资格。

六、平衡名义股东和实际出资人及公司债权人、股权受让人的利益

商事实践中，名义股东与实际出资人相分离的情况并不鲜见，因此引起的争议也时有发生。对名义股东与实际出资人的约定，司法解释（三）基于缔约自由精神予以确认有效，并对股权收益和责任归属予以明确：

1、名义股东不可以记名对抗实际出资人，实际出资人可依据合同向名义股东主张投资权益，但如请求公司变更为名义股东，应经公司其他股东过半数以上同意。

2、公司债权人要求未履行出资义务的股东承担责任，名义股东不可以其非实际出资人为由对抗公司债权人。

3、对名义股东未经实际出资人同意处分股权的行为，引入物权法善意取得制度，即原则上承认登记内容构成第三人的信赖，第三人可以取得该股权，但第三人非善意的除外，实际出资人可以要求名义股东承担赔偿责任。该原则同样适用于原股东转让股权后，登记机关尚未变更登记的状态下，原股东再次转让股权的情况。

司法解释（三）反映了中国司法机关对《公司法》相关规定及其法律原理的理解和把握，不仅对出资和股权规定进行了更具可操作性的细化和整理，还在一定程度上填补了一些领域的立法空白，为规范公司实务运行指明了方向，更使得相关权利人行使权利真正有法可依。

该文章首次发表在金杜律师事务所月刊《中国法律期刊》2011年3月，总47期上。

注释：

1、该法于1993年12月29日颁布，历经三次修订，现行《公司法》于2005年10月27日发布，2006年1月1日生效实施。

2、于2006年4月28日发布的《关于适用<中华人民共和国公司法>若干问题的规定（一）》和于2008年5月12日发布的《关于适用<中华人民共和国公司法>若干问题的规定（二）》。

3、外观主义，又称法外观理论，它是德国私法学者在上世纪初创立的，是指以交易当事人行为的外观为准来认定商事交易行为的效果。外观表示与真实意思可能不一致，依据外观主义，交易行为完成后，出于对交易安全保护的目的，原则上不得撤销，即当行为主体主张其真实意思与意思表示不一致时，以显示在外的意思表示为准，意思表示一经成立即发生效力。

4、《中华人民共和国物权法》（2007年3月16日发布）第一百零六条规定了物权的善意取得制度：“无处分权人将不动产或者动产转让给受让人的，所有权人有权追回；除法律另有规定外，符合下列情形的，受让人取得该不动产或者动产的所有权：（一）受让人受让该不动产或者动产时是善意的；（二）以合理的价格转让；（三）转让的不动产或者动产依照法律规定应当登记的已经登记，不需要登记的已经交付给受让人。受让人依照前款规定取得不动产或者动产的所有权的，原所有权人有权向无处分权人请求赔偿损失。当事人善意取得其他物权的，参照前两款规定。”

5、权属登记机构是指：土地使用权的权属登记机构一般为土地所在地的土地管理部门；房产的权属登记机构一般为房产所在地的房产管理局或房产交易中心；商标权的权属登记机构是指国家商标局；专利权的权属登记机构为国家专利局。

On February 16, 2011, the Supreme Court further issued Provisions of the Supreme People's Court Regarding Certain Issues Concerning the Application of the Company Law of the People's Republic of China (III) (the "Supreme Court Interpretation"). The Supreme Court Interpretation provides clarification of various widely disputed issues in practice, including assumption of liability at the pre-incorporation stage, equity contribution and verification of equity interests and so on. This article aims to share our view on the Supreme Court Interpretation from a practice point of view.

I.Who shall assume liability arising during the incorporation phase of the company?

During the incorporation process of a company, it is usual for promoters of the company to enter into contracts in their name or the company's name. However, the Company Law has no provision on who shall assume liability caused by promoters' actions. For the purpose of reducing transaction costs and protecting the interests of the counterparties, the Supreme Court Interpretation adopts the Rechtsschein(3)as the rule for determining assumption of liability, which holds that the individuals initially named as parties to the contract shall assume the respective liability. The foregoing rule, however, is subject to two exceptions: (i) if a contract was originally formed in the name of the promoters, but the company, after its establishment, ratified that contract or has become the actual party to that contract, the counterparty can require that the company assume liability; or (ii) if the promoters enter into a contract in the name of the company for their interest, the promoters shall assume liability. theory (or theory of appearance)

II.Defining the validity of making contributions using property owned by another.

The Supreme Court Interpretation does not deny the validity of all acts of making contributions using property owned by another. Instead, it adopts the good faith acquisition principle(4)under the Property Law. If contribution is made using money gained through criminal activities such as corruption or misappropriation, auction or forced sale of equity interest can be conducted to compensate the non-breaching party's loss. This approach is favorable to maintain the company's capital, safeguard the interest of the counterparty and protect the interest of the company's creditors.

III.Setting the criteria for determining whether a non-cash contribution is fulfilled and the respective remedies

The Company Law allows shareholders to make equity contributions with non-cash property, but it fails to provide the respective standards and procedures for non-cash contribution. According to the Supreme Court Interpretation:

When it is uncertain whether the value of non-cash property that has not been evaluated is consistent with the payable contribution amount, such non-cash property shall be evaluated by an evaluation institution designated by the court.

Regarding certain kinds of non-cash property which are subject to registration requirement for transfer of ownership, the completion of ownership change registration and actual delivery of such property are both required for equity contribution.

Investors may make contributions using equity of other companies which have no defects in rights and are not subject to any claim or lien, provided that the required evaluation and equity transfer procedures are duly performed.

IV. Refining the civil liabilities of defective contribution(5)

Making equity contribution is the shareholder's basic obligation to the company. The shareholder's failure to perform its obligation of making equity contribution would injure both the interest of the company and the interest of the company's creditors. The Supreme Court Interpretation provides in detail the civil liabilities of defective equity contribution. The provisions are conducive to supervise and urge the shareholder to fully perform its obligation of making equity contribution, which also provides a clear legal basis for the creditors to claim recourse.

A. Expanding who shall be liable for defective equity contribution. Where promoters of a limited liability company fail to make equity contribution, the other promoters shall bear joint liabilities. Where a shareholder fails to make equity contribution at the time of capital increase, the directors and senior officers who breach their duty of care shall bear corresponding liabilities. The other shareholders, directors, senior officers and persons in actual control who assisted a shareholder in wrongfully withdrawing an equity contribution shall bear joint liabilities. Where a third party advances funds to a promoter to assist the promoter in establishing a company and the promoter wrongfully withdraws the contribution, the third party shall bear joint liabilities. Where the shareholder who made defective equity contribution transfers its shares to an assignee, if the assignee is aware of or should have been aware of the defects of equity contribution, the assignee shall bear joint liabilities.

B. Clarifying the scope of the parties who have the right to request the shareholder to perform his obligation of making equity contribution and bear the liabilities of equity contribution. Parties with such rights shall include the company, the other shareholders of the company and the creditors of the company.

C. Clarifying the scope of the liabilities of the shareholder failing to make equity contribution or wrongfully withdrawing an equity contribution, which includes the principal and interest of the contribution, and it limits the shareholder who has defects in equity contribution to raise a defense on the ground of the statute of limitations.

V.Limiting and disqualifying the rights of shareholders who have defects on equity contribution for the first time

The Company Law does not clearly stipulate whether the rights of shareholders who refuse to make equity contribution should be limited or even if such shareholders should be disqualified. Thus, the Supreme Court Interpretation provides a breakthrough: the company can reasonably limit the rights of shareholders who have defects on equity contribution to claim for profit distribution, their preferential subscription rights of new shares and their rights to claim for residual property distribution based on the Articles of Association of the company or the shareholders resolution; if the shareholders of a limited liability company refuse to make equity contribution or withdraw their capital, and do not contribute or return the capital upon request by the company, the company can disqualify these shareholders through shareholders' resolution.

VI.Balancing the rights and obligations of nominal shareholders, actual investors, creditors and equity assignees

In commercial practice, the situation in which nominee shareholders and actual investors are different individuals or entities is not uncommon and sometimes causes disputes. The Supreme Court Interpretation confirms the validity of the agreement between nominee shareholders and actual investors is based on the spirit of freedom of contract and clarifies the allocation of equity profits and liabilities as follows:

A. Nominee shareholders shall not challenge the actual investors based on their registered status; actual investors are entitled to claim for investment profits against nominee shareholders according to the agreement, but if actual investors require the company to change nominee shareholders, such request must be approved by a vote representing more than half of the other shareholders of the company, not counting the nominee shareholders.

B. If the creditors request the shareholders who do not make equity contribution to undertake liability, nominee shareholders can not challenge the creditors on the grounds that they are not actual investors.

C. The good faith acquisition system of Property Law is adopted to permit the bona fide third party to acquire the equity shares transferred by the nominee shareholders' without the consent of the actual investors. The Supreme Court in principle recognizes that the third party can rely on the public registration information, unless such third party does not act in good faith. Actual investors can claim damages against nominee shareholders. This principle is applicable to the situation when the original shareholders have transferred their shares and the registration of such transfer has not been completed by the registration authority.

The new Supreme Court Interpretation reflects Chinese judicial authority's most current position on the regulations and legal principles of the Company Law. Not only do the provisions provide practical refinements for the regulation of investments and shares, but the provisions fill important legislative gaps. The provisions also provide a clearer basis for a range of relative rights holders to exercise their rights.

This article was originally written in Chinese, the English version is a translation. This article was first published in the firm's periodical China Bulletin March Issue, 2011, Vol. 47)

Notes:

1、Company Law of the People's Republic of China was promulgated on December 29, 1993 and has been amended three times. The current version was issued on October 27, 2005 and effective as of January 1, 2006.

2、These two judicial interpretations include Provisions of the Supreme People's Court about Several Issues Concerning the Application of the Company Law of the People's Republic of China (I) issued on April 28, 2006 and Provisions of the Supreme People's Court about Several Issues Concerning the Application of the Company Law of the People's Republic of China (II) issued on May 12, 2008.

3、The Rechtsschein theory was created by the German private law scholars in the beginning of the last century. It requires determining the effect of commercial activities based on the appearance of the parties' act. Appearance may be inconsistent with the true intention. Pursuant to the Rechtsschein theory, for the purpose of protecting transaction security, transaction activities cannot be revoked once they are conducted. That is to say, when a party argues that his true intention differs from the manifestation of intention, the latter shall prevail and shall be effective once it is conducted.

4、Article 106 of the Property Law of the People's Republic of China (promulgated on March 16, 2007) provides the rule of acquisition in good faith: "In case a person unauthorized to dispose realty or chattel alienates the realty or chattel to an assignee, the owner is entitled to recover the realty or chattel. The assignee shall obtain the ownership of the realty or chattel if meeting all of the following conditions, unless it is otherwise prescribed by law: (1) to accept the realty or chattel in good faith; (2) to purchase the realty or chattel at a reasonable price; (3) in case registration is required by law, the alienated realty or chattel shall have been registered, while in case registration is not required, the delivery thereof shall have been accomplished. In case, according to the preceding paragraph, an assignee obtains the ownership of a realty or chattel, the original owner may require the person unauthorized to dispose of the realty or chattel to compensate for his losses. In case a related party obtains any other form of real right in good faith, the preceding two paragraphs shall apply by reference."

5、Defective contribution generally includes failing to make contribution, failing to make full contribution and illegally taking away the contribution by shareholders.

The Offences – Sections 1 to 8:

The Act creates four offences, specifically: giving or receiving a bribe to induce a person to improperly perform a relevant function (Sections 1 and 2), bribery of a foreign public official with the intention of obtaining a business advantage (Section 6) and, as a new strict liability corporate offence, failing to prevent bribery (Section 7). The test of what is and what is not “improper performance” to which the Sections 1, 2 and 6 offences relate is to be objectively assessed by reference to the expectations of a ‘reasonable person’ in the United Kingdom (Section 5(i)). Where the breach occurs outside the UK, ‘any local custom or practice’ of the place in which it is alleged the bribery has taken place is to be disregarded unless it forms part of the written law of that jurisdiction.

The prohibitive scope of the Bribery Act is thus much wider than that of the Foreign Corrupt Practices Act (“FCPA”), in that it is an offence to receive as well as to give a bribe. Further, unlike the FCPA, the Bribery Act does not exempt facilitation payments, (generally small payments to lower level officials for expediting government actions), and bona fide payments to promote products or services, (often referred to as commercial bribery).

The penalties for bribery under the Act are severe, with a maximum of 10 years imprisonment for conviction on indictment, and/or an unlimited fine (Section 11).

The Defence: “Adequate Procedures”

The new offence of ‘failing to prevent bribery’ has far reaching effects, particularly for international companies, and will initially be a cause of concern for compliance officers and management globally.

The Act does, however, provide a defence to “failing to prevent bribery” in circumstances where commercial organizations can show that they had “adequate procedures” in place to prevent an act of bribery being committed by ‘associated persons’ in connection with its business. “Adequate procedures” is not defined in the Act, but on 31st March, 2011 the Ministry of Justice published its Guidance notes (“the Guide”) to assist practitioners and industry members alike (See:www.justice.gov.uk/guidance/bribery.htm).

The Guidance notes identify six key principles:-

a) Proportionality

The bribery prevention procedures to be put in place by commercial organizations are expected to be proportionate to the bribery risks they face by reference to the nature, complexity and scale of the business concerned. The Guide suggests that to be considered ‘adequate’ procedures should be ‘clear, practical, accessible, effectively implemented and enforced’, evince a clear ‘top down’ zero tolerance of bribery, and be designed to “identify risks and to prevent deliberate and unethical conduct”. They should address reporting obligations for suspected bribery, and provide a clear management reporting line for this purpose. The expected standards of behaviour for employees, managers and agents, (together “associated persons”) should be defined, along with the consequences of failing to observe them.

b) Top level commitment

The procedures are to be adopted at the highest level of decision making within the commercial organization to emphasize its commitment to eliminating bribery. The key individuals responsible for the implementation and supervision of the organisation’s bribery prevention procedures should be identified.

c) Risk Assessment

The commercial assessment of bribery risk will necessarily vary from business to business, but the Guide requires that commercial organizations adopt risk assessment procedures that reflect the size, structure, business activities and locations of their operations. Risk assessment is also a function of due diligence, and to be effective it will require appropriate rules, resourcing and to be supported by appropriate risk assessment documentation which will need to be maintained as proof of the existence and implementation of such procedures.

d) Due diligence

Due diligence procedures will include assessment of country risk, business opportunity risks, sector and transactional risk and the existing or prospective ‘associated persons’ with whom the organisation is to conduct business. They will extend to all areas of business, particularly recruitment, financial controls, business acquisitions, bonus policies and, indeed, any aspect of a commercial organization whose function is to ‘win’ business.

e) Communication and training:

The “adequate procedures” will necessarily need to be pro-actively implemented and overseen by management. To ensure that its bribery prevention policies and procedures are properly understood, the commercial organization should educate through training to enable staff to identify corruption concerns and to be aware of and understand the availability of internal procedures to deal with them. The training should be ongoing, properly documented and current.

f) Monitoring and Review

Potential bribery situations will continue to evolve as, indeed, must the policies and procedures designed to address them. It will not be sufficient simply to ensure that the new employees are given an induction to the policy or access to a website, continuous training, monitoring and updating of procedures will be required if the defence is to be effective.

Extra jurisdictional application

‘What then is needed to trigger this extended jurisdiction? …… you need to be carrying on business or part of your business in the UK….. That is all it takes’

Richard Alderman – Director of the SFO.

Perhaps of greatest concern to international business is the broad territorial scope of the Bribery Act. It applies to companies operating in the UK and also to overseas companies with business operations in the UK. Its extra territorial application will have important implications for Chinese and Asian companies with operations in the United Kingdom. These businesses will now not only have to comply with their own domestic legislation with regard to bribery and corruption, (such as the Prevention of Bribery Ordinance in Hong Kong) and the known extra territorial reach of the FCPA, but will also need to be mindful of their responsibility to monitor the activities of ‘associated persons’ with whom they conduct business around the world so as to avoid circumstances which could lead to contravention of the Bribery Act.

Time will tell whether the UK Courts will operate the extra-territorial provisions of the Act with the same enthusiasm that American Courts have embraced the FCPA, and clearer indications of this will emerge when matters are tested before the UK Courts. In light of the somewhat relaxed attitude towards bribery generally in some parts of Asia, however, and the international communities’ propensity to cooperate in anti corruption matters, particularly with regard to FCPA investigations post the Dodd Frank Act, a strong position can be expected to be adopted by the SFO. The need for commercial organizations to set in place ‘adequate procedures’ is therefore paramount.

What should you do?

The practical steps to be taken to ensure the availability of an ‘adequate procedures’ defence will vary from company to company, but the absence of any such procedures will obviously deny a defence to what is a strict liability offence with high value adverse consequences.

A starting point would be to conduct an operational review of your business, and thereby to identify possible business situations in which the issue of bribery could arise. Thereafter, a code of conduct should be composed and implemented, and reporting lines created and publicised. This will need be followed by training of staff, and the implementation of clear policies on corporate hospitality and third party due diligence.

‘Failure to prevent bribery’ is a strict liability offence, and the burden of proof will rest with the commercial organization to prove the existence and effectiveness of its ‘adequate procedures’. As with earlier legislation, such as Hong Kong’s anti discrimination legislation, or the FCPA, to be entitled to rely upon the ‘adequate proceedings’ defence, a clear and focused effort will be required on the part of the commercial organization to address bribery concerns. Given that the alternative is the potential exposure to criminal conviction, multi million pound penalties and the possible imprisonment of management, it is an exercise that all commercially exposed businesses with interests in the UK should address as a matter of some urgency.

Overview - The previous version of the Rules in effect was the 1999 version, which was adopted by the IBA Council on June 1, 1999, and replaced the 1983 IBA Supplementary Rules Governing the Presentation and Reception of Evidence in International Commercial Arbitration. Noting the wide acceptance of the Rules in the international arbitration community and the need for reflecting the latest developments in international arbitration, the IBA initiated a review process in 2008. The revised version of the Rules was developed by the members of IBA Rules of Evidence Review Subcommittee, assisted by members of the 1999 Working Party.

Purpose - The Rules were issued to provide a fair and efficient process for the taking of evidence in international arbitration. The Rules provide mechanisms for the presentation of documents, witnesses of fact and expert witnesses, inspections, as well as the conduct of evidentiary hearings. The Rules are designed to be used in conjunction with, and adopted together with, institutional, ad hoc or other rules or procedures governing international arbitrations. They reflect procedures in use in many different legal systems and may be particularly useful when the parties come from different legal cultures.

Revisions - The 2010 revision to the Rules is a full-scale one, through which the Rules, whilst maintaining those fundamental characters, refined some important terms and / or mechanisms, including without limitation:

• Definition of “Document”: compared with the definition in the 1999 version, the updated one is more “open”, saying “Document means a writing, communication, picture, drawing, program or data of any kind, whether recorded or maintained on paper or by electronic, audio, visual or any other means.”
• Definition of “Evidentiary Hearing”: similar to the situation with “Document”, the updated one here enriches the methods that can be adopted in evidentiary hearing in international arbitration, saying “Evidentiary Hearing means any hearing, whether or not held on consecutive days, at which the Arbitral Tribunal, whether in person, by teleconference, videoconference or other method, receives oral or other evidence.”
• Definition of “Request to Produce”: unlike the above two terms, the updated one here overwrites the idea in the previous one, saying “Request to Produce means a written request by a Party that another Party produce Documents.” The 1999 version defines it as “a request by a Party for a procedural order by which the Arbitral Tribunal would direct another Party to produce documents.” Obviously, the arbitral tribunal’s role in the stage of request to produce becomes less active under the 2010 version.
• “Consultation on Evidentiary Issues”: this term entitles a new Article 2 that is created in the 2010 version of the Rules. As is explained in paragraph one of this article, under this “consultation” mechanism the arbitral tribunal “shall consult the Parties at the earliest appropriate time in the proceedings and invite them to consult each other with a view to agreeing on an efficient, economical and fair process for the taking of evidence.”
• Content of a “Request to Produce”: corresponding to the definition of this term mentioned above, in Article 3 of the 2010 version, the respective rule is supplemented as for the situation where Documents in electronic form is required, saying “.... in the case of Documents in electronic form, the requesting Party may , or the Arbitral Tribunal may order that it shall be required to identify specific files, search terms, individuals or other means of searching for such Documents in an efficient and economical manner.
• “Good faith”: some may consider that this “good faith” rule is so established in almost every single jurisdiction that it is unnecessary here in the Rules. However, it is mentioned twice in the 2010 version, interestingly at the beginning and the ending thereof: (i) in paragraph 3 of the Preamble, it says “The taking of evidence shall be conducted on the principles that each Party shall act in good faith and be entitled to know, reasonably in advance of any Evidentiary Hearing or any fact or merits determination, the evidence on which the other Parties rely.” (ii) in paragraph 7 of Article 9, it says “If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence.”

* Ms. Ye, head of the firm's international dispute resolution practice, was privileged to participate in the review process of the Rules as a member of the IBA Rules of Evidence Review Subcommittee, and sincerely congratulates the IBA on this momentous move.
 

In the first instance judgment, the court found that no contract existed regarding the derivative transaction between the parties and dismissed all claims made by the Bank. The Bank appealed that decision to the Shanghai Intermediate People's Court. The Court of Appeal rendered its final judgment at the end of 2009. In that judgment, the Court of Appeal found that the parties had not entered into a contract, but held that the Company was liable for the non-conclusion of such a contract and was required to bear fifty percent of the Bank's losses pursuant to the principle of culpa in contrahendo under Article 42 of the PRC Contract Law. The implications of the case for future similar disputes are as follows:

In financial derivative transactions, what type of contract should be signed between a financial institution and a company?

One of the most significant points of argument in this case was whether the parties had entered into any contract regarding the financial derivative transaction.

The Court of Appeal found that no such contract was formed. In its judgment, the Court of Appeal expressed the following opinions on this point:

(1) Both parties to the transaction should execute a single standardized agreement; and

(2) On March 11, 2009 the People's Bank of China ("PBOC") released its Announcement No.4 of 2009 (the "PBOC Announcement No.4") announcing the introduction of the Master Agreement of Financial Derivative Transaction in the PRC Inter-bank Market (the "NAFMII Master Agreement") after which market participants in China must execute the NAFMII Master Agreement for derivative transactions entered into after the issuance of PBOC Announcement No. 4. If a financial derivative contract was executed prior to March 11, 2009, as was the case here, the parties can continue to perform their obligations in accordance with the documents filed with the relevant authorities by the bank.

Is it compulsory for a financial institution to execute the NAFMII Master Agreement in a financial derivative transaction, no matter whether it is a RMB or non-RMB transaction, when the counter party is a non financial company?

PBOC Announcement No.4 provides that when trading financial derivatives, market participants must execute the NAFMII Master Agreement designated and published by China's National Association of Financial Market Institutional Investors ("NAFMII").

According to NAFMII, it is unclear whether "market participants" include financial institutions and non-financial institutions as PBOC's Announcement No. 4 does not define this term. The market participant in a specific transaction is decided on a case by case basis according to PBOC's regulations in respect of the different types of financial derivative products (each product is, in effect, subject to a separate regulation).

For RMB derivative transactions, the current and generally accepted practice of NAFMII is to include both financial and non-financial institutions as market participants. Therefore, the NAFMII Master Agreement should always be adopted in RMB derivative transactions, whether the transaction is between financial institutions or between a financial institution and a non-financial institution.

For foreign exchange ("FX") derivative transactions, only financial institutions are allowed to access the China Foreign Exchange Trading System ("CFETS"). According to NAFMII, this implies that financial institutions are the only market participants in FX derivative transactions. In other words, companies and other non-financial institutions are excluded from the market participants in FX derivative transactions. Therefore, NAFMII believes that a financial institution and a non-financial institution do not have to execute the NAFMII Master Agreement when carrying out a FX derivative transaction since a non-financial institution is not regarded as the "market participant" in such a transaction.

However, Neither PBOC nor NAFMII has issued any official document addressing whether the NAFMII Master Agreement must be adopted in financial derivatives transactions between a financial institution and a non-financial institution (including RMB derivatives transactions and FX derivatives transactions). Therefore, this issue remains a question and requires further clarification by the relevant authorities.

Will there be any legal risk if financial institutions fail to adopt the form of contract submitted to or filed with the authority?

In China, financial institutions are required to file the form of the master agreement of their financial derivative services with the competent financial regulatory authority. But a financial institution's noncompliance with the administrative rules will not lead to the invalidation of a contract under the PRC Contract Law. The general understanding is that whether the contract is subsequently filed with the regulatory authority as required or whether the filed form of contract is adopted should have no impact on the effectiveness of the contract. However, according to the Court of Appeal's judgment, financial institutions may be subject to legal risks where they fail to adopt the form of the master agreement submitted to or filed with the authority. The court did not establish that master agreements would be invalid if financial institutions executed them in a form different from that filed with the authority. Yet, financial institutions would bear a heavier burden of proof to prove that there is an effective and binding contract between the parties with respect to the specific transaction.

This decision indicates that Chinese courts are making efforts to understand the characteristics of derivative transactions and to establish their rules regarding what issues they should focus on when hearing disputes arising from such transactions. It shows the importance for financial institutions to pay attention to 1) communication with the authorities such as PBOC and China Banking Regulatory Committee, 2) all of the applicable regulatory requirements, including those concerning the form of documents, authorization, risk disclosure and other compliance requirements, and 3) ongoing communication with the client, evidenced in writing, regarding the details of a specific transaction.
 

In a 15 year products liability dispute (Hubei Gezhouba Sanlian Industrial Co. Ltd.  vs. Robinson Helicopter Company Inc.), the Central District of California found that the plaintiffs were entitled to the issuance of a domestic (U.S.) judgment in the amount of the PRC judgment with interest. This judgment was originally made in the PRC and recognized in the U.S. marking a landmark in recognition of judgments from China abroad. The case stemmed from a helicopter accident (March of 1994) which was the result of production defects of that particular type of helicopter (R-44).

With respect to foreign money judgments, the general principles of comity and recognition of foreign awards have been codified in the U.S. as the Uniform Foreign Money Judgments Recognition Act (“UFM-JRA”), which has been adopted by the majority of U.S. states. "Foreign money judgments" under the UFM-JRA refers to any judgment granting or denying recovery of a sum of money rendered in a jurisdiction outside the U.S. and its territories.  In states adopting the UFM-JRA, such as in California and codified in the California Code of Civil Procedure, a foreign judgment is subject to a limited scope inquiry prior to a determination as to whether it is entitled to be recognized. A defendant challenging recognition of a foreign judgment may not retry issues of liability or damages, but rather is limited to due process-type defenses enumerated in the statute.
 

Legal Requirements Under UFM-JRA
 

A. Mandatory Conditions

Other than a final, conclusive foreign judgment, the three mandatory requirements for recognition of a foreign judgment are all due process-type considerations:
(1) the foreign court must have rendered its judgment under a system that provides impartial tribunals or procedures compatible with the requirements of due process; (
(2) the foreign court must have had personal jurisdiction over the defendant; and
(3) the foreign court must have had subject matter jurisdiction over the controversy.
 

B. Discretionary Conditions
The discretionary factors a court may consider include:
(1) The Defendant Received Sufficient Notice of the Proceedings
(2) The Judgment Was Not Obtained by Fraud
(3) The Judgment Is Not Repugnant to the Enforcing Court’s Public Policy
(4) The Judgment Is Not in Conflict with Another Final and Conclusive Judgment
(5) The Judgment Is Not Inconsistent with an ADR Agreement Between the Parties
(6) Where Jurisdiction Is Based on Personal Service Alone, the Foreign Tribunal Was Not a Seriously Inconvenient Forum
(7) Does the Foreign Court Reciprocally Recognize Judgments From the U.S.?
 

In the Sanlian case, the district court found that service was proper, the PRC judgment was final, conclusive, and enforceable under the laws of the PRC and involved the recovery of a sum of money. As California's UFM-JRA applied and no exceptions to recognition were presented, the plaintiffs were entitled to a domestic judgment.

Because the principles governing recognition of foreign judgments in the U.S. are relatively uniform without regard to the nation where the judgment originated, however, one can look to authority under the UFM-JRA pertaining to recognition of judgments entered in any country for guidance of equal weight in assessing whether a judgment from China will be granted recognition and enforcement under any given set of facts.

While cases under the UFM-JRA abound, cases specifically addressing recognition of foreign judgments entered in China are still relatively few. Based on developments in the legal system in China, and especially in the People’s Republic of China, over the past two decades, it is increasingly likely that a U.S. court evaluating whether to recognize a judgment entered in China would conclude that the system of justice in China comports with traditional western notions of due process, and thus that element would likely not to be a bar to recognition in a U.S. court. If the Chinese judgment otherwise meets the due-process type requirements of the UFM-JRA, there is nothing unique about judgments from China that should interfere with their recognition and enforcement in any U.S. court under the same analysis as a judgment entered in England or Canada, as demonstrated in the Sanlian case.

Article 148, paragraph, 2 of the Company Law establishes that “directors, supervisors and senior managers shall not take advantage of their position to take bribes or other illegal income, and they shall not speculate with the company’s assets.” Article 91 of the Meeting Minutes of the Second National Forum on Foreign-Related, Commercial Maritime Trials (Fafa [2005] No. 26), issued by the Supreme People Court on December 16, 2005, provides that “the people’s courts will accept petitions from foreign invested companies attempting to retrieve a company seal from a natural person, legal person, or other entity.” Therefore, based on Article 148 of the Company Law and the published meeting minutes, a company can take legal action against a removed legal representative to have the company seal returned to the company.

However, in practice, this remedy is hard to implement. When a company files a lawsuit to seek the return of the company seal, the indictment must be stamped with the company seal. If the company seal is not available, then the court will accept the legal representative's signature on the petition, but the legal representative that signs the petition must be the legal representative list on the company's business license. When the person illegally holding the company seal is the company's removed legal representative, and the company has not filed the application to change its registered legal representative, the terminated legal representative will remain the legal representative on the company's business license. In a situation where the preceding legal representative is the defendant, he or she will clearly be unwilling to execute a petition against him or herself to return the company seal. Although the Supreme People's Court has confirmed a company can effectively change its legal representative even if it does not file a change in legal representative with the SAIC or its local branch office, the new representative must still provide the court his or her identification and company authorization stamped with the company seal to be able to act in the company's name. Therefore, the company has several procedural problems it must overcome if it wants to file a lawsuit to retrieve the company seal in its own name.

When a company has trouble retrieving the company seal from a removed legal representative, another potential option is to report the lost company seal to the police. Although the public security bureau (“PSB”) in each city and province has its own requirements for reporting a lost company seal, all PSBs require a company to state how the seal was lost or stolen, and publish an announcement about the loss in a designated newspaper for prescribed period of time. Once the announcement has been published for long enough, the new legal representative may bring an original copy of the company's business license to SAIC or its branch office, and apply to make a new company seal and file related registrations. However, there are two roadblocks to using this technique. First, a company cannot get a new company seal, unless, the new seal registration is completed by the legal representative listed on the company’s business license with the approval of PSB. Second, the question of when a company’s seal should be considered “lost” or “stolen” is a subjective question. Therefore, many PSBs tend not to approve a company's request to replace a lost seal. However, some PSBs will consider a terminated legal representative's continued possession of a company seal to be an acceptable exception to the requirements, and they will approve the company’s application for a new company seal after the company provides a detailed explanation about why it cannot follow the proper procedure.

The company seal, as the symbol of power of the company, is critical for obtaining corporate control. However, regaining the seal from a displaced and uncooperative executive is a time-consuming and oftentimes difficult undertaking. Foreign investors should take care to regain possession of the seal prior to replacing management if at all possible.
 

I. PRC law does not protect confidential information between an attorney and a client as privileged

The concept of "attorney-client privilege" does not exist under PRC law. In other words, confidential communications between an attorney and a client are not privileged or protected.

Article 33 of the PRC Lawyer's Law(1) ("Lawyer's Law") provides that attorneys must protect the confidentiality of their clients' private information, and if they are aware of any of their clients' trade secrets they must also protect them. Furthermore, this article requires attorneys to protect all of the state secrets they discover while working with clients.

At face value, an attorney is only accountable for protecting these two very specific items. However, the scope of this protection is up to interpretation because there is no clear definition of exactly what private information entails. Yet, the more important point is the fact that this article does not exempt attorneys from being forced to disclose this information in a judicial action. Therefore, a court can order an attorney to testify about a client's private information or trade secrets in a judicial proceeding.

Article 70 of the PRC Civil Procedure Law ("Civil Procedure Law") establishes that an attorney has a duty to testify about a client's private information in court by stating that anyone (organizations or individuals) that knows any facts that are relevant to a case must provide those facts in court. Yet, Articles 66 and 120 of the Civil Procedure Law do provide a client with trade secrets some protection because these articles allow a case that involves trade secrets or a client's private information to be held in a closed-door courtroom when a party requests that the proceeding not be held in public. The said provisions of theCivil Procedure Law create the basis for lawyers to be compelled to testify on a client's confidential information, and these laws prevail over any ethical duty of a lawyer to protect a client's information under attorney-client privilege. Furthermore, a lawyer cannot refuse to testify based on the fact that a client may request the information be discussed in a closed-door courtroom. A closed-door courtroom is only available for use in a case if a client requests one, and even if a client does request a closed-door courtroom, the request does not relieve his or her lawyer of the obligation to disclose the confidential information to the court.

On the contrary, Article 45 Section 1 Subparagraph 3 of the Lawyer's Law states that if an attorney conceals facts, or threatens or solicits others to conceal facts from a court, the court may revoke that attorney's bar license. Furthermore, depending on the kind of information that is concealed from the court the attorney could be subject to criminal liability.

Overall, prior to the 1996 Lawyer's Law, an attorney had no legal duty to protect the information a client provided. Even after this law was put in place, if the information an attorney is aware of is important to a litigation, he or she can still be forced to disclose it in court. Furthermore, if an attorney does not provide this important information, he or she can be held criminally or administratively liable for not disclosing the information to the court.

PRC law does not protect any legal document and correspondence that is marked "confidential and privilege." This fact shows that attorneys and their clients are not exempt from disclosing information that would otherwise be protected by attorney-client privilege outside of the PRC.

II. PRC law does not protect the attorney-client privilege of foreign lawyers practicing under foreign laws in China

Under Chinese law, all parties with the knowledge necessary to decide a case are obligated to provide that information in court, and confidential communication between attorneys and clients is not exempt from this disclosure in court. International conflict of law principles establish that a court with jurisdiction over a case will establish the procedural rules for the case. Therefore, in China, foreign lawyers must comply with the Civil Procedure Law and the Lawyer's Law, and they must testify in PRC courts about the evidence they have knowledge of.

Article 3 of the Administrative Rules for the Representative Offices of Foreign Law Firms establishes that foreign law firms and their attorneys must follow the PRC's laws, rules, and regulations. Furthermore, Article 3 requires foreign attorneys in foreign law firms to strictly comply with the PRC's rules for lawyers' professional ethics and practice. Furthermore, foreign law firms and their attorneys must not jeopardize China's national security and public interest when they provide their legal services in China. This provision indicates that, under PRC law, the rights and obligations of foreign attorneys working in China are the same as the rights and obligations of Chinese lawyers.

For the said reasons, foreign lawyers cannot be exempt from testifying in Chinese court based on a claim of attorney-client privilege under non-Chinese laws.

III. The 2008 amendments to the 1996 Lawyer's Law reinforces the protection of confidential information between an attorney and a client

The 1996 Lawyer's Law was amended on October 28, 2007, these amendments came into effect on June 1, 2008 ("Amended Lawyer's Law"). Specifically, the amendments to the law increased the protection afforded attorney-client confidential communication.

Article 38 of the Amended Lawyer's Law states provides that attorneys must protect the confidentiality of their clients' private information, and if they are aware of any of their clients' trade secrets they must also protect them. Furthermore, this article obligates attorneys to protect the state secrets they discover while working with a client. Moreover, if a client requests that the attorney keep certain information confidential, even though it would otherwise not be confidential, the attorney has the duty to keep this information confidential. However, if the information that the client requests be kept secret involves a criminal activity, which is, has, or will be committed, then the attorney must disclose this information to PRC authorities. Finally, if a client's activities would jeopardize national and public security, or if a client's actions could cause someone serious personal or property damage, then a lawyer must inform government authorities of those activities.

Article 49 Section 4 of the Amended Lawyer's Law eliminates a lawyer's duty to reveal all material facts of a case. Thus, an attorney may conceal a client's confidential information from a court when he or she is litigating a case. Before these amendments to the Lawyer's Law attorneys had the duty to present all of the facts of a case, and if they did not reveal everything they knew about a case they could be held liable for concealing that information.

The Amended Lawyer's Law has strengthened client confidentiality requirements. However, the Amended Lawyer's Law does not expressly establish that lawyers may refuse to give testimony in court based on attorney-client privilege, or the information that should be used as evidence because it is protected by "attorney-client privilege." The amendments indicate that the Amended Lawyer's Law is taking steps towards establishing the basic concept of attorney-client privilege in the PRC. These efforts can be seen by the fact that the Law clearly establishes that attorneys must keep confidential information secret, and attorneys must also keep any additional information that clients request them to keep secret, even if, the information the client requests be kept secret would not otherwise be considered confidential. Furthermore, eliminating the possibility that an attorney could face liability for keeping facts from a court shows that there are items parties can keep from the PRC's courts, which in some cases may be attorney-client confidential communication. These changes to the Lawyer's Law show that the PRC's government is becoming more receptive to the concept of attorney-client privilege, and that the government is likely to change Chinese law in more ways that will move China toward accepting the concept of attorney-client privilege.

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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.