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By King & Wood’s Finance Group

The China Banking Regulatory Commission (the "CBRC") issued Guiding Opinions of the China Banking Regulatory Commission on the Implementation of the New Regulatory Standards by the Chinese Banking Industry (Yin Jian Fa [2011] No. 44) (the "Guiding Opinion") on April 27, 2011, which clearly creates new rules for liquidity and capital held by banks in accordance with the "Basel Accord III" ("Basel III"), and on the basis of comprehensively assessing the effectiveness of the current prudent regulatory system, to improve the capital adequacy ratio, leverage ratio, liquidity, loan loss reserve and other regulatory standards. The four new regulatory standards for capital listed above will be implemented on January 1, 2012.Continue Reading New Capital Requirements for Banks Postponed

By King & Wood’s Trademark Group

There has been a long debate on whether an unregistered trademark can be the subject of a franchise contract in China. Proponents argue that an unregistered trademark is the franchiser’s property and is thus eligible for being franchised so long as it is of economic value in the eyes of the franchisee. Opponents of this argument see an unregistered trademark as not legally owned by a franchiser without going through the trademark registration process and therefore not eligible for being licensed in a franchise contract. The Regulation on Administration of Commercial Franchises ("Regulation on Franchises") (商业特许经营管理条例) enacted by the State Council of the PRC on February 6, 2007, while clearly including registered trademarks, enterprise marks, patents and know-how into the checklist of business resources that a franchiser "possesses" for franchising, fails to touch on the issue of unregistered trademarks. However, it leaves room by putting the catch-all of "any other business resource" undefined.Continue Reading An Unregistered Trademark is Formally Franchisable in Beijing

By Xianjie Ding and Di Yao King & Wood’s IP Legal Group

New developments in e-commerce regulation bring the issue of intellectual property infringement and the liability of e-commerce operators to light. A landmark case in China removed the defence of the "Safe Harbor Principle" for the first time, and should serve as an admonition to online platforms

The rise of e-commerce in China

In 2011, the e-commerce business in China underwent major changes. After significant amounts of private equity (PE) investments and many successful initial public offerings (IPOs) on the New York Stock Exchange (NYSE) or NASDAQ, e-commerce operators have increased resources to develop their business strategies. They are no long playing a neutral role by providing a merely technical and automatic processing of the data (for example, merely providing space for a blog, etc.) but marketing aggressively as a real internet value-added service provider (for example, providing services in building up or optimising a member’s own website, etc.). This change in role will lead to great legal challenges in the future in the area of trade mark infringements committed on an e-commerce operator’s platform. This article will introduce two high-profile online trade mark infringement cases in both the EU and China, and offer an analysis of the implications on the development of e-commerce.

Continue Reading IP reshapes e-commerce strategies

Susan Ning and Ding Liang

On December 16, 2011, the Beijing Lawyers Association organized a seminar inviting Mr. Zhou Zhigao, an official from the Price Supervision, Inspection and Anti-monopoly Bureau (Price Supervision and Anti-monopoly Bureau) of the National Development and Reform Commission (NDRC), to speak on anti-price monopoly legislation and enforcement. 
 Continue Reading NDRC Doubles Its Antitrust Enforcement Force

By  Susan Ning, Ji Kailun and Yin Ranran

On December 12th, 2011, the Ministry of Commerce ("MOFCOM") conditionally approved the acquisition of the hard disk drive ("HDD") business of the Korean Samsung Electronics ("Samsung") by the US Seagate Technology ("Seagate")1. This is the 4th conditional approval of this year and the 10th conditional approval by MOFCOM since China’s Anti-Monopoly Law ("AML") entered into effect in 2008.

According to MOFCOM’s announcement, this review process lasted for almost 7 months starting from May 19th when the notification was first submitted to MOFCOM. The review process entered into the Extended Phase II and was cleared on the next business day of the expiry date of this phase.2  
 Continue Reading With Conditions, MOFCOM Clears Seagate/Samsung Deal

By Susan Ning and Ding Liang

On November 14, the National Development and Reform Commission ("NDRC") announced its decision to fine two private pharmaceutical companies nearly RMB 7 million for violating the Anti-monopoly Law (AML) (please see our previous article entitled NDRC Fined Two Pharmaceutical Companies for Abusive Conducts).  The NDRC’s news release did not clearly indicate which article(s) of the AML the two companies have violated and the method the NDRC adopted to calculate the fine. 

On December 16, Mr. Zhou Zhigao, an official from the NDRC’s Price Supervision, Inspection and Anti-monopoly Bureau discussed the reasoning behind this case in a seminar.  According to Mr. Zhou, the two pharmaceutical companies were fined under Article 17(3) of the AML because they abused their dominance by refusing to deal with reserpine manufacturers.  He also discussed the method used in that case to calculate the fine.Continue Reading NDRC Official Speaks on the Pharmaceutical Case

By You Yang and Lin Kaiyi King & Wood’s Real Estate Group

A real estate pooled investment fund ("RE Pooled Fund") is where trust companies raise funds from investors (who act as both "settlors" and "beneficiaries" in the trust) and work with real estate developers to provide beneficiaries with profits in return. RE Pooled Funds generate returns through specific assets, equity investments, loans, or a hybrid thereof.

With housing purchase restrictions being implemented in China’s major cities, real estate developers working with trust companies are facing serious cash flow pressure and some of them have even experienced operating difficulties. When real estate developers are unable to provide trust companies with high investment returns on schedule, and investors continue to hold expectations of high returns regardless of investment risk, trust companies are inclined to pay investors at their own expense and solve investment return problems with real estate developers internally rather than disclose investment risk to the investors. This is partly because trust companies value their reputation and the reputation of their investment products and want to avoid upsetting trustees and commercial banks who engage in selling the trust company’s products. Trust companies may also be concerned about the potential for class-action lawsuits by investors. However, such trust companies may one day be unable or unwilling to pay investors out of their own pockets, or investors may no longer be satisfied with being paid investment returns, leading to a very unsustainable situation.Continue Reading Risk Management for China’s Real Estate Pooled Investment Funds (Part I of II)

By Liu Xinyu and Gao Xiaorui King & Wood’s International Trade Group

Improper commodity classification in customs declaration may cause different legal liabilities. This article will begin the analysis with two cases.

Case 1: A large-scale foreign-investment enterprise ("Enterprise A") imported 72.6 tons of ethylene powder from Germany, and made a customs declaration in the name of ethylene powder with a commodity code ("HS code") of 29,012,100. Later, the customs office extracted samples from the declared goods for inspection. The laboratory identification report issued by the customs laboratory center revealed that the materials were actually a type of polymer with the main ingredient being vinyl acetate, and the proper corresponding HS code was 39052900. Through further investigation, the customs office found that Enterprise A had imported the same materials as "ethylene powder" three times. The customs office finally determined that Enterprise A’s acts constituted false declarations, and imposed administrative penalties on Enterprise A in accordance with relevant laws.

Case 2: According to a news report, the merchandiser of a well-known foreign-funded enterprise ("Enterprise B"), when scrutinizing Enterprise B’s former declaration materials for imported raw materials, found that the beginning of the HS code on the commercial invoice was 3302 rather than 1302, the correct beginning of HS code for the imported raw materials. Imported materials with HS codes 1302 and 3302 were levied different customs duties of 20% and 15%, respectively. HS code 1302 was the correct coding for imported materials by Enterprise B and the merchandiser was aware of the fact. However, Enterprise B continued to use the original commodity code when filing customs declaration for the imported materials, and carried out this misconduct for the next 30 months. Finally, the customs anti-smuggling department discovered Enterprise B’s acts and determined Enterprise B had evaded customs duties amounted to over RMB 1 million. Finally, a lawsuit was instituted by the competent procuratorate before the courts.Continue Reading Legal Liabilities from Improper Product Classification in Customs Declarations

By Susan Ning, Sun Yiming, Liu Jia and Yin Ranran

On December 13, it was reported that the National Development and Reform Commission (NDRC) asked China Telecom to submit more detailed "rectification proposal" in relation to its pledge for suspension of antitrust probe1.   Earlier on December 2, China Telecom and China Unicom announced that they have applied to the NDRC for suspension of its antitrust investigation into their internet access pricing practices, by promising to adjust the internet access prices and overhaul their broadband services (see our article entitled "China Telecom and China Unicom Seek to Settle Antitrust Probe").Continue Reading NDRC Demands More Concrete Pledges from China Telecom

By King & Wood’s Labor & Employment Group

The State Administration of Work Safety passed the Decision on the Amendment to the Interim Punishment Rules for the Regulations on Reporting and Investigating Work Safety Accidents (hereinafter the "Decision") on August 29th, 2011. The Decision will be effective as of November 1st, 2011.Continue Reading Penalty for Lying about or Concealing Work Safety Accidents Up to RMB 5 Million