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By Zhang Shouzhi  He Wei  Chen Jun and Hu Ke   King & Wood Mallesons’ Dispute  Resolution & Litigation Group

張守志何薇On November 14, 2014, China Council for the Promotion of International Trade revised and adopted the China International Economic and Trade Arbitration Commission Arbitration Rules (2015) ( the “2015 Arbitration Rules”), which revised the China International Economic and Trade Arbitration Commission Arbitration Rules (2012) ( the “2012 Arbitration Rules”, effective as of May 1, 2012). The 2015 Arbitration Rules shall go into effect as of January 1, 2015.
Continue Reading CIETAC issued the 2015 Arbitration Rules

By Ding Xianjie King & Wood Mallesons’ Trademark Group

xian-jie_dingWhether OEM constitutes trademark infringement has been an area of controversy in the field of intellectual property for many years. The ongoing debate has arisen recently, mainly focusing on the following three points: a) whether export-related OEM constitutes trademark infringement regulated by the Trademark Law of the PRC; b) whether OEM satisfies the requirement of “prior use” with an ability to prevent others from registering the trademark on the same or identical goods by illegitimate means; c) whether OEM can defend others’ cancellation requests on the grounds that the trademark has not been used for three years consecutively.

With regards to the abovementioned issues, the focus of the argument lies in whether the “brand-post” in OEM is a use of trademark in the sense of Trademark Law. If a) above is not satisfied, b) and c) will be problematic. This article summarizes existing case law and the prevalent literature, and concludes that the current controversy over the use of trademarks shall be weakened, but over the substance of trademark right protection.
Continue Reading Analysis of the use of trademarks in OEM based on the legislative intent of trademark protection

By  King & Wood Mallesons’ Tax Group

On 31st October, 2014, the Ministry of Finance, State Administration of Taxation (SAT) and China Securities Regulatory Commission jointly published Cai Shui [2014] No.79 (Circular 79) to clarify enterprise income tax (EIT) policy for capital gains with respect to QFIIs/RQFII. Under Circular 79, QFIIs/RQFIIs are temporarily exempt from EIT on China-sourced capital gains derived from transfer of equity investment assets (including shares) effective from 17th November, 2014. However, at the same time, it provides that the abovementioned capital gains derived prior to 17th November, 2014 shall be subject to Chinese EIT. 
Continue Reading Chinese Tax Authorities will recently commence tax cleaning-up activities targeting incomes of QFIIs/RQFIIs

By Denning Jin , Yongqi Tao, King and Wood Mallesons’ Dispute Resolution Group

jin_denningIn the past decades, explosive economic and industrial growth in China has led to significant environmental degradation. As a result, China is currently in the process of developing more stringent controls over environmental issues. Since the new leadership came into power, the government declared a “war against pollution” and embarked on the road to “ecological civilization” in the context of the rule of law reform it recently launched. Therefore, we expect that environmental law and its enforcement will surely be a critical part of Chinese legal reform.

At the beginning of 2015, several big issues received widespread attention. On 1 January 2015, China formally began to implement the updated PRC Environmental Protection Law (“Amended EPL”), imposing incredibly harsher legal liabilities to polluters. In addition, a public interest lawsuit that yielded a $26 million verdict was chosen by the Supreme People’s Court as one of the most important cases of 2014. In this new era, these are clear signals that besides the improved administrative enforcement, new approaches, such as public interest lawsuits, will also become of importance in the regulation of environmental issues. Consequently, both enterprises’ outdated production mode and outdated concepts shall be abandoned. In order to better prepare you, we hereby introduce to you the new environmental law regime from multiple perspectives through this series of articles.
Continue Reading Harsher Legal Liabilities under New Environmental Law Regime

By Banking Team    King & Wood Mallesons

Overview

The China Banking Regulatory Commission (“CBRC”) jointly with three other government departments promulgated the CBRC Guidance Opinions on the Use of Secure and Controllable Technology to Strengthen the Internet Security and Information Construction of Banking Industry (YINJIANFA (2014) No. 39, the “CBRC Opinion”) on 3 September 2014. The Guidelines on Promoting the Use of Secure and Controllable Technology in Banking Industry (2014-2015) (YINJIANBANFA (2014) No. 317, the “CBRC Guidelines”) were later issued on 26 December 2014, as the detailed implementing rules of the CBRC Opinion. Targeting to improve the information security in the banking sector and in a larger sense, the financial security of China, the CBRC Opinion and the CBRC Guidelines (collectively, the “New Rules”) require that banks, within a specific timeframe, achieve a series of fixed targets in relation to applying “secure and controllable” IT products. This may have a significant impact on China’s banking industry and thus have already fuelled concerns in the market.
Continue Reading China Banking IT Regulation Tightened Up

By Mining & Resources Dispute Resolution Team, King & Wood Mallesons

To acquire mining rights through equity transfers is a common investment scheme in the mining industry. However, its legal effect is not without problems. This article provides a brief analysis of this scheme and the related legal issues.

Transfer of Mining Rights through Equity Transfers: the Mechanism and Its Potential Problems

To summarize, the typical scheme to transfer mining rights through equity transfers is as follows: the seller transfers all or a majority of shares of a mining company to the buyer, who subsequently becomes the sole or majority shareholder of the mining company. Through its ownership of shares in the mining company, the buyer can exercise the mining company’s mining rights indirectly. 
Continue Reading Contract Validity in the “Transfer of Mining Rights through Equity Transfers”

By Armstrong Chen , Han Min and Zhang Jun King & Wood Mallesons’ Dispute Resolution Group

chen_armstrongOn December 26, 2014, The China Banking Regulatory Commission (CBRC) and the Ministry of Industry and Information Technology（MIIT） jointly issued the Guide to Promote Banking Application of Secure and Controllable Information Technology (2014 to2015) (CBRC Banfa [2014] No.317, “Guide No.317”,or the “Guide”). The Guide immediately triggered a heated discussion amongst domestic and foreign enterprises; and in particular by foreign information technology providers in China.  So controversial is the Guide that it has led to questions being passed from US President Barack Obama to his Chinese counterpart, President Xi Jinping. What is Guide No.317 and why has it been the cause of such controversy?
Continue Reading Quake invoked: The Guide to Promote Banking Application of Secure and Controllable Information Technology issued

By Susan Ning, Kate Peng and Lingbo Wei King & Wood Mallesons’ Antitrust Group

NING, Susan (Xuanfeng)彭荷月After more than a year’s investigation into Qualcomm, the NDRC made an announcement of its investigation decision through press release on 10 February 2015.[1] About 20 days later, the NDRC published the full-text of the decision on its official website on 2 March 2015. The decision provided a comprehensive analysis on the definition of the relevant markets, Qualcomm’s dominant position and abusive conducts that are deemed violating the Chinese Anti-Monopoly Law (“AML”), which sent a warning to patent-heavy companies to review their business practices in China.

We hereby set out the points below to provide insight into the facts and factors that the NDRC considered in its decision making process.
Continue Reading NDRC’s Qualcomm Decision：A Warning to Patent-heavy Companies

Contributed by: Wachtell, Lipton, Rosen & Katz (New York) and King & Wood Mallesons (Beijing)

M&A was robust in 2014, hitting several noteworthy post-crisis high-water marks: total global volume reached US$3.5 trillion, cross-border volume reached US$1.3 trillion (37% of the total) and cross-border M&A involving U.S. companies reached US$770 billion (45% of which was incoming). Acquirors from Germany, France, Canada, Japan and the United Kingdom accounted for 67% of the incoming acquisitions into the U.S., and acquirors from China, India and other emerging economies accounted for approximately 7%. Cross-border deals announced in 2014 included some of the year’s largest, including many above US$10 billion and a number of real blockbusters.
Continue Reading U.S. UPDATE – 2015 Checklist for Successful Acquisitions in the U.S.

By Zhao Yan and Daisy Duan , King & Wood Mallesons’  Taxation Group

赵炎段桃After several rounds of revisions and consultations in the past few years, the State Administration of Taxation (“SAT”) has recently promulgated the Bulletin on Several Issues concerning the Enterprise Income Tax (“EIT”) on Indirect Asset Transfer by Non-Resident Enterprises (“Bulletin 7”)[1]. Tax matters occurred but have not been settled before 3 February 2015, the date of implementation of Bulletin 7, shall be governed by Bulletin 7. Meanwhile, the relevant provisions of Guo Shui Han [2009] No. 698 (“Circular 698”)[2] and SAT Bulletin [2011] No. 24 (“Bulletin 24”)[3] concerning indirect equity transfers shall be revoked accordingly.

In accordance with Bulletin 7, indirect transfer of China taxable assets conducted by non-resident enterprises through arrangements that do not have reasonable commercial purposes, which results in avoidance of EIT, shall be deemed as direct transfer of China taxable assets and thus subject to tax in China. As an upgrade to Circular 698, Bulletin 7 shall have profound impacts on the tax costs, investment structuring and exit plan of foreign enterprises making investments into China and of domestic enterprises setting up “red-chip” structures for overseas listings.
Continue Reading A New Milestone for Taxation on Indirect Asset Transfer by Non-resident Enterprises — A Review of the Past and Present of Bulletin 7