Foreign Investment

Subscribe to Foreign Investment via RSS

By Meg Utterback   Monique Carroll and Emily Rich   King & Wood Mallesons’ Dispute Resolution Group

Bribery and corruption is increasingly an issue of concern for multinational companies, especially when seeking to invest in “high risk” jurisdictions. Historically, the primary concern in this area has been exposure to civil and criminal penalties for contravention of anti-bribery and corruption legislation. However, recent years have seen a growing trend towards governmental expropriation of investments alleged to have been obtained by bribery and corruption. This poses a significant additional risk to foreign investors. Investors who are found to have engaged in corrupt practices will have difficulty defending against expropriation or seeking compensation for expropriation that might otherwise have been obtainable under either domestic or public international law. Unfortunately, in some cases, foreign officials may take retaliatory action against an investor for failing to pay a bribe. Organisations doing business abroad must remain vigilant about anti-bribery and corruption compliance. They must also consider what protections may be available under investment treaties for unfair or arbitrary state conduct that equates to an expropriation or another breach of applicable international standards.
Continue Reading Bribery and Corruption in Foreign Investments: Investors Beware

By George Zhao and Dai Mu   King & Wood Mallesons’ M&A Group

In China, the new energy automobiles (NEAs) are currently defined as vehicles utilizing advanced technical know-how, new technologies and new structures, which use unconventional vehicle fuel as the power source (or conventional vehicle fuel but new in-vehicle power devices). The NEAs are defined as vehicles that integrate advanced technologies in power control, including hybrid electric vehicles, battery electric vehicles (BEV, including solar energy vehicles), fuel cell electric vehicles (FCEV), hydrogen engine vehicles, other new energy vehicles (e.g., efficient energy storage device and methyl ether), and products enumerated in China’s industrial policies[1].
Continue Reading Recent Development in China’s New Energy Auto Industry and M&A of Foreign Investors

By Sidney Qin King & Wood Mallesons’ FDI Group

Deloitte predicts the private education sector will reach a market size of RMB640bn (US$102bn) by 2015. This growth is likely a response to rising income levels, which fosters the demand for high-quality private education. In 2013, China relaxed its decades-long one-child policy, allowing couples to have two children if one of the parents is an only child, which greatly bolsters the potential demand for private education like pre-school education and after-school tutoring. Up to now, education has been a valuable hot land of investment, but it is not easy for private investors to enter into the market, particularly foreign investors, because of legislation that treats education as a form of public welfare. But recent legislative developments look set to change this. Although no new national laws or regulations have yet been promulgated, recently-released draft legislation and newly promulgated local regulations suggest that the dawn of private educational institutions is approaching.
Continue Reading The Dawn of Private Educational & Training Institutions

By Wang Rui and Ge Yibo King & Wood Mallesons M&A Group

1.  Introduction

China’s (Shanghai) Pilot Free Trade Zone (“FTZ”) has attracted global media attention ever since it was established in September 2013. This can largely be attributed to the new FTZ rules that relax restrictions on foreign investment in China’s markets. In particular, the value-added telecommunication services (“VATS”) sector in the FTZ opens up foreign investment in two main ways: (1) lifts bans on foreign investment in foreign invested telecom enterprises (“FITE”) in certain service areas, e.g., in information services (only applicable to application stores); and (2) opens up four new types of VATS services previously closed to foreign investment (i.e., call center services, internet access services, domestic multi-party communication services, and domestic internet VPN services). In mid-April of 2014, the government further issued detailed procedures and guidelines on the establishment of FITEs in the FTZ. This Article aims to provide an update of these new developments in the FTZ.   
Continue Reading China’s (Shanghai) Free Trade Zone Paves Way for Foreign Investment in China’s Value-added Telecommunication Service Market

By King & Wood Mallesons

King & Wood Mallesons has updated its guide to doing business in Australia.

Australia welcomes and encourages foreign investment and has a favourable investment environment.  Investments that create exports, replace imports, introduce new technology or create employment are

particularly welcome.

Australia offers significant benefits for foreign investors, including:

  • a resilient and diverse economy with low inflation;
  • a transparent and liberal process for approval of foreign investment;
  • low barriers to trade and investment, with business-oriented corporate regulation;
  • a competitive company tax rate; and
    Continue Reading A guide to doing business in Australia

By Monique Carroll, Huang Tao King & Wood Mallesons’ Dispute Resolution Group

‘Political risk’ in foreign investment is the risk that an investment will be adversely affected by a host country’s political or regulatory decisions. These political or regulatory decisions might result in unfavorable tax legislation, revocation of a business license or, nationalization or ‘expropriation’ of an investment by, for example, the direct or indirect taking of control over the investment by the government. For instance, earlier this year the Argentinean Government announced that it would assume ownership and control of YPF, Argentina’s biggest energy company. At the time, YPF was privately and partly foreign owned and controlled.  

Foreign investors can take steps to minimize exposure to political risk. These steps include structuring the foreign investment so that it falls within the protections provided by an investment treaty to which the host country is a party.
Continue Reading Arbitration as A Tool to Manage Political Risk in Foreign Investment

作者：Monique Carroll 黄滔 金杜律师事务所争议解决组

外商投资中的政策风险是指东道国的政策或日常决策可能会对投资产生不利影响的风险。这些政策或日常决策可能会导致不利的税收制度，企业营业执照被撤销，投资的国有化或“征收”，例如，政府直接或间接地控制外商投资。比如，今年初，阿根廷政府宣布其将取得阿根廷最大的能源公司YPF公司的所有权和控制权。当时，YPF公司是部分由外商个人所有和控制的。

外国投资者可以采取措施降低政策风险。这些措施包括调整投资结构，使其属于东道国作为缔约国的投资条约的保护范围。对于已经遭受东道国政府行为不利影响的外国投资者，则应当考虑是否可以寻求投资条约的保护。
Continue Reading 仲裁–控制外商投资中政策风险的工具

By  Zeng Xianwu Bai Lihui King & Wood’s Foreign Direct Investment (FDI) Group

To achieve the initial public offering (“IPO“), there are two options for Chinese companies, onshore listing (also known as A-share listing) and offshore listing (also known as red-chip listing).  Since the conditions and qualifications for A-share listing are usually a little higher and the procedure is more time-consuming than for the offshore listing, Chinese companies which cannot meet the A-share listing’s requirements or which need to complete IPO rapidly, usually would prefer the red-chip listing.  For the red-chip listing, there are two commonly-used structures for Chinese companies: the straight-forward offshore listing structure and the VIE structure.  In addition, for the purpose of attracting foreign investors and for circumventing restrictions on foreign direct investment, during the Pre-IPO restructuring, the VIE structure is also widely used by Chinese companies and foreign companies alike.

In 2011, after a series of public events, the variable interest entity (“VIE“) structure re-attracted a lot of attention and concerns from the PRC authorities, entrepreneurs, investors and other market participants.  This essay will describe the circumstances in which the VIE structure was created, how it has been used and the changes in the regulatory environment which might affect the feasibility of utilizing the VIE structure.Continue Reading Variable Interest Entity Structure in China

作者：徐萍 金杜律师事务所外商投资组

长期以来，可变利益实体结构（即Variable Interest Entity，“VIE”结构）一直是外国投资者进入中国外商投资限制领域的常用模式。与此同时，VIE结构一直以来也是中国境内企业在境外资本市场实现上市的常用做法。

第一个通过VIE结构上市的著名案例便是新浪，其于2000在美国纳斯达克成功上市。实际上，VIE结构的另一种常用的说法就是“新浪模式”。新浪使用VIE结构成功绕开了中国电信增值产业对于外商投资的限制。从那以后，无论是外国投资者还是国内投资者在中国很多限制或禁止外商投资的领域开始复制使用VIE结构。

VIE结构实质上是指一种安排，根据该安排，在中国境内的一家全资或合资外商投资企业（“控股公司”）取得另一家实际运营公司（“运营公司”）的控制权，而该运营公司则持有必要的许可以在限制或禁止外商投资的领域内开展业务。由于这些产业被中国政府规定为限制或禁止外商投资的产业，所以外国投资无法直接向该运营公司进行投资。相应的，外国投资者会在控股公司和运营公司之间采取多种合同安排，以便使该控股公司获得对运营公司的运作和管理的实际控制权。该运营公司的利润也将流回控股公司，并其业绩将最终纳入控股公司。
 Continue Reading 在中国通过VIE结构进行外商投资将遇到挑战