index

China issues rules on foreign investment disputes

(Xinhua)
Updated: 2010-08-17 00:20

China's Supreme People's Court (SPC) on Monday issued a set of regulations providing a detailed ruling basis for cases involving foreign investment companies regarding share transfer, anonymous investment and other procedures.

The regulations mainly focus on conflicts involving foreign limited liability companies, including the effectiveness and legal consequences of equity transfer contracts without administrative approval, according to a statement on the website of the supreme court.

The new rules also specify various conditions for anonymous investment, and consider contracts invalid only when investors allegedly violate laws and regulations or intent to escape legal responsibilities.

The move aims to protect many investors who make anonymous investment when it is not proper to reveal their names.

Related readings:  China still a focus for foreign direct investment  China calls for more investment between China, ASEAN  China investment vehicles will issue more bonds

According to the SPC statement, conflicts involving foreign investment companies accounted for about 20 percent of all foreign-related civil and commercial cases in the past two years.

"Among these cases, conflicts involving share transfer, anonymous investment, merger and liquidation saw a sharp increase, and the legal problems reflected in these cases are very complicated," said the statement.

SPC spokesman Sun Jungong said the rules will play a positive role in ensuring equal rights of domestic and foreign investment companies and promoting a fair market environment.

However, the document did not cover merger conflicts.

"These conflicts are more complicated as they not only involve private laws but also run on public laws such as the Anti-monopoly Law... and the legal basis is inadequate. So it's not the right time to map out judicial interpretations for them," Sun said.

Sun revealed that the court will also release a set of judicial interpretations focusing on the application of law on conflicts involving foreign investment companies on termination issues such as disbandment and liquidation.