China Business Law: Recent Updates & Commentary

For your reference, a roundup of recent China-related business updates and legal commentary, including analysis of the Ministry of Commerce’s security review system for foreign M&A of domestic companies and other foreign direct investment into China developments:

On Foreign Direct Investment into China…

China Implements a Security Review System for Certain Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (Sheppard Mullin Richter & Hampton LLP):

“The Chinese State Council has officially implemented a Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors based on a set of interim rules issued earlier this year. Mergers and acquisitions by foreign acquirers will be reviewed under the Review System based on factors such as the target’s industry, the type of M&A, and the right to de facto control. Foreign acquirers must submit an application to China’s Ministry of Commerce for review prior to certain mergers or acquisitions of a domestic enterprise.” Read more»

China Implements New Laws in Foreign-Related Products Liability Cases (Quinn Emanuel Urquhart & Sullivan, LLP)

“In 2010, the People’s Republic of China enacted two laws that together will substantially affect all civil litigation in China – and, in particular, product liability litigation regarding foreign entities. The Law of the Application of Law for Foreign-Related Civil Relations of the PRC covers almost all aspects of the application of law in foreign-related civil cases. The Tort Law of the PRC comprehensively governs tort liabilities. This article will focus on the provisions of these laws relevant to product liability disputes, particularly as they affect foreign entities.” Read more»

New Law Boosts U.S. Employers’ Costs for Deploying Workers to China (Armstrong Teasdale LLP):

“Foreign expatriates working in China are now required to participate in, and contribute to, China’s Social Security System under the recently passed ‘Interim Measures for Social Insurance Coverage of Foreigners Working within the Territory of China’. Generally, the new law, which went into effect on October 15, 2011, forces expatriates working in China to contribute to the social security systems of both China and their home country and substantially increases the costs to employers for deploying workers to China.” Read more»

China Market Access Improves for Foreign Shipowners (Richard Kimber):

“The Circular Strengthening the Administration of the Wholly Foreign-owned Shipping Companies Examination and Approval was issued by The Ministry of Transport On August 22, 2011. The Circular relaxes the access conditions and scope of business for Wholly Foreign-owned Shipping Companies.” Read more»

On Theft of Trade Secrets…

A Runaway Train? Citing Secret Stolen by Chinese Competitor, ITC Derails Import of Railway Wheels, and Federal Circuit Affirms (Sutherland Asbill & Brennan LLP):

“Overseas manufacturers have long known that their products manufactured abroad can be excluded from importation into the U.S. if they infringe U.S. patents, trademarks or copyrights. But a new decision by the U.S. Court of Appeals for the Federal Circuit has expanded the list of acts that can result in the exclusion of articles from import to the U.S. market.” Read more»

Another Instance of Alleged Trade Secret Misappropriation Results in Federal Criminal Indictment (International Lawyers Network):

“U.S. v. Pu presents another instance of a trade secret theft case with an international component that the federal authorities have decided to prosecute. Yihao Pu, a former quantitative financial engineer for Citadel LLC, was arrested last Wednesday for allegedly stealing proprietary information related to the Chicago-based company’s trading system as part of a plan to launch his own hedge fund in China.” Read more»

Once Again, An Alleged International Trade Secrets Heist Draws A Federal Indictment (International Lawyers Network):

“Last week, Chunlai Yang, a former senior software engineer for Chicago-based CME Group, Inc., was indicted in federal court in Chicago and charged with two counts of theft of trade secrets. In the indictment, the government alleges that Yang stole the global exchange operator’s proprietary source code while pursuing, and in furtherance of, business plans to improve a chemical electronic trading exchange in China.” Read more»

On China-related Compliance…

Watts Water: Don’t Get Caught on the (FCPA) Slow Boat to China (Thomas Fox):

“Last week, the Securities and Exchange Commission instituted a Cease and Desist Order again Watts Water Technologies, Inc. (WWT) and one of its employees, Leesen Chang (Chang). The Order was to obtain certain civil penalties and fines for conduct of WWT and Chang concerning violations of the books and records and internal control provisions of the Foreign Corrupt Practices Act for its China operations.” Read more»

China Announces Legal Changes That May Broaden Power to Investigate Bribery (Bryan Cave):

“… the National People’s Congress of the People’s Republic of China released the draft Criminal Procedure Law Amendment to the public for comment, … expected to provide additional protection to the civil rights of accused parties, including the right to privately confer with an attorney and blocking evidence collected through coercion. However, critics say that the Draft Amendment would also provide authorities legal cover to utilize secret locations to detain subjects suspected of engaging in acts involving national security, terrorism, or other serious crimes which may include serious bribery.” Read more»

SciClone FCPA Lawsuit Settlement: New Enhanced Best Practices? (Thomas Fox)

“SciClone has a large amount of its business in China and on its website announces, ‘SciClone’s goal is to grow sales of our significant marketed portfolio in China’. As noted by LaCroix, ‘The existence of the FCPA investigation underscores the challenges facing companies attempting to do business in China.’ This ‘China-centric’ business focus may have led to some of the issues involved in the FCPA investigation.” Read more»

Related Commentary and Analysis

Global Tax Highlights – A focus on China, Europe and the United States (McDermott Will & Emery):

“The 2009–2010 exercise where the Chinese State Administration of Taxation required 10 large-scale multinational companies in China to conduct tax self-investigations proved effective to China tax authorities as a means to collect tax revenues from foreign enterprises (and their Chinese subsidiaries).” Read more»

China Briefing (Reed Smith)

“Life Sciences Health Industry China Briefing summarizes the business, regulatory and legal developments during August 2011 in China important for drug, device, and life science/health care companies.” Read more»


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