China Law Roundup: Criminal Procedure, FCPA, Banking Fee Investigation, CIETAC Arbitration Rules, Drug Safety, & More

For your reference, a roundup of recent Chinese legal news and developments of interest to multinationals active in the country:

China’s Parliament Adopts Revision to Criminal Procedure Law (Sheppard Mullin Richter & Hampton LLP)

“On March 14, 2012, the fifth session of the National People’s Congress adopted the latest revision to China’s Criminal Procedure Law (‘Revised Law’). The Revised Law is the second amendment to the Criminal Procedure Law following its enactment in 1979 and its first amendment in 1996… As has been reported, major progress has been made with respect to the protection of the rights of criminal suspects and defendants. Notably, the phrase ‘respecting and protecting human rights’ has been incorporated in the Revised Law’s first chapter with respect to its aim and basic principles.” Read the full update>>

China Business Series: Legal Representatives (Pillsbury Winthrop Shaw Pittman LLP)

“By law, every company in China must have a ‘legal representative.’ The concept may be unfamiliar to US companies, but is more significant than it may first appear. In China, the ‘legal representative’ of a company has broad-ranging power to act in the name of the company. This is similar to the authority of a CEO, but the Chinese position is more explicitly addressed in the law. And, even if a Western investor might be comfortable with a CEO having broad-ranging authority, frequently such an investor will not realize that the bureaucratic-sounding position of ‘legal representative’ is such a powerful position.” Read the full update>>

China’s NDRC to Launch Massive Country-wide Investigation into Banks’ Irregular Charges (McDermott Will & Emery)

“Banks in China have long been criticised for charging irregular and exploitatively high fees. According to recent reports, China’s National Development and Reform Commission (NDRC) will soon conduct a widespread inspection into China’s banking industry. The inspection is expected to be conducted by 10,000 inspectors from NDRC offices across the country and will cover 3,000 types of banking fees, including fees for companies, businesses and individuals. Banks could face millions or even billions in fines.” Read the full update>>

FCPA Compliance in China: An Oxymoron? (Michael Volkov)

“If your company does business in China, you need to conduct an anti-corruption audit. No ifs, ands or buts — and I am not one who would easily make this recommendation. But the picture in China is growing worse by the day. If you follow the mounting number of disclosures, the pattern is unmistakable.” Read the full update>>

Hong Kong Court of Appeal Expands SFC Powers to Seek Remedies for Insider Trading (Proskauer Rose LLP)

“In what is being seen as a landmark decision, the Hong Kong Court of Appeal has allowed an appeal by the Hong Kong Securities and Futures Commission (SFC) from the decision of a lower court that will permit the SFC to proceed to seek final remedial court orders imposing sanctions as a free standing remedy against Tiger Asia, a New York-based fund manager that has no presence in Hong Kong.” Read the full update>>

Securitization in China: Recent Developments (Dechert LLP)

“China has announced plans to launch a new pilot securitization program that will allow some Chinese commercial lenders to securitize financial assets. Recent news reports indicate that the trial securitization program will involve up to $7.9 billion of securitized assets. Eligible assets are likely to include, among others, loans to local Chinese government financing vehicles, which would address what has been an area of significant concern. One academic advisor to the People’s Bank of China noted that asset securitization could help Chinese banks transform illiquid assets into liquid assets.” Read the full update>>

China Solicits Comments on Draft Rules for Writing Periodic Safety Update Reports (McDermott Will & Emery)

“China’s State Food and Drug Administration (SFDA) issued on 19 March 2012, draft Rules on Drafting Periodic Safety Update Reports for Drugs (Draft Rules)… According to the Preamble, the Draft Rules is ‘a technical document for guiding drug manufacturers in drafting and preparing Periodic Safety Update Reports, and is also an important basis on which the institutions monitoring for adverse drug reactions (ADRs) comment on the Periodic Safety Update Reports.’” Read the full update>>

CIETAC’s New Arbitration Rules (Sheppard Mullin Richter & Hampton LLP)

“The China International Economic and Trade Arbitration Commission recently adopted revised arbitration rules (‘Revised Rules’), to be effective on May 1, 2012… The Revised Rules provide that at the request of one party, the arbitral tribunal may order any interim measure it deems necessary or proper in accordance with the applicable law. It remains to be seen to what extent an arbitral tribunal can enforce such interim measures under China’s laws of civil procedure, where parties agree to arbitration in China.” Read the full update>>

China Continues to Encourage Establishment of Non-Public Medical Facilities by Non-Governmental Entities (McDermott Will & Emery)

“On 14 March 2012, the State Council, China’s chief administrative authority, promulgated the roadmap and implementation plan on health care reform for the 12th Five-Year Plan period (2011–15) (the Roadmap)… The Roadmap states that the Chinese Government will continue to encourage the establishment of non-public medical facilities. It further states that the Government intends to have non-public medical facilities provide 20 per cent of the total hospital beds and medical services in China by 2015.” Read the full update>>

China’s Newly Revised Foreign Investment Guidance Catalogue (Sheppard Mullin Richter & Hampton LLP)

“In late 2011, China’s National Development and Reform Commission and Ministry of Commence jointly announced the new Foreign Investment Guidance Catalogue (2011 Amendment) (“New Catalogue”)… The Catalogue categorizes the specific industries in which foreign investment in China is ‘encouraged’, ‘restricted’ or ‘prohibited’ (industries not specifically mentioned in the Catalogue are generally considered ‘permitted’).” Read the full update>>

China Law Alert: Focus on Competition – March 2012 (McDermott Will & Emery)

“It is now just over three years since China’s Anti-Monopoly Law (AML) was introduced. Compared with the well-established practices of U.S. anti-trust and EU competition authorities, AML enforcement is still in its infancy. However, China’s AML regulators, especially the authority in charge of merger control, the Ministry of Commerce (MOFCOM), has moved quickly to make its mark on international business. Now, most large cross-border mergers, acquisitions and joint ventures must also successfully pass the rigors of review by MOFCOM as well as the European Commission and U.S. Department of Justice (DOJ) and/or Federal Trade Commission (FTC).” Read the full update>>

China’s Anti-Monopoly Law: What To Expect In 2012 (Sheppard Mullin Richter & Hampton LLP)

“In the first three years, the major focus has been merger filings. Merger notifications continue to be time-consuming (some taking up to six months or more), and involve elaborate formalities and investigations which sometimes were not necessary. Last year, 160 investigations were completed (in comparison to 25 in 2008, 80 in 2009 and 117 in 2010). Of those 160, four were cleared with conditions (in comparison to one in 2008, four in 2009, one in 2010), bringing us to a total of 10 conditional clearances, all involving foreign companies.” Read the full update>>

China Conditionally Clears Western Digital’s Acquisition of Hitachi’s Hard Disk Drive Business (McDermott Will & Emery)

“Recently China’s Ministry of Commerce (MOFCOM) approved Western Digital’s proposed acquisition of Hitachi’s hard disk drive business on a conditional basis. Containing the most comprehensive clearance conditions ever imposed by MOFCOM, this decision mirrors previous guidance issued by the European Commission and illustrates that at least two authorities in two of the world’s major economies are working toward imposing similar clearance conditions in their respective jurisdictions.” Read the full update>>

Regulatory Challenges for the “Big Four” (Sheppard Mullin Richter & Hampton LLP)

“At the time of China’s accession to the World Trade Organization in 2001, the Big Four successfully lobbied to have an exception to China’s requirement that only Chinese certified accountants could own Chinese accounting firms. As a result, the Big Four were allowed to maintain their foreign ownership in their existing joint ventures. However, the exception only applied to the Big Four’s existing joint ventures, which have 20 year terms. As a result, the joint venture agreements signed by KPMG, Deloitte & Touche, and Ernst & Young will expire later this year, with PricewaterhouseCoopers’ to expire in 2017.” Read the full update>>

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