Sunday, September 13, 2009

US-China Trade War Begins!

In response to President Obama's decision to impose Section 421 tariffs on Chinese tires, the Chinese government took a short two days to retaliate. The Chinese Ministry of Commerce announced that it will initiate the necessary proceedings to address anti-dumping and countervailing duties on U.S. imports of chicken products and automobile parts.

Commentators have feared and forewarned such reactions from China if President Obama were to utilize the obscure trade protection remedies that the U.S. negotiated with China before its entry to the WTO. Nobody is surprised by this quick retaliation from China. However, how much more will China do in response to Obama's ostensibly pro-union trade policy is anyone's guess.

The following analyses on the Section 421 case are extraordinarily insightful:

Monday, August 10, 2009

Forced Confessions to Be Inadmissible for Death Penalty in China

Over the past two and half months, I had devoted my every waking moment into studying for the Texas Bar Examination (TBE), which FINALLY took place on July 28-30. This should explain the absence of any posts for the last several months. Now, with the bar exam behind me, I'm ready to resume blogging.

While I was preparing for the TBE, the subject that I was most uncomfortable with was constitutional criminal procedures. Crim Pro was difficult because of the myriad protections for the accused and public policy exceptions. One of the most complex concepts was the admissibility of confessions obtained in violation of a suspect's constitutional rights: Miranda rights and the Sixth Amendment right to an attorney. According to the holding of Miranda v. Arizona,
The person in custody must, prior to interrogation, be clearly informed that he has the right to remain silent, and that anything he says will be used against him in the court of law; he must be clearly informed that he has the right to consult with a lawyer and to have the lawyer with him during interrogation, and that, if he is indigent, a lawyer will be appointed to represent him.
The police may interrogate a suspect after he was given his Miranda warnings only if the suspect voluntarily resumed discussions about the alleged crime and waived his rights. Without
a voluntary waiver by the suspect, any confession or inculpatory information obtained by the police while he was in police custody as a result of interrogation is inadmissible to prove guilt.

A suspect's Sixth Amendment "super" right to counsel attaches once formal judicial proceedings take place. "Formal charge, preliminary hearing, indictment, information, or arraignment" are
all considered formal judicial proceedings according to Brewer v. Williams. After a defendant's "super" right to counsel attaches, he has a right to counsel at police questioning by an undercover
police officer and the right to counsel at questioning even if not in police custody.

These broad constitutional protections for criminal defendants operate as a critical shield against police misconduct in law enforcement. The protections are so broad that any inculpatoryinformation or confession (as stated above) gained in violations of the constitutional is inadmissible.Further, exclusions of such illegally obtained inculpatory information apply to felony and misdemeanor
cases--including death penalty cases.

Reports in China show that the Chinese government will probably soon adopt similar evidentiary rules to exclude forced confessions from being used against defendants in capital cases.

China does ban torture by police in order to force confessions. But, that does not mean much. If we all still recall, the U.S. "does not" torture either, and yet it happened. If the new evidentiary
rules are adopted, they could at least in theory be a powerful tool in protecting the basic rights of criminal defendants, and they could counter rampant police abuses in China.

Let's hope that this long overdue procedural protection for criminal defendants become a reality
in China.

Friday, April 10, 2009

China's Jury System

"I consider trial by jury as the only anchor ever yet imagined by man, by which a government can be held to the principles of its constitution."

--Thomas Jefferson

Two days ago, I had the pleasure of talking to Hon. Duan, a senior justice on the Supreme People's Court of China, who is currently on administrative leave to study American administrative laws here at SMU Law School. In our two hour long conversation, we talked about many different topics regarding the Chinese and American legal and judicial systems. One of the most interesting discussions concerns the jury systems in both countries. The United States has a very unique jury system that is often vilified and glorified by people of different philosophies. However, many people probably do not know that China actually has its own jury system, at least on the books. So, I think the importance of this subject deserves a little discussion on this blog.

A. History of the Chinese Jury System:

My cursory research reveals that a rudimentary jury system existed even during the early days of the communist revolution. The idea was that common people would be selected to participate in rendering justice. However, the jury system formally established in the 1954 Constitution, along with the entire justice system, came to a halt during the horrific Cultural Revolution. The end of the Cultural Revolution gave the Chinese jury system a second chance. In 2004, the Standing Committee of the National People's Congress promulgated the Resolution/Decision Regarding Improving the People's Jury System ( 关于完善人民陪审制度的决定) ("Jury System Decision"), which came into effect on May 1, 2005. Currently, the Chinese jury system theoratically operates under this piece of legislation.

B. The Criteria for Selecting Jurors:

Pursuant to Articles 4-6 of the Jury System Decision, a candidate for the people's juror must meet the following requirements:

a. must uphold the Chinese Constitution;
b. must be older than 23 years of age;
c. must be of good moral character;
d. must be physically fit and healthy;
e. must have a minimum of a junior college degree (大学专科文凭);
f. must not be a lawyer, a member of the National's People of Congress, employee of the Public Security Bureau, People's courts, People's procuratorate, or National Security;
g. must not have committed a crime;
h. must not have been terminated from public office.

C. Method of Selection:

Assuming that candidates meet the above-criteria, they can be nominated by their work units (Danwei) to the local people's court for consideration. After nomination, the local people's court and the justice department of local government coorporate to evaluate such individuals before they could be recommended to the chief judge of the local court, who can then petition the local people's congress to officially appoint the recommended individuals as jurors.

The number of jurors is determined by the local people's courts on a as-needed basis.

D. Working Procedures:

First of all, Chinese jurors, unlike American jurors, have the same authority as other judges who serve on the presiding panel. They could ask questions during court proceedings, and can cast votes regarding the final decision and outcome of cases. In fact, Chinese trial courts, much like appellate courts, decide cases based on the principle of majority rule. In other words, if the juror vote is in accordance with the vote of another judge panelist, then the majority votes determine the outcome of the case.

Second, jurors can participate in cases of varying nature. Except for summary judge proceedings (简易程序审理) and other cases provided for by law, jurors could hear, along with his/her judge panelists, the following types of cases:

a. criminal, civil and administrative cases of significant social impact;
b. criminal, civil and administrative cases where criminal defendant or plaintiff in administrative case requests juror presence.

Third, the law requires that where jurors participate, there must be at least one juror for every two judges.

Fourth, the normal term for jurors is five (5) years.

Fifth, jurors, like judges, must avoid conflicts of interest during legal proceedings, and must undergo professinal training regarding procedures and substantive law.

E. Compensation for Jurors:

Chinese jurors, like their American counterparts, are entitled to monetary compensation for their service. However, much like their American counterparts, their compensation is minimal. The source of such compensation lies in the budget of the local courts and governments.

F. The Reality of the Jury System in China:

While I applaud the jury system as established by Chinese law, I have to say that the system exists largely on paper. Based on the facts above, it is obvious that severe impediments exist for the actual functionaity of the Chinese jury system. First, the selection criteria post a high bar for many Chinese people. The intent behind such criteria is that only people with good education and connections could possibly be nominated, not to mention being appointed. Second, because of budgetary limitations, courts and local governments are not going to fork out more money to conduct jury trials. Third, I doubt that litigants in China actually prefer to have jurors serving on their presiding panel (this is to be debated and researched.). As a result, the jury system does not play a significant part in the Chinese justice system.

G. Future of the Chinese Jury System:

One thing is certain--the Chinese government obivously thinks that jurors do have a role to play in the justice system, given the relatively long history of the system in Communist China. The question is how the jury system can actually be implemented or reformed to function. On that note, Justice Duan thinks that the American jury system appears to guarantee procedural fairness, while the Chinese system appears to strive for substantive fairness by imposing high standards on juror candadates. She believes that China can actually borrow the spirit of the American system to ensure procedural fairness in Chinese legal proceedings. How the Chinese jury system be fashioned in the future remains to be seen.

Monday, April 6, 2009

Economic Crisis Tests China's Enterprise Bankruptcy Law

The Economic Crisis is a Test of Character.

路遥知马力,日久见人心。(As distance tests a horse's strength, so time reveals' a person's heart.)

China's Enterprise Bankruptcy Law (EBL) came out after more than one decade of debates and compromises, and it was applauded for advancing China's efforts in establishing a truly market-oriented economy. More than two years after its promulgation, it has been tested in Chinese courts. For example, the Chinese company, Sanlu Group that manufactured tainted milk, went through an seemingly orderly liquidation process under the new Enterprise Bankruptcy Law.

Besides Sanlu, the law is also undergoing public tests in the context of massive failures experienced by small to miedium sized business in Guangdong Province due to the economic crisis. Like other bankruptcy regimes in many countries, the EBL was designed to provide orderly and effective means to sort out debtor-creditor relationships during difficult times. To accomplish that, the EBL allows liquidation (Chapter 7/13 under U.S. Bankruptcy law), reorganization (Chapter 11 under U.S. Bankruptcy law), or reconciliation (informal workouts). The law also contains detailed provisions governing the relationships, behaviors, and obligations of courts, creditors, debtors, creditors' committee, and the bankruptcy administrator. Overall, the law is a very comprehensive piece of legislation, and if enforced properly, it could be a effective tool to regulate market behaviors.

But, how is the law fairing in these difficult times? According to this report, the EBL is experiencing some significant growing pain.

As the global recession slams China, bankrupt business owners are shutting factories overnight. Often, they leave the mainland, afraid of angry suppliers and workers and uncertain about legal protections. Dongguan alone last year recorded 673 cases—up 24%—of owners fleeing their factories, leaving behind 113,000 unemployed workers owed $44.1 million. Labor disputes almost doubled, to nearly 80,000.
Many foreign investors, due to falling demands from the West, had no choice but shut down their businesses in order to stop the bleeding. One would think that most foreign investors who decried China's lack of legal institutions would throw their arms into the relatively well-developed and interests-neutral courts in Guangdong Province. The reason being that the EBL is an excellent way out in case of business failures, and that the EBL is not unfriendly to investors. Further, courts and judicial enforcements in costal areas, according to Professor Peerenboom, are in comparison better than those in interior China.

However, that is not the case. Many investors fled China, like those New Yorker debtors who escaped their debtors to populate the great State of Texas because New York law could not reach them in the early days of frontier history in the American west. In the case of debtors in China, they led to Taiwan, Korea, or wherever the "sword" of Chinese law cannot follow.

The excuse, as reported is:
But few judges have received the necessary training to understand the complex measure, so local officials often discourage hard-pressed owners from filing for bankruptcy. And by compensating creditors before employees, the law undercuts Beijing's desire to minimize labor unrest....
Putting aside the validity of the argument that local officials discourage the filing of bankruptcy, I think the excuse for not using EBL is a weak argument. True, many judges in China are not trained and versed in the EBL, but the fact is that Chinese courts set up special tribunals to handle special litigation. Those judges assigned to the speical bankruptcy tribunals are more qualified to handle liquidation cases. Further, this aversion and fear of the incompetency in Chinese courts and judges have got to stop at some point. Yes, the qualification of judges in all cases play a crucial role in the outcome of cases, and qualifications of judges vary widely from court to court. There is no exception even here in the U.S. But, because of China's recent efforts in moderninzing its judiciary by imposing strict requirements on qualifying judges, for example, law license, judges are getting more and more better trained and educated. In addition, because of the vast number of businesses and disputes in southern China in Guangdong Province, many judges are actually very experienced in economic disputes. I'd submit that many are more versed in such disputes than some in East Texas. Therefore, to use Chinese judge's perceived lack of qualification as an excuse for fleeing China instead of initiating bankruptcy proceedings under the EBL is an ancient and weak argument.

In sum, the EBL is flunking the test because it is not doing what it was intended to do.

Wednesday, April 1, 2009

Five Years Holding Period, Is it Fair?

China Banking Regulatory Commission (CBRC)'s chairman, Liu Mingkang announced that rules will change for foreign invesors who invest in Chinese commercial banks.

Remember the blockbuster IPOs of Chinese state-owned banks? Bank of China, China Construction Bank, China Industry and Commerce Bank all had their IPO a few years ago when the market was good. Many foreign investors bought shares of those banks, riding the wave of the bull market. When they bought into those shares, they agreed to holding those investment/shares for a period of three (3) years before they could sell because the CBRC required such a lock-up period.

The market situation has changed dramatically in recent months. Many of those foreign investors that bought shares in Chinese banks found themselves in urgent need of liquidity due to the severe finanical crisis worldwide. For example, according to reports, Bank of America sold its shares in the China Construction Bank; Royal Bank of Scotland got rid of its shares in the Bank of China. Foreign investors in Chinese banks' stocks also sold their shares for speculation purposes, based on the same report.

To combat the above phenomena, the CBRC has announced that the rules of the game shall change--the lock-up period for foreigner investors in Chinese banks' stocks will be lengthened from three (3) years to five (5) years.

It appears that this rule change is not meant to be retroactive, and it is effective only against future "strategic investors" in Chinese banks' shares.

The change from three years to five years seems arbitrary. Why would a five-year lock up period be more effective in reducing speculation on the part of foreign investors? I don't know if the CBRC made its rule/policy change based on solid research or just a a matter of course. Chinese government appears in many instances to like the number "five" in its macro-level planning. I sure hope the former is the case.

The change further illustrates the difficulties that foreign investors face in China in terms of uncertainties in the Chinese legal environment. When foreigners just got used to the three- year holding period for their investments in Chinese banks, suddenly, the Chinese government decided that a longer holding period is more desirable from a regulatory standpoint. For any reasonable investor, the question to pose is--what is prevent the CBRC from modifying the holding period in the furture again?

It is understandable for the Chinese government to make policy changes in accordance with circumstances and the country's corresponding regulatory needs. However, any policy changes must be based on sound reasoning by balancing the needs of investors and those of the public/nation at large. Without a balanced approach to adjustments in policy changes, China will be in actuality doing itself a disservice in creating unnecessary uncertainty in its capital markets.

Friday, March 20, 2009

Seven Steps to Protect Your Trademark in China ran an article written by Alison Ross, which discusses "How to Protect Your Brand in China."  I thought the author did a very good and thorough job in advising mark owners on how they should go about protecting their marks in a comprehensive and proative way in China.

Here are the seven steps that Alison suggests as listed below:
1. Register trade marks early
2. Territorial registration
3. Register trade marks in English and Chinese
4. Mitigate risks through vigilance
5. Educate employees
6. Consider the applicable jurisdiction in disputes
7. Utilise available enforcement procedures

Read the full article here.

MOFCOM's Rejection of the Coke-Huiyuan Merger Disappoints Legal Experts

China, by and through MOFCOM, rejected Coca-Cola's bid to acquire the Chinese juice maker Huiyuan.  As soon as the news came out, it caught international attention and has been widely reported.  Many views float out there about why and how come

The Caijing Magzine in China came out with its own analysis of the legal implication of this decision.  Titled Legal Implications of Coke-Huiyuan, this report reveals concerns raised by legal scholars in China's Anti-Monopoly Law.
Some anti-monopoly experts remain skeptical about the power of a law that has been regarded as a “paper tiger.” Specifically, experts are concerned about whether the case followed rigorous legal processes and standards that would have helped China further define its merger and acquisition regulations.
More here.

Thursday, March 12, 2009

Extraordinary Time is No Excuse for Extra Judicial Partiality

Two camps of lawmakers are debating what role Chinese courts should play in China during this extraordinarily trying time.

One camp believe that the courts should remain neutral, irrespective of how the financial and economic crisis is impacting businesses, and that the courts should be the instruments of justice in China's market economy.

For example, lawmaker Peng Xuefeng, director of the All China Lawyers Association, believes that:

"Prudent handling of company owners suspected of breaking the law is not a good option to solve current disputes resulted from financial woes."

[Market economy was fundamentally] "an economy ruled by law" and the economic development in the long run especially needed an integral legal guarantee, ..., adding there was no place for sentiment in judicial organs.

Peng represents the group of lawmakers who are of the view that the courts should not be taking sides, should not in any way favor businesses and companies in violation of the law, despite the macro economic circumstances.  They essentially believe that the courts are there to enforce the law.  Period.  There is no need to venture beyond the bounds of the law and the facts as they relate to the law.  In a certain sense, these are the pure jurists.

On the other hand, the second camp, which includes the current President of the Supreme People's Court of China, believes that the courts should play a more constructive and active role in assisting defendant businesses  weather the economic storm so as to contribute to social stability in China.  Specifically, they believe that 

...courts at all levels should "prudently use such compulsory measures as sealing up, impounding or freezing assets of companies," and should "promptly offer judiciary advisories to help enterprises in operational difficulty tide over economic woes." 

In helping enterprises deal with the economic hard times, courts, as the second camp believe, should uphold the law, while at the same time soften the way the law is to be enforced.  For example, when it comes to freezing the assets or impounding equipments of businesses, the courts should take into consideration how many jobs will be lost, and what collateral social consequences of such enforcement actions would result.  

This debate is nothing new, and it represents the tough situation Chinese courts are in.  They are painfully dependent upon other administrative organs in the Chinese government; therefore, they must bend in the direction that the prevailing political wind is blowing.  If the country is in tough financial times, courts are expected to be soft on enterprises in violation of the law; if the country needs to strike down on piracy or IP infringements, courts should act accordingly.  Courts are always caught up in politics.

The debate also reveals the reality of the rule of law in China.  The rule of law serves a political purpose.  It should serve purpose whereby the courts dispenses justice ONLY, free of political tides.  

I believe the second camp of people are short-sighted.  They see only the short-term benefit of lenient law enforcement on the part of the courts, but they fail to see the long-term ill of a judicial system that obeys both the law and political leaders.  They see only the upside of courts taking a temporary pro-business stance, but they fail to see the consequence of the same courts taking a pro-labor/pro-consumer/pro-whatever stance under different circumstances.  What they need to see is the value of a judicial system with courts and judges that are neutral and bound by the law only.


Wednesday, March 11, 2009

The Case for Individual Bankruptcy in China (2)

Right after the earthquakes in 2008, I wrote a post advocating for China to establish a individual bankrupty system. In that post, I gave cultural, economic and legal reasons in favor of such a system, in addition to China's fairly new Enterprise Bankruptcy Law.

One Chinese lawmaker, Shi Ying, who is a deputy to the Chinese National People's Congress, submitted a bill to the NPC which is in session now. She is also calling for the the establishment of a personal bankruptcy system for victims of the earthquakes in Sichuan Province.

In an interview, she lamented the tough situations that some of the victims are in because they are still on the hook to pay their mortgages even though their houses/apartments have been demolished by the earthquakes.

She states:

"If there is a personal insolvency system, we can declare someone is bankruptcy according to a fixed standard. And the bank can take all his or her assets except minimal living necessities for the family, and the debt is thus cleared..."

I think she is right on. The earthquakes were an act of God, and it is unreasonable for them to carry the debt for something that ceased to exist. If they had got into financial trouble due to their own irresponsbile spending, they'd have a weaker argument for personal bankruptcy to discharge their debt. But, the situation is far from that. Allowing them to declare bankruptcy will truly be a relief and a second chance to start all over again.

In addition to personal benefits for the earthquake victims, allowing personal bankruptcy to this group of people could also serve as opportunity for China to test the waters, so to speak, in anticipation of a full-fledged system that can go countrywide. Testdriving economic and/or political programs and policies is not a new thing to the Chinese authorities. Look at what happened to Shenzhen, whose success has built the foundation for more special econmic zones to be established. Permitting earthquake victims to declare personal bankruptcy could potentially build a model for the rest of the country.

Monday, March 2, 2009

International Trade, WTO and China Human Rights

A few days after Secretary of State Hillary Clinton's hopeful and celebrated official visit to China, the U.S. State Department issued its annual report on China's human rights record.  In it, the U.S. criticises China for silencing dissent and oppressing ethnic minorities.  

Not to be outdone by the U.S., China hit back with its own Human Rights Record of the United States in 2008, enumerating a laundry list of rights violations committed by the United States government.

As a law student who wants to carve out a living by building a China-related law practice, I refuse to be drawn into this "p___ing contest."  However, that is not to say that human rights and law practice related to China are not related.  Quite on the contrary, I learned over the weekend that there is a correlation between the two.

During the UT International Law Journal China Law Symposium, Professor Patricia Hansen at the University of Texas Law School spoke about the connection between international trade, the WTO, and human rights, and the possible ramifications that this connection may have for China.  From a historical perspective, before China joined the WTO, the U.S. Congress had an annual review of China's human rights record in the 1990s, and thus a chance to publicly shame China before the Congress would grant China the coveted Most Favored Nation Status for the purpose of international trade.  In that sense, there was a direct correlation between China's behavior on human rights and carrots that the U.S. held on trade.  However, after China joined the WTO, the U.S., essentially, lost its only effective leverage to "whip" China into shape with respect to human rights because China did not agree nor did it commit to any provisions regarding human rights in its negotiations for the WTO membership.

Professor Hansen posits that the disconnect between international trade and human rights abuses/concerns extends beyond China.  Therefore, there should be an international solution that binds all players in international trade.  To reach that goal, Professor Hansen explained that trade policymakers have attempted the following two approaches: (1) weave human rights protection into the Doha Round; and (2) empower and implore the Appellate Body of the WTO to use human rights protection as a factor in deciding trade disputes.

However, problems exist for both approaches.  First, developing countries are unlikely to and have refused to agree to any kind of human rights protection provisions as envisioned by the developed countries because human rights is just another excuse for the latter to discriminate against the former and impose unreasonable demands.  Second, the Appellate Body of the WTO is fiercely textual in its application of the relevant law; and hence, absent textual authorization, it is unlikely to step beyond its commitment to the WTO agreements.  Given these hurdles, it seems that human rights protection and international trade do not really mesh well in the context of creating a binding obligation on trading nations in the WTO.

Professor Hansen does see hope on the horizon though in light of some incremental developments on this very subject.  First, international negotiations have resulted in a narrow exception to the strict prohibition of compulsory licensing of pharmaceutical technology (patents) by member countries.  Where there is a human health pandemic or disaster, member countries like Brazil and India are permitted to appropriate patents held by foreigners in order to protect the right to protect public health and access to medical treatment.  Second, in a  case regarding sea turtles decided by the WTo Appellate Body, the Court decided that laws implemented by the U.S. in protecting sea turtles to the detriment of other member countries are fully in compliance with the WTO rules and consistent with relevant WTO decisions.  Based on the above, access to medical treatment & the protection of public health as well the the protection seas turtle, both of which are beyond the traditional notions of human rights, might herald a new direction in linking trade with human rights protection.  [One might think that protecting human rights (however one interprets it) is arguably more important than the protection of endangered sea turtles even though it is also arguable that some sea turtles are more lovable than some humans.]

These developments led Professor Hansen to see the possibility that the Appellate Body might gradually read more human rights protection into trade disputes between nations where necessary and appropriate despite its strictly textual approach to interpreting the WTO rules.

I do think that human rights have a part to play in international trade and vice versa. Undoubtedly, China's entry to the WTO has resulted in dramatic changes in the Chinese society.  Millions of Chinese enjoy more material wealth, and the society has grown more open and integrated to the rest of the world.  More Chinese have the basic necessities to sustain their lives, and the government is growing more responsive to people's fundamental survival needs (public health, transportation in the countryside) (some might argue that this is not a result of the WTO, but I'd humbly submit that there is a connection.)

Because of the transformitive power of international trade to trading nations, human rights could certainly play a role in improving the lives of citizens of those nations.  However, in order to help developing nations stomach the idea of international standards on human rights, the following limitations might facilitate and/or accelerate the linking of the two:

1.  Integrate international customary law on human rights, rather than human rights standards set forth by the developed nations.  International customary law is already recognized and practiced by many nations, and it does not  impose additional, new obligations on developing nations. 

2. The WTO Appellate Body should require evidence of specific violations relevant to a trade dispute, rather than simply relying on allegations of general violations by a certain nation.  This requirement imposes a heavier burden of proof on the complaining nation, and it helps the Appellate Body to fashion appropriate and proportionate penalties for actual and specific violations of international human rights obligations. 

Saturday, February 28, 2009

China Enacts Sweeping, Tough Food Safety Law

The Standing Committee of China's National People's Congress passed a brand new Food Safety Law on February 28, 2009, and the law is set to become effective on June 1, 2009.  Without having a chance to read it carefully, I have some preliminary comments as follows:

1.  It repeals its predecessor law--the PRC Food Safety Law (1995) in its entirety.  With food safety disasters occurring back-to-back, tainted milk, pig organs, rice, and everything one can think of, the Chinese society in general has been facing a battle of life and death with respect to food safety.  The legislature acted quickly to pass this brand now law.  It is noteworthy that the Standing Committee did not just fiddle with the old law and try to amend it; rather, it saw too many problems in the provisions of the law, and saw the self-evident proof of deficient enforcement.  This really shows the resolve to get food safety under control.  I think this resolve and the NPC's solution are laudable in light of the dire food safety situation of late.

2.  Since the predecessor law is repealed by this law, all the related regulations, measures, rules, guidelines, opinions, etc. pursuant to the old law are also repealed.  This is good news.  With so many ministries, departments, divisions all responsible for food safety, what ended up in reality was that nobody was effectively responsible for enforcing food safety and ensuring health and safety of the Chinese people, which caused collateral damage around the world.  Now, the situation might be a little better under the new law as explained in the following.

3.  Food Safety Commission .  The new law, Art. 4, authorizes the State Council to establish the Food Safety Commission, which , presumably, oversees and coordinates the entire food safety law enforcement.  I say "presumably" because the law itself does not clearly define the authority and limitation of the Commission.  As stated above, one of the lethal shortcomings of the prior Food Safety Law is that there was no centralized authority to be ultimately responsible, which in a sense created a  responsibility vacuum.  In order to remedy that problem and based on the Chinese governance model, creating one centralized entity, like the Food Safety Commission, is the solution to that problem.  Will it be THE solution?  Will it remedy the enormous food safety problems in China?  I don't know, but I surely hope it would before all Chinese people kill themselves by eating tainted whatever.

4.   The law is comprehensive.  In ten (10) Chapters and one hundred and four (104) articles, it encompasses special provisions on food safety risk assessment, food safety standards, food production, food inspection, food import & export, food safety disaster management, local supervision and management, and liability.  New areas of interest in this law include special attention to food additives, the creation of a food safety information database, civil and criminal liability.  The real teeth of the law are the private right of action.  Consumers can sue for damages, and exemplary damages up to ten (10) times of the actual damage.  Yes, ten (10) times.  See Art. 96.

5.  Will the corresponding regulations come out soon?  A pattern has been developing lately in the Chinese law making process.  The NPC passes important yet controversial laws, but implementing regulations come out very slowly.  This has happened to the Enterprise Bankruptcy Law and the Anti monopoly Law.  Will this happen to the Food Safety Law?  I hope not.  Food safety is unlike the initiation of bankruptcy proceedings, nor like administrative monopolistic behaviors, in that disasters can strike immediately on a very large scale if food safety is compromised.  Food safety cannot wait. 

For other comments on the new law, read this.

Monday, February 23, 2009

Measures for the Registration and Administration of Import and Export Technology Contracts

On February 1, 2009, the Minister for China's Ministry of Commerce signed into law the Measures for the Registration and Aministration of Import and Export Technology Contracts. (in Chinese) ("Technology Contract Measures")  This is a ministry level administrative regulation, and it will become effective on March 2, 2009.

To summarize, the Technology Contract Measures include the following important provisions:

1. Definition:

Technology contracts are defined as: patent assignment contracts, patent application assignment contracts, patent implementation contracts, trade secret contracts, technology service contracts, and any other contracts involving the import or export of technology.

2. Content of the Registration Document:
a. Contract Serial Number: the regulation sets forth a standardized coding system to identify each technology contract within the purview of the Technology Contract Measures. [合同号]
b. Title of the Contract. [合同名称]
c. Provider of the Technology. [技术供方]
d. Receiver of the Technology. [技术受方]
e. User of the Technology. [技术使用方]
f. Summary of the Contract. [合同概况]
g. Monetary Amount in the Contract. [合同金额]
h. Method of Payment. [支付方式]
i. Term of the Contract. [合同有效期]
3. When to Register the Contract?  Within sixty (60) days from the date when the contract becomes effective. 
4. Where to Register?  There is a central on-line registration system designed by the Ministry of Commerce, just like the registration of commercial franchises.  The web address is:  But, before the on-line registration, the local commerce bureaus have jurisdiction over the administration of contract registration.  Application materials, including a copy of the original contract, a copy of the contract translated into Chinese, documents evidencing the contracting parties respective authorities (to determine whether the contract is valid in the first place), must be submitted.
5. Filing Amendments. Any subsequent changes, amendments and or rescions of contracts must be timely filed.
6. Other Laws: Where foreign parties invest technology as capital in joint ventures or foreign-owned entities, other laws governing such investments apply.



Friday, February 20, 2009

"Inside the Meltdown"

Frontline (PBS) recently produced an in-depth documentary on the financial meltdown. It is an attempt at figuring out the root causes of the problems that led to the current economic crisis affecting the entire globe. It is well worth your time to watch it.

China International Law Symposium at UT (Austin)

The University of Texas International Law Journal will be hosting a China law related symposium on February 26, and 27, 2009.

Here is how it is described:

Entitled “China’s Emergence: Effects on Trade, Investment, and Regulatory Law,” this one-and-a-half day symposium will address the legal and policy implications related to China’s rise in political and economic power.


Opening remarks of the main body of the symposium will be at 9:00 a.m. on Friday, February 27. Expert panelists will be coming fro China, Hong Kong, and throughout the United States. They will be discuss challenges and opportunities related to China's economic and political rise through the lens of three primary topic areas--(1) Trade, (2) Investment, and (3) Regulatory law. Experts from both academic and practioner backgrounds will present. Official from MOFCOM, the Office of the U.S. Trade Representative, and the Department of Commerce will also present.

This program is free and open to the public. So if you don't want to obtain CLE credits, it is free. Free education is good. Free education in beautiful Austin, Texas on such interesting topics is even better. I plan to attend on February 27th. If you are going to be in Austin on that day, I'd like to meet.

For more information, please check here.

Wednesday, February 18, 2009

Enforcements of Judgments in China: Pretty Good in Urban Areas (Republish)

Contrary to the popular view that enforcement of judgments is poor in China, Professor Randall Peerenboom stated in his recent article that: 

While enforcement is often portrayed as difficult in China, recent studies have found significant improvements in urban areas, where more than half of creditor-plaintiffs receive 100 per cent of the amount owed, and three quarters are able to receive partial enforcement, a situation explored in more detail [elsewhere]. Moreover, the main reason for non-enforcement is that defendants are judgment proof: they are insolvent or their assets are encumbered.  No legal system is able to enforce judgments in such circumstances.  Although cross-country comparisons can be misleading, it would appear that enforcement in China may be less problematic than in many jurisdictions, including in rich countries such as the United States, the United Kingdom, or Russia (He policy brief 3). In the World Bank’s ‘Doing Business 2008’ survey, China ranked twentieth out of 178 economies in enforcement of contracts. The survey measures the time, cost, and number of procedures involved from the moment a suit is filed until payment is made.

Looking into the reasons behind the improvement in enforcement of judgments, Peerenboom found that:

The main reasons for the improvement in enforcement are changes in the nature of the economy; general judicial reforms aiming at institution building and increasing theprofessionalism of the judiciary; and specific measures to strengthen enforcement (citation omitted). The economy in many urban areas is now more diversified, with the private sector playing a dominant role. The fate of a single company is less important to the local government, which has a broader interest in protecting its reputation as an attractive investment environment. As a result, the incentive for governments to engage in local protectionism has diminished (citation omitted).

According to Peerenboom, enforcement in less developed areas, i.e. rural China, remains a dire problem for a host of reasons.  Competency and quality of judges are still less than satisfactory.  Local economy still depend on a few sources; thus, the incentive for non enforcement of judicial judgments remain.

Improving enforcement of judgments in rural areas is likely to be a difficult task as it is not simply a judicial problem.  Lax enforcement, as can be inferred from the experience of urban areas, is a complicated institutional issue, linked to economic development, availability of well-educated, professional judges, and very significantly a thriving private business sector.  Given the reality in the vast rural areas, better enforcement in these areas probably won’t come any time soon, short of drastic changes to local conditions

Yellow Cranes, Will You Return? (Republish)


The Yellow Crane Tower

Forefathers departed on yellow cranes,The Yellow Crane Tower

leaving this spectacular tower empty.

Yellow cranes will not return,

leaving the white clouds for millennia without companion.

–by Cui Hao (704-754 A.D.), Tang Dynasty

This poem has remained one of my favorites, throughout my education in China. In college in the city of Wuhan, I passed by the truly spectacular Yellow Crane Tower hundreds of times while commuting to and fro Hankou, marveling at its beauty and historical significance. It looks beautiful when you observe it on the First Bridge over theYangtze River (Chang Jiang, for Chinese readers), as it sits on the Snake Hill, stretching into the clouds over the ever grand Wuhan stretch of the Yangtze. Before I get carried away with nostalgia and poetry, I’d better move on to Chinese business law.Luckily, I get to return to the “Yellow CraneTower” for this post on cybersquatting law inChina.

As reported,Yellow Crane Tower Tobacco Company (“TCTTC”) is one of the most famed tobacco companies in Wuhan and throughoutHubei Province. And when it sought to register the www.YellowCraneTowerTobacco.cndomain name in Chinese (Huanghelou) in June 2005, it found, to its dismay, that domain name had been registered by a certain Mr. Deng, a restaurant owner in Jiangxi Province.TCTTC further found that Mr. Deng also had registered a slew of domain names using the core words “Yellow Crane Towner,” such,, etc.

Naturally, TCTTC took Mr. Deng to court, in the Wuhan Intermediate People’s Court.

TCTTC sued Deng for trademark infringement in the form of cybersquatting. Since the central issue here is whether Deng’s registration of the domain names using the TCTTC’s registeredword mark constitutes trademark infringement, the 2001 Several Explanations on Domain Name Civil Disputes (“Domain Name Explanations”) issued by the China Supreme People’s Court apply in this instance. The Domain Name Explanations expressly provide that a mark owner can ask a court of competent jurisdiction to determine whether its mark is famous, and the court may order the cancellation of the infringing domain name if it finds unfair competition, and monetary damages are also available to the victorious plaintiff. Upon request, the Court may also order the transfer of such infringing domain name to the plaintiff. See Arts. 4-8.

To prevail, TCTTC must prove that its marks were infringed and they were famous prior to Defendant’s use. The Court found TCTTC’s marks well known, the “Yellow Crane Tower” word mark and the “Yellow Crane Tower” design mark, both of which were used by Defendant in his website. In finding these marks well-known, the Court looked to the scope and expenses of advertisement for the marks, and it cited the reputation of products bearing the marks.

Upon finding the marks in question well-known, which is the prerequisite to prevail in a domain name cancellation dispute, the Court also found infringement in Defendant’s unauthorized use of the marks in question. It reasoned that both domain names and trademarks have the quality to help consumers relate to the source of goods and services.Given that shared quality of trademarks and domain names, Defendant’s use of TCTTC’s word mark could confuse consumers, despite the unrelated nature of the parties’ trades, one in restaurant while the other in tobacco.Further, the Court disagreed with Defendant’s argument that he did not have the intent to ride on TCTTC’s trademarks to gain economic advantages, because, as the Court stated it is obvious that Defendant’s use of a well-known mark as the core for his domain names was to obtain more economic opportunities, and such use was marked with commercial intentions.

This is easy win for TCTTC here. Of course, Plaintiff had an obvious home court advantage. The “Yellow Crane Tower” brand is very well-known in Wuhan, because it is a local trademark. Even though I am not a smoker, I knew that brand while I lived inWuhan. There was advertisement everywhere in the city. Though the Court may be suspected of local protectionism, I still think it just applied the black letter law. I do not see the Court straining to protect a local player while “screwing” an outsider. Another thing noteworthy here is that Plaintiff can get either the infringing domain names canceled or transferred. I would want a transfer.

So, with a win for the local player, the “Yellow Cranes” should be able to return toWuhan upon a transfer. And that should make TCTTC happy.

But, will the “real” yellow cranes return after millennia of absence? Poets wait on…