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Iohann Le Frapper
Chief Legal Officer
Gulf Bridge International

Member of the global board
of ACC

Vice-chair of ICC Commission
on Corporate Responsibility
and Anti-corruption
 

 

Writing the roadmap for companies doing business in China

The expansion of the leading Asian market in recent years is a headache for general counsel across the continent who are constantly being asked by their boards what the risks, upsides and downsides are of doing business in China.

In this edition of TalklawGlobal™ Iohann Le Frapper, Chief Legal Officer for Gulf Bridge International (GBI), unites leading specialists across international jurisdictions to discuss practical tips, opportunities, and traps to avoid when companies contemplate doing business in China.


The experts joining him on this panel are (in alphabetical order by jurisdiction): 


England & Wales: Sherry Yin, Partner, Gordon Milner, Partner, Jonathan Gowdy, Partner, Vena Cheng, Of Counsel, Morrison & Foerster 

France: Thomas Urlacher, Partner, Rebecca Silli, Partner, Charles-Henri Leger, Partner, Antoine de La Gatinais, Partner, Gide Loyrette Nouel

Germany: Christoph von Einem, Partner, White & Case

Italy: Betty Louie, Of Counsel, DLA Piper

Spain: Alex Dolmans, Partner, Gaston Fernandez, Associate, Adrian Emch, Counsel, Terence Wong, Partner, Lovells

 

DISCLAIMER: Any opinions, statements or other information expressed in TalklawGlobal by the respective author(s) do not necessarily state or reflect those of TalklawMedia, the chairperson or his employer, the firm to which the author belongs or other panellists. The information submitted by the legal experts is for educational purposes only and does not create an attorney-client relationship between the reader, their firm, or any lawyer in their firm, and does not prevent any lawyer in any firm on this panel, from representing a party in any matter or manner (including taking a different position to that which he/she might have expressed or endorsed in TalklawGlobal) or serving as arbitrator, mediator, dispute board member or in any similar position based on the expression of his/her opinions on the various subjects published on TalklawGlobal. No information published on TalklawGlobal may be quoted or reproduced elsewhere without the prior written consent of the author and TalklawMedia.

 


Iohann's questions for each jurisdiction are:

Question 1) Please discuss briefly the following questions about investing in mainland China:

1.1 - Which investment vehicle do you recommend in your jurisdiction: Wholly foreign-owned Enterprises, different types of joint-ventures?

1.2 - Pros and cons of investing via an offshore (e.g. Hong Kong) intermediate vehicle to buy assets or companies?

1.3 - New Foreign Investment Industrial Guidance Catalogue (into effect from end January 2012): Which key changes? Which opportunities?

1.4 - M&A maze of government approvals (e.g. National Security Review; antitrust).

Question 2) Protecting your intellectual property. Please discuss briefly:

2.1 - Trade name and trademark (including in Mandarin language);
2.2 - Do not forget domain names for on-line marketing & business;
2.3 - How to tackle copyright infringements: Litigation challenges?
2.4 - Filing of patents and registration of software: Pros and cons?
2.5 - Need to handle inventor’s entitlement to compensation;
2.6 - Transfer/licensing of technologies.
 

Question 3) Dealing with suppliers, competitors and distributors. Please discuss briefly:

3.1 - Recent Anti-monopoly Law: Beware of increase in enforcement activities;
3.2 - Abuse of dominant market position;
3.3 - What is a monopolistic conduct: Price-related or not actions that are prohibited? 

Question 4) Dispute Resolution. Please discuss briefly:

4.1 - Litigation versus arbitration: Pros and cons?

4.2 - Arbitration in mainland China versus offshore (e.g. Hong Kong): Specifics of CIETAC arbitration versus HKIAC? What is your recommendation?

4.3 - Enforcement of judgments (foreign and domestic): How to mitigate challenges?

4.4 - Enforcement of arbitral awards against Chinese parties: How to be successful? 
 
 
























Sherry Yin
(biography)
Partner

Morrison & Foerster
Beijing
Tel: +86 10 5909 3566        
syin@mofo.com
 



England & Wales: Morrison & Foerster


Answer 1) Sherry Yin, Partner

1.1 - The wholly foreign-owned enterprise (“WFOE”) is by far the most widely used investment vehicle for foreign investors, at least in those sectors in which sole foreign ownership is permitted. The principal advantage of a WFOE is that the foreign investor has complete control over the management and financial affairs of the company.

There are certain industrial sectors in which complete foreign ownership is prohibited but in which foreign ownership through a joint venture is permitted (e.g. telecommunications, media and the exploitation of natural resources). There are two kinds of joint ventures: equity joint ventures (“EJV”) and cooperative joint ventures (“CJV”). In an EJV, all profits, losses and liabilities are allocated according to the parties' respective equity ownership percentages, while in a CJV they are allocated according to the provisions of the joint venture contract. While CJVs provide flexibility, EJVs remain more common due to their relative simplicity of establishment. Compared to WFOEs, EJVs and CJVs are subject to additional corporate governance requirements, including unanimous shareholder consent for termination, amendment of the articles of association, increasing or reducing the registered capital, or merging with another entity.


1.2
- Adding an intermediary entity can provide an investor with an additional layer of protection in order to avoid potential corporate veil piercing liability at the onshore level. Additionally, if the investment has an



















Gordon Milner
(biography)
Partner
Morrison & Foerster
Hong Kong
Tel: +852 2585 0808
gmilner@mofo.com

 
 


Answer 2)
Gordon Milner, Partner

2.1 - It will be particularly important for the business to register its trademarks with the China Trademark Office (“CTMO”) as early as possible. China does not recognise or afford protection to unregistered trademarks. This, coupled with the fact that the CTMO operates on a first-to-file basis, means that the business will not usually be able to assert any priority over (and will generally have no legal recourse against) a third party who registers the trademarks in China before the business. However, China is a signatory to the Paris Trademark Convention and it is possible to claim priority if the CTMO application is filed within 6 months of first filing in any other signatory jurisdiction.

Although the CTMO has adopted the international Nice system of trademark classes, these are further divided into a unique system of sub-classifications. As a result, it is possible for unconnected registrants to register an identical mark within the same class provided that the marks are registered in different sub-classes.

The practice of ‘trademark ‘squatting’ is unfortunately very common in the PRC. Indeed, there have been several cases in which Chinese trademark squatters have successfully sued international businesses for infringement of their own house marks in China.

It is good practice to register a range of Mandarin language translations and phonetic equivalents of each of the business’ key marks as there will not normally be a single unique transliteration and choosing the best version is rather a black art. The additional registrations can help mitigate the risk of trademark

















Jonathan Gowdy
(biography)
Partner

Morrison & Foerster
Washington D.C./ Brussels
Tel: +322 340 7351        
jgowdy@mofo.com
  Answer 3) Jonathan Gowdy, Partner

3.1 - Apart from complying with the pre-closing filing requirements for M&A deals, firms doing business in China should be mindful of the risks of breaching the PRC Anti-monopoly Laws’ (“AML”) prohibition of monopolistic agreements or abuse of a dominant market position.  Until 2011, enforcement activities related to these provisions of the AML were sparse; however, the National Development and Reform Committee (“NDRC”, which is the regulatory body for price-related issues) and the State Administration of Industry and Commerce (“SAIC” , which has authority over non-pricing related issues) have recently issued administrative sanctions for AML violations that illustrate the type of conduct that is prohibited under China’s developing competition law. 

The SAIC issued its first administrative sanction in 2011 after determining that several concrete companies in a trade association had entered into unlawful horizontal monopoly agreements to divide up the concrete market within the Jiangsu Province.  Likewise, NDRC also imposed in 2011 over RMB 7 million fines on two pharmaceutical companies for colluding to raise the price of raw material for a hypertension medicine that treats high blood pressure by entering into exclusive dealing agreements with the only two national providers.  The NDRC is also currently investigating whether China Telecom and China Unicom have abused dominant market positions in the broadband network market by engaging in price discrimination, i.e., charging rival suppliers of broadband services with higher network access fees than its affiliated broadband service providers.

PRC government is stepping up its efforts to enforce the AML and it is suggested that wary firms review their traditional models for doing business in China, especially those that are likely to be viewed as having a dominant position or participating in any potentially monopolistic arrangements with



















Gordon Milner
(biography)
Partner
Morrison & Foerster
Hong Kong
Tel: +852 2585 0808
gmilner@mofo.com



















Vena Cheng
(biography)
Of Counsel
Morrison & Foerster
Hong Kong
Tel: +852 2585 0832
vcheng@mofo.com
 

Answer 4)
Gordon Milner, Partner, Vena Cheng, Of Counsel

4.1 - In general, arbitration gives parties confidentiality and flexibility.  Unlike litigation that is conducted in open court, arbitration is conducted in private, preserving parties’ confidentiality. There is also greater flexibility in every step of the arbitration from the choice of venue, rules and tribunal, the appointment of arbitrator, discovery, the admission of evidence to the allocation of costs incurred by the parties.  This allows parties to choose according to the technical skills, experience, professional qualification and language skills of the arbitrators.  The venue of the proceeding is not restricted to the court setting, but could be a conference room at a law firm or even a hotel room in a third-party country. The same flexibility applies to the parties’ choice of arbitration rules, such as the United Nations Commission on International Trade Law (“UNCITRAL”) rules, or rules promulgated by the Hong Kong International Arbitration Centre (“HKIAC”), Singapore International Arbitration Centre (“SIAC”), CIETAC (“China International Economic and Trade Arbitration Centre”) and International Chamber of Commerce (“ICC”).  This gives an additional advantage of neutrality to foreign businesses to settle disputes in Asia.

However, as arbitration is by consent or agreement of parties, the arbitral tribunal is restricted in its power to require a third party to participate in arbitration proceedings, or in making orders affecting non-parties to the arbitration agreement. In relation to the arbitral awards, parties have limited right of appeal, and arbitration decisions do not create a binding legal precedent.


4.2 - Whilst we are unaware of any laws prohibiting the use of foreign arbitral tribunals to resolve disputes between two domestic People’s Republic of China (“PRC”) parties, we consider there may be risks that any foreign arbitral may not be recognized or enforced in China by a Chinese court as there is no “foreign element”. The jurisdiction of the PRC courts or PRC arbitral tribunal may not be validly excluded by any agreement between the parties. It is therefore prudent for domestic parties to choose a local arbitration tribunal, such as CIETAC, Beijing Arbitration Commission, or similar provincial arbitration centres for resolution of disputes.

For disputes involving foreign elements, parties may wish to elect a neutral tribunal or administering body such as HKIAC.  HKIAC arbitration in Hong Kong is often seen as one of the most credible and popular arbitration options in Asia, given traditional, common-law-style approach and institutional support.  Moreover, the structure of the Arbitration Ordinance 2010 mirrors that of the UNCITRAL Model Law, and is therefore a simpler model, making the ordinance more user-friendly to foreign businesses.

The CIETAC Arbitration Rules have also undergone major revisions that came into effect in May 2012, such as allowing CIETAC to designate a seat of arbitration outside the PRC, allowing arbitral tribunals to grant interim relief and permitting arbitration to be held in languages other than Mandarin Chinese.  They are intended to bring the procedures into greater conformity with other established offshore arbitration providers, enhancing CIETAC’s appeal as an international dispute resolution platform for foreign businesses.


4.3 - The enforcement of domestic judgments is governed by part 20 of the PRC Civil Procedure Law.  The period for applying for enforcement is two years.
























Thomas Urlacher
(biography)
Partner
Gide Loyrette Nouel
Beijing
Tel. +86 10 65 97 45 11  
urlacher@gide.com



















Rebecca Silli
(biography)
Partner
Gide Loyrette Nouel
Hong Kong
Tel. +852 2536 9110
silli@gide.com
 




France: Gide Loyrette Nouel

Answer 1) Thomas Urlacher, Partner, Rebecca Silli, Partner

1.1
- Except in a few instances, a foreign investor must set up a Chinese legal entity to carry out commercial activities in mainland China. This is mainly in the form of a WFOE [i] or a joint venture.

A WFOE provides significant advantages, including not having to negotiate with Chinese parties and organizational flexibility. However, not all activity sectors allow the use of WFOEs, and Chinese regulations sometimes require that foreign investors team up with Chinese partners in a joint venture [ii].

Equity joint ventures are the most widely used form of joint ventures, though cooperative joint ventures may offer more flexible arrangements as profits and losses can be allocated in accordance with the shareholders' agreement.

1.2 - Structuring a foreign investment in the PRC through an offshore vehicle [iii] can have benefits and disadvantages, as summarised below.  Suitability of such structuring will turn on the characteristics of the planned investment. 

Pros

Cons


- investor may benefit (under certain conditions) from low taxation of the profits from business operations or capital gains in offshore jurisdiction

- approvals are not usually required from offshore jurisdiction authorities to transfer ownership of the vehicle

- offshore jurisdictions usually have flexible corporate laws (e.g. that allow innovative structuring options such as profit pooling & the ability to obtain enforceable securities over assets)

- may benefit from the CEPA [iv] (in Hong Kong)

- access to a sophisticated and fair judicial system (in Hong Kong)


- taxation may not always be advantageous compared with direct holding of a PRC company depending on particular investment and applicable tax treaties (which can offer incentives to direct ownership). For example, expected changes to the Sino-French tax treaty will provide for a 5% withholding tax on dividends

- transfers of ownership of the vehicle may be subject to taxation in the PRC if it  does not carry on substantial business in offshore jurisdiction

- local costs of carrying on substantial business may offset taxation benefits

 


1.3 - The changes embedded in the revised catalogue [v] reflect China's current policies of promoting technological innovation, environmental protection and upgrading industries, with the aim of encouraging foreign investments in high technology, new energy, environmental sustainability and value-added manufacturing industries.



















Charles-Henri Leger
(biography)
Partner
Gide Loyrette Nouel
Paris, France
Tel. +33 (0)1 40 75 61 48 
leger@gide.com
 

Answer 2) Charles-Henri Leger, Partner

2.1
- Like in several other jurisdictions (including France), trademarks in China are protected only if registered - mere use without registration does not create trademark rights.

A limited exception to prior registration exists for well-known trademarks, to which China is bound to afford some degree of protection under international conventions (such as the Paris Union Convention of 1883) to which it has acceded.

Irrespective of this, foreign companies investing in or selling to China (and those fearing counterfeiting originating from China), should seriously contemplate registering their trademarks in China.

For trademarks consisting of words (in whole or part), the issue of Chinese language issue arises - in China, a foreign trademark will be pronounced in Chinese and such pronunciation may be put into Chinese characters that could be registered by a third party.

Foreign companies using foreign word trademarks in China would be prudent to also register each such trademark in the Chinese language. Such companies will also enjoy the advantage of defining and controlling their Chinese language trademarks, because a given foreign word (or words) has a multitude (not single) Chinese "translation". Choosing a good translation is an art that combines matters of sound (if an equivalent is sought in one of the Chinese languages, generally Mandarin), meaning, appeal to



















Antoine de La Gatinais
(biography)
Partner
Gide Loyrette Nouel
Shanghaig
Tel. +86 21 53 06 88 99
gatinais@gide.com
 

Answer 3) Antoine de la Gatinais, Partner

3.1 - 2012 marks the fourth year since the PRC Anti-Monopoly Law (“AML”) entered into force. Since then, we have seen AML enforcement agencies[i] progressively adopt implementing guidelines while beginning to use their power to impose sanctions for contraventions of the AML.

Significant progress has been made in the area of merger control, where MOFCOM has published several guidelines. Enforcement actions in the areas of cartels and abuse of dominant position remain low. However, there have been positive developments with the adoption of implementing guidelines on the abuse of dominant position and monopoly agreements, and a number of recent cases indicating intensified enforcement efforts in these areas.

2011 was notable for the record amount in administrative fines imposed by the NDRC, with fines of approximately USD 1.07 million imposed on two pharmaceutical companies for price fixing.  Another significant step forward occurred when the NDRC launched antitrust investigations into large SOEs – China Telecom and China Unicom – for the first time. These enforcement efforts reflect the authorities' determination to strengthen enforcement of the AML going forward.

3.2 - To supplement the AML, the NDRC and SAIC separately released regulations to counter abuse of market dominance, as well as monopoly agreements. In general, violation of these regulations may result in a fine from 1% to 10% of the sales turnover of



















Charles-Henri Leger
(biography)
Partner
Gide Loyrette Nouel
Paris, France
Tel. +33 (0)1 40 75 61 48 
leger@gide.com
 

Answer 4) Charles-Henri Leger, Partner

4.1 - In mainland China, litigation generally involves public court proceedings with the competent People’s Court while arbitration can involve various types of proceedings: international arbitration [i], foreign-related arbitration [ii] and domestic arbitration  [iii].

International arbitration and foreign-related arbitration are available to foreign investors [iv] and offer more flexibility than litigation (e.g. in terms of language and choice of arbitrators). Arbitration is also usually confidential (minimising reputational issues) but can have a higher cost compared to litigation.  The pros and cons to arbitration and litigation include:

























Christoph von Einem
(biography)
Partner
White & Case
Munich, Germany
Tel: + 49 89 206043 500
cvoneinem@
muenchen.whitecase.com
 



Germany: Christoph von Einem, Partner, White & Case


Answer 1)
1.1
 - Foreign investors, in particular those from Europe and my home jurisdiction Germany have different possibilities to operate their China-based business: The conventional business entities are the wholly foreign-owned enterprise (“WFOE”), the equity joint venture enterprise (“EJV”), the contractual joint venture enterprise (“CJV”) and holding companies.

An EJV is regularly established as a limited liability company with foreign and Chinese parties as its shareholders. A CJV is an entity established by the respective parties pursuant to a cooperation agreement, which deals inter alia with rights and responsibilities under such an agreement as well as with the distribution of profit and loss. Therefore, the profit and loss distribution among the parties of a CJV may not be equivalent to their respective investment ratio.

As per our experience we strongly recommend to use the WFOE as the most common and suitable vehicle. First of all, in a WFOE the entire management can be efficiently kept under complete control of the investor. Secondly, in order to be independent from domestic Chinese partners, a WFOE is the entity of choice to avoid disputes due to deviating interests. Additionally  the WFOE can effectively be used to increase protection against infringements of intellectual property in China. 

Although the WFOE has recently increased its popularity in China, there are still industry sectors in which you cannot be operate as a wholly foreign owned company, e.g. in automotive manufacturing and insurance. In these cases, the foreign investors are still forced to establish an EJV or CJV with a domestic Chinese partner.





























Betty Louie
(biography)
Of Counsel
DLA Piper
Rome, Italy
Tel: +39 06 68 88 505
betty.louie@dlapiper.com

 
 

 


Italy: Betty Louie, Of Counsel, DLA Piper

Answer 1) 1.1 - The decision to choose an appropriate investment vehicle depends on a large number of factors.  For an Italian company (or any foreign company), it must first analyze (i) whether it has the financial resources, (ii) whether it has the human resources (both in terms of the everyday operations of the intended business in China, and also any local contacts that may be useful in the smooth operations of the business), and (iii) its projected timeline to enter into the Chinese market.  

Of course, if an Italian company has the financial resources and the human resources to enter into the Chinese market alone, a wholly-foreign-owned enterprise (WFOE) would provide the Italian company with the most control over its operations and financial affairs in China.  In recent years, an increasing number of Italian companies have been entered the Chinese market as WFOEs (with the caveat that it must be operating within a sector where sole foreign ownership is permitted).

Alternatively, Italian companies can form equity joint ventures (EJVs) or cooperative joint ventures (CJVs) in China, so long as they are operating within one of the permitted sectors and can find a suitable Chinese partner.  In general for a variety of reasons, CJVs are not commonly used by foreign investors;

Under current PRC laws, the amount contributed by a foreign investor in an EJV or a CJV shall generally not be less than 25% of its registered capital.  In the event the foreign investment is less than 25%, (1) the foreign investor must expressly note that the foreign investment is less than 25% on the approval certificate and the business license of the EJV/CJV; and (2) the investors in the EJV/CJV will be subjected to a more stringent timeline to complete their capital contributions.  Specifically, in such a case, if the foreign investors intend to make a capital contribution in cash, the capital must be fully-paid within three months of the incorporation of the EJV/CJV.  If the foreign investors intend to make a capital contribution in-kind, the capital must be fully-contributed within six months of the incorporation of the EJV/CJV.
































Alex Dolmans
(biography)
Partner
Hogan Lovells
Madrid, Spain
Tel: +34 91 349 82 00
alex.dolmans@
hoganlovells.com



















Gaston Fernandez
(biography)
Associate
Hogan Lovells
Miami, FL, USA
Tel: +1 305 459 6630
gaston.fernandez@
hoganlovells.com
 

 

Spain: Hogan Lovells


Answer 1) Alex Dolmans, Partner, Gaston Fernandez, Associate

1.1 - Wholly foreign-owned enterprises (commonly referred to as “WFOEs”) are often preferred by foreign investors generally and Spanish multinationals in particular -- if they are allowed in the target industry. The starting point for determining which industries are “prohibited”, “restricted” and “encouraged” for foreign investment is the Foreign Investment Industrial Guidance Catalogue, which was most recently updated effective 30 January 2012; industries not included in the catalogue are deemed to be “permitted” for foreign investment. In certain industries that are officially “restricted” for foreign investment, such as the value-added telecommunications industry, foreign investors often participate in the market through establishing WFOEs that contractually siphon revenue from domestically owned enterprises holding the relevant operating licenses which are controlled by cooperative nominees, in an attempt to extract the benefits of equity ownership. While these arrangements may not be formally compliant with PRC law, they are widely used in certain industries and their use is disclosed in the prospectuses of many listed companies. However, the China Securities Regulatory Commission (“CSRC”) reportedly issued an internal report in 2011 addressing methods for eliminating offshore equities listings based on such structures to promote listing domestically, suggesting that certain authorities are interested in curtailing this practice – it is important for Spanish and European investors to keep this in mind when structuring the investment.

On occasions the involvement of a domestic partner is required to achieve business goals in China -- equity joint ventures and cooperative joint ventures with such local partners are also vehicles available to foreign investors, however they are less frequently used due to their inflexibility (unanimous shareholder consent is required for key matters such as termination of the joint venture, amendment to the joint venture agreement or changes to the registered capital of the joint venture). Other less commonly used investment vehicles include companies limited by shares, partnerships and trusts.

1.2 - The primary benefits of investing through an offshore vehicle are avoidance of many time consuming PRC registrations and approvals that are required when the equity in a PRC entity changes hands and increased flexibility in corporate governance afforded by foreign laws. For example, certain merger and acquisition approvals from the Ministry of Commerce (“MOFCOM”) and registrations with the State Administration of Industry and Commerce (“SAIC”) would not be required for changes in the equity structure in an offshore investment vehicle with an interest in PRC subsidiaries. Offshore investment vehicles also allow for multiple classes of equity (with varying voting and dividend rights) which can be difficult to replicate using PRC legal structures.

Historically, offshore structures were often used to avoid PRC tax liabilities. However, in recent years the State Administration of Taxation (“SAT”) has focused on collecting tax revenue from sales of offshore holding companies of PRC entities. In some instances the SAT has assessed tax on non-PRC persons transferring shares in such holding companies. Hong Kong is often chosen by foreign investors for establishing intermediate investment vehicles due to a favorable tax agreement with the mainland, but recent SAT regulations have clarified that offshore Hong Kong entities must have independent business activity to justify taking advantage of tax benefits. PRC tax authorities have also been moving to capture additional revenue by collaborating with authorities in traditional tax haven jurisdictions, such as through a tax information exchange agreement between the PRC and the British Virgin Islands in 2010.

Regulations issued by the State Administration of Foreign Exchange (“SAFE”), such as SAFE Circular 75, require registrations when PRC persons hold an interest in a domestic entity through “round-trip” investments offshore. SAFE registration can often be a time-consuming process, especially when attempting retroactive registrations to bring legacy structures into compliance. This would be an important factor to consider when a PRC person would have an equity interest in the offshore vehicle.

1.3 - Recent revisions to the Foreign Investment Industrial Guidance Catalogue were mostly incremental, with changes reflecting industrial policy to encourage more efficient energy use, use of renewable energy and recycling. Descriptions of technologies in certain industrial categories were also updated to reflect advances since the last revision of the catalogue in 2007.



















Deanna Wong
Partner
Hogan Lovells
Beijing, China
Tel: +86 10 6582 9419
deanna.wong@
hoganlovells.com
 


Answer 2)
Alex Dolmans, Partner, Deanna Wong, Partner

2.1 - China is a "first-to-file" jurisdiction and as such, it is important for companies to register their trademarks as early as possible. Many European and other international brands entering the PRC are now having to deal with recovering their associated trademarks and trade names which have been registered by unscrupulous third parties, many of which with the aim of eventually selling the said marks to the rightful owners at a profit – this is otherwise known as trademark hijacking.

For a foreign company looking to invest in China, it is also important for it to develop a Chinese language version of its trademarks and trade names – domestically, many international brands are more well known by their Chinese names rather than their English (Latin) equivalent. Once a foreign company's Chinese language trademark and trade name has been developed, it should again make sure to file it as a trademark in the relevant classes.

In relation to trademark registration, we note that China adopts its own unique sub-classification system. According to this system, goods and services in each International Class of goods (as adopted internationally by the Nice Convention) are further divided into sub-classes. As such, it is important for foreign companies to consult with PRC counsel to ensure that sufficient coverage is given across the subclasses.

In China, trademark owners also have the option of recording their trademarks with the PRC Customs together with the names of their authorized manufacturers/exporters/licensees. As part of their checks, should Customs find goods bearing the recorded trademark which are being exported by a party not on



















Adrian Emch
(biography)
Counsel

Hogan Lovells
Beijing
Tel: +86 10 6582 9488
adrian.emch@
hoganlovells.com
 


Answer 3)
Alex Dolmans, Partner, Adrian Emch, Counsel

3.1 - Contrary to what occurs in Spain (where competition legislation is enforced by one single authority), there are three different regulatory authorities with jurisdiction to enforce the Chinese Anti-Monopoly Law (AML):

• the Ministry of Commerce (MOFCOM) is responsible for merger control;

• the National Development and Reform Commission (NDRC) is responsible for monopoly agreements, abuses of a dominant market position and so-called "administrative monopolies" (that is, essentially, government-imposed restrictions to competition), but only to the extent where the anti-competitive conduct relates to pricing; and

• the State Administration for Industry and Commerce (SAIC) is responsible for the same three types of anti-competitive conduct as NDRC, but to the extent where the conduct does not relate to pricing.

In addition, courts in China are authorized to hear civil actions brought by plaintiffs having suffered losses as a result of anti-competitive conduct (similarly to actions for unfair trade before Spanish commercial courts).

The Chinese competition authorities have been stepping up antitrust enforcement recently.  In particular, MOFCOM released measures for investigating and handling of mergers which are not filed in accordance with the law, and imposed far-reaching conditions to its approval of the two hard-disk drive mergers (Seagate/Samsung and Western Digital/Hitachi) in late 2011 and early 2012.  Similarly, on 19 May 2012, MOFCOM was the only antitrust authority worldwide to impose conditions on its approval of the Google/Motorola Mobility deal – all other authorities had unconditionally cleared the deal several months



















Terence Wong
(biography)
Partner
Hogan Lovells
Shanghai, China
Tel: +86 21 6122 3800
terence.wong@
hoganlovells.com


 
 


Answer 4)
Alex Dolmans, Partner, Terence Wong, Partner

4.1 - For Spanish and other European companies investing in Asia (whether in Mainland China, Hong Kong, or other jurisdictions) one of the main advantages in using arbitration (rather than litigation) is that arbitral awards will be more widely enforceable around the world (pursuant to the New York Convention), compared with court judgments made in any countries after litigation.

There are other advantages in using arbitration, such as confidentiality, choice of arbitrators with international reputation, and familiarity with a particular industry (construction, shipping, etc).

However, European companies investing in Asia should not automatically select arbitration.  For example, where the company is investing in a jurisdiction with an efficient court litigation system, and where there is little need for overseas enforcement, it may be acceptable to select litigation in the local courts. 

It would be advisable to seek professional advice in deciding whether to use litigation or arbitration when entering into a contract.


4.2 - Both CIETAC and HKIAC are top international arbitration institutions in the world, who have handled many domestic and international arbitration over the years.  Other arbitration institutions in Asia such as the SIAC in Singapore are also very reputable.