What is force majeure?

A force majeure clause exempts one or both parties from liability or obligation since an extraordinary event, such as war, strike, crime, or “Act of God” prevents one or more parties from fulfilling their obligations under the signed contract. Epidemic measures enacted to contain COVID-19 (such as lockdown) which directly restricts companies from performing contractual obligations may constitute as a force majeure, since the original terms can no-longer be performed. For instance, as the citywide lockdown in Shanghai continues, manufacturers unable to resume work cannot fulfil their contractual obligations, and such manufacturers may invoke the force majeure clause.

Invoking force majeure during or after lockdown

The legal basis for force majeure is provisioned under The Civil Code of the People’s Republic of China

Articles 180, 563 and 590.

Article 180
A person who is unable to perform his civil-law obligations due to force majeure bears no civil liability, unless otherwise provided by law. “Force majeure” means objective conditions which are unforeseeable, unavoidable, and insurmountable

Article 563
The parties may rescind the contract under any of the following circumstances:
(1) the purpose of a contract is not able to be achieved due to force majeure;

Article 590
Where a party is unable to perform the contract due to force majeure, he shall be exempted from liability in whole or in part according to the impact of the force majeure, unless otherwise provided by law. The party unable to perform the contract due to force majeure shall promptly notify the other party to mitigate the losses that may be caused to the other party, and shall provide proof of the force majeure within a reasonable period of time. Where the force majeure occurs after a party’s delay in performance, such party’s default liability shall not be exempted

Under such provisions, companies invoking force majeure are not wholly exempted from contractual obligations. Rather companies are required to prove that the lockdown measures directly impacted their contractual terms. For example, a manufacturer could not deliver the goods as agreed within the contract since the factory was lockdown and manufacturing could not continue, therefore, the manufacturer could be exempted from such obligation and breach of contractual term.

In conclusion, affected companies can be exempted from for the breach of contract in part or in whole according to the influence of the force majeure – such as an epidemic measure.

Terminating contracts under force majeure

Contracts can only be terminated if the fundamental purpose of the contract cannot be achieved due to force majeure. Namely, where the contract cannot be performed or cannot be performed in accordance with the agreed terms defined in the contract.

The Circular of the Supreme People’s Court on Issuing the Guiding Opinions (II) on Several Issues concerning the Proper Trial of Civil Cases Related to the COVID-19 Epidemic According to the Law (“the guiding opinions of the Supreme Court (II)) provides further guidance on contract termination.

If the epidemic situation or epidemic prevention and control measures cause the parties to fail to perform the sales contract within the agreed time limit or the performance cost will be increased, and the continued performance does not affect the realization of the purpose of the contract, if either party request to terminate the contract, the people’s court will not support.

Under such example, though the continued performance of the contract has been adversely affected by the epidemic measures, the force majeure does affect the purpose of the contract. Hence, the contract cannot be terminated.  Instead, both parties to the contract shall still perform their contractual obligations in accordance with the agreement in accordance with the principle of good faith.

The affected party in such instance may apply the change of circumstance to renegotiate the contractual terms, if the epidemic situation or epidemic prevention and control measures significantly increased the performance costs of labor, raw materials and logistics, or significantly reduced the price of products.

Change of circumstances

The Civil Code of the People’s Republic of China revised in 2020 includes epidemic within the provisions in change of circumstances. Specifically, parties to a contract adversely affected by the epidemic may renegotiate the conditions for the performance of the contract. If the negotiation fails within a reasonable period of time, each party may request the people’s court or arbitration institution to change or terminate the contract.

The Civil Code stipulates parties to renegotiate new terms in the first instance and continue to perform according to the negotiated terms. However, if the negotiation fails each party may request the people’s court or arbitration institution to change or terminate the contract by applying to the principle of fairness.

Where the people’s court or arbitration institution decides to change the contract, the party shall continue to perform the contract according to the changed conditions based on the agreement of the parties or the effective judgment document.

Case Study

Epidemic prevention and control measures directly restricted the delivery of  goods within the agreed time limit defined in the contract. Parties failed to negotiate new terms and the seller requested the people’s court to change the conditions of performance time limit. The people’s court changed the performance time limit according to the principle of fairness in combination with the actual situation of the case.

Consequently, companies should note that invoking force majeure clause for lockdown measures can be complex, which requires proof of the force majeure directly impacting the contractual obligation. Under certain circumstances, the party is exempted from the breach of contract, but the performance of the contract shall continue. Terminating contracts under force majeure should demonstrate the purpose of the contract is affected by the force majeure, otherwise the people’s court may not support such case. Alternatively, companies may utilise the change of circumstances provisions to renegotiate more suitable terms or apply to the people’s court to change or terminate the contract.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

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Personal Information Protection Law (‘PIPL’), effective from 1 November 2021, regulates those collecting and handling personal information. For companies processing employee data, a robust data security system should be integrated into the IT infrastructure and in line with PIPL.

Whilst PIPL largely affects companies handling consumer data, employers are not immune from PIPL and should be fully compliant to mitigate risks. Specifically, the Civil Code of the People’s Republic of China amended in 2020 defines personal information as the below.

‘Personal information refers to any information electronically or otherwise recorded that can be used, either alone or in combination with other information, to identify a specific natural person, including the name, date of birth, identification document number, bio-metric information, address, telephone number, email address, health information or whereabouts of the natural person.’ (Article 1032)

Therefore, employers should strengthen internal employee data management systems to secure employees’ data. At Horizons, we have been advising companies in formulating compliance mechanisms. In the below, we outline the main dos and don’ts of processing employee data from our experience.

Do implement a classification management

Companies should review the existing personal information of employees and classify the information according to the level of sensitivity. Under PIPL, employers are not required to obtain employees’ consent where it is necessary for carrying out human resources management under an employment policy legally established or collective legally concluded (Art. 13). However, separate consent is required for the handling of information that is not included in employment policies or labour contracts. Namely, companies processing sensitive information that is not included in human resources management (including religious beliefs, biometrics, specific identities, medical and health and financial accounts, whereabouts, and other information of a natural person) will need to obtain a separate consent and sensitive personal information are subject to stricter measures.

We suggest companies utilise a classification system on the personal information held and establish robust policies to process the data according to PIPL.

Don’t overlook technical security measures

Companies should have already established cyber security measures under the Cyber Security Law (‘CSL’) effective from 2017. Specifically, the network system should be protected from cyber-attacks and leakage. Regularly reviewing the IT system and updating equipment and software are essential for companies to be safeguarded from new forms of cyber-attacks.

Equally, contracting the processing of personal information to third parties can be vulnerable areas. We advise companies to review related contracts/agreements to ensure third parties do not infringe on personal privacy rights. If necessary, clauses should be redrawn to comply with PIPL and CSL.

Do assess control and schedule regular training

Where necessary, companies may only transfer personal information outside of mainland China by meeting one of the conditions in Article 38 of PIPL.

• Where a security assessment organized by the national cyberspace authority has been passed under
• Article 40 of this Law;
• Where certification of personal information protection has been given by a professional institution in accordance
• with the regulations of the national cyberspace authority;
• Where a contract in compliance with the standard contract provided by the national cyberspace authority has
• been concluded with the overseas recipient, establishing the rights and obligations of both parties; or
• Where any other condition prescribed by law, administrative regulations, or the national cyberspace authority is
• met.
• Where there is any stipulation on the condition or any other stipulation for the provision of personal information to a recipient outside the territory of the People’s Republic of China in any international treaty or agreement concluded or
• acceded to by the People’s Republic of China, such stipulation may apply.

Though the national cyberspace authority has not issued the aforementioned materials yet, companies must draft a control mechanism and regular training for related personnel-in-charge to ensure international data transfer complies with PIPL and forthcoming regulations.

Don’t neglect incidents emergency response plan

The amended Civil Code addresses the protection of personal information and the right to privacy. Privacy is defined under the Civil Code as the following:

The private life of a natural person is not to be intruded upon, as well as any private space, private activity, or private information of the natural person that he or she does not want to be known by others. [And] no organization or individual may, by means of spying, intrusion, exposure, disclosure, or otherwise, infringe upon another’s right to privacy. (Article 1032)

In other words, employers must protect the employee’s personal information and their right to privacy when handling employees’ data. As a result, companies should not neglect to implement an incident emergency response plan to demonstrate their commitment to protecting personal information. The company may utilise the emergency response plan provisions under CSL as guidelines.

Both the amended Civil Code and PIPL call for employers to strictly regulate the handling of employees’ personal information. Specifically, a comprehensive internal governance system should be established to migrate penalties. Failure to perform obligations under the PIPL can be subject to a fine of CNY 1 million on the violator and any person in charge or another individual directly involved will face fines between CNY 100,000 and CNY 1 million, as well as be suspended from serving as director, supervisor, senior officer, or personal information protection officer of an enterprise for a period of time.

Consequently, severe penalties require employers to act immediately and understand PIPL obligations seriously.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

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We highlight the practical elements for enterprises to note when implementing the resumption of work.

1. Closed-loop management

Enterprise should implement a closed-loop pandemic control mechanism that is acknowledged by the authorities. Namely, a closed-loop refers to area zoning and category-based management for different areas to prevent physical contact between different groups of employees such as in production, common areas, or meeting rooms, as well as establishing no-contact with external individuals such as logistic suppliers (external individuals must hold a negative nucleic acid test certificate within 48 hours and on-site negative antigen test results). As result, employers should ensure the employees are segregated into groups, establish the work environment to permit one metre social distancing within the workplace, and restrict or limit physical contact between such groups to isolate positive cases to one group and prevent cluster outbreaks.

2. Emergency response plan

Enterprises shall formulate emergency response plans for COVID-19 outbreaks in the workplace. Any employees with abnormal antigen detection and nucleic acid detection should be reported to the official in charge and the Centre for Disease Control and Prevention. Transportation and treatment of those diagnosed with COVID-19 should be priorly established with the local government and temporary isolation measures should be implemented for close-contact staff. Large enterprise shall set up a shelter in the factory area.

3. Stock of Anti-Pandemic Materials

Enterprises should maintain a stock of anti-pandemic materials and purchase antigen self-test kits, face masks, alcohol-based disinfectants, hand sanitizers, infrared thermo-detectors, thermal imaging detectors, protective suits, goggles, disposable gloves, etc. whenever necessary. A minimum supply of anti-pandemic materials for 14 days is recommended. All used protective items shall be disposed properly and safely.

The Guideline also adds that enterprises should resume work and production under the guidance of district governments on a “one-on-one” basis. We suggest that enterprises consult with professionals to ensure the resumption of work is compliant with the local guidelines and district government.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

The post Resuming work for industrial enterprises in Shanghai? appeared first on China Collaborative Group.

A design is defined as any feature of shape, configuration, pattern or ornament that is applied to any object by an industrial process and are judged solely by the eye. A design does not include any method of construction or feature which is dictated solely by the function which the object is to perform.

For a design to be registered, it must be new or original and must not be the same as a design which appears on the design register or has been published previously in Malawi. A design which differs with a previously registered design only in immaterial details or in variants commonly used in trade shall not be registrable.

Legal Framework for Registered Designs

Registered Designs are governed by the Registered Design Act [Cap 49:05].

Malawi is also a signatory to various international instruments including:
• The Paris Convention for the Protection of Industrial Property
• The Protocol on Patents and Designs within the Framework of the Industrial Property Organization for English-speaking Africa, 1984
• The Banjul Protocol
• The Madrid Protocol

Who may apply for Registered Design

The following can apply for registration of a design:
• The proprietor
• The author
• The assignee or legal representative of the proprietor

What Designs can be Registered

For a designed to be capable of registration, it must fulfil the following conditions:
• Be new or original
• Must be distinguishable by sight
• Must be distinguishable from known designs
• It must not merely be a feature that is commonly used in trade
• It must not be a feature that is solely dictated by the function that the product must perform
• Must not contain anything contrary to public order or contain any obscenity

What Designs Cannot be Registered

The following shall be excluded from registration under the Registered Designs Act:
• works of sculpture other than casts or models used or intended to be used as models or patterns to be multiplied by any industrial process
• wall plaques and medals
• printed matter primarily of a literary or artistic character, including book jackets, calendars, certificates, coupons, dressmaking patterns, greeting cards, leaflets, maps, plans, postcards, stamps trade advertisements, trade forms, and cards, transfers and the like.

What is the Procedure for registration of a design in Malawi

Registration of a Design in Malawi can be obtained by filing an application with the office of the Registrar General as follows:
• The appropriate from in accordance with the Registered Designs Act
• An Endorsement as to novelty
• Representations or specimens to be furnished with the application
• Power of attorney where applicable

The Registrar may then make the necessary searches as to novelty and registrability of the design.

What Rights are Conferred on Registration

The registration of a design under the Registered Designs Act shall give the proprietor or their successors the exclusive copyright in the design.
The proprietor shall have exclusive right to sell or use the said design in any trade or business.
The proprietor also has the right to assign or license the said design to third parties; such assignment may be registered with the office of the Registrar.

What is the Duration of Protection

Design registration is valid for a period of five years from the date of filing of the application and is renewable for two further terms of five years each.

How are Rights Enforced

Any action for infringement of a registered design shall be brought before the High Court where the applicant is at liberty to seek interlocutory remedies.

Conclusion

The law in Malawi allows for the registration of novel designs and vesting of rights in copyright, in their prospective proprietors. Said registration is valid for a renewable period of five years with infringers liable to suit in the High Court.

This content appears as a courtesy of Ritz Attorneys at Law, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit https://ritzattorneys.com/.

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The Personal Information Protection Law of the People’s Republic (“PIPL”) takes effect from 1 November 2021. Companies engaged in processing the personal information of individuals located in China are obliged to implement necessary measures.

Below, we highlight the mandatory requirements for foreign companies under the PIPL:

1. User Consent

Under PIPL, companies may only collect personal information when the individual’s consent is obtained. The consent shall be voluntary and the individual shall be explicitly informed. Individuals can request how their personal information is collected, stored, and require such information to be corrected and deleted.

Companies processing personal information (‘the processors’) are obliged to allow the individual to decline. When users withdraw their consent, the processors shall halt the collection or promptly delete the collected personal information.

Companies outside of China are not exempted from PIPL. Any company outside of China and processing the personal information data of individuals in China can be subject to PIPL. Specifically, PIPL outlines the following circumstances for companies outside of China:

• Where the purpose of the activity is to provide a product or service to an individual located within China;
• Where the purpose of the activity is to analyze or assess the behavior of an individual within China; or
• Any other circumstance as provided by law or administrative regulations.

Practically, companies outside of China should conduct a risk assessment of their personal information database.

2. Equal treatment for consumers

PIPL forbids companies from utilising automated decision-making functions to increase online sales. A company cannot implement unreasonable differential treatment of individuals – such as prices or terms. In other words, special discounts for new customers cannot be utilised, without reasonable grounds. Individuals shall also have the option to withdraw from any push marketing based on automated decision-making.

3. Stricter stance to sensitive personal information

The PIPL classifies the following as sensitive personal information and companies may only process such data for a specified purpose.

• Religious beliefs;
• Biometrics;
• Specific identities, medical and health;
• Financial accounts, whereabouts and other information of a natural person;
• Personal information of minors under the age of fourteen

Companies shall adopt strict measures to protect such data and inform the individual of the necessity and the impact on their rights and interests. For personal information of a minor under the age of fourteen, processors shall obtain the consent of a parent or guardian of the minor.

The stricter stance towards data collection of sensitive personal information significantly affects human resources and educators (minors under the age of fourteen). We advise such departments to align data management policies under the PIPL provisions, without any further delay.

4. Cross-border data transfers

Under PIPL, companies may only transfer personal information outside of mainland China by meeting one of the following conditions:

• Where a security assessment organised by the national cyberspace authority has been passed;
• Where a certification of personal information protection has been provided by a professional institution, under the regulations of the national cyberspace authority;
• Where a contract in compliance with the standard contract provided by the national cyberspace authority has been concluded with the overseas recipient, establishing the rights and obligations of both parties; or
• Where any other condition prescribed by law, administrative regulations, or the national cyberspace authority are met.

For companies, especially multinationals working with the personal information of employees and suppliers located in China, implementing the provisions to transfer personal information is essential to avoid penalties.

PIPL shall significantly affect businesses processing the personal information of individuals located in mainland China. Particularly, PIPL stipulates specific rights of individuals in activities related to the processing of personal information, including the right to access and make copies of the personal information processed.

Violators can face fines up to RMB 50 million (US$7,74 million), or up to five percent of annual turnover. Violators located outside of mainland China may be included in a blacklist and publicly announced.

Therefore, we recommend companies doing business in or with China to conduct a data mapping assessment including a thorough review to identify which data is collected, stored, process, and employee access to such data. Data management policies should be revised and relevant training provided to employees, so that PIPL is correctly implemented into the company.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

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Less than 30 days till the world’s largest import-themed expo, CIIE will be held in Shanghai from 5-10 November and CCG has been invited to exhibit for the second time.

CCG is made up of business and legal advisors who work together to provide clients with smart corporate solutions that effectively facilitate cross-border activities, CCG is honoured to participate again in this prestigious event.

PRESIDENT XI JINPING first announced the CIIE annual trade fair at the Belt and Road Forum for International Cooperation in 2017, with the first expo held in November 2018. With foreign direct investment (“FDI”) in the mainland rising year on year, CIIE is pivotal in assisting foreign goods and services launching in China and reaching Chinese consumers. Equally, the high international media coverage coupled with national and local government support offers foreign companies a crucial platform to generate business opportunities, strengthen international trade and cooperation with key industry players.

As part of the exhibition, CCG will highlight and discuss the most recent trends in laws and rules for foreign companies engaged in or with China.

With the consistent changing business landscape, businesses face challenges in navigating through numerous regulations. Many cross-border investment issues remain steeped in cultural and language barriers, especially for investments in unfamiliar jurisdictions, such as China. CCG offer foreign investors engaged in China a local gateway to facilitate their investments. CCG leverages multidisciplinary professionals to allow the client to speak with a local advisor in the comfort of their home country or region and erase language and cultural difficulties. The local team continuously follows the investment, so the controlling dashboard of the investment in China is always in the investor’s hands.

Dr Roberto Gilardino, CCG President

“For CCG, our participation at CIIE enables us to be amidst the action and within the significant exchange of western and Chinese entrepreneurs. As a result, the priority is to seize the opportunities, further our understanding of decision-makers and generate business projects. Equally, we remain committed to providing practical advice to our clients, which extends beyond the mere law and tax opinions and procedures. Our expertise offers clients updated know-how, seasoned experience, and an ability to anticipate challenges. Therefore we remain steeped in reality and practicality as opposed to the traditional approach of the typical law firms.

In 2021 we achieved successful and tangible results from the third CIIE, which propelled CCG’s recognition internationally. In addition, from the connections generated in our participation, we effectively facilitated several acquisitions in 2021. As a result, we anticipate good outcomes from this year’s participation to further projects in 2022. ”

Bas Besseling, Secretary

“CIIE plays a significant role in facilitating the development of professional services. Last year, through our participation of CIIE, we generated strong leads with our global clients and wider network. For many businesses, China is the market to develop and expand in, therefore having CCG professionals structure the investment in a jurisdiction, that is unfamiliar for many investors, enables the investors to focus on the business aspects. We are honored to be invited again to exhibit in CIIE and believe the expo will generate excellent connections with foreign businesses in China.”

Martin Hütte, Treasurer

“Whilst many may be concerned with China closing the doors for foreign business, we believe there is ample opportunity for foreign businesses. Although, the foreign investment landscape in China has significantly changed in the last 40 years. Companies entering China shall be aware of not only the changing market trends but the current legal obligations for foreign investors. CIIE is a fantastic opportunity for foreign companies to present and launch goods and services to Chinese consumers, as well as gain first-hand insights in the market. For CCG this year, we are focused on recent legislation adopted, which impacts both companies aboard and in China.”

Despite the pandemic, CIIE attracted approximately 400,000 visitors, 411 new products, technologies, and services were exhibited, and a total value of 72.62 billion USD in intended deals were signed. This year’s CIIE boasts an exhibition area of 360,000 square meters for enterprises.

If you want to know more about CCG’s participation in CIIE this year, please contact Ms Miranda Dong at hb.dong@theccgway.com. We look forward to you joining our CIIE experience.

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Deng Xiaoping initiated the Reform and Opening Up policy and opened the door to the world in 1978. As a result, China’s GDP rose from 367.9 billion yuan in 1978 to 15.45 trillion yuan in 2020 and lifted China from a third-world country to becoming a global economic superpower.

In the last 40 years, China’s significant economic growth has increased its role in the world both as a trade and investment partner and as an international Institution member in the United Nations (1945), World Trade Organisation (2001), and World Bank (1980). As a result, China holds a more influential and significant role in the world today than 40 years ago and more recently demonstrating a more mature and assertive stance.

Internationally, China has increased activism and assertiveness within international institutions (“Institutions”) in recent years. Specifically, China increased engagement in formulating policies and positions within the Institutions and increasingly utilised such Institutions as platforms to articulate its’ position. Equally, today’s institutions represent a broader range of countries with different priorities, needs, and interests than the founding members. Therefore, Institutions are increasingly evolving from the post-second world war era, in which the USA played a primary role in the founding principles of the Institutions.

Domestically, China has adopted a collection of legislation to strengthen the national sovereignty and interests, including:

• The Cyber Security Law of the People’s Republic of China effective from 1 June 2017
• The Export Control Law of the People’s Republic of China effective from 1 December 2020
• Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and other Measures, effective from 9 January 2021
• The Anti-Foreign Sanctions Law of the People’s Republic of China effective from 10 June 2021
• Data Security Law of the People’s Republic of China effective from 1 September 2021

For companies and individuals doing business in or with China, such legislation defines business operations – especially cross-border activities in several areas.

With a rapidly growing middle-class in China, the Chinese market for many companies is an increasingly important and growing market segment. Therefore, companies either invested or planning to invest in the Chinese market cannot disregard national sovereignty and interests’ compliance within their business operations. Below, we highlight the three key areas of national sovereignty and interests’ compliance applicable to companies doing business in or with China.

Cyber and data security

Cybersecurity for many countries is a top national priority to maintain secure networks and protect data from cyber-attacks.

In China, cyber security is centred on the security of the collected data, and companies are obliged to ensure networks collecting and processing the data are secure, monitored and shall not endanger national security or sovereignty.

The Cyber Security Law of the People’s Republic of China (“CSL”) and Data Security Law of the People’s Republic of China (“DSL”) are two primary legislation governing cyberspace and affect all companies working with data collection, processing, and management in China.

Cyber Security Law

The CSL establishes the compliance framework for network operators and is the overarching law for cybersecurity.

Under CSL, the network operator is defined as owners and administrators of the network and network service providers and obliged to ensure servers and data stored, transmitted, or created on such servers are secure and protected from cyber-attacks. Furthermore, the CSL outlines a Critical Information Infrastructure (“CII”), which subjects information crucial to national security and economy to store the collected and produced personal information and important data within the territory of mainland China. Any data required to be transmitted aboard shall be conducted under measures of the Cyberspace Administration of China.

Data Security Law

DSL sets forth an overarching framework to regulate data handling and management accordingly with national sovereignty, security, and development interests.

Under the DSL, the scope and definition of data include any record of information in electronic or other forms and imposes an extraterritorial application to China-related data handling and management.

Organisations and individuals are obliged to ensure and formulate data management policies, cooperate with public security and national security organs that require their data for national security or criminal investigation. Mismanagement of data, specifically those handling important data could face significant liabilities for both the company and individual.

Export Controls

Prior to the adoption of the Export Control Law of the People’s Republic of China (“ECL”), export controls were scattered across several laws. The ECL is the first comprehensive framework establishing export controls, a list of controlled items, and provisioning extra-territorial application to individuals and organisations outside of China who endanger national security and interests.

Under the ECL any export of the controlled items from an individual or organisation within the territory of mainland China to an overseas individual or organisation is subject to certain obligations including obtaining the relevant license from the State Export Control Authorities. Controlled items are defined under the ECL as the following:

• Dual-use items which can be for civil and military purposes or helping to improve military potentials, especially goods, technologies, and services in design, development, production, or application utilised for weapons of mass destruction;
• Military products comprising of equipment, special production facilities, and other related goods, technologies, and services utilised for military purposes;
• Nuclear materials, including nuclear equipment, non-nuclear materials used for nuclear reactors, and related technologies and services;
• Technical materials and data related to the items listed above.

For companies with an international supply chain or engaged in cross-border research and development, the ESL has a significant impact on exporting operations. For example, foreign items containing components assembled or manufactured in China could be deemed as controlled items or cross-border research or technology transfer, activities such as research, inter-company research (where the research and development centre are in China), or technology sales to foreign enterprises could be classified as related technical material and data – thus subject to export control.

Addressing sanctions

In 2021, China addressed the application of foreign legislation and sanctions to Chinese individuals and legal entities both within and outside of the territory of China. Two main legislation were enacted and established a stricter stance against foreign economic sanctions against Chinese organisations and individuals.

Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and other Measures

Early this year, the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and other Measures (“Rules”) were promogulated by the Ministry of Commerce. The Rules provision a working mechanism for Chinese companies and individuals affected by extraterritorial foreign legislation that prohibit or restrict engagement in normal economic, trade, and related activities with a third State (or region) or its citizens, legal person, or other organisations. Affected individuals or entities are required to such matters to the State Council within 30 days. The State Council shall issue a prohibition order to oppose an unjustified extra-territorial application of foreign legislation and other measures.

Foreign companies in China especially multinationals should note the Rules stipulate any Chinese entities who comply with the unjustified extra-territorial application of foreign legislation subject to a prohibition order can be pursued in court.

The Anti-Foreign Sanctions Law of the People’s Republic of China

The Anti-Foreign Sanctions Law of the People’s Republic of China (“AFSL”) establishes the regulatory framework for foreign persons, both legal entities and individuals, acting against China’s national interests. Under the AFSL, organisations, individuals, and affiliated individuals who directly or indirectly participate in formulating, deciding, and implementing discriminatory restrictive measures against China shall be included in a Sanctions List (“List”). Those included in the List shall be subject to penalties including visa restrictions, prohibitions, or restricted conduct in transactions, cooperation, or other activities with Chinese organisations or individuals. Therefore, for foreign companies and individuals doing business in or with China, AFSL significantly impacts external conduct and communications, and public relations.

Whilst some may view a more assertive China negatively, China’s international significance and role cannot be disregarded. Specifically, in the business world, companies involved in the Chinese market should evaluate their full operations and third parties’ relations and update relevant policies or establish China-specific policies, otherwise risk legal penalties and economic losses. Unless companies forgo the China market completely, the recent legislative movements in strengthening national sovereignty and interests should be reflected in company operations and policies. Companies generating business from China cannot disregard China’s principles around national sovereignty and interests.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

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Moving forward from low-cost manufacturing, China is focused on attracting high-quality foreign investments, especially in industries which support the technological and eco-sustainable movement in China.  Equally, regulation reforms in the last years coupled with the digitalisation of business administrative and taxation procedures require greater management in legal and financial compliance. Companies seeking to enter the China market shall be aware of not only the changing market trends, but the current legal and financial obligations for foreign investors.  Overall, companies should implement an essential China checklist before entering China to ensure the business can thrive and scale in China.

Webinar Focus China

At Horizons Corporate Advisory, we have navigated clients through the regulation reforms and collaborated with the Industrial Federation of Canavese (Italy) this Summer to present an insight. Through a joint webinar “Focus China: the new foreign investment landscape” hosted on 17th June 2021, our experts provided the essential China checklist for Italian investments today.

Dr. Lucia Myriam Netti, Regional Partner in Horizons Italy – Head of the Group’s consulting activities in Europe, and Dr. Pier-Domenico Peirone, Executive Director of Pathways (partner of Horizons Group), were called to lead the webinar. The webinar attracted over numerous local Italian companies from various sectors including packaging, textiles and mechanics with plans to enter the China market.

The successful collaboration also paved a long-term partnership between Horizons and the Industrial Federation Canavese. Specifically, Dr. Gianfranco Franciscono, Head of the Economic Service of Industrial Federation Canavese comments on investing in China.

“We are well aware that investing in a China business project today is the most promising. However, it is never free from risks -the risk shall never be an impediment. On the contrary, the risks are evaluated in a rational way, it can be managed and leveraged sucessfully. Starting your business in an attractive market such as China, we want to provide companies with information and suggestions for the correct approach and expansion strategy.”

China: current investment landscape for Italian companies

“Despite the ongoing pandemic, China did not abdicate the role as economic leader -especially in the manufacturing sector. In 2020, China GDP grew 3%, whilst the rest of world contracted. For Italy, China is an important trade partner, with a commercial exchange of 44 billion euro – noted Dr. Patrizia Paglia, President of the Industrial Federation Canavese.

“In the uninterrupted flow of trade relations with China, the sectors include not only traditional Made in Italy brands fashion, agri-food and mechanical engineering – Dr. Paglia continued – but also innovative companies working environment and sustainable energy. For example, smart urbanisation, infrastructures and transport and space technology. As a result, the current investment landscape is increasingly broadening and offer opportunities for companies to seize with the adequate legal and financial tools to both protect the investment and comply with the local regulations.”

The essential China checklist

Dr. Peirone explains in the webinar “expanding to China today opens very different perspectives compared to the previous years”.  The digitalisation and speed in China offer Italian businesses new perspectives to enter the market, however companies should understand the legal and financial responsibilities and activacte the legal protection, before speeding ahead. In the below, we provide three aspects of the essential China checklist.

Pre-investment stage: trademark and patent protection

Companies should ensure trademark and patent are registered in China before entering the China market. Dr. Netti pointed ‘Despite the preconception in Italy (rooted in prejudice), intellectual property rights (‘IPR’) is strongly recognised in the Chinese Law and enforced. However, many Italian companies do not proactively protect trademarks and patents with the provisions of the Chinese Law.”

For more information on trademark protection, Horizons Partner and IPR Head Dr. Angela SU Qi discusses the IPR reforms in the article  Dr. Angela Su, Horizons Partner and IPRS Head, provides insight on trademark protection for the foreign community in Shanghai

Working with Chinese companies: cultural nuances in contracts

The word ‘contract’ in Chinese is written with the two characters 合同 (hétóng).  合(hé)  means to join and 同 (tóng) means to be the same together. Therefore, the two characters combined signifies the parties to the contract are unified with the same objectives. Contract Law defines a contract as an agreement between equal parties and emphasises that the parties shall be of equal footing.

“At Horizons, we encounter many contracts drafted without the mandatory clauses – notes Dr. Peirone – or drafted in English. In such cases, without taking the reasonable steps to ensure the contacts have be drafted properly and accordingly to the Chinese Law, the contract may not provide significant protection  during a contractual dispute.”

For more information on contracts in China, Horizons penned an article on the Do’s and Dont’ of Contracts in China.

E-commerce; legal and tax obligations for Italian businesses   

“In China, online sales are achieving absolute success – explained Dr. Netti – Already sales have increased by 27.5% in 2020, rising by 21.0% in 2021 and accounting for 52% of retail transactions – demonstrating China leading e-commerce sales.”

For companies selling products through Chinese online retail platforms, there are both legal and tax obligations to observe. Specifically, many companies neglect the withholding tax obligation for the income generated in territory of China. Equally,  E-commerce Law adopted on 1 January 2019, requires companies selling online to be legal entities in China and strengthens consumer protection by forbidding fictitious deals and fabricated user comments.

For more information on withholding tax and the E-commerce Law in China, please see the articles  China business: cross-border withholding tax 101 and China’s first e-commerce law to go into effect from 1 January 2019

Whilst, there are ample opportunities in China for Italian and other companies, legal and tax responsibilities cannot be neglected. Many companies may be tempted to find cost-saving alternatives, but this often lead to larger risks and costly fees. As Dr. Netti mentioned in the webinar, succeeding in China requires an understanding of the laws and regulations in China, if you do not have professional experts in China, it’s impossible to navigate through the legalities or protect your investment.

If you have questions or would like to know more about the corporate services available to you from Horizons, please contact us at +86 21 5356 3400 or email talktous@horizons-advisory.com.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

The post The essential China checklist for Italian investments appeared first on China Collaborative Group.

Recently, rapid Chinese demand for domestic design products is paving regulation reforms in intellectual property rights (‘IPR’) protection.

Both qualitative and quantitative growth in the design market is advocating the protection of intellectual property as fundamental in sustaining the industry within China.

The Chinese authority promptly acknowledged this issue and with the fourth amendment of the “The Patent Law of the People’s Republic of China” (“Patent Law”), approved by the Standing Committee of the National People’s Congress on October 17, 2020, reformed legislation to comprehensively protect patents and intellectual property. The newly amended law recently came into force on 1^st June 2021 and for designers offers several tools to protect innovation.

The main amendments can be summarised as follow:

1. From generic design protection to partial design protection.

In the evolution of the design industry and continuous innovation, the revised Patent Law aligns with the current design landscape. The revised Patent Law increases the design scope, specifically, both the design product in its entirety and constituent parts (partial protection) can be patented.

Previously, only complete products could be patented, whilst under the revised Law patent protection can be applied to the indivisible components of the design. For example, for the design of a ceramic teacup with an original motif on the handle, patenting the handle of the motif offers sufficient protection, the patent of the entire cup is no longer required.

Such amendment aligns with the best practices of the European Union, the United States, and other major economies in the world, and offers an effective approach in combatting counterfeits.

2. The design protection term increases to 15 years

The validity term for design patents extends from 10 to 15 years. In this way, the Patent Law aligns with the requirements for accession to the Hague Agreement. The Hague Agreement requires at least 15 years term for the international registration of industrial designs.

3. The national priority on patents

For design patent applicants who have filed the first design patent application in China, the Patent Law allows the priority for the second design patent application. Specifically, a design patent application shall be filed within 6 months to claim the right of priority for a second Chinese design patent application.

4. Introduction of the Open License

The Patent Law grants patent holders to provide an open license for non-exclusive usage during the period. Patent holder shall notify the State Council of the intent to provide an open license with a written declaration. For patent holders who adopt an open license, the annual patent fees paid by the patentee will be reduced or exempted.

5. Tighter sanctions for counterfeiters

Finally, the revision stipulates stricter penalties for the counterfeiting of patented goods. Statutory damages for patent infringement have been significantly increased, from RMB 10,000~1,000,000 to RMB 30,000~5,000,000 and related illegal earnings shall be confiscated. In addition,  The statute of limitation extends by one year: the patentee has 3 years to file a complaint against the patent infringement, as opposed to the previous 2 years.

If you have questions or would like to know more about the corporate services available to you from Horizons, please contact us at +86 21 5356 3400 or email talktous@horizons-advisory.com.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

The post China strengthens Intellectual Property Rights protection appeared first on China Collaborative Group.

China was recognised as the Asian factory for the developed world in the past. Today China boasts a strong consumer market for quality products and services. In the first quarter of  2021, the GDP in China jumped to 18.3 percent compared to 2020, predicted to reach 9 percent annually. The economy has significantly recovered in the post-pandemic era and offers ample prospects for foreign brands.

Italian home and design are favorable sectors to seize the opportunities in the post-pandemic China market.

Piedmont Home &Design

In response to the post-pandemic era of the China consumer market, Turin Chamber of Commerce organised “Piedmont Home Design”. This business development project is dedicated to furniture & home design companies and aims to create housing models characterised by local products and cultural affinities between Piedmont and China.

Companies entering the China market must understand the dynamics and safeguard assets beforehand. Therefore, Piedmont Home Design has organised a series of six training webinars between June and July and in collaboration with Horizons Corporate Advisory (HCA), the international legal, fiscal, and strategic consulting group. The series is an analysing the opportunities, cultural nuances, and inevitable risks in the China market.

The webinar series features Dr. Lucia Myriam Netti, Regional Partner EMEA, Russia and Belarus of HCA, and Dr. Roberto Gilardino, Regional Partner, North Asia and additional countries of HCA, and lawyer in China. With Dr. Netti as the requested lead for the webinars, the two regional partners presented topics specifically designed for the sector.

The Silver Age of China; a consumer appetite for  sophisticated environments and designs

The Piedmont Home Design project is organised in partnership with ChinaRoom – Polytechnic of Turin. The ChinaRoom is a center specialising in the study of architecture and urbanization in contemporary China, and the partnership signifies the importance of the project.

For the project, China Room cultivated a survey on the main housing trends in the China market. “The housing market in contemporary China is at a turning point – declares Dr. Francesco Carota, research fellow of China Room – the current Chinese President, Xi Jinping, defined the economy of the New Normal, a moment of major stability for the country’s economic growth. The real estate market has entered a new era defined as the “Silver Age”. The phase ‘Silver Age’ projects the need to improve the quality of domestic life”.

In the Silver Age, real estate developers are establishing housing models for various occupants including singles, young couples, families with children, the elderly without children, and so forth. Housing spaces are gradually adapted to suit their varied lifestyles.

“Thus, these new housing models have emerged, among the traditional models, designed for standard families – continues Carota – Therefore, the furniture sector is currently aligning with the new housing models and new tastes in style. In recent years, increased trends characterised by ancient Western elements, Nordic style, or new industrial style in the home and design sectors are increasingly paving an appetite for more sophisticated style”.

As a result, such increasing market demand presents a prosperous market for foreign designers and architects. Though the opportunities should be seized with prepared and prudent plans – which are legally compliant.

In the Piedmont Home Design webinar series, Horizons focused on the opportunities for Home and Design and provided three areas of risk management, when investing in China.

Brand protection

Protecting the brand is fundamental and ensures the correct identity and visibility in the Chinese market.

Commercial contracts in China

Designers and architects must understand both the legality and cultural nuances to safeguard investments.

E-commerce

E-commerce is a must for all businesses in the digital world and established in the framework of strict Chinese regulations.

Trademarks and patents

Intellectual property (“IPR”) protection is crucial in safeguarding the creativity of designers and architects. In the first webinar, Dr. Netti provided an insight into IPR protection and noted “Trademarks and patents are the main company assets. Moreover, the inventions can be fully leveraged and a distinctive mark can exclusively identify the business – all of which are significant economic advantages”.

Numerous reforms and updates in IPR legislation have strengthened the legal framework for IPR protection, especially following the accession to various international treaties. However, many areas remain subject to national discipline.

Dr. Netti explains:

“Generally, IPR protection in China is often considered risky and fragile. In reality, the current regulatory landscape offers significant tools to protect your IPR concretely. Timing is certainly important. For those entering the Chinese market, it is fundamental and necessary to safeguard their intellectual property rights immediately, -without any delay.

Entrepreneurs can utilise specific regulations provisioned in Chinese legislation. However, these rules are often unfamiliar to the entrepreneur due to the peculiarity of Chinese regulations”.

How contracts protect your investment

The second webinar centered on legal contracts. In China, the principles of law and contractual clauses are imperative in safeguarding investment. Overall, investors should carefully compose contracts including the agency, distribution, or technical assistance agreements. In this approach, the contract sets forth an essential legal framework and establishes the primacy of the projects and high-end products.

Dr. Roberto Gilardino highlighted in the webinar “As a world economic leader, China increasingly manages large fiscal transactions with foreign companies. As a result, regulations in China have rapidly adapted to the new needs of the global market”.

In enforcing contractual terms, the investor should not solely rely on continuous regulatory interventions or various treaties signed between the Chinese government and other foreign regions and contracts. Rather, a contract remain strongly influenced by the Chinese national legislation.

Culture also plays a significant role. Dr. Gilardino states in the webinar,

“when drafting a contract with a Chinese counterpart, linguistic and cultural differences are crucial aspects to be considered. Often, the same contractual clause can be interpreted differently by the parties due to cultural nuances and language differences. Therefore, a detailed contract is required since clear and detailed context sets forth clear parameters, transparency, and trust between the parties.”

Dr. Netti added the topic by explaining:

“Often, we encounter skepticism among companies who are signing contracts with Chinese counterparts. Such skeptics are largely due to the distance between west and east, not only geographically, but also cultural and regulatory. As result, contracts are drawn accordingly to the local law often dispel the mistrust between parties.

A contract is a practical tool for investors.  The key is understanding how to assert contracts, so the investment is protected. At Horizons, we have continuously operated according to the principle of identifying concrete and effective solutions, with full legal certainty”.

E-commerce:  the digital economy and legal aspects

For the consumer market, e-commerce is rapidly the current and future of international transactions.  In the third webinar, Horizons highlighted both the opportunities and legal precautions in the Chinese e-commerce landscape.

E-commerce transactions in China outpace the rest of the world and offer ample opportunities for design studios. Dr. Netti explains:

“the success of Chinese e-commerce has surpassed the world, the e-commerce market grew 27.5% in 2020 and predicted 21.0% growth in 2021. According to recent reports from market research firms, e-commerce will account for 52% of total retail sales in China this year”.

However, entrepreneurs should consider the legal implications in the e-commerce market. Specifically, ensuring maximum trademark and patents protection when goods are sold on e-commerce platforms in China.

Dr. Gilardino highlights in the webinar “With the development of e-commerce and digital marketing via social media channels, companies increasingly face online violations in intellectual property rights.  Such violations can cause serious economic, as well as distort the market value of brands. For this reason, adequate protocols to protect intangible assets are increasingly necessary”.

Overall, implementing the right protocols is not only beneficial for architects and designers but also results in a higher market value for the designs. There is a large market for foreign home and design companies in China, however, , companies should ensure the right legal foundations are established before entering the market.

If you have questions or would like to know more about the corporate services available to you from Horizons, please contact us at +86 21 5356 3400 or email talktous@horizons-advisory.com.

This content appears as a courtesy of Horizons Corporate Advisory, a proud member of the China Collaborative Group (CCG Association). It is informational in nature and does not constitute legal advice or establish an attorney-client relationship between you and its author, publisher or any member of CCG. For more information, please visit www.horizons-advisory.com. 

The post Made in Italy home & design for the elite China market appeared first on China Collaborative Group.