Crossing the East-West BridgeRepresenting Chinese Clients in EuropeYiyi JIN Chinese Lawyer27 October 2010Practice in China
www.hoganlovells.com2Some questions about Chinese clients• "1. Their lawyers earn less in one week than our lawyerscharge for one hour."• "2. They expect us to have ready answers to virtually allof their legal questions without any research."• "3. They wait until they are facing a significant problembefore they ask for our assistance."• "4. Many Chinese companies say they want to hire us forone thing (lets say, to form a U.S. company), but theyreally have another goal in mind (like getting visas fortheir families)."
www.hoganlovells.com3Chinese courts and legal systemChinese legal educationculture differences and similaritiesbasics of company and contract law
www.hoganlovells.com4Chinese legal educationRequired courses for LL.B. program (4 years) are generally asfollows:(1) Jurisprudence(2) Constitution(3) Administrative Law and Administrative Procedure(4) Chinese History of Legal System(5) Civil Law(6) Civil Procedure(7) Criminal Law(8) Criminal Procedure(9) Commercial Law(10) Law of Intellectual Property(11) Economic Law(12) Public International Law(13) Private International Law(14) International Economic Law(15) Environmental Law(16) Contract Law(17) Company Law(18) Finance Law(19) Tax Law(20) Guarantee Law(21) Law of Negotiable Instruments(22) Foreign History of Legal SystemSelected courses are mainly as follows:(1) International Trade Law(2) Judicial Systems and Legal Practice(3) International Investment Law(4) International Finance Law(5) Maritime Law(6) Resolution of International Civil and Commercial Disputes(7) Foreign Criminal Law(8) Foreign History of Legal Thoughts(9) Law of Science and Technology(10) Legislative Science(11) Foreign Constitutions(12) Chinese History of Legal Thoughts(13) Foreign Civil and Commercial Law(14) Roman Law(15) Basic Theory of Economic Law(16) Insurance Law(17) Legal Medicine (Forensic Medicine)(18) International Criminal Law(19) Arbitration Law(20) International Human Right Law(21) Law of Natural Resources(22) Labor Law(23) International Relations(24) Law of the Europe Union(25) Inter-regional Conflicts Law(26) International Environmental Law(27) Criminal Policy(28) Clinical Program(29) Legal Focuses and Jurisprudence Frontiers
www.hoganlovells.com5• National Judicial Exam• The qualification exam for judge, procurator andlawyer.• 2 days in the middle of every September, fourpapers:• Paper 1: Comprehensive knowledge, includingJurisprudence, Constitution, Economic Law,International Law, International Economic Law,Legal Ethics and Professional Responsibility.• Paper 2: Criminal and administrative justice system,including Criminal Law, Criminal Procedural Law,Administrative Law and Administrative ProceduralLaw• Paper 3: Legal System of Civil and Commercial,including Civil Law, Commercial Law and CivilProcedural Law (arbitration system).• Paper 4: Analysis of cases, including all subjectslisted above.
www.hoganlovells.com6Chinese Lawyer• Intern in a law firm for one year• Employed by a Chinese Law Firm• Allowed to practice in all the regions and courts• Foreign law firm representative office in China• Shanghai with 27 million populationhas 10 thousand Lawyers• USA: 1 lawyer per 265 Americans• Germany: 1 lawyer per 593 Germans• Shanghai: 1 lawyer per 2700 Chinese
www.hoganlovells.com11Legislation• Written laws, regulations, directives andlocal laws, laws of Special AdministrativeRegions and laws resulting frominternational treaties entered into by thePRC government.• Court case verdicts do not constitutebinding precedents. However, they areused for the purposes of judicialreference and guidance.ConstitutionLawAdministrativerules and regulationsLocalrules and regulations
www.hoganlovells.com12Constitution and LawsThe National Peoples Congress （ NPC ）• amend the Constitution• enact and amend basic laws governing State agencies and civil and criminal matters.The Standing Committee of the NPC• enact and amend all laws except for the laws that are required to be enacted andamended by the NPC.
www.hoganlovells.com13Administrative and local rules and regulationsThe State Council• enact administrative rules and regulationsThe provincial and municipal congresses and their respective standing committees• enact local rules and regulations
www.hoganlovells.com14Interpretation of Law• The PRC Constitution vests the power tointerpret laws in the Standing Committeeof the NPC.• The Supreme Peoples Court, in additionto its power to give general interpretationon the application of laws in judicialproceedings, also has the power tointerpret specific cases.
www.hoganlovells.com15Laws• Criminal Code• Civil laws: General Rules of Civil Law, Property Right Law, Tort Liability Law, ContractLaw, Guarantee Law, Copyright Law, Patent Law, Trademark Law, Marriage Law,Succession Law, Adoption Law...• Administrative Law• Procedure laws: Criminal Procedure Law, Civil Procedure Law, Administrative ProcedureLaw, Arbitration Law and other special procedure laws...• Commercial laws: Company Law, Partner Enterprises Law, Sole Proprietorship Law,Chinese-Foreign Equity Joint Ventures Law, Chinese-Foreign Co-operative JointVentures Law, Wholly Foreign Owned Enterprises Law, Enterprise Bankruptcy law,Maritime Law, Negotiable Instruments Law, Insurance Law, Securities Law...• Economic laws: Antitrust Law, Anti-unfair Competition Law, Protection of Rights andInterests of Consumers, Product Quality Law, Food Safety Law, Commercial Bank Law,Banking Supervision Law, Tax Law, Audit Law, Labour Law, Labour Contract Law, LandManagement Law, Environment Protection Law...
www.hoganlovells.com16Company LawCompanyLimited LiabilityCompanyJoint StockLimited CompanyCommonLimited LiabilityCompanyWholly State-OwnedCompanySingle ShareholderLimited LiabilityCompanyListed Company Unlisted Company
www.hoganlovells.com17Governance Structure of a Limited Liability Companyshareholder meeting(organ of authority)board of directorsor exclusive director(elected byshareholder meeting)General managerboard of supervisorsor supervisor(elected byshareholder meeting)Other managerse.g. Legal Manager• Business license (registered capital,legal representative)• Article of association filed onAdministration of Industry andCommercial Bureau (AIC)• Company seal
www.hoganlovells.com18Governance Structure of a Wholly State-OwnedCompanystate owned assetssupervision andadministrationcommission (SASAC)board of directors(appointed by SASACexceptemployee representatives )board of supervision(appointed by SASACexceptemployee representatives )General managersOther managerse.g. Legal Manager• The articles of associationof a wholly state-ownedcompany shall beformulated by the state-owned assets supervisionand administrationinstitution
www.hoganlovells.com19Governance Structure of a Joint Stock LimitedCompany• Joint Stock Limitedcompany has thesimilar governancestructure as LimitedLiability company,except Listed companyhas independentdirectors and secretaryto ´the board ofdirectorsshareholder meeting(organ of authority)board of directors(elected byshareholder meeting)General managerboard of supervisors(elected byshareholder meeting)Other managerse.g. Legal Managerindependentdirectors(only in listed company)secretary tothe board of directors(only in listed company)
www.hoganlovells.com20Contract Law• GENERAL PROVISIONSCHAPTER 1 GENERAL PROVISIONSCHAPTER 2 CONCLUSION OF CONTRACTSCHAPTER 3 EFFECTIVENESS OF CONTRACTSCHAPTER 4 PERFORMANCE OF CONTRACTSCHAPTER 5 MODIFICATION AND ASSIGNMENTOF CONTRACTSCHAPTER 6 TERMINATION OF THE RIGHTS ANDOBLIGATIONS OF CONTRACTSCHAPTER 7 LIABILITY FOR BREACH OFCONTRACTCHAPTER 8 MISCELLANEOUS PROVISIONS• SPECIFIC PROVISIONSCHAPTER 9 SALES CONTRACTSCHAPTER 10 CONTRACTS FOR SUPPLY AND USEOF ELECTRICITY, WATER, GAS OR HEATINGCHAPTER 11 DONATION CONTRACTSCHAPTER 12 LOANS CONTRACTSCHAPTER 13 LEASE CONTRACTSCHAPTER 14 LEASE-FINANCE CONTRACTSCHAPTER 15 CONTRACTS FOR WORKCHAPTER 16 CONSTRUCTION PROJECTSCONTRACTSCHAPTER 17 CONTRACTS FOR TRANSPORTATIONCHAPTER 18 TECHNOLOGY CONTRACTSCHAPTER 19 DEPOSIT CONTRACTSCHAPTER 20 WAREHOUSING CONTRACTSCHAPTER 21 CONTRACTS FOR COMMISSIONCHAPTER 22 CONTRACTS FOR BROKERAGECHAPTER 23 INTERMEDIATION CONTRACTSSUPPLEMENTARY PROVISIONS
www.hoganlovells.com21Contract Forming• Contract in writing• Article 10 The parties may conclude a contract in writing, orally or in other forms.Where the laws or administrative regulations require a contract to be concluded inwriting, the contract shall be in writing. If the parties agree it to be in writing, it shall be inwriting.• Offer and acceptance• Article 25 A contract is established when the acceptance becomes effective.• Article 32 Where the parties conclude a contract in a written form, the contract isestablished when both parties sign or affix seals on it.
www.hoganlovells.com22Effectiveness• full civil capacity of conduct - 18 years old.• Article 44 The contract established according to law becomes effective when it is established.With regard to contracts which are subject to approval or registration as provided for by the lawsor administrative regulations, the provisions thereof shall be followed.• Article 52 A contract shall be void under any of the following circumstances:(1) A contract is concluded through the use of fraud or coercion by one party, therefore damagesthe interests of the State;(2) Malicious collusion is conducted to damage the interests of the State, a collective or a thirdparty;(3) An illegitimate purpose is concealed under the guise of legitimate acts;(4) Damage the public interests;(5) Violating the mandatory provisions of the laws and administrative regulations.• Article 54 A party shall have the right to request the peoples court or an arbitration institution tomodify or revoke the following contracts:(1) those concluded as a result of serious misunderstanding;(2) those that are obviously unfair at the time when concluding the contract.If a contract is concluded by one party against the other partys true intentions through the use offraud, coercion or exploitation of the other partys unfavourable position, the injured party shall havethe right to request the peoples court or an arbitration institution to modify or revoke the contract.
www.hoganlovells.com23Breach Responsibility• Continue to perform its obligations, take remedial measures, orcompensate for losses.• TerminationArticle 94 The parties to a contract may rescind the contract under any of the followingcircumstances:(1) The purpose of the contract is not able to be realized because of force majeure;(2) One party to the contract expresses explicitly or indicates through his acts, before theexpiry of the performance period, that it will not perform the principal debt obligations;(3) One party to the contract delays in performing the principal debt obligations and fails,after being urged, to perform them within a reasonable time period;(4) One party to the contract delays in performing the debt obligations or commits otheracts in breach of the contract so that the purpose of the contract is not able to berealized; or(5) Other circumstances as stipulated by law.
www.hoganlovells.com24Some misunderstandings about contracts in China• Here following is some misunderstanding about Chinese contract :• "1) The contract must have Chinese VersionThe Chinese Government will not help you to translate your contract from French orSpanish to Chinese when they read it. Only the contract with Chinese Version can beacceptable and looked as the valid document in China. "• "2) Sending money to your vendor’s appointed bank account means nothing in ChinaThere is a different concept between western country and China about what legal force itcan represent when sending money to another party. In China, it could not certify thereexisting any trading relationship between the funds receiver and sender if you don’t havea contract. The money you send to the vendor will disappear in the air without anyreason if there is not a legal contract can protect you."• "3) Parent company and subsidiary companyParent company will take any legal responsibility of his subsidiary company. They aretwo separate independently company. If the title of one contract is the name of the parentcompany and the seal at the end is his subsidiary company, the contract is illegal."
www.hoganlovells.com25Some opinions about contracts in China• "1) How to find out the status of a company in China in one minuteYou can go to a searching website first and then type in the name of local Industry And Commercial Bureau. Inthe website of local ICB, you can type in the full name of the company you want to know if it is still in good status.The searching result can tell you if it is still open, if it does not exist at all, who is the legal person, the registeredcapital, the registered address etc."• "2) The legal force of company seal and signature of legal personThe company seal and the signature of legal person has equal legal force. Either of them can represent thecompany."• "3) One letter’s difference in the company’s name means they are two different companyIn one contract, the name of the parties in title, in content and in the seal should be exactly same. They representdifferent companies although there is only one small difference in the company’s name."• "4) The legal force of original document and copyPlease don’t hesitate to ask for the original contract no matter how complicated to get it. Whoever in yourvendor’s company can make a fake contract and fax to you. Also, the legal force of copy contract is much lowerthan an original contract."• "5) ChopA legal formed company in China should have at least three chops. They are called Company Chop, FinanceChop and Private Chop of Legal Person. The shape of company chop and finance chop of foreign company isellipse. The shape of company chop and finance chop of Chinese company is round. All the private chop of legalperson should be square."• "6) The basic structure of a contractThere should have Parties, Date, Location of signing, Production, Quantity, Quality, Unit Price, Shipping Terms,Rights and Obligation of all parties."
www.hoganlovells.com27Some questions about the current state of ChineseClients• "1. Their lawyers earn less in one week than our lawyers charge for one hour."• "2. They expect us to have ready answers to virtually all of their legal questionswithout any research."• "3. They wait until they are facing a significant problem before they ask for ourassistance."• "4. Many Chinese companies say they want to hire us for one thing (lets say, toform a U.S. company), but they really have another goal in mind (like gettingvisas for their families)."
www.hoganlovells.com28Some questions about the current state of ChineseClients• "5. Whereas European/US parties usually sit together for weeks and monthsnegotiating detailed agreements which are then strictly performed, Chineseparties tend to just sign some short agreement (more like the idea of an MoU)and try to negotiate their way around afterwards. "• "6. Once they hire us, they want to tell us exactly how we should do our jobs.For example, we were retained by a Chinese company to sue a U.S. companythat owed the Chinese company millions of dollars. We sent our Chinese clienta memorandum explaining our proposed course of action and we took a few ofthe initial steps. We soon received a memorandum back from our non-lawyerclient setting forth the steps we should follow--steps that made absolutely nosense at all in the U.S. We told our client they had to trust our competency aslawyers or let us go and we would return what they had already paid us. Theylet us go."
www.hoganlovells.com29It is all about the ability to deal with the differences.
www.hoganlovells.com30• Thank you very much for your attention.• firstname.lastname@example.org