China Law Update : China Business Law Lawyers & Attorneys : Sheppard Mullin Law Firm : Direct Investment, Dispute Resolution, Intellectual Property, Antitrust, Venture Capital

By Jennifer Ding

China’s State Administration for Industry and Commerce (“SAIC”) and Ministry of Public Security issued a joint Notice on Further Administration of Registration of Foreign Companies’ Resident Representative Offices (the “Notice”) on January 4, 2010, in light of increased problems with foreign representative offices providing counterfeit registration materials and violating rules regulating their business operations in China. The Notice heightens the scrutiny over registration procedures, personnel structure, and operations of foreign representative offices, which the issuing administrations claim will enhance the enforcement of current regulations and help maintain economic and market order. There is no direct requirement in such Notice that the new restrictions established will be applied to foreign representative offices of certain professional-services firms (including law firms) and liaison offices of foreign-invested enterprises. A summary of changes outlined by the Notice is as follows:

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The third amendment of Chinese Patent Law went into effect on October 1, 2009, and since then there has been a need for new rules detailing its implementation. On January 18, 2010, the Chinese State Council published the third revision of the Implementing Rules For Patent Law (the "Rules"). The Rules are set to take effect on February 1, 2010.

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On December 8, 2009, the largest Bit Torrent ("BT") download base, BTChina, was shut down by the State Administration of Radio, Film, and Television ("SARFT") for "lack of Certificate". SARFT explained that the regulation of Internet audio-visual services is a long-term project. Until the site resolves its piracy issue it can not be re-opened. According to a CCTV report on December 17, 2009, SARFT announced that it had shut down more than 700 websites, including nearly 30 of the BT download sites. This incident raises deep concern among Chinese netizens: why did the Chinese government suddenly intensify efforts to crack down BT sites? Does this mean that the peer-to-peer (P2P) download technology will meet its end in the near future?

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On October 27, 2009, the Chinese State Administration of Taxation (“SAT”) issued a Notice, "How to Understand and Determine the 'Beneficial Owner' in Tax Agreements" (Circular No. 601, hereinafter referred as to the “Notice”). This Notice clarifies the definition of beneficial ownership for purposes of avoiding double-taxation and appropriately reducing tax burdens.

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Since enacting China's Anti-Monopoly Law (AML) in August 2008, China has been making efforts to update its antitrust laws. The Ministry of Commerce (MOFCOM) published draft regulations on the notification of mergers between enterprises, and on the examinations of mergers between enterprises for comments in January and March, 2009.

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On November 23, 2009, China's Supreme Court launched public consultation on draft Regulations on Issues in Adjudicating Cases Involving Foreign Invested Enterprise Disputes (Part 1) (the "Guidelines"). The Guidelines provide detailed rules regarding dispute resolution for foreign investors based on the court's experience in real cases.

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The Chinese Ministry of Health (“MOH”) announced the promulgation of the Hospital Complaint Rules (for Trial Implementation) (the “Rules”) on November 26, 2009. The Rules aim to improve the management of hospital complaints and reduce medical accidents and negligence.

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At the 36th Annual Meeting of the Internet Corporation for Assigned Names and Numbers ("ICANN") on October 30, 2009, the ICANN board finally approved the new Internationalized Domain Name ("IDN") Fast Track Process. IDNs have been a topic of discussion since before ICANN's inception. It has taken years of intense technical testing, policy development, and global cooperation to prepare the Fast Track process for its launch. On November 16, 2009, ICANN officially opened the IDN Fast Track Process to allow countries that use non-Latin based languages to also apply for top-level domains that reflect their country's name in local scripts such as Chinese, Korean, Arabic, etc.

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On November 25, 2009, China’s State Council issued the long-awaited Administrative Measures for the Establishment of Partnership Enterprises in China by Foreign Enterprises or Individuals (the “FIP Measures”). The FIP Measures will take effect on March 1, 2010.

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