China Arbitration Update: New CIETAC Rules Effective January 1, 2015

The China International Economic & Trade Arbitration Commission (CIETAC) approved a new set of arbitration rules effective on January 1, 2015.  The 2015 CIETAC Rules include a number of important updates and revisions that bring CIETAC arbitration proceedings closer in line with international arbitration practices. The revisions include the following:
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New Customs Credit Measures

The General Administrations of Customs issued the Interim Measures of the Customs of the People’s Republic of China for the Administration of Enterprise Credit (the “Interim Measures”) on October 8th, 2014, which is effective as of December 1, 2014.

Under the Interim Measures, companies are classified by the China Customs into the following three categories based on their credit status: (i) authorized enterprise (认证企业); (ii) general credit enterprise (一般信用企业); and (iii) uncreditable enterprise (失信企业).

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China and Australia Conclude Landmark Free Trade Agreement Negotiations

Summary

On November 17, 2014, China and Australia completed their negotiations for a China-Australia Free Trade Agreement (“ChAFTA”) by signing a Declaration of Intent which contained the essential elements of the free trade deal and commits both countries to draft the legal text of the agreement for signature at a later date.  This agreement ends almost a decade of free trade negotiations between China and Australia.  The ChAFTA is significant because it will initially lower and ultimately eliminate tariffs on a wide range of exports between the two countries boosting bilateral trade between the world’s second largest economy and a significant U.S. free trade partner in Asia.

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China Court Ruled Infringement for Ambush Marketing in Film Industry

The term “Ambush Marketing” originally came from inappropriate sport advertisement in western countries. It involves a marketing strategy wherein the advertisers associate themselves with, and therefore capitalize on, a particular event without paying any sponsorship/license fee. As more and more film producers are engaging such marketing strategies to promote their films over recent years in the PRC, there have been controversies on whether Ambush Marketing activities should be deemed as infringement in the Film Industry.

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State Council Issues Guideline to Boost Sports Industry

On October 20, 2014, the State Council announced a guideline to boost China’s sports industry, named Opinions on Accelerating the Development of Sports Industry and Promoting Sports Consumption, Guofa [2014] No. 46 (国务院关于加快发展体育产业促进体育消费的若干意见) (“Guideline”).  The Guideline marks the first time the Chinese government has tapped into the economic value of the sports industry.  With the issuance of the Guideline, the market expects China to be the biggest fitness market in the world within the next twenty years.  In particular, foreign investors can see great opportunities as the Guideline encourages foreign investors to invest in sports industry in China.

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China Bank Card Clearing Market — A Feast for Foreign Investors?

China plans to promote consumption and open up its bank card clearing market. This is the outcome of a State Council meeting chaired by Premier Li Keqiang on October 29, 2014. “All qualified domestic and overseas enterprises can file applications for setting up bank-card clearing institutions in China.” The State Council has not given any specifics on foreign investors’ qualification currently, but said that the country must improve management, prevent risks to safeguard the legitimate interests of card users.

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China to Open Up Its Hospital Market to Foreign Investment on a Pilot Program

On August 27, 2014, the National Health and Family Planning Commission (“NHFPC”) and Ministry of Commerce (“MOFCOM”) jointly released Notice on Conducting Pilot Work of Setting Up Wholly Foreign Owned Hospitals (关于开展设立外资独资医院试点工作的通知) (“Notice”) dated on July 25, 2014.  The Notice allows foreign investors to set up hospitals in the form of wholly foreign owned enterprises (“WFOE”) in Beijing, Tianjin, Shanghai, Jiangsu Province, Fujian Province, Guangdong Province and Hainan Province[1].  Under the Notice, either setting up a new hospital or acquiring an existing private hospital is allowed.  This move marks a significant step of the opening-up of China’s medical markets to foreign investment.  Previously, the equity ratio of foreign investment from outside Hong Kong, Macao and Taiwan in a hospital should not exceed 70%[2].

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China State Council Approves Adjustment of Special Access Management Measures in Shanghai Pilot Free Trade Zone

Following the big change where registration was replaced by filing for establishment applications of companies excluded in the Negative List, China State Council further approves adjustment of the special access management measures for qualification requirements, share ratio restrictions and business scope restrictions in some industries in the Shanghai Pilot Trade Zone to allow foreign invested enterprises engaging in some business activities that were previously restricted or prohibited.

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More Transparency- New Enterprise Information Disclosure Rules Take Effect

China has recently passed new laws requiring enterprises to disclose important information which the public can access. On October 1, 2014, new rules came into effect, Provisional Rules on Enterprise Information Disclosure (企业信息公示暂行条例) (“Enterprise Information Disclosure Rules”).  One reason behind this new legislation is China’s desire to establish a national credit system founded upon transparency of information relating to registered enterprises.  A national credit system will allow the public to access and rely upon important enterprise information when making investment decisions.

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Supreme Court’s Latest Interpretation on Late Payment Interest

The Supreme People’s Court of China recently issued an interpretation on how to calculate the interest accrued on delayed payment – Interpretation of the Supreme People’s Court of Several Issues Concerning the Applicable Law for Calculating Interest On Delayed Payment in the Enforcement Action (FaShi [2014] No.8).

The Interpretation made a clear distinction between General Interest and Penalty Interest, provided guidance on when and how to calculate Penalty Interest, including interest payment in foreign currency.

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