Court moves to solve foreign investment disputes

By Zhao Hongyi

On August 16, the China Supreme People’s Court issued new regulations on foreign investment disputes to frame a basis for the settlement of cases involving foreign investments companies.

Identify and solve disputes

“This document is a first draft of the first part of the regulations,” said Sun Jungong, a spokesman for the Supreme Court. “More regulations will be written as we mediate disputes.”

He said he hopes the regulations give local courts standard measures to use when settling the disputes – ones which will benefit all parties.

The regulations focus on conflicts involving foreign limited liability companies, including the effectiveness and legal consequences of equity transfer and anonymous investment.

In equity transfer cases, many investors use the time gaps between signing contracts and official approval for their own benefit. “The rules provide standard punishment for dishonest behavior,” said Liu Guixiang, a Supreme Court judge.

The new rules also specify various conditions for anonymous investment and nullify contracts where investors violate regulations or attempt to escape legal responsibility.

“Conflicts involving share transfer, anonymous investment and liquidation have seen a sharp increase, and the legal problems resulting from these cases can be extremely complicated,” the court said in a statement.