Court moves to solve foreign investment disputes

In the three decades since, the government has been improving its investment environment through subsequent revisions to the Contract Law and Corporation Law. In 2001, when China joined the World Trade Organization, it began adopting the standard international economic and business laws.

For the most part, the government has fulfilled its promise to change and open. It has created a very stable economic, business and judicial environment for foreign investors, which made China one of the top business partners worldwide.

The momentum of foreign investment has not slowed.

But disputes are becoming more and more common as increased interaction exposes holes in the existing laws and regulations. Many dishonest investors and their partners use these holes to their advantage, Liu said.

In equity transfer, contracts normally need approval from both local and central authorities. But on the market, share values can fluctuate dramatically between the two steps. Some parties have refused to fulfill their contracts or postponed submissions to boost their own benefits.

“The regulations say that once a contract is signed, you cannot decline to fulfill your end or withdraw,” Liu said. “If you postpone the approval, the benefits must go to your partner.”

Anonymous investors are also common in joint ventures. Chinese courts protect anonymous investors as long as they are accepted by other board members and do not violate Chinese law. “We won’t protect the benefits of investors only in name,” Liu said.

The change is intended to better protect the benefits of real investors.