1.Conduct Necessary Due Diligence Before Transactions

It is common for overseas sellers to face issues of non-payment after shipping goods to Chinese manufacturers. From practical experience, pursuing criminal charges for nonpayment or civil liability often results in lost time and high costs. How can these situations be avoided?

We believe that conducting necessary due diligence on the manufacturer before the transaction is an effective way to reduce risk. Sellers can appoint Chinese lawyers to examine the buyer’s public information to learn about the company’s registered address (for example is it a legitimate office space or an individual residential address), registered capital (is it fully contributed, has there been any capital reduction), credit status, ongoing lawsuits, major judicial risks, and more. This allows sellers to gain a preliminary overview of whether the enterprise is operating normally. Current lawsuits are an especially important standard for credit checks because if an enterprise has unresolved cases, winning a judgment in the future may still not result in actual compensation. Therefore, before trading with a Chinese enterprise or considering litigation after a dispute, we believe that conducting necessary due diligence before the transaction can greatly reduce the risk of fraud.

2.Agree on Dispute Resolution Methods in Contracts

In one of our cases, an overseas seller specified an overseas arbitration institution for dispute resolution in the contract, but the specified institution did not exist. After a contract dispute occurred, the seller sought our help, and after reviewing the materials we initiated litigation. We recommend that when a defendant is a domestic enterprise, agreeing on a domestic international arbitration institution for jurisdiction is more convenient for trial procedure and enforcement. Our goal in resolving disputes is not just to obtain a favorable ruling but to help the seller recover payment or compensation. Thus, we focus on the enforceability of the ruling.

Additionally, even though it is a domestic arbitration institution, it can be agreed in the contract to use English as the arbitration language, simplifying evidence production for the seller and enabling easier understanding of court documents . Furthermore, despite the progress in international judicial assistance in recent years, , there is uncertainty and complexity in recognizing and enforcing overseas arbitration awards in domestic courts. . According to published data very few cases of overseas litigation and arbitration awards have been recognized in mainland China in recent years. Therefore, we strongly advise our foreign clients to choose Chinese arbitration institutions, such as the China International Economic and Trade Arbitration Commission (CIETAC) in Shanghai or Beijing, for dispute resolution in contracts with domestic buyers. This provides a more practical guarantee for resolving potential disputes.

3.Retain Relevant Communication Records and Preserve Valid Evidence During Transactions

in civil disputes, buyers, sellers, and courts often present three different versions of the stories. Why is this so? After a dispute occurs, both buyers and sellers will make statements in their favor, and the court or arbitration tribunal will ultimately judge based on the specific evidence provided by both parties. Therefore, we believe retaining valid documented evidence to support the claim is crucial during business transactions. When meeting or communicating with your business partners, we advise keeping business cards of both parties’ contacts, and set out their contact information (such as WhatsApp, email, cellphone) in the contract or other related documents such as BOL, invoice, etc. This way, in case of a dispute, full and complete records can recreate the entire transaction process, serving as important factual evidence in the ruling.

Additionally, it is also necessary to keep courier stubs, delivery notes, online signatures, etc for important document transmissions to prevent the other party from claiming non-receipt. Sometimes, when the other party does not appear in court, the judge or arbitrator will scrutinize the transaction details more closely, rendering the final ruling irrefutable. However, this increases the burden of proof on the plaintiff, so sellers should pay special attention to retaining transaction-related evidence in advance.

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Registration of a patent is an effective method to protect the intellectual property of a company and claim the exclusive ownership of a technology. However, because of the consequent publicity, it will also allow for easier imitation when the patent’s documentation is publicly revealed. Alternatively, a company may choose to keep the information private as a trade secret, but internal procedures must be adopted to prevent disclosure. The following are some factors to be considered when taking appropriate protection of IP rights by a company.

1.Different Requirements for Right’s Granting:

According to the Patent Law of China, any invention or utility model for which a patent may be granted must possess novelty, inventiveness and practical applicability. Whereas, granting of a trade secret has a relatively lower threshold. In China, for technical information not qualifying as a patent or business operational information (such as a client list or specifications of a client’s products) but which should be unknown to the public, and has economic value to the company, can be protected as a trade secret as long as the company has adopted processes to maintain confidentiality.

2.Protective Measures For Trade Secrets:

Recently, more companies choose to delay the filing of a patent even when the invention will meet the requirement for patent application, and have alternatively set up a strict procedures and sophisticated measures to protect their trade secrets, including
a. categorizing of technical documentation as normal, intermediate secret, and confidential, and restricting document accessas appropriate.
b. have employees and business partners sign non-disclosure agreements to prevent any improper disclosure or use of proprietary information without prior approval.
c. adding a non-compete clause to the employment contract is another practical way to prevent an employee who has access to trade secrets to work for a competitor.

3.Patent Detection:

Filing a patent is rewarding against the competitors manufacturing same or similar products also the intangible assets generated will also be reflected and evaluated during M & A transactions subsequently. After investing resources, money and effort when conducting research and development, many companies urge an immediate filing for a patent. This relies heavily on valid research, analysis and opinion from patent professionals in terms of identifying patentability. “Patent detection” is a cost-effective service for those companies who wants to identify and detect the potential patent rights that could be protected by law. In this process, IP professionals would arrange a series of meetings with the chief engineer, program developer and technicians to help the company analyze, categorize, divide, and select the most valuable and innovative points and advise on suitability for patent registration. A small fee is applicable for the initial consultation service, and at that point the potential costs would be submitted to the client for investigation of the possible innovation points and preparation and submission of the documentation.

Our experienced IP team is a department of Watson & Band, a comprehensive law firm with more than 300 professionals, which is regarded as a top tier law firm within the IP area. Our IP legal service includes detection, registration, and filing invalidation requests to the State Patent Re-examination Board, anti-unfair competition practice. You may contact us via our public account for more information.

The horrible boss does not just exist in the Hollywood comedy movie, they exist in real life too! Previously many of the foreigners working in china were assigned by their overseas corporate headquarters, but now many expats apply for their own jobs in China through LinkedIn or global headhunters. Thus, it is more frequent to meet these horrible employers who are random in hiring and firing people especially when the Chinese economy seems slows down. Unlike Japan or western countries, generally China has a higher mobility rate in terms of employment, which means people change jobs quite often, either actively or passively. Although I hope this won’t happen to you, but if one morning, your boss sets up a 1:1 meeting and requests you to submit your resignation letter or even worse, you received a termination notice either orally or written. Then, what you need to do is to take a deep breath and read the following guidelines:

Step 1: Ensure you have a valid Employment Permit and a Residence Certificate.
Only legitimate working status will be protected by Chinese labor Law. According to the Rules for the administration of Employment of foreigners in China, the foreign individual is obligated to acquire a working permit and a residence certificate to work legally in China. An unlawful employment status may be subject to penalties or repatriation by the national security department. When switching to a new job, foreign employees need to update the record or submit an application for a new approval as required. So, check these two documents, and ensure they are valid before seeking legal remedies with the labor dispute arbitration committee.

Step 2: Review the defaulting liability clause of the signed Employment Agreement:
Generally, if the employer has violated basic requirements of China employment laws and regulations such as, minimum salary, working hours, vacations, occupational safety & hygiene and social insurance, it will be punished by the administrative department. You may have a detailed contract that specifies damages to be paid if one party breeches the agreement. However, usually the employer minimizes the amount of damages when providing the contract to the employee. In this case, the employee may need to take legal proceedings to prove the loss suffered due to such illegal termination to get appropriate compensations,
Alternatively, if the agreement has specifically chosen to apply the Employment Contract Law of China, even if there is no defaulting clause in the agreement, the employer shall pay the compensation to the employee pursuant to the remedy clause of this law, which states: an average monthly salary within the previous 12 months × years of working in the company × 2, for illegal termination of the contract, and there are more stipulations to even further protect employees rights, such as a strict procedure for termination, notice period etc..
Note that there is a cap on average monthly salary amounts within some districts and cities when calculating the compensation.

Step 3:Try to collect the evidence in favor of yourself.
Since the compensation is usually calculated based on the average monthly salary, a foreigner employee should try to collect evidence to prove total compensations, including the monthly basic salary, overtime payments and bonuses. This can be a combination of bank statements, salary receipts or overtime application forms etc. The evidences shall be original and in writing unless you are not able to obtain the original document and in such cases, an investigative order from the judge may be necessary to obtain it. All related emails or other forms of electronic communication e.g. wechat should be saved and must be notarized to act as effective evidence. Audio recordings can also be helpful if the conversation can explain the cause of illegal termination.

Step 4: Negotiate with the employer
No matter if the termination is caused by your failure to meet your boss’s expectations or your boss just simply doesn’t like your accent, all they want is for you to leave ASAP, and while your motivation to continue to work for such a boss is low, you still need them to compensate you accordingly. Have a basic sense of the amount of the compensation the law can provide to you, and bargain above that number. If they are keen to hire your replacement immediately, then you might ask them to pay more.
Tip：Don’t sign anything unless you have reached agreement on the compensation for everything and that the payment schedule of the compensation to be paid is clear too. Most of the time the employer would ask you to sign a waiver note and exempt them for any further liability. Many employees signed and regretted afterwards.

Step 5: Proceedings for disputes resolutions: arbitration and litigation
If the disputes can’t be effectively solved through negotiation, a foreign employee may submit the application to arbitration up to one year from date of termination. The verdict shall be granted within 45 days by the labor dispute arbitration committee, and exceptionally extended by up to 15 days. Then if you don’t agree with the ruling issued by the committee, you may bring the case to the court within 15 days of receipt of their decision. Normally, you can’t file the case directly to a court, as the arbitration is a mandatory pre-court procedure in China.

Conclusion and Suggestion
There is controversy about whether the employment contract law of China shall automatically apply to the employment contract of a foreign employee. Shanghai’s 1st and 2nd Intermediate People’s court held different opinions previously and once reached different conclusions on similar cases. In 2010, there was a case where Shanghai’s 2nd intermediate people’s court granted award in favor of the economic compensation provided by employment contract law when there was no such provision in the agreement. But, recently there is a tendency that both intermediate people’s courts have started to have the same attitude towards the issue that no extra compensation will be granted if the agreement doesn’t provide such.
So, unless you have great bargaining power and have managed to clearly state the contract termination conditions and amount of compensation on the agreement, we suggest that you specify that the agreement comes under the application of Employment Contract Law when signing the employment agreement, which will avoid ambiguity when disputes occur, and most of the employers won’t deem it an unreasonable request based on our experience.

Disclaimer: The information provided here is based on the laws and regulations which are applicable and valid as of April 1st 2019. You should consult with an attorney concerning your specific situation.

Why do most of the Disney fairy tale movies end by getting married instead of starting with it? Because real marriage is full of ups and downs and worse, often it no longer lasts forever. According to the semi-annual report on divorce in China for 2019, the divorce rate has exceeded more than 50% nationwide. Marriage involving a foreign spouse can be even harder to maintain when there exists for example conflicts of culture, an unstable working environment or children’s educational issues to agree on. So, if unfortunately, you finally intend to take the first step, or your spouse has disappeared and you suddenly received a summons from the court, the following information is the very basic legal matters about divorcing in China that a foreigner would be well advised to know.

Governing law: If a Chinese citizen files a divorce case against a foreigner in China, Chinese law applies. Pursuant to applicable Chinese marital law, the divorce between a Chinese citizen and a foreign citizen shall be subject to the law of the country where the proceeding court is located. In a case which has been accepted by a Chinese court, matters of divorce and property division shall all be subject to Chinese law, while in regarding to the validity of the marriage, the law of the place of marriage registration shall prevail.

Important principles about Chinese marital laws and regulations:
o Property owned before marriage by one of the marriage partners belongs solely to that individual. Any property purchased after the marriage, are jointly owned by both parties unless a prenuptial agreement has been legally agreed in advance.
o Separation between the couple for more than two years constitutes a solid ground for filing for divorce.
o Generally, if the divorcing couple can’t reach agreement and if the child is below 2 years old, the guardianship will be granted to the mother. For a child above 2 years old, then other factors including which parent would provide the superior living environment are taken into account. When a child is above 8 years old, then the child’s opinion will also be a consideration. For the parent not living with the child, then they must allocate a fixed percentage of their monthly salary in the range of 20% to 30% as child maintenance payments to the parent granted custody. Some regional courts have issued internal guidelines that cap the maximum payment accordingto local economic conditions.

The above-mentioned principles are subject to some exceptions. For detailed provisions, please refer to Marriage Law of the People’s Republic of China.

Two ways to divorce:
1.By entering into a divorce agreement
If you manage to reach an agreement in relating to the property division and the guardianship of child with your spouse, you may go for registering the divorce in the same way that you got married. On the agreement, apart from the previously mentioned property division, child guardianship and allocation of educational expenses, other items such as the cause of the divorce, proprietary of the house, debt repayment shall also be arranged and set out in the agreement.

2.By litigation
In China, usually the judge will not grant a divorce if the filing party fails to prove the marital relationship is really broken and there is no chance to reconcile in the future. In such cases, without proper causes, the party may only be able to bring the case again to the court after another six months. So, most of the time, filing for divorce will become a tedious procedure unless one party is ready to pay a relative high compensation in exchange for changing their marital status.

For more information or legal services, you may reach us via the following QR, we will provide you more professional advices via telephone or by making appointment to our law office.