The largest Yuan Fund Is to Be Set Up by Non-Mainland-Based Private Equity Firms !

According to the South China Morning Post today of 5 May 2008, direct investment fund CDH Investments and buyout fund Hony Capital - a unit of Legend Holdings, the parent of the world's No. 3 computer maker Lenovo Group - will each set up a mainland registered yuan fund of 5 billion yuan, Caijing magazine reported.

Large institutional investors such as the National Social Security Fund were likely to become founding investors of the funds, which are expected to be completed by the end of this month, it said.

It could be the largest yuan funds to be set up by non-mainland-based private equity firms.

Jason's comments: the PE market has extremely been low in the past five months or since late last year. The "CDH Investment, Hony Capital to set up funds totalling
10b yuan" is no doubt stimulating and encouraging to the low investment market, and also indicate to the greatest extents that the PE market in mainland China is still promising and bright in the near futures or in the long run.


The 7 Habits of Highly Useless Corporate Lawyers !

1. Be risk-averse at all times. Clients have come to expect this from their lawyers. It's tradition. Honor it.

2. Tell the client only what it can't do. Business clients are run by business people who take risks. They need to be managed, guided, stopped. Don't encourage them.

3. Whatever you do, don't take a stand, and don't make a recommendation. (You don't want to be wrong, do you?)

4. Treat the client as a potential adversary at all times. Keep a distance.

5. Cover yourself. Write a lot to the client. Craft lots of confirming letters which use clauses like "it is our understanding", "our analysis is limited to..." and "we do not express an opinion as to whether..."

6. Churn up extra fees with extra letters and memoranda and tasks. Milk the engagement. (If you are going to be a weenie anyway, you might as well be a sneaky weenie.)

7. As out-house counsel, you are American royalty. Never forget that.

(Notes from "me": "Ernie from Glen Burnie", not his real name, is an unreliable but wise childhood friend who likes the works of Hunter Thompson. EFGB is now a partner at a Washington, DC law firm. For years he has claimed that the following--by an unknown and long-dead lawyer, and dated 1836--was discovered during the 1980s in the ruins of an old Episcopal church in a northern Virginia town near our native DC. I would believe EFGB--except that I doubt that the word "weenie" was much in style in the antebellum American south)


Danone & Wahaha Dispute: Rules of Law May Not Become A Failure !

The Shenzhen Economic Daily of 17 April 2008 made an official comment and review on the subject matter coming to the points, and its contents are cited here for reference.

The Danone and Wahaha' negotiations are still coming to the deadlocks, even though their disputes have always been full of hot points at intervals. Since releasing to the public of the dispute one year ago, the two parties have got used to different sorts of "pouring shits fight". For the time being, Wahaha chairman ZONG, Renqing is deeply involved in the "Tax Evasions Gate', but such kind of fight has also labelled Danone as a "cunning" merchant.

There are no winners in respect for the "flesh fighting war", for Wahaha chairman ZONG, Renqing has suffered from "sick" fame, while Danone has "lost" hearts of the ordinary people. We are happy to see that the Chinese government's stance is still clear and cool about the matter. Media quoted an relevant official from the Chinese Ministry of Commerce as saying yesterday that they can not make any comments on ZONG, Renqing'a personal income tax evasions, but believe that the tax incident and the Danone / Wahaha dispute should not have many connections. For the time being, the Ministry of Commerce(Foreign Investment Division) is performing the governmental duty to mediate therein by offering an negotiation platform. The dispute was originally an economic conflict, then evolved into a "political incident". The Ministry of Commerce's stance has clearly shown its determination of disolving the disputes under the rules of law.

It is no doubt that Wahaha chairman ZONG, Renqing, who has been claiming himself as a "Nationalist Banner Raiser", is in the passive position, for various facts disclosed in the past one year have let the ordinary people cast doubts over the inconsistencies of Mr. ZONG's statement and his actions, e.g. nationalities of ZONG's wife and daughter(s), offshore companies, personal tax evasions at issue, even though all behind may show Wahaha's images, but compared with what Mr. ZONG's highly-profiled statement of "state economic safety", "protections of national brands", etc, all of which have led the ordinary people to form feelings that they have been "made good used of" or "rocked".

The "water mouth fight" has not positioned Danone as a winner, but a loser, for to pour dirty water to the rival party will firstly make dirty of its own hand, too. Danone is also facing a new media challenge. Take the huge amounts of money in relation to Mr. ZONG's "Tax Evasions Gate" for example, the said money was paid by Danone in the form of "service fees", but what is the definition of "service fees" ? Some media state that to analyze the time of payment, the said money could be deemed as commercial bribery. Should the commercial bribery be legally defined and listed, Danone shall not only "shit" Wahaha's chairman ZONG, Qinqing, but also "shit" itself.

The year-long dispute is still of no hope but seemingly indicates mutual failure. Wahaha's chairman ZONG, Renqing may fail, Danone may fail, but the only thing that can not lose is our rules of law.

First of all, there must be a definite definition and explanation about the some hundred millions of evasive taxes. No matter how Mr. ZONG makes explanation in the regard, and despite of the dispute fact between Danone and Wahaha, there can not be any "cunning" things in terms of the tax evasions.

In additions, whether the "service fees" shall be defined as "commercial bribery" shall also require definitions. Once there are sufficient evidences concerned, the responsible persons shall not only be Wahaha chairman ZONG, Renqing, but also Danone.

Last but not the least, from the current Wahaha / Danone dispute, we sincerely hope to be able to establish efficient resolution channels, for it is truly anticipated that there will occasionally be more commercial conflicts among the "national enterprises" and multinational companies, but how to avoid such sorts of commercial disputes to be politicized, and how to build up a fair and transparent dispute resolution option remain to be realistic issues. What has made us feel happy is that the responsible Chinese Ministry of Commerce has been maintaining an objective and rational mind.


Marks & Spencer Has Spent 10 Years to Probably Win A VAT Case ! Do You Dare to Easily Make A Lawsuit in Britain or China or Other Jurisdictions ?

According to the South China Morning Post of 11th April 2008, the British leading retail operator of Marks & Spencer will get a full refund of the HK$54.06 million in tax that British authorities charged for years on its teacakes, the European Union's highest court said.

The firm has been fighting with authorities for more than 10 years to get a refund of the value-added tax it paid between 1973 and 1994.

Jason's comments:

1. It is generally the legal right for a corporate / individual person to make a lawsuit in China or in Britain or in any other jurisdictions, but the plaintiff has to think it over and over again whether it is truly necessary and also whether they could prepare or have prepared sufficient amounts of money to pay for their lawyers and may probably endure the years-long time and sufferings before a lawsuit is actually brought to a court.

2. It is no doubt a good alternative to settle a dispute via negotiation and mediation before and during litigation, in order to save time, money. Relatively speaking, to find an acceptable solution may still be much better than pursuing a marathon-long satisfactory judgment, without talking about potential legal risks.

3. Lawyers may help clients, but only the clients themselves have disposals and absolute rights to instruct and lead how to appropriately settle a dispute or tough case to much extent.


American Pfizer Has Recently Failed in Its 9-year-long Lawsuit in China over its Trademark of Viagra

According to the Beijing Youth Daily of 8th April 2008, the American Pfizer Pharmaceuticals Limited has recently be judged to be a loser to a Chinese enterprise by the Beijing Higher People's Court over the Chinese-character trademark ownership of Viagra, and the final judgment rules that Pfizer's requests against a Chinese company can not be upheld and further decides that the Pfizer does not own the trademark ownership of Viagra in mainland China.

In its writs to the Chinese court, Pfizer stated that the trademark related lawsuit started from 1998 when the magic pill of Viagra freshly came into existence, the Cantonese WeiErMan Pharmaceuticals Limited immediately applied to the Chinese trademark authorities for registrations of the Chinese-character trademark of Viagra, resulting in Pfizer unwillingly to register Viagra in China some other Chinese characters of WanAiKe. The Cantonese company not only declared the Chinese-character of Viagra was its own trademark, but also consented other companies to make use of it. Pfizer brought lawsuits to the Chinese court and expected the court to rule that Viagra is a famous trademark unregistered in China, and further rule that the Cantonese company as defendant to compensate Pfizer RMB500,000.

Beijing No.1 Intermediate People's Court of 1st instance tried the case and decided at last to overrule Pfizer's requests, followed by an appeal to the Beijing Higher People's Court by Pfizer.

Beijing Higher People's Court of 2nd instance, after trying the case, believes that according to the independent protection principal for trademarks, Pfizer does not own relevant interests in the trademark of Viagra in mainland China; in additions, verification of famous trademark is beyond the court's jurisdiction. Therefore, the court has recently overruled again the legal requests from Pfizer, ending the 9-year-long trademark lawsuit in China.

Italian Chocolate Firm Ferrero Wins Court Battle Against China Fakes

According to the South China Morning Post of 9th April 2008, A five-year-old Sino-Italian chocolate war has ended, with the mainland's highest court ordering a Chinese manufacturer to stop producing nutty knock-offs of italian giant confectioner Ferrero's signature gold-wrapped chocolates.

The Supreme People's Court also ordered manufacturer Montresor to pay "symbolic" damages of 500,000 yuan(HK$557,104) for making fake Ferrero Rocher chocolates.

Victory was sweet for the Turin-based chocolatier, which said the ruling was important for all Italian firms because copies of "Made in Italy" products were widespread.

"It is already hard for Italian companies, and foreign ones in general, to get into China, overcome resistance put up against foreign produts, build up a commercial network and invest in the country, only to be faced with a strong and invisible enemy such as the counterfeiting industries ," the firm said.

Ferrero Rocher chocolates are a popular gift for mainlanders, especially during the Lunar New Year, and almsot ubiquitous in Hong Kong.

The confectioner said it had spent more than US$1 million battling counterfeiters but would look at further investment on the mainland.

The ruling was applauded as a landmark victory by upmarket brands combating illegal Chinese-made clones, but legal experts said similar judgments in the past had proved hard to enforce.

There are at least 35 chocolate products that look like Ferrero Rocher in mainland supermarkets, according to mainland media reports.

Ferrero began legal action against Montresor and its virtually identical "Tresor Dore" chocolates in 2003, as it was the only imitator judged dangerous enough to take a real bite out of Ferrero's market share.

Montresor registered its Chinese trademark, "Jinsha", an unofficial but popular translation for the Italian chocolates, in the early 1990s. It registered "Tresor Dore" in 2003 for its cheap imitations, which were priced at one-third of the genuine product.

Yet Montresor was named a national prestigious brand and has exported throughout Southeast Asia since 2000.

Jason's comments:

(1)IP infringement lawsuits and other influencial commercial litigation in China may also be time-consunming or as long as the marathon race, this 5-year-long litigation case is just another live example. Please bear in mind that commercial litigation in China is not (much) shorter than Hong Kong or other common law countries.

(2)for international companies related (IP) litigation cases in China, a large porporation of battling fees shall also be prepared in advance, for this particular case, US$1 million is used up, while for the Danone/Wahaha (joint venture / IP disputes) case, US$2 million has been spent by Wahaha so far,...

(3)litigation for justice should continue forward, but fake products may also survive, the playing game of cats and mouses may still be widespread in the developing country of mainland China and other countries or regions with similar economic living standards.


Schroders Bets on QDII Funds Growth in Greater China

According to The Standard of 8 April 2008, UK fund firm Schroders hopes to double its managed assets in the next five years from the current US$16 billion(HK$124.8 billion) by tapping growth opportunities in China, Hong Kong and Taiwan, its Asia top executive said yesterday.

Bank of Communications Schroders Fund Management Company, its joint venture with BoCom(3328), won approval to launch funds for global securities investment under the QDII(qualified domestic institutional investor) scheme last year.

Schroders Asia Pacific chief executive Lester Gray said the company would launch a new QDII fund this year through the joint venture depending on market conditions.

The fund firm currently has 31 QDII funds through four foreign banks in the mainland.

Gray Expects China investors to be skeptical about offshore in the short term after overseas equity markets peaked at the end of last year, saying it would take time for them to regain confidence.

"It is bad timing," he said.

"It has nothing to do with the QDII product itself. Plus, it has just been six months , too short to tell."

Despite the highly volatile market conditions this year, Gray said the company doesn't see any redemption pressure in the first quarter.

"Retail investors are still confident that things will go better."

2008: The Year of M & A for Mainland China

The following article is taken from Jack's Corner in earlier April 2008(for more details, please visit: www.gcsl.info)

The CPI is constantly increasing. The RMB is projected to accelerate its appreciation to RMB6 to USD1 by the end of 2008. The banking reserve ratio increased to its highest point of 15.5%. A stronger monetary policy has been announced. The export tax rebate incentive has been cut down dramatically...

Chinese Domestic Enterprises (“CDE”), especially the small and medium size CDEs, will certainly face a tough business environment in 2008. These CDEs will not only need to re-think their sales and market strategies, but they also will need to consider various other issues including, but not limited to, financing, forex, cost management, investment portfolios, etc. Given these issues, many CDEs are currently looking for foreign financing or co-operation to solve their difficulties.

Therefore, 2008 will be the year of Mergers and Acquisitions (“M&A”) and good opportunities for foreign investors to enter or expand in the China market.


What Are the Benifits to Us If We Hire CHINA LAW OFFICE As Our PRC Lawyers ?

A Thailand businessman's daughter came to my firm yesterday afternoon with his brother in order to get Chinese legal consultations on their Thai father's recent detaining by the Hainan provincial prosecutor/presecurate, the meeting lasted almost one and a half hour. What struck me most at the meeting, however, is their question of why they shall hire my firm to be their PRC lawyers to deal with their father's tough case, which may necessarily require us lawyers to fly to Hainan back and forth for several or probably quite a few times, even though they were referred to us by a chief Hong Kong arbitrator.

In fact, this is not the first time that we are asked such a sort of question, generally applicable to the new-coming clients. I had to think it over again and also decide now to list as follows the main reasons so that I may easily give them the replies via emails or read them aloud in the futures:

1. China Law Office lawyers are all licensed PRC lawyers, no different from the other Chinese lawyers, but we are headquartered in Hong Kong beyond Mainland China, focusing on serving the Hong Kong and other overseas clients.

2. China Law Office is the sole Mainland Chinese law firm nowadays to be named with "China", for according to the PRC Lawyers Law, no Chinese law firms can be named with "China", my firm is exceptional, for it was established and is always existing in Hong Kong which adopts the "one country two legal system" state policy, beyond Mainland China. Such a "big" name may to much extents reflect its special status, almost all of my firm's lawyers were originated from Mainland China, but had once studied or lived abroad for some years before their joining in the firm, having gained years of overseas experiences which can no doubts help serve better the Hong Kong and overseas clients.

3. China Law Office is a Chinese law firm with the PRC Ministry of Justice backgrounds, or to be more exact, the Beijing based PRC Ministry of Justice established in Hong Kong in 1987 its "window company" of China Legal Service (Hong Kong) Limited, which is still existing, and China Law Office was established in 1997 in Hong Kong under the umbrella of China Legal Service (Hong Kong) Limited, 2 or 3 partners of China Law Office are designated by China Legal Service(Hong Kong) Limited, even though legally speaking, China Law Office is a partnership commercial law firm with unlimited liabilities, just as all the other law firms in Hong Kong, and/or as most of the other Mainland Chinese law firms. Therefore, China Law Office has more or less / indirect governmental backgrounds or at least we lawyers are officially easier to communicate with the mainland Chinese central/provincial/municipal governmental authorities, courts, public bureau and prosecurate, also there is no need for us lawyers to worry about or concern more about the local governmental stances or "threats" upon (local) lawyers.

4. China Law Office lawyers have practiced Chinese law in Hong Kong for more than 20 years, for before 1997 when China Law Office was officially established, all of our lawyers had practiced the Chinese law in the name of / within China Legal Service (Hong Kong) Limited, but after 1997 in the name of / within China Law Office, having gained almost two dozens of legal experience for the Hong Kong and overseas clients, having known how to better serve the Hong Kong and overseas clients, having earned widespread reputations, otherwise, how can we survive in the most expensive city of Hong Kong for 20 years(note: we lawyers have not been financially supported by the legal company or any other governmental authorities)?

5. China Law Office is headquartered in Hong Kong, with liaison offices(not representative offices) in Shenzhen, Shanghai and Beijing. Moreover, we have also established a nation-wide cooperative lawyers' network covering up almost all capital cities of different Chinese provinces, may easily instruct any of such cooperative local Chinese lawyers to take immediate actions for our overseas clients, or make efficient searches for any Chinese companies/properties/land, or deliver and receive documents as necessarily required by some local Chinese authorities or by clients, or to do other simple / minor matters.

6. With regard to our professional fees and disbursements, we quote competitive service fees, in fact, we have noticed that my firm's hourly charge is almost the same as or generally lower than those leading law firms in Beijing and/or Shanghai, for they usually quote professional fees for overseas (M & A or PE) clients in 2007 and 2008 for US$500 up per hour, while we usually quote the hourly rate for US$450 around. As for the travel expenses, they are separately billed to the clients as cost, no big differences in the regards between my firm and the leading Chinese law firm.

7. China Law Office has a list of Hong Kong and world leading clients, annually on their outside lawyer list, reflecting their strong trust and confidence in us lawyers.

Isn't it clear enough for the Hong Kong and overseas clients to consider using China Law Office as one of their selective PRC law firms in order to better protect their lawful interests in relations to their complicated with unique cultures Mainland China affairs ?


Bankers May Not Necessarily Concern More About Money Claims in Litigation, But about Formalities & Procedures

A few days ago, I posted an article entitled "Hei, Be Careful. Your Trustworthy Lawyers May Probably Betray You Sooner Or Later"(see my blog dated 19 March 2008).

I received a phone call this afternoon from the Hong Kong bank staff, who told me that they are quite interested in the "dropping from the heaven" properties currently worth around HK$12,000,000, but expects to know where the properties are located and also wants to know how many percentage of claimed money(when the properties are ultimately sold out)may be used as professional fees if we help get back the properties or money.

The bank surely can not be informed now of whereabouts of the properties, for lawyers have to survive as well !

The bank emphasised, however, that even though they are interested in cooperation with lawyers on the project, they may not offer professional fees more than 30% out of the claimed money or worth of the properties on contingency basis, 30% is generally their maximum payment to lawyers, or else, no bank responsible or staff may dare to work with us, for over 30% payment as professional fees will be beyond their controls and is not the banker's normal practice, they may risk taking responsibilities for that ! If the bank does not cooperate with us on the project for sakes of over 30% as professional fees, they follow banking formalities and procedures, and may not have any potential liabilities upon themselves. What a strange way of thinking the bankers have? If the bank were a private owned or money making company, they would surely take different/practical actions or may give different responses.

The banking client is seemingly different from other individual and money-making corporate clients ! Lawyers should have to take different stances toward different clients in terms of professional fees charges !


M & A Deal Making in China – Getting in on the Action

(This article was previously published by LexisNexis® Martindale-Hubbell® Counsel to Counsel Magazine on January 2008, and was mentioned on 25 March 2008 by Dan Harris on his China Law Blog. According to Dan, a gross summarization of this article is that the basic questions to ask (due diligence) when doing a China acquisition are really not much different from those asked in a domestic US deal. The difficult and distinctive part comes in finding the answers)

Having a meaningful footprint in China has become a strategic imperative for multinational companies from around the world. The attraction is China's seemingly insatiable demand for products, services, capital and technology. George D. Martin, partner and chair of the Faegre & Benson...

Having a meaningful footprint in China has become a strategic imperative for multinational companies from around the world. The attraction is China’s seemingly insatiable demand for products, services, capital and technology. George D. Martin, partner and chair of the Faegre & Benson China Practice, sees the current acquisition boom in China as the logical culmination of foreign investment trends that he first observed when practicing in Shanghai in the mid-1990s. Martin expects this M&A trend to continue. But in the years to come, he advises, it won’t be just foreign companies on the buy-side of cross-border M&A deals involving China.

China’s accession to the World Trade Organization (WTO) in 2001 opened new sectors to foreign investment and eliminated many restrictions on structuring those investments. As a result, joint ventures that were in vogue among early China investors waned. Multinationals acknowledged the diligence and in getting local managers to accept the ways of their new owners.”

Martin believes, however, that thorough and realistic integration planning makes it possible for U.S. companies to achieve success with their new businesses in China.

Dave Sampsell, associate general counsel for Minneapolis, Minn.-based ADC Telecommunications, Inc., agrees. Sampsell has worked on acquisition and joint venture transactions around the world for ADC, a global provider of network infrastructure equipment and related services. He found that analyzing and negotiating an acquisition in China involves a range of issues either unique to China or more sensitive than they might be elsewhere.

“Above all, you need to think holistically about how to structure the purchase and how you will address diligence issues you uncover relative to the impact on future operations, including any ongoing relationship with the sellers of the business,” he says. “Obviously this is important in any deal, but the legal, cultural and language differences between the United States and China really heighten the importance of thinking not only about legal solutions to issues but the business impact of those solutions.” This involves deliberate fact checking during diligence, heightened attention to relationship-building and careful consideration as to how acquired operations will be overseen and integrated.

Love It or Leave It

The good news is that the number of viable targets in China is increasing. State-owned enterprises are being privatized and early investors in Asia are divesting to realize the rewards of their early market entry. But, “expect intense negotiations over price,” Martin warns. “The strategic imperative driving interest in China drives up valuation. In addition, local management is often pressured by their shareholders to explore an IPO on one of the booming Chinese stock markets. And, there are financial investors emerging on the scene.” As a result, Martin has seen instances where acquiring companies paid multiples of 12 to 18 times EBITDA—significantly higher than current valuations in the United States in comparable industries.

Martin recommends that buyers emphasize their strategic value. “Chinese companies are cross-cultural integration and operational problems with their partners. Initially, this realization, coupled with China’s market liberalization, led to the establishment of more wholly foreign-owned enterprises as foreign businesses were convinced that such problems could be avoided with their own “greenfield” start-up operations. While this proved true, many companies found organic growth to be a frustrating—and unacceptably slow—process.

More comfortable with market risk, facing aggressive plans for business in China by their competitors and determined to make this market a more significant component of their global operations, U.S. multinationals embraced M&A in China. While not free of risk, M&A has proved to be the best means by which to achieve strategic growth in China. Martin cites statistics indicating nearly 300 cross-border acquisitions of Chinese companies in 2006, up 16 percent from the year before; and M&A volume is highly motivated by the prospect of absorbing international best practices, worldwide branding and distribution, and accessing the deeper pockets of a strategic foreign buyer to help with expansion,” he says. At the same time, Martin cautions that Chinese owners take great pride in the companies they have built and may be reluctant to change their ways post-closing. “If the management of an acquired company does not embrace the new ownership culture within six to nine months of closing, it never will. The best solution is to part ways, cut losses and move on,” he asserts.

Look Before Leaping

The challenges associated with buying and operating a business in China make exhaustive legal and financial due diligence essential. Sampsell recalls, “It was impossible for us to do all the diligence ourselves. First, we don’t have many people who read and speak Mandarin, much less in areas of needed expertise.” He says that ADC invested more than a year negotiating and structuring a recently announced acquisition, relying on a multilingual team in China that included Faegre & Benson as outside counsel and a global accounting firm. ADC also retained a market research firm to verify the target’s market assessments and business plans. .

Even so, risks can’t be avoided entirely. Martin says that a buyer can mitigate those risks, however, by positioning its own managers to at least initially control finances, protect intellectual property and oversee operations. He also adds, “Being prepared to make a quick change is imperative.” For example, under PRC law, the chairperson is the company’s “legal up even more in 2007. Yet, achieving critical mass is not simple. Most acquisitions are small by developed market standards—a systemic challenge in China resulting from local companies operating in highly segmented and regional markets. Because of this, “foreign investors need to complete more deals for significant market penetration,” Martin says. “That means having a greater deal flow. The challenge is that buyers are largely on their own in finding targets. Investment bankers in Greater China tend to be focused on capital markets and only the very largest M&A deals.”

Thinking Holistically

“Acquisition targets in any emerging market usually have poor financial controls, inadequate record keeping, spotty regulatory compliance and a history of questionable business practices,” Martin cautions. “Buyers can also face very real cultural hurdles in obtaining full disclosure during representative”—a role with significant power. Martin recommends installing your own designee as the new chairperson to allow for swift action if problems occur. Still, reliance on expatriates is not a longterm solution. Martin recommends a transition period of no longer than three years, during which expatriates train local successors.

The Payoff

The frenzy surrounding China can be intoxicating. This is an exciting market, with many competitors hunting for the same targets. Committing to the market and engaging with a fully dedicated team is important. But, Martin notes, “the most successful buyers look at many deals, carefully choose which to pursue, undertake exhaustive diligence, make realistic valuation and risk decisions, and instill strong governance, with ongoing training and oversight of local management.”

Those who do so will find ample rewards in China for many years to come. And, they will be better positioned to fend off their rapidly emerging Chinese competitors, whose commitment to globalization—with increasing means to achieve it—will soon add additional buy-side pressures to this dynamic market.


Only Time Can Tell If Tycoon Chan Is Guilty of Sour Grapes Or Is Going to Have the Last Laugh on His Rivals

To see a Hong Kong tycoon's fresh comments upon mainland China's deep-valley property market

Not so long ago, Hong Kong developers thought they were going to strike gold with mainland China's property and joined the stampede to build up land banks. Notable among them was Sino Land with its HK$4.4 billion auction win in Chengdu, followed by Wharf (Holding) with an even higher HK$7.24 billion.

Consider what happened next: most mainland property stocks have fallen more than 50 per cent from their peaks on worries that the central Chinese government will move to cool off the red-hot property sector.

We could not put it better than Hang Lung Group and Hang Lung Properties chairman Ronnie Chan Chichung, who vowed to spend US$4 billion in building his property empire but lost out in one of the high-priced Chengdu auctions.

In his letter to shareholders this week, Mr. Chan points out that previously sceptical Hong Kong players seem to have cast off all restraint in an effort to grab a slice of mainland property, pushing prices sky high.

He grumbled about a certain Hong Kong developer who bought a commercial plot in a thriving city in western China at a unit price that was some 20 times higher than Mr. Chan's Shenyang Doumugong property bought one year earlier.

"The two projects are very similar in almost every aspect," wrote Mr. Chan.

"Just as striking is the fact that the price paid by our Hong Kong friend is more than the totality of all of our land purchases in the mainland including those of our two Shanghai projects."

There is definitely a limit to developer's tolerance for land costs, he argued. So Hang Lung did not buy any land in the past six months and is patiently waiting for the market to get back to normal.

"Fortunately, the central government stepped in towards the end of last year and brought things back to a more sensible state. Some of those who bought land only a few short months ago might be regretting their decisions."

Only time can tell if Mr. Chan is guilty of sour grapes, or is going to have the last laugh on his rivals.

(Note: the aforesaid article is from the South China Morning Post of 29 March 2008)

Lawyers in Mainland China Or Solicitors in Hong Kong May Help Clients Generally, But May Not Help Themselves Sometimes !

1. A Chinese lawyer is ordered by a Beijing court to return groundless fees to his clients

According to a report by Beijing Youth Daily in earlier February 2008, Mr. XU, a lawyer of Beijing Heng Cheng Law Firm has recently been ordered by the Beijing Haidian court to be detained for 15 days.

Mr. XU is said to have illegally obtained agency fees twice while he represented clients, and were sued to the Haidian court thereafter. The court had issued two judgments for the lawsuits, demanding Mr. XU to return the illegal fees to his clients. Mr. XU, however, had not performed the judgments. The judgments plaintiffs alternatively in 2005 and 2007 applied to the court for their enforcements.

The court has issued an enforcement notice to Mr. XU, and also seized his property, but Mr. XU presented to the court stating that there were faults of the two judgements requiring judicial reviews, and expecting the court to extend enforcement periods. Thereafter, Mr. XU had no more contacts with the court, no speaking of returning of any judgments' fees.

2. A Hong Kong solicitor's request for anonymity is rejected by a Hong Kong Court

According to the Souch China Morning Post of 20 March 2008, the identity of a solicitor who is claiming damages from his former employer for psychiatric problems would not be protected, a Hong Kong District Court judge ruled.

The District Court judge David Lok Kai-hong dismissed the application made by Tam Kam-tong for an anonymity order in relation to his claim for employment compensation arising from an incident. He asked the court to conceal his identity fearing future discrimination, but the judge said it did not apply in this case.


Magic Power of Money Let Father Kill Son in China !

We have heard at intervals or read on newspapers sometimes that family members or relatives argue or file writs in a court over unfair distributions of wills assets or corporate interests and properties and the likes, but we have never or seldom heard father kills his sons for sakes of money.

A Tongnan court in mainland Chinese northwestern Chongqing had to reschedule a hearing this Tuesday because of overwhelming interest in the case, which involves a man murdering his son for money.

No details are released, but some of the 300 observers who wanted to see the case said they had taken their children and husbands along for a "lesson".

The unbelievable story was reported by Chinacourt.org, and further printed on the South China Morning Post of 26 March 2008.

Are there any Chinese lawyers to defend the killing father for escaping capital penalty ? The answer is yes in legal sense, but no in moral sense !

Good Lawyers Are Legal Supporters, Not Simply Money Takers from Clients !

One of my clients has recently introduced me a minor case with less money to claim, sincerely expecting that I can handle the matter. The story goes as follows:

A private-owned company in Guangdong province sued a Hong Kong company a few years ago at Zhuhai Intermediate People's Court(the "Zhuhai Court") and then appealed to the Guandong Provincial Higher People's Court, a judgment was ultimately issued in favour of the Guangdong company. The loser Hong Kong company, however, did not perform the judgment, the judgment was then duly applied to the Zhuhai Court for enforcement.

Given that Hong Kong and Mainland China adopts "one country two legal system" state policy, the judgment issued by any Mainland Chinese courts can not be legally admitted and acknowledged for enforcement in Hong Kong, the Guandong company Chairman has to come down to Hong Kong several times, expecting to have good talks for getting most of the money back

Since the judgment amount is just over RMB320,000(equivalent to US$45,000), not much not less for the Guangdong company boss, in additions, he has always been refused to meet with the Hong Kong company boss or management, even though it almost takes him a whole day each time to come down to Hong Kong and return home, the boss becomes extremely angry and is introduced to my firm. According to the boss, if I can help get back the RMB320,000 or whatever, all the claimed money can be used as our professional fees, for he just wants to get completely released of irrigation and upsets.

I am a Hong Kong based Mainland Chinese lawyer, having rights to issue Demand Letters and to have talks and negotiations with the Hong kong company boss or management,if they do not respond to us, we may cooperate with Hong Kong solicitor to make a new lawsuit at a Hong Kong court against the Hong Kong company by using the Chinese judgment as a cause of action or as a strong legal evidence. I reckon there is a great possibility to get back the money, for the Hong Kong company is still in operations and its boss or directors or management staff are said still frequently to travel to Mainland China, by the Chinese immigration rules and regulations as well as legal practices, their Home Return Permits for entering and leaving Mainland China may be detained via certain procedures(i.e. to apply to the Zhuhai Court at first and then the court may contact immigration departments), under such circumstance, they can not leave China after arrivals unless they settle the the judgement.

I have told my client that my firm can not accept his 100% offer, 50% of the successful claims is enough or at minimum, for good lawyers are legal supporters, not just money takers from clients, even though all lawyers like to make more professional fees but on good faith and in the best interests of clients as well. Sound correct ?!


Could the Hong Kong Lawyers Charge Their Client If They Can't Duly Deliver Professional Legal Comments Or Opinions ?

As a Hong Kong registered Chinese lawyer, I have had a meeting with two Hong Kong solicitors(one Solicitor and one senior associate)this morning in a corporate client's office in Central of Hong Kong, as previously scheduled before the Easter Holiday. The meeting has lasted almost two hours, with 7 people present.

To my surprise, the two Hong Kong solicitors seem to know little about the Hong Kong civil and criminal procedural law as well as court practices or experiences, even though the meeting was originally designed to focus on listening to their professional legal comments and opinions. Several basic questions were raised at the meeting and their vague replies went as follows:

1. Can emails or emailed printouts/documents be used as legal evidences at Hong Kong court?(the solicitors' replies: it seems OK, probably should be all right)

2. What civil and criminal consequences can false signatures generally lead to ? Or to be more exact, if a person has signed some change of directors agreements, but refuses to sign more similar documents as necessarily required by governments for change of directors formalities, even though he has been informed again and again for 5 months via emails and middleman or via lawyers or even paid to consult independent legal opinions, the person still refuses to sign more necessary documents, and the relevant may be forced to cease operations, under such circumstances, what civil and criminal consequences may occur to the "false signer" in the best interests of the company on good faith ?(the solicitors' replies: not sure, have to check later, it seems criminal liabilities may happen to the "false signer")

3. Do you have any suggestions of what to do now and in the near futures ?(the solicitors' replies: to send Demand Letter at first to the refusal person in the name of law firm)

4. ...

The two Hong Kong solicitors may be familiar with documents work, but obviously have no experience in commercial litigation or court procedures, but with common sense. Can they still issue bills and charge the client two hours for their "professional" work ?


Hei, Be Careful ! Your Trustworthy Lawyer May Probably Betray You Sooner Or Later !

An associate in my firm told me yesterday that there is a Guangdong lawyer who is eagerly approaching us for expectations of a possible cooperation on a Chinese court judgment enforcement case.

The Guangdong lawyer once represented a corporate client located in Guangdong province in 2003 as its defence lawyer, for his client was then sued by a Hong Kong bank at a Chinese intermediate people's court where his client was incorporated to repay outstanding loans of more than HK$60M in principal. Although the Guangdong lawyer worked hard to protect his client, they still lost the case, the judgment demanding his client to repay the Hong Kong bank HK$60M plus interests. The losing client was deep in financial troubles and soon ceased operations. The Hong Kong bank just got minor cash and some invaluable corporate interests in a faraway Chinese city.

As former trustworthy lawyer of his client, the Guangdong lawyer knows well that his client is still owning several properties in Macao worth at least for HK$12M. His client paid up to purchase those properties quite a few years ago while they had been underdeveloped, but had no time to get them then it became collapsed. The properties are being let out by the developers.

The Guangdong lawyer expects us to contact the Hong Kong bank as my firm has been in Hong Kong for over 10 ten years with good reputation and may know the bank. He is correct, I immediately picked up the phone today to call the Hong Kong bank once I received and looked at the judgment. The bank of course feels good to hear that, and has agreed to take into good considerations of how to cooperate with the Guangdong lawyer via us. It is understandable that the Guangdong lawyer expects to get highly paid on contingency basis.

Should I make congratulations to the Guangdong lawyer and feel thankful to him for referring the cooperative case to us, or shall the Guangdong lawyer be morally accused of ? This is a tough question worth thinking by most clients as well !


Private Equity Firms Top Five in the World

1.Carlyle Group, with US$32.5 billion

2.Kohlberg Kravis Roberts, with US$31.1 billion

3.Goldman Sachs Principal Investment Area, with US$31 billion

4.Blackstone Group, with US$28.36 billion

5.TPG Capital(formally known as Texas Pacific Group), with US$23.5 billion

(Notes: the afordsaid rankings come from an recent report in the South China Morning Post of 17 March 2008)


Private Equity Firms Hot in Hong Kong Today, Focusing on Greater China Investments

1. Baring Private Equity Asia

The Baring Private Equity Asia has recently been reported in the South China Morning Post on 11 of March 2008(Reuters) that it stuck a deal to invest US88 million in China CBM Investment Holdings(CCBM), a Mainland China's producer of coalbed methane. Chengwei Ventures is also an investor in the deal.

CCBM was formed from a management buyout of Asian American Gas, one of the first foreign companies to engage in the exploration, development and production of coalbed methane.

2. Rocket Capital Investment

The firm was established by the mainland basketball star Yao Ming's finder of Leslie Alexander, to cash in on his new mainland business connections. Mr. Alexander is its sole investor, and Forbes magazine estimates his worth at US$1.5 billion.

In 2007, the firm poured US$200 million into some of Hong Kong's biggest IPOs. In 2008, the firm is planning to invest another US$200 million to focus instead on buying listed shares and making other types of investments, but will be more careful this year, according to its managing director of Kenneth Huang.

Rocket Capital's investment are in Great China, focusing on the concessions and management of sports facilities, travel and leisure, which includes railways, airlines and the vehicle sector; and entertainment, such as sports televisions and other media, but avoids companies that it feels mistreats animals, based on Mr. Alexander's love for animals and support for the Humane Society. He once declined to invest in a national hot pot chain before it went public, for he prefers his lambs alive.

3. Harvest Capital Partners

Harvest Capital Partners was formed in May 2006 by the Chinese state-owned conglomerate China Resources Holdings, to launch or run two overseas private equity real estate funds, including one focused on Middle East cash, with combined sized of about US$1 billion, encompassing the Greater China market, including Hong Kong and Marcau.

It has invested in seven projects in Beijing, Chongqing, Guiyang and Hong Kong, involving 70 per cent of the raised fund. It will announce more deals in Tianjin and Wuhan shortly. Among the projects, only one is related to China Resources Holdings, subject to its good returns to the funds.

4. TPG Capital(formally known as Texas Pacific Group)

As one of the world's largest private equity firms from the United States, the buyout specialist TPG Capital is sharpening its focus on strategic mainland Chinese industries amid the economic slowdown in other markets around the world.

Ms. Mary Ma Xuezheng, managing director in Hong Kong for TPG, who jointed the firm six months ago(or in May 2007) after her retirement from computer giant Lenovo Group as chief financial officer, said that some of the most attractive mainland sectors for TPG include financial services, retail, technology and resources. There are also new opportunities related to the environment, including in terms of clean energy and environmental protection.

"All the parters in TPG are very focused on China", Ms. Ma said.

TPG is currently holding controlling interests in Shenzhen Development Bank and private lender Minsheng Bank. TPG is also among those seeking Morgan Stanley's stake in the investment bank of China International Capital Corp.


The Days of Limited Enforcement and Few Labour Regulations in China Are Over ! Don't Blame Labour Contract Law for Rising Costs, A Top Official Says !

Starting from 1 January 2008, the Chinese Labour Contract Law has come into effects and becomes legally binding on all the enterprises and employees in mainland China, including the PRC based foreign investment enterprises or the so-called products processing enterprises familiar to most of the Hong Kong businessmen. The new labour contract law intends to protect both parties of employers and employees, but is negatively commented by the employers for it seemingly protects employees' interests, leaving employers with higher costs and liabilitiesby, widely welcomed by the employees for limits placed on overtime work, doubling the monthly pay of a worker if the employer fails to enter into a contract with the employees.

The Chinese central government official may tell one side of the new Labour Contract Law. The Chinese Vice Minister of Labour Sun Baoshu said recently that manufacturers were wrong to blame the new Chinese labour contract law for the rising cost of production. Mr. Sun also rejected calls to amend the legislation, because the manufacturers had violated the legal rights of their workers(i.e. while maximising profits by cutting costs, the companies had exploited workers)for years and misunderstood the law.

The Hong Kong manufacturers or its national people's congress representatives may tell another side of the new Labour Contract Law. The labour contract law may lead to lay-offfs and shutdowns of more than 10,000 mostly Hong Kong owned factories in the Pearl River Delta, those factories are also facing increasingly stronger yuan, soaring raw materials and production costs, higher corporat income tax as well as unfavourable state policies on exports and tax refunds.

The Employment Promotion Law , which also came into effect on 1 Janury 2008, specifically prohibits employment discrimination on the basis of ethnicity, race, sex and religion.

The new law on the Mediation and Arbitration of Employment Disputes is scheduled to take effect on 1 May 2008, which will surely worsen the rising factory floor tensions. The arbitration bill was open to abuse as workers would be allowed to file claims or complaints against their bosses for free, which would lead to more disputes. The arbitration will make it easier for the employees to bring a legal action against their employer by extending the time for the employees to bring a claim, reducing the cost of certain actions, and limiting the right of the employer to appeal.

The foreign investment companies in China therefore shall actively consider taking or studying immediate steps to bring their human rsources practices into compliance. This would include, for example:

1. Company Rules

Companies need to ensure that their policies(including codes of ethics, anti-harassment, and discrimination policies)go throught the new, statutory "consultation" procedures.

2. The Employment Contract Law may prevail over existing company policies, so any rules that have not gone through this statutory procedure might not be enforceable.

3. Employment Contracts

An increasing number of employees will be entitled to "open terms"(or permanent) employment contracts. Since contracts can not be terminated at will, companies must revisit their hiring practices and possibly find ways to limit the number of long-term employees.

Also, most companies will need to strengthen their human resources systems to increase their ability to terminate employees within the framework of law, if necessary. And outside consultations to employment lawyers or labour specialists shall frequenty/at intervals be made, as the saying goes: one needle saves nine.

4. Staffing Agencies

Companies should stop using staffing agencies for employees who are not "temporary, auxiliary, and substitute" personnel. Such employees could be considered de facto employees. Such de facto employees could be entitled to double wages and a permanent employment contract.

(Notes: the aforesaid contents assemble from several recent reports, especially the one written by Andreas Lauffs and Joseph Deng from Baker & McKenzieon as shown in the South China Morning Post of 10 March 2008, with Jason's amendments or adjustments or comments)

There Are 6 Government-backed Private Equity Funds in Mainland China Today, with 4 More State PE Funds Pending Approvals

Private equity funds are popular in the United States and other western countries or regions for a decade। China is catching up with the trends too. Since late 2006, China has established 6 government-backed private equity funds, and China is actively considering approving 4 more state-funded private equity firms. We list blow the current existing 6 state PE firms as follows with some notes:

Bohai Industrial Investment Fund(the first yuan-denominated private equity fund was created in China in late 2006, focusing on domestic buyout deals)

Shanghai Financial Industrial Investment Fund(one of the five yuan funds approved in 2007)

Shanxi Coal Energy Industrial Fund(one of the five yuan funds approved in 2007)

Guangdong Nuclear Power Industrial Investment Fund(one of the five yuan funds approved in 2007)

Sichuan Mianyang High-Technology Industrial Fund(one of the five yuan funds approved in 2007)

China-Singapore Hi-tech Industrial Investment Fund(one of the five yuan funds approved in 2007)

The State Council is pending approval to four new government-backed private equity funds to enhance the country's industrial sector of water treatment, shipbuilding, equipment manufacturing and urban infrastructure। Huayu Water Industry Funds is one of them to raise 30 billion yuan to finance water treatment projects in the major western cities of Chengdu and Xian.

(1)the five yuan funds approved in 2007 are worth a combined 56 billion yuan.
(2)the government-backed funds have their own edge because they are more resourceful in their home market, therefore, those state funds are a challenge to the big-name global private equity firms.
(3)since the five yuan funds all have a geographical focus, however, Beijing may also have reasons to worry about regional bias. The central government is worried that governments at lower levels would interfere in the running of the funds, which are intended to be profit-driven.
(4)top officials are worried as well that cash-rich funds would not do well under government directives.


Hollywood Studios Settle Suit in Mainland China Over Films for Internet Cafes

Five Hollywood studios have reached a settlement with a Mainland Chinese internet company accused of providing cyber-cafes with illegal copies of their movies.
Walt Disney Pictures, 20th Century Fox, Columbia Pictures, Universal Pictures and Paramount Pictures sued Beijing Jeboo Interactive Science & Technology in Shanghai in September and December last year for supplying internet cafes with software that allowed users to download and watch illegal copies of 20 Hollywood movies।
The Motion Picture Association of American said Jeboo had paid “significant” compensation.
(notes: the aforesaid report is made in the South China Morning Post of 7 March 2008 with minor adjustments)
Jason's Comments:

1।The said lawsuit was originally filed with and tried by the Shanghai court, rather than by the Beijing court where the defendant Beijing company is located, is for the Chinese civil procedural law requirement that a tort case shall be dealt with either by the court where the infringement occurs or by the court where its “consequence” occurs, subject to choice of the plaintiff. The Hollywood Studios sued the Beijing company in Shanghai is for such Chinese civil law provision and they chose Shanghai court for lawsuits, probably they believe that it may satisfy their best interests or they might feel more appropriate.

2.Civil settlement inside or outside court is generally indeed an appropriate method and practical solution for all litigation parties, on the preconditions that (1)it is relatively easier to distinguish which party may lose a case to great extents, for lawyers of both parties may objectively come to the conclusions by law and by their rich experience; (2)a case may last year(s)-long; (3)reasonable or acceptable compensations may practically be offered by the defendant(s) for whatever reasons; in additions, (4)most of the Chinese judges prefer to settle their cases via mediation, and the chief judge may insist on or repeat his stance in the regard, for sakes of an earlier closing of a case, legal requirements, etc. In fact, most of the Chinese civil cases are settled in court or outside court via mediation, and the current Hollywood studios tort case is just another updated example.


China Needs To Establish Small Claims Tribunal

The Mainland China could turn to Hong Kong’s Small Claims Tribunal as a model for dealing with small economic disputes, a Bank of Communications director said yesterday.

Most of the mainland’s economic disputes involved less than 5,000 YUAN(HK$5,485), new Chinese People’s Political Consultative Conference delegate Jiang Chaoliang said.

“These cases add immense pressure to already deeply strained judicial resources, resulting in disproportionately high litigation cost, sometimes even higher than the disputed amount,” Mr. Jiang said in his proposal to the conference.

He said that without cheaper and simpler litigation processes to settle these small claims, the cases would “increase unnecessary expenses for litigants and society”.

The concentration of these cases in large and medium-sized cities also created a high court backlog and failed to lead to timely resolution.

This, he said, could threaten the building of State President Hu Jintao’s vision for a “harmonious society”.

Mr. Jiang said the mainland could turn to overseas experience and Hong Kong’s.

He applauded Hong Kong’s 30-year-old Small Claims Tribunal. The system had flexible, mediation procedure, lawyers were not allowed, and the tribunals dealt with cases such as bank debt, damaged goods and service-fee disputes.

“This organization contributes greatly to social fairness and raising people’s legal awareness to fight for their rights,” Mr. Jiang said.

He suggested the mainland adopt a similar system and greatly reduce costs by barring lawyers from cases and hearing cases behind closed doors.

Issues such as bank-card debt recovery, public service fees and mobile phone charges could be handled.

Jason’s Comments:

China is holding in Beijing its more-than-a-week-long annual National People’s Congress and the Chinese People’s Political Consultative Conference, and many delegates raise different proposals. The aforesaid is one of such proposals as reported in the South China Morning Post of 5 March 2008.

China does not have Small Claims Tribunals, even though it has “Branch Courts” system. By my more than 10 years of Chinese legal practice and the Chinese actual state situation with a vast population of more than 1.3 billions, most of them are grassroots residing in the countryside or poor areas of cities, and their litigations are more concerning about minor amounts of money or “minor arguments” with respect to their daily life, the proposal being currently issued by a banker delegate rather than by a legal delegate is a little bit surprising, but very practical. The Chinese state legislative body should actively consider such a positive proposal and manage to establish Small Claims Tribunal system in the shortest possible time.


Critical Issues for the Overseas Investors in Mainland China Today

1.At present, human capital has become a critical issue for many businesses in the mainland and executives based there are learning the hard way the amount of time that must be dedicated to human resources related issues

(The aforesaid remarks are said to be reflected in the newly released mere title of “The Little Red Book of China Business” by Sheila Melvin who spent seven years at the United States-China Business Council advising executives on politics, economics and the practicalities of doing business in 2008

2. China ranks 53rd out of 68 jurisdictions on the Fraser Institute’s Policy Potential Index of attractive investment destinations. The low ranking is partly due to paranoia. Almost 75 per cent of mining companies cited restricted access to geological data as a deterrent to investment.

The big problems, according to the report’s author, Fred McMahon, are mainland shortcomings on the rule of law. “Different departments or levels of government try to impose conflicting regulations, making life impossible,” he notes. And even where central government do not forbid foreign investment, local government paranoia and hostility combined with ambiguous and inconsistent regulations act as an effective deterrent.

The aforesaid contents are reflected in the South China Morning Post of 3 March 2008


Woman swallows evidence against her in Mainland China

According to a brief report on the South China Morning Post of 27 February 2008, A Zhengzhou court in Henan province has agreed to hear a case against a 48-year-old woman who swallowed a paper bill to avoid repaying a 1.2-million yuan debt to a friend, Xinhua reports. The woman swallowed the note because the bill indicated she “borrowed” the money rather than simply “owed” it, a distinction that allowed the debtor to ignore the debt after two years.

Jason’s comments:

No matter she borrows or owes 1।2-million yuan from/to his friend, as indicated in the swallowed bill, the woman shall all be liable for repayment if the two years of statute of limitation does not expire and also other supportive evidences from plaintiff are legally admitted by court.

According to the General Principles of the Chinese Civil Law regarding statutes of limitations or limitation of action:

Except as otherwise stipulated by law, the limitation of action regarding applications to a people's court for protection of civil rights shall be two years;

The limitation of action shall be one year in cases concerning the following: claims for compensation for bodily injuries, or sales of substandard goods without proper notice to that effect, or delays in paying rent or refusal to pay rent, or loss of or damage to property left in the care of another परसों.

A limitation of action shall begin when the entitled person knows or should know that his rights have been infringed upon। However, the people's court shall not protect his rights if 20 years have passed since the infringement. Under special circumstances, the people's court may extend the limitation of action.

If a party chooses to fulfil obligations voluntarily after the limitation of action has expired, he shall not be subject to the limitation।

A limitation of action shall be suspended during the last six months of the limitation if the plaintiff cannot exercise his right of claim because of force majeure or other obstacles। The limitation shall resume on the day when the grounds for the suspension are eliminated.

A limitation of action shall be discontinued if suit is brought or if one party makes a claim for or agrees to fulfillment of obligations. A new limitation shall be counted from the time of the discontinuance.


Can an engagement ring originally purchased for US$243,000 be legally demanded back via lawsuits in Mainland China, after the wed splits up ?

(This article entitled as “Engagement ring woes for investor” appears on The Standard dated 14 February 2008 with minor adjustments, for reference only)

A shanghai born investor is suing the former sister-in-law of US President George W Bush after she refused to return an 11-carat diamond engagement ring after she agreed to be wed in October 2006.

Gerald Tasi Jr, 78, said in his lawsuit the “sole and exclusive consideration, motivation and reason” for offering the ring to 55-year-old Sharon Bush – formerly married to the president’ younger brother, Neil – was for their contemplated married.

Originally purchased for US$243,000(HK$1.89 million), Tsai is asking for the ring’s fair and reasonable replacement value of US$434,000, after appreciation.

Their engagement was called off on January 23. Tsai had asked for the ring back but Bush had refused to return it, according to the lawsuit, filed earlier this month at the New York state Supreme Court in Manhattan.

Sharon and Neil Bush, 53, were divorced in April 2003 after 23 years of marriage and three children।
Jason’s Comments:
Suppose the case is to be tried by a Mainland China court !
According to the Chinese civil procedural law and relevant judiciary interpretations in relations to the court evidences, the plaintiff has to prove objectively and convincingly in courts that the “sole and exclusive consideration, motivation and reason” for offering the ring to 55-year-old Sharon Bush – formerly married to the president’ younger brother, Neil – was for their contemplated married।

Pursuant to the Chinese Civil Procedural Law of Article 63, evidence shall be classified of 7 categories as follows: (1) documentary evidence; (2) material evidence; (3) audio-visual reference material; (4) testimony of witnesses; (5) statements of the parties; (6) expert conclusions; and (7) records of inquests। In additions, any one of the above-mentioned evidence must be verified upon cross-examinations in courts before it can be taken as a basis for ascertaining a fact।
Can the plaintiff successfully do that ? Or else, the investor has to get ready for losing the case in Mainland China। Probably he is lucky enough to have the case be brought up and tried by the common law country of the United States।


If you dare not to pay off credit card debt of RMB40,000, you have to prepare to be jailed for 3.5 years in Mainland China

Credit card fraudster jailed for 3.5 years for failing to pay back RMB40,000 in credit card debt

According to South China Morning Post of 13 February 2008, an unemployed Shenyang man has been jailed for 3.5 years for failing to pay back 40,000 yuan in credit card debt, Xinhuanet reports.

ZHANG, Zhimin, 33, was convicted of fraud because he failed to pay off the debt on four credit cards used to buy luxury goods।

Comments: In Mainland China, some civil cases may turn into criminal cases, and the division line is not always clear, that is why the Chinese police are occasionally complained of being used by powerful persons as a tool to collect outstanding debts.


Malaysia judge got gifts from lawyer, inquiry told

(The article is taken from the South China Morning Post of 5 February 2008, by Associated Press in Kuala Lumpur of Malaysia, for reference ओनली)

A high-profile lawyer accused of manipulating judicial appointments gave expensive gifts to Malaysia's former top judge and offered to buy him a house, the lawyer's brother told a public inquiry yesterday।

The government-ordered inquiry is investigating whether V।K. Lingam, a well-known lawyer, used his influence with politicians to rig the appointment of senior judges – a claim that as severely embarrassed the judiciary.

The other key figure in the investigation is Eusoff Chin, Malaysia's chief justice between 1994 and 2000, who is said to have been close to Mr। Lingam.

The scandal surfaced when opposition politicians leaked a video in September that showed Mr। Lingam allegedly speaking on the phone in 2001 with another former top judge Ahmad Fairuz Sheikh Abdul Halim about the promotion of judges.

Mr। Lingam's brother, Thirunama Karasu, testified that he drove Mr. Lingam to Mr. Eusoff's home seven or eight times in 1995, possibly to discuss cases, and that he once personally delivered to Mr. Eusoff a handbag and wallet that Mr. Lingam bought from Italy.

Mr। Thirunama also claimed he was with Mr. Lingam and Mr. Eusoff when they surveyed a house in Kuala Lumpur that Mr. Lingam planned to buy for Mr. Eusoff in 1995. Mr. Eusoff declined the place because he wanted a bigger one, Mr. Thirunama said.

Both Mr। Lingam and Mr. Eusoff have denied the accusations, with Mr. Lingam claiming his brother was unstable.

Mr। Thirunama said on Monday he “wasn't delusional”, and that he was “110 per cent sure I'm not mad”.

Comments: We hear occasionally that some Chinese litigation lawyers expect to form special relationship with judges in order to win cases. But we have never heard in China a lawyer can extend his powerful influence to select senior judges. Malaysian lawyers “step one forward” than their Chinese counterparts. We are happy to see as well that the Malaysian government is a hopeful country to some extents from revelations of the case, no matter it is for political reasons or simply purifying its indecent judiciary system.


Legal framework for doing successful business in Mainland China

Law and regulations
Obey all Chinese laws and regulations, or else run the risk of sanctions or fines. Also be aware of any relevant regulations belonging to other countries. For example, if you are exporting technology from the US to China, check the US Bureau of industry and security regulations as American law prohibits transfer of some sensitive technologies without a license.

Make sure that if your partner is a subsidiary and defaults on payments, you will be able to collect from the parent company. Verify your partner's background with independent sources, such as corporate due diligence consultants. Ensure that your negotiating partners have the authority to make key decisions. You could lose a lot of money if you make a deal with the wrong partner.

Do not enter into an agreement without sound advice from your legal counsel. Make sure that all signing parties have a common understanding of the terms. In your contract, specify exact terms of payment, performance standards and time lines and what should happen in case one party defaults. Do not agree to previsions in a contract that are not under your control. For example, you may be asked to specify in the contract that your partner must visit your overseas production facilities but you can not guarantee that he/she will receive a visa.

Payment terms
Check with legal counsel to determine the specific payment terms that are customary for a certain type of transaction. Protect yourself from loss by using financial instruments with an international bank, such as letters of credit. If you do not want to use a letter of credit, get your partner to agree to make advance payments. Avoid unsecured payments after delivery. For large projects, a combination of advance payment and payment after delivery with a letter of credit are common with Chinese companies.

International property rights
Register copyrights in China, even though theoretically copyrights for creative works are automatically in force under the Berne Convention, the international agreement on copyright. File trademarks with the State Administration of Industry and Commerce and notify Customs; file patent with the State Intellectual Property Organization to receive protection and notify Customs. China has numerous laws that encourage, restrict or prohibit investments in specific industry sectors. Learn in advance if any of these laws apply to your business when investing in China.

(Note: the aforesaid article with minor adjustments is cited from South China Morning Post of 26 January 2008 by Nixon Chan as senior executive commercial banking, HSBC, for reference only)


What bank accounts do you need for making investments in China ?

What bank accounts do you need for doing business in China ? When entering the Chinese business environment, foreign companies should plan ahead, even for basic things such as opening bank accounts.

1. Foreign companies not registered in China

If your company is a non-resident entity in the mainland, you may open a foreign currency account only with a foreign bank, but not a renminbi(“RMB”) account.

‧Temporary capital account

This is used to hold capital and funds for the payment of expenses incurred before the establishment of a foreign invested entity. The account requires approval of the State Administration of Foreign Exchange(the “SAFE”) before being opened.

‧Foreign direct investment account

This is used to hold funds for payment related to a company's direct investment, including mergers and acquisitions, in China. The account requires SAFE approval before being opened.

‧Other account

This is set up for receiving foreign currency funds only and the funds can not be converted into RMB. Opening this type of account does not require SAFE approval.

2. Foreign invested entities registered in China

If your company is a foreign invested entity registered in China, you can open foreign currency accounts or RMB accounts with a foreign bank provided the bank has a foreign currency service license or a RMB service license.

‧Foreign currency accounts

A number of foreign currency accounts are available to foreign invested enterprises registered in the mainland, including capital accounts for receiving capital injections, settlement accounts for collecting and paying current items in foreign currency, foreign debt special accounts for receiving loan proceeds from overseas, foreign debt special loan repayment accounts and foreign currency loan accounts. Foreign invested enterprises can open foreign currency settlement account, foreign currency loan accounts and repayment accounts directly with banks without prior approval from SAFE, but SAFE approval is required for opening of other types of foreign currency accounts. Approval for opening settlement accounts is accompanied by a ceiling set for the company, which is determined and annually reviewed by SAFE. Funds received by settlement accounts in excess of the present limit must be paid out or converted into RMB within 90 calendar days.

‧RMB accounts

The primary types of RMB accounts are the basic account and general account. No matter how many banks you are banking with, a company can open only one basic account in China. You can open as many general accounts as you like for RMB collection and payments, but cash can only be withdrawn from the basic account, salary and bonus payments can solely be taken from the basic account as well.
(Note: the aforesaid article is taken from the South China Morning Post dated 26th January 2008, written by Shenglin Ben as head of commercial banking, HSBC China, with minor adjustments)


Hong Kong Judge hit for prejudice in retrial ruling, worth learning by the Mainland Chinese judges

(This article is extracted from the Hong Kong newspaper of The Standard on 22th January 2008, by Patsy Moy, with minor adjustments)
The Court of Appeal in Hong Kong yesterday ordered a retrial for three men who had been jailed for allegedly stealing Buddhist pines and accused the deputy district judge who found them guilty of prejudice, arrogance and using sarcastic and insulting remarks.

The three Chinese mainlanders – Chan Wah, Cheung Yanyau and Ko Kwan – had been sentenced to jail terms ranging from four years to 56 months after being convicted by Deputy District Judge Symon Wong Yu-wing on charges of illegal stay and conspiracy to remove and steal the Buddhist pines from a country park. They appealed to the High Court last month.

In allowing their appeal, Judge Peter Cheung Chak-yau said the conduct of the trial judge and his remarks may have given the public an impression he had not taken a neutral and unbiased stand.

“I have been reading numerous judgments during my 30 years in the legal sector. I have never come across any judgment by current judges that contained remarks as biased, sarcastic and insulting as this one,” Cheung said in his ruling, which was written in Chinese.

“Such words should not have appeared in an advanced and open legal system like Hong Kong.

“I believe the wording used by Mr. Wong failed to comply with the requirement for judges who need to analyze the facts of the case in a rational manner. So it (the judgment) is unacceptable,” Cheung said.

In the judgment, Wong was quoted as describing one of the defendants as “smart” after he chose not to testify.
Wong had also wished the defendants “good luck” after announcing their jail terms.

The other two judges on the panel, Maria Candace Yuen Ka-ning and Wally Yeung Chunkuen, shared Cheung's views. Yeung said the audio recording of the trial showed Wong to be arrogant when reading out the judgment, giving the impression he despised the defendants.

“Judges have a solemn and important duty to fulfill when they are in any trial because their rulings wold impact on the personal freedom (of defendants),” Yeung said.

“So judges should be cautious about their conduct and their remarks and any ambiguity or improper manner should not be allowed. Not only has justice to be done, it has to be seen to be done”.

The alleged offenses happened in November 2005. The defendants were arrested during an anti-illegal immigrant operation in Sai Kung during which police found 10 Buddhist pines, a saw, two blankets and some clothes.

The trio were unable to produce any travel documents when arrested.

Comments: the aforesaid Hong Kong judge report may never happen in Mainland China, for the Chinese court judgment will not be retried for such “improper attitude or stance of trial judges”, but simply by the rigid conditions as prescribed by the Chinese civil procedural law and relevant judiciary interpretations. In additions, credits or faiths of the plaintiff or defendant are also not taken into accounts while the Chinese judges try civil cases, but may widely be considered by common law Hong Kong court. That is why people sometimes say that it is easy to be a Chinese judge who just need to look at the filed evidences and written laws. Hopefully, the Chinese judges may still learn something from the Hong Kong judges via this particular case of how to maintain the fair judiciary system.



Police in the Lithuanian city of Klaipeda were baffled to discover that a woman arrested for shoplifting last weekend had been registered as dead a month earlier.

The woman's parents had mistakenly identified a body found in a forest as that of their 27-year-old daughter, Natalya Pavlova, who disappeared in November, police said.

It emerged that Pavlova was alive and well and living with her boyfriend in the same town.
“Her parents identified the corpse as their daughter. What could we do ?” deputy police chief Petras Mikalauskis said.

Comments: by the Chinese civil procedural law, court evidences are classified as 7 kinds as indicated in my blog dated 12th of January 2008, among which testimony of witness is one of them, but deemed less persuasive, and the Chinese judges normally require plaintiff to present more objective evidences concerned. The careless parental case as mentioned above could prove to much extent that the Chinese courts are correct.
(Notes: the aforesaid story is extracted from the South China Moring Post dated 20 January 2008, having been previously reported by Reuters.)



“After making this court report, I will be retired, and my consideration of issues will be limited. Today, however, I want to fire a canon of statement ! Right now, there are a great number of law school students that can not do the court work, and they have to be trained from the very beginning !”, said the Guandong Provincial Higher Court President LU, Botao, out of his personal feelings and experiences, at the Guangdong provincial people's congress yesterday afternoon, as reported by the Canton Daily of 18 January 2008.

“That the governments develop economics can not simply look at the GDP, and to train talents are also not simply to look at the gross school admission rates. Academic certificates do not represent capabilities, academic certificates do not represent personal morals, academic certificates do not represent characters, this is vitally important.”

“The more legal knowledge a judge masters, the worse he will be if he is not good at morals, because he is more aware of how to avoid the blank areas of law. I believe this is true of the other professions. Therefore, please do keep in mind that we shall never simply reply on the academic certificates.”

“Take the governmental purchases by public auction for example, it is very good ! We heads all want to support that, for we can be more relieved and feel no worries. The realistic fact, however, is that it is still not effective enough, and the purchased things are also not the cheapest and best !”, LU, Botao said at last, making emphasis that how to maintain high efficiencies during the course of administrations by law is obviously a test of the governmental work.

Comments: Probably it is good news to learn that LU, Botao as Guandong provincial higher court president is to be retired soon or as earlier as possible, for what he recently states aforesaid is obviously misleading to much extents. Should the court judges not have academic certificates of LL.B, LL.M and J.D., how can the judges be selected objectively in China today ? This is vitally important, especially when you come to know the realistic facts that there are few senior Chinese lawyers who want to become judges of any levels, and also when you have to admit that Mainland China is still a strong connection society today. Should the Chinese court presidents or governmental heads of various levels always select or hire the persons they believe “qualified”, how can the outstanding talents with excellent academic certificates without social connections become judges or governmental staff ? What LU said may be true to some extents, but it could be much worse than the current situations if his retiring free remarks become realistic. How could a person be capable of the court work without necesssary legal academic certificates of LL.B, LL.M or J.D. ? No one says the academic certificates may soly be replied upon. What LU emphasises, however, is truly not appropriate and could be misleading, for fresh law graduates are still the mainstreams for recruiting would-be / new Chinese judges in the short and middle terms, and it is quite understandable that the new law graduates with good academic certificates require a few years to be qualified for being judges, this is true of lawyers and other professons as well. According to LU, the Chinese courts shall probably recruit most of its judges in the futures from every walks of life, regardless of their legal adacemic certificates ? Probably LU has forgotten how he becomes a senior judge or court head.



(The report is extracted from South China Morning Post dated 15 January 2008, having originally been released by Agence France-Press in Colombo, Sri Lanka)

A Sri Lankan man has been released after spending 50 years in prison without ever having been charged, his lawyer said yesterday.

D.P. James, now 80, was arrested in August 1958 for attacking and wounding his father with a knife.

He was sent to jail, then moved to a psychiatric hospital, and then sent back to jail – where he was forgotten about.

Lawyer Dharmavijaya Seneviratne said James, who was never put on trial, was a victim of prison bureaucracy.

“James went to jail when he was 30. He has been robbed of his youth and is now a grey-haired man of 80 with failing eyesight,” Mr. Seneviratne said.

The prison’s situation was only noticed last month after he fell ill and was admitted to hospital in Colombo, forcing prison authorities to go through his paperwork.

The lawyer said James, originally from a small village, did not complain about his long-running detention because he was ignorant of law.

A local court released him last week on bail, and apologized for the “rare, pathetic incident”, a court official said.

“We are preparing the papers to file a case seeking compensation for 1.5 million rupees(HK$108,300) and use the money to pay for his medical and other welfare bills,” Mr. Seneviratne said.

The sum amounts to HK$2,165 for each year spent behind bar.
Comments: Should the oridinary persons' various rights be not actually enforced and forcefully protected either in Sri Lanka or in Mainland China, by means of law and public medias, the responsible staff in charge be not heavily fined and pay out of their own pockets, and be further served for years behind bars by law, the power-abusing incidents will still happen sooner or later.



(The article is taken from the HK Magazine of 11 January 2008 with minor adjustments, for reference only)

A 45-year-old Hong Kong man has recently been ordered by a Shenzhen court to pay HK$1,500,000 as compensation to his legal wife after he was found guilty of living with a concubine. He is also facing a jail sentence of up to two years. In the Mainland China, it is illegal for a married man to live with “another woman”. Pundits worry that this case may trigger more Hong Kong wives to report their husbands to the Mainland Chinese police.
Comments: By the Chinese Civil Procedural Law(Article 63), litigation evidence shall be classified as 7 kinds as follows: (1)documentary evidence; (2)material evidence; (3)audio-visual reference material;(4)testimony of witness; (5)statements of the parties; (6)expert conclusions; and (7)records of inquests. Any of the above-mentioned evidence must be questioned, cross-examined and verified before it can ultimately be accepted as a basis for ascertaining a fact.

In this particular case, the legal wife has successfully obtained all or some of the aforesaid evidences, convincing the court to order that the husband is illegally “living” with another woman like husband and wife, having broke the Chinese Marriage Law of one-husband-one-wife compulsory provision.

To gather favorable evidences in such cases, private detectives are sometimes hired by legal wife, apart from obtaining evidences on their own. This is true of the other commercial disputes cases. In order to win a civil litigation case for the favorable judgment at the Chinese court, the plaintiff has to consider before filing a case not only statute of limitations, but also the aforesaid 7 kinds of evidences, managing to gather evidences as many as possible.



(This Article is taken from the South China Morning Post written by Chloe Lai dated 11 January 2008, for reference only)

G2000 Group, a company owned by Michael Tien Puk-sun, former chairman of the Kowloon-Cantoon Railway Corporation, has been ordered by a Hangzhou court to stop manufacturing and selling fashion accessories such as stockings, ties and belts under the G2000 brand on the mainland.

The court also ordered the company to pay 20 million yuan to Hangzhou businessman Zhou Hua for infringing the latter’s registered trade mark, 2000.

Chen Qun, spokeswoman of the Hangzhou Intermediate People’s Court, said yesterday that G2000 had filed an appeal so the court had yet to execute the ruling. Describing the case as a battle between an ant and an elephant, she said the compensation G2000 had to pay was the largest the court had ever ordered.

“It is why we decided to publicize the case now. We want the public to know the court is determined to safeguard copyright,” Ms Chen said. She said the Hangzhou businessman selling fashion accessories registered the 2000 trademark in 1997 for 25 types of merchandise.

So when G2000 registered its trademark on the mainland, the Hong Kong company was only allowed to use G2000 brand for its clothes and bags. For accessories, G2000 was ordered to use the G2 brand.

G2000 declined to comment on the case yesterday.

(1)Given that the individual plaintiff has recently won the said case at the Hangzhou intermediate people's court, primarily because he has legally owned a trademark in China of "2000", applicable to fashion accessories of stockings, ties and belts; he has obtained earlier other administrative decision from the Beijing Based China Patent Office; he has obtained favourable judgment earlier from the Beijing Higher People's Court; in additions, given the realistic fact that the Hangzhou court should/might have practically consulted opinions, before its judgment was issued, with the higher court in Zhejiang province, even though it is not appropriate but is said practiced constantly or at intervals among the Chinese courts for various reasons, therefore, G2000 company as defendant has to make ways now to obtain an independent "Experts' Opinion" to be issued by the top/leading Chinese IP mastermen, stating with convincing/authorative reasons therein that G2000 and 2000 brands are not the same in the particular case, no speaking of infringements and compensation amounts ! The mastermen's opinions could certainly or to much extent influence the higher court judges' appeal judement.
(2)the defendant of G2000 company may not win its appeal case if it simply insists that the individual plaintiff with his 2000 brand have no reputions at all in Mainland China, while G2000 is widely known in there, for the plaintiff regardless of individual or a corporate person also has equal rights to have his duly registered trademark of 2000 be legally protected if his 2000 brand maintains valid, even though it might practically be regarded that it is the 2000 brand owner of the individual plaintiff who has been riding on the corporate G2000 brands in the past years, not the opposite.
(3)Suppose that the Zhejiang higher court upholds the judgment of 1st instance, the compensation amounts of RMB20,000,000 should also be greatly reduced, for there are no apparent evidences from the individual plaintiff to support those amounts, which are simply calculated out by the first court juges based on their analysis. According to the Chinese evidence judicial interpreations, the individual plaintiff has obligations and liabilities to deliver such evidences to the court or ask the court to collect those evidences before official trials, or else, the court can not support the plaintiff's demand in the regard. It is obviously unusual and seemingly unfair that the judges of 1st instance has served not only as independant judges, but also as participants in favour of plaintiff, which may easily lead the defendant of G2000 and outsiders to come to conclusions that the Hangzhou court judges have not issued an absolutely fair judgment.