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Legal Issues in China Foreign Businesses Must be Aware Of

To a some extent, Chinese market is quite similar to many other markets. But it maintains certain unique aspects that are completely different. Sometimes the differences can be find out quite easily and sometimes they are quite difficult to figure out. Whether you are an experienced or a new entrant, doing business or growing business in China, it is highly important to be able to point out the issues properly deal with these differences. Do keep in mind, often these differences are not apparent.

The primary purpose of this article is to focus light on some of the key areas if you are wishing to do business in China. Managing tricky situation in a correct way and remaining aware of the loopholes of doing business in this country are skills you need to hone in order to get the most out of your China business. Managing adverse situation tactically could bring in the desired outcome and you get maximum return on your investment.

Property Rights in China-

The Property Law of the People’s Republic of China passed in 2007 codified property rights. According to the Chinese constitution, land in urban areas is owned by the state, while land in rural and suburban areas is owned by the state or by local collectives. Real property rights in China can generally be grouped into three types. The first type is ownership rights. The second type is usufructuary rights, and the third is security rights.

1- Ownership rights

Ownership rights are protected under Article 39 of The Property Law of the People’s Republic of China, which gives the owner the right to possess, utilize, dispose of and obtain profits from the real property.

2- Usufructuary rights

The owner of a usufructuary right has the right to possess, utilize and obtain profits from the real properties owned by others.

3- Security rights

Forms of security rights include mortgages, pledges and liens. Holders of security rights have priority if a debtor defaults on his obligation.

Legal Professional Privilege-

Privilege, at its most basic, is a fundamental right (in most common law jurisdictions) that enables individuals and corporate entities to resist disclosure of confidential and potentially incriminating/sensitive material, communicated with their lawyer for the purposes of legal and/or litigation advice, to third parties, including regulators and prosecutors. Under PRC Law, there is no equivalent regime of attorney–client privilege similar to those found in a common law jurisdiction like the US. Nonetheless, under PRC Law, an attorney has an obligation to keep their clients’ information confidential. According to the China lawyers, if US companies are not careful handling multijurisdictional matters such as anti-corruption investigations, they may lose “privilege-like” protection in China and also risk losing attorney-client privilege in the US.

Legal Issues in China

Labor Law-

The Chinese labor law is hereby formulated in accordance with the Constitution in order to protect the legitimate rights and interests of labourers, readjust labor relationship, establish and safeguard the labor system suiting the socialist market economy, and promote economic development and social progress. China lawyers say that the laws cover the rights and responsibilities of both – the employer and employee.

Employee Handbooks in China-

Employee handbooks provide a uniform set of guidelines that the employer follows in terms of employee dress codes, vacation policies, procedures and grounds regarding discipline and termination of employees, and a whole host of other issues that may arise in the workplace. They can serve as powerful defenses in wrongful termination, harassment, whistle-blower protection and other lawsuits.It is an essential part of the contract between the employee and employer that explains in detail what is expected of the employee.

These are the aspects that China lawyers put more emphasis in order to secure their clients could do business in China without facing major hassle. The effect of increased wealth and consumer spend in China is already being felt around the world. Intellectual property rights is an area that has been notoriously difficult in China, although recent reports suggest this is an area that is improving the most. Gary Locke, America’s ambassador to China, recently said that “for every foreign company calling for stronger IP protection, there are more Chinese companies calling for the same,” suggesting that progress is occurring.

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