1. Research in Foreign Law Chenglin Liu LL.M (China); LL.M (Sweden); LL.M, MS, JSD (U.S.) Cliu@central.uh.uh Foreign and International Law Librarian O’Quinn Law Library

2. Foreign Law Search Common Law v. Civil Law--Personal observations: –Law School: Case book v. Hornbooks –Law Classes: Socratic (1hr) v. Lecture (3hr) –Tuition: high v. low –Exams: Memorizing v. Analyzing –Law making: Judges v. Scholars –Law making: Case by case v. Laying out all contingencies –Judicial Review: Norm v. Exception –Jurisprudence: highly practical v. highly theoretical –Judge selection: lawyer-judges v. student (scholar)-judges –Judgment: Lengthy (with dissent) v. short (W/O dissent) –Attorneys: Active role v. Passive role

3. Foreign Law Research Not as easy as finding domestic law Useful Sources Thomas H. Reynolds & Arturo A. Flores, Foreign Law- Current Sources of Codes and Legislation in Jurisprudence of the World (K38.R49 1989, Reference Collection) Online Research Guide Muligan and Liu’s Foreign Primary Law on the WebForeign Primary Law on the Web LLRX.com Resource Center - Comparative and Foreign Law Foreign and International Law Sources on the Internet: Annotated LexisNexis (Legal (excluding U.S.) ) Reference Librarians

4. On-line and Print Resources Lexis-Global –Not international Westlaw Government Website Online Catalogue Interlibrary loan

5. Class 2:State Structure

6. Basic Facts about China Population –China 1.4 billion –U.S. 200 million as of this week 10/17/06 –EU 450 million Size: Which country is bigger, China or the U.S.? –CIA http://www.cia.gov/cia/publications/factbook/geos/ch.html U.S. is bigger!http://www.cia.gov/cia/publications/factbook/geos/ch.html –China.org http://www.china.org.cn/e-changshi/index.htm China is bigger!http://www.china.org.cn/e-changshi/index.htm Nationalities: minorities 56; majority 1 (Han) Provincial governments –4 large cities: Beijing, Shanghai, Tianjin, Chongqing –23 provinces –5 autonomous regions –2 special administrative regions (SAR): Hong Kong and Macau –Taiwan Neighboring States

7. Foreign Direct Investment in China From the US-China Business Councilthe US-China Business Council China's foreign direct investment (FDI) inflows surpassed those of the United States in 2002, making China the world's leading destination for foreign funds; China should continue to attract significant levels of FDI in 2003 from existing and new investors alike. The 2002 annual increases in both contracted and utilized FDI, of 20 percent and 12 percent, respectively, were particularly striking in light of the fact that overall world FDI flows declined in 2002 for the second consecutive year. (Global FDI fell 50 percent in 2001 and an estimated 25 percent in 2002).

8. US-China Trade Statistics and China's World Trade Statistics http://www.uschina.org/statistics/tradetable.html Trade in Goods (Imports, Exports and Trade Balance) with China http://www.census.gov/foreign-trade/balance/c5700.html

9. China and TWO China applied to join GATT in 1986. December 2001, became WTO member.

10. Foreign Investment in China Equity Joint Venture (EJV) Contractual Joint Venture (CJV) Wholly Foreign-Owned Enterprises Holding Companies

11. EJV Governing Law –The Law on EJV –Regulations for the Implementation of the Law on EJV –Rules, notices from the State Council and ministries –Local rules

12. EJV The Chinese Government protects EJV’s investment. No national expropriation (if it happens, EJVs will be compensated. ) EJVs must follow the laws and regulations of China. EJVs should take the form of a LLC.

13. Setting up an EJV Approval and license Foreign share must be over 25%. Foreign parties should bring in high tech. EJVs have the site use rights Contributions –Foreign side: high tech, cash, –Chinese side: site, workers

14. EJV board of directors and general manager The highest authority of a JV is its board of directors. Term: 4 yrs. BD should consist of no less than 3 members. 7, 9, … in odd numbers Should meet at least once a year. Unanimous votes required for –Amendment of the articles of association –Termination or dissolution of the JV –Increase or decrease of registered capital –Merger or division of the JV The General Manager runs the JV and reports to the board. Do you recall the relationship between “NPC” and “State Council?”

15. Net Profit Distribution In proportion of shares invested After tax, the foreign party is allowed to remit the profit abroad.

16. Materials and Products Not restriction for acquiring materials, but domestic market preferred. Products are encouraged to be marketed in the international market, but are allowed to be marketed in domestic market.

17. Dispute Solution EJV reg. Art. 97-100 Consultation or mediation Arbitration Court

18. JV: Basic Issues Total investment and approval –$ 30 million Contribution –Debt –Equity (cash, know-how, IP, site, facility etc.)

19. Discharging Debts and Liability Reasons for resolving local partner’s debt –Could become JV’s debt –Creditors might create trouble for the JV Solutions –Urge the local partner to pay off the debt –The MNE pays it off, but the amount should be counted in the contribution.

20. Size of the Total Investment Scale Ratio: 49/51; 30/70; 10/90 in favor of the MNE Approval purpose –Under $ 30 million, local –Above $ 30 million, Beijing Tricks –Increase capital immediately after approved by the local authority –Divide a large project into several $30 million projects –Defense –Risk

21. Competition Agreement on non-competition –May be difficult to enforce –May be difficult to interpret –For good cooperation Solutions –Absorb the local partner –Separate location –Purchase local brand names, trademarks

22. Management Structures Appointments of board members are in proportion to the ration of the contribution. Chairman of the board is the JV’s legal representative. Symbolic status The MNE can concede this position to the local partner. But, MNE should control the appointment of the GENERAL MANAGER of the JV.

23. Practical Issues Employees –The MNE should refuse to take all of the local partner’s employees. –Good faith efforts to hire former employees. –Probation –Arrears should be paid by the local partner. –Or, one-time payment. (if the MNE pays off, it should be counted in the contribution.)

24. Other issues Selection of site Land use –Check if the conversion fees have been paid. –If not, the MNE should urge the local partner to pay off. Or the MNE pays it off, but the amount should be counted as part of contribution. Utilities