Legal News: EU and China Reached a Comprehensive Agreement on Investment

Legal News: EU and China Reached a Comprehensive Agreement on Investment

Legal News

1. EU and China Reached a Comprehensive Agreement on Investment

In the past two decades, the mutual bound investments between EU and China have been dramatically growing and significantly impacting on two major economic entities in the world. To benefit investors from both entities and further enhance the investment flow and cooperation between EU and China, two sides went through the tough and long negotiation process (started with the political agreement on February 2012) on the main terms and principle of EU-China Comprehensive Agreement on Investment (the “CAI”), and announced on December 30, 2020 that the CAI has entered into final stage.1

The CAI is significative specially for EU investors in China because the CAI dedicates to bring higher level market opening, fairer investment environment, etc. to EU investors eager to explore business opportunities in China and desire for a transparency and free market in China for all transactions.

We summarize the most catching contents worth EU investors’ attention:

(1) Broader Market Access to China for EU Investors2

EU investments in China mainly are in the fields of manufacture, services, wholesale and retail, etc.3 The CAI carries out the existing market access (legally rooted in China Foreign Investment Law, Negative List 2020, etc.) and expands the market access in certain sectors. The below table is a roundup of important market access commitments by China in the CAI.

table01

(2) Level Playing Field4

Forced technology transfer, fair competition/cooperation with state-owned enterprises have always been cited as major concerns for EU investors doing business in China. China aims to increase EU investors’ confidence by adding some rules in the CAI. The below table is a roundup of significant rules making fairer competition.

Besides the aforementioned contents, the CAI also set out rules related to equal access to standard setting bodies, sustainable development, dispute settlement mechanism, institutional framework monitoring the implementation of the CAI.5

At this stage, the CAI preliminary lay out the principles and main terms. Asiallians will keep a close eye on the CAI’s execution, practical implementation, and practical enforcement and promptly notify you in our subsequent newsletters.

(http://www.mofcom.gov.cn/article/ae/sjjd/202012/20201203027541.shtml
https://trade.ec.europa.eu/doclib/press/index.cfm?id=2115)

2. Hainan Released “Zero Tariff” Policy for Vehicles and Yachts Imported

On December 25, 2020, the General Administration of Customs (the “GAC”), the Ministry of Finance (the “MOF”), and the State Administration of Tax (the “SAT”) jointly released the “Zero Tariff” Policy (the “Policy”) for Means of Transport and Yachts in the Hainan Free Trade Port with immediate effect, following up the Master Plan for the Construction of the Hainan Free Trade.6

First, according to the Policy, the means of transport (including ships, aircraft, vehicles and other operational means of transport) and yachts meeting the following conditions are entitled for exemption of import tariffs, import value-added tax and consumption tax:

1. The importing enterprises are registered in the Hainan Free Trade Port with independent legal personality;

2. The importing enterprises are engaged in transportation or tourism industry (as for aviation companies, they shall take the Hainan Free Trade Port as the main operating base);

3. The means of transport and yachts imported are for the enterprises’ self-use in the transportation or tourism industry.

Second, the Policy specifies that means of transport and yachts subject to “zero tariff” are managed based on a positive list which is dynamically adjusted according to Hainan’s actual needs and regulatory conditions by the GAC, the MOF, the SAT, and other relevant authorities.

Asiallians will keep track of the following implementation and adjustment and keep you posted timely.

(http://www.chinatax.gov.cn/chinatax/n810341/n810825/c101434/c5160332/content.html)

3. SPC Released Judicial Interpretation on Labor Dispute Case

On December 30, 2020, the PRC Supreme People’s Court (the “SPC”) issued the Interpretation concerning on Labor Dispute Case I (the “Interpretation I”), which took effect on January 1, 2021. On the same day, SPC also announced that the four previous SPC judicial interpretation documents related to labor dispute case implemented for many years (“Previous Interpretations”) shall be abolished accordingly.

Generally, the Interpretation I maintains the existing legal rules on labor dispute spread out among PRC Civil Code, PRC Labor Law, PRC Labor Contract Law, PRC Law of Mediation and Arbitration of Labor Disputes, and PRC Civil Procedure Law and minorly updates the Previous Interpretations.

We summarize the major updated contents worth your attention:

First, the Interpretation I adds five circumstances where a PRC court can decide not to implement an effective labor arbitration award (or mediation agreement).

1) there is mistaken application of regulations (in addition to an error of application of laws mentioned in Previous Interpretations) in arbitration award or mediation agreement;

2) there is a violation of legal procedures in arbitration award or mediation agreement;

3) the forged evidence is the basis of the arbitration award;

4) the other party conceals evidence which are sufficient to materially affect the fair adjudication;

5) the arbitrator engages in bribery when arbitrating the case.7

Second, the Interpretation I excludes the residents of Hong Kong, Macao and Taiwan from the following clause, because as of July 28, 2018, Hongkong, Macao and Taiwan residents who are employed in Mainland China do not need to apply for the employment permit:

If a foreigner or stateless person signs a labor contract with an employer within the PRC territory without obtaining an employment permit, a PRC court shall not confirm the existence of a labor relationship.8

Third, the Interpretation provides that:

• If the employer and the employee agree to change the labor contract without written form, but they have actually performed the labor contract with oral change for more than one month, and the content of the changed labor contract does not violate the laws, administrative regulations and public order and good customs, a PRC court shall not support the claim that labor contract is invalid due to non-written form.9

While, the previous judicial interpretation provided an extra limitation that is not violating the national policy.

(http://www.court.gov.cn/fabu-xiangqing-282121.html)

Should you have any inquiry about the above rule, please contact us at asiallians@asiallians.com. As always, Asiallians remains at your service and our teams are currently mobilized in all our offices in Mainland China, in Hong Kong and in Taipei.

 

1. The pending matters include proofread, translation, execution, and entry into force. Please note that the content of CAI agreement which this article discussing has not been finalized. More details will show in the final text of CAI.

2. We selected few examples based on the following articles for your reference:
https://europeansting.com/2020/12/31/key-elements-of-the
-eu-china-comprehensive-agreement-on-investment/

3. https://trade.ec.europa.eu/doclib/docs/2020/
december/tradoc_159239.pdf

4. We selected few examples based on the following articles for your reference:
https://europeansting.com/2020/12/31/key-elements-of-the
-eu-china-comprehensive-agreement-on-investment/

https://trade.ec.europa.eu/doclib/docs/
2020/december/tradoc_159242.pdf

5. https://europeansting.com/2020/12/31/key-elements
-of-the-eu-china-comprehensive-agreement-on-investment/

6. Please refer to previous Asiallians newsletter: 
http://asiallians.com/zh-hans/china-legal-update-ncp-
outbreak-fast-track-visa-application-foreigner-employees/

7. Article 24 of the Interpretation I

8. Article 33 of the Interpretation I

9. Article 43 of the Interpretation I

 


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