Congress Amends Equity Joint Venture Law - International Law Office

The National People's Congress (NPC) issued amendments to the People's Republic of China Equity Joint Venture Law on March 15 2001. The changes follow amendments to the People's Republic of China Wholly Foreign Owned Enterprises Law and the People's Republic of China Sino-Foreign Cooperative Joint Venture Enterprises Law, which were announced on October 31 2000. Like the changes to the Wholly Foreign Owned Enterprises Law and the Cooperative Joint Venture Enterprises Law, the new amendments come as preparation for China's anticipated entry to the World Trade Organization.

An important addition to the Equity Joint Venture Law is the insertion of a new Article 7, which provides that equity joint venture employees must establish a trade union organization in order to carry out trade union activities, as well as to protect the rights and interests of the employees.

Article 8 has now been renumbered as Article 9. Its Paragraph 4 now provides: "The various items of insurance required by a joint enterprise shall be furnished by an insurance company in China." The article previously required that these items be provided by a "Chinese insurance company". The changes were presumably made to widen the range of insurance companies permitted to provide these services to include foreign as well as Chinese insurance companies.

Article 9(1) has been deleted entirely, removing the requirement whereby equity joint ventures must report their production and operational plans to the relevant authorities. Article 9(2) has been renumbered as Article 10(1). In addition, equity joint ventures are no longer required to give priority to domestic resources when purchasing raw materials. These changes are in line with similar amendments to the Wholly Foreign Owned Enterprises Law and the Cooperative Joint Venture Enterprises Law.

Article 15 (previously Article 14) now states that the partners to an equity joint venture may bring an action in the people's courts if no provision for arbitration was made in the joint venture contract.

Finally, the previous Article 15, which divested the NPC of the power of amendment, has been deleted. Therefore, the Standing Committee of the NPC will now have the right to amend the law.

For further information on this topic please contact Thomas Jones at Freshfields Bruckhaus Deringer by telephone (+852 2846 3400) or by fax (+852 2810 6192) or by e-mail (thomas.jones@freshfields.com).

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