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Aviation

China

The Cape Town Convention is effective in China, making the International Registry an additional registry for registering various interests in aircraft equipment in China. The Civil Aviation Administration of China has identified the registrable interests and has announced the steps that it has taken to implement the new registration system.

Industry Developments; Legal Developments; Outlook.

Once the Cape Town Convention comes into force in China, the International Registry will become an additional registry for various interests in aircraft. The Civil Aviation Administration of China has been designated as an entry point to collect and transmit registration information. It is likely to adopt the authorizing entry point model, as applied in the United States.

A recent statement by the Civil Aviation Administration raises concerns for the aviation industry, particularly in its recommendation that Chinese airlines cancel orders for new aircraft or postpone their delivery. Although the measures are arguably not official rules, many stakeholders expect them to affect aircraft orders and lease agreements; they may also benefit the industry's long-term development.

The National People’s Congress has ratified the Cape Town Convention. The ratification will provide owners and mortgagees of aircraft equipment with better protection for their interests in terms of perfection and priority of such interests by way of registration. As such, it is likely to be welcomed by existing and potential financiers, leasing companies and other market participants.

Commercial Property

Hong Kong

Overview
Including: Land System; Registration; Types of Sales; Taxation and Charges; Mortgages; Leases

The Hong Kong courts have considered the validity of an instrument where the company seal is affixed and attested by one single director. A recent Court of Appeal decision that has overruled previous lower court decisions on the same point will doubtless create headaches for local conveyancers.

A recent case is another cautionary tale for lawyers acting for vendors to note that the vendor's obligation to prove title should be performed well before the date fixed for completion.

The Building Management (Amendment) Ordinance 2000 was introduced to improve the management of private buildings and to rectify deficiencies in existing regulations. It marks a shift towards increased compulsion, in terms of penalizing recalcitrant owners and making owners more accountable if they do incorporate.

Case law has established that a seller who insists on receiving a deposit exceeding 10% of the price of the property in question runs the risk of not being entitled to keep the deposit if the buyer defaults, unless there are special circumstances. A recent case provides an example of such special circumstances.

Companies with mixed manufacturing and service operations in Hong Kong will be disappointed by the recent decision of the Court of Final Appeal.

In an attempt to address some of the issues of urban degeneration, the Urban Renewal Authority Ordinance was enacted on July 7 2000. The broad objective is to implement renewal over a 20-year period, by way of development schemes and projects. The effect on landowners and residents is explored here.

Company & Commercial

China

Overview
Including: Foreign Investment and Registered Capital; Dividends, Voting Rights and Equity; Share Transfer and Directors' Accountability; Shareholders.

Various government departments have jointly issued Implementing Opinions on Certain Questions Concerning the Laws Applicable to the Administration of the Approval and Registration of Foreign Investment Companies. The opinions restate much current law but also aim to clarify certain principles in China's foreign investment regime that overlap or conflict with the revised Company Law and the Company Registration Regulations.

The amendments to the Regulations on the Administration of Company Registration bring the rules into line with the newly amended Company Law and clarify various points related to registration. They also increase the financial penalties for non-compliance which may be imposed on companies and their directors.

A number of local administrations for industry and commerce in China have stopped accepting applications to register liaison offices and will not renew existing registrations. Foreign-invested enterprises that have used liaison offices to minimize tax liability may wish to evaluate the options offered by a branch structure.

As individual members of a corporation's decision-making body, directors do not usually bear personal liability for the actions of the corporation. Nevertheless, in certain circumstances directors can be personally liable for damages to others as well as to the company itself. A director may even bear criminal liability in some situations.

The Ministry of Commerce has issued a notice regarding foreign investment in distribution activities in China. Before the issuance of the notice, there was limited guidance on the procedures for existing foreign-invested enterprises to include distribution in their business scopes.

Entertaining and giving gifts are part of doing business in China. However, foreign investors are often uncertain about where to draw the line between appropriate gifts on the one hand and bribes on the other. If the authorities conclude that a certain gift constitutes a bribe, foreign companies may face criminal, administrative or civil liability.

More updates >

Employment & Labour

China

The secondment of expatriate employees to China has been a headache for multinational companies since 2009, when the tax authorities started to treat secondment as creating a permanent establishment of the overseas employer. However, new rules recently issued under domestic tax law with respect to cross-border secondment will hopefully ease the pain associated with expatriate secondments.

The Supreme People's Court has issued the long-awaited Interpretation on Various Issues Concerning Application of Law in the Trial of Employment Disputes (commonly referred to as 'SPC IV'), which provides clarity on some hot-button issues. Among other things, it sets out certain severance pay protections and specific rules on the enforcement of non-compete restrictions.

The Standing Committee of the National People's Congress has finally passed an amendment to the Employment Contract Law, under which companies will no longer be allowed to hire staff through staffing agencies, except under very narrow circumstances. Companies should be mindful of how these changes may affect their human resources structures.

The Shanghai Pudong District People's Court has dismissed an employee's claim against his former employer for termination payments after finding that the credibility of the employee's evidence was outweighed by the evidence produced by the employer and the employee's refusal to take a polygraph test. The case highlights that submission of fraudulent evidence is still a problem in employment disputes in China.

The Dongguan Number 3 District People's Court has upheld an employer's termination of 17 striking employees for misconduct. Although Chinese law does not explicitly allow employees to strike, it is silent on whether strikes are considered illegal. This case indicates that in some strike situations, the courts may uphold an employer's disciplinary actions against striking employees on the ground of serious violation of company rules.

The Shenzhen Municipal People's Congress Standing Committee has passed the Regulations on the Promotion of Sex Equality, which will become effective in January next year. While various national laws and local regulations already contain provisions related to sex discrimination and sexual harassment, this is the first piece of legislation exclusively addressing the issue of sex equality.

More updates >

Trade & Customs

China

Under the value added tax (VAT) pilot programme, international transportation services and the export of research and development services and design services are zero-rated. To clarify the rules for the implementation of this zero-rating, the State Administration of Taxation and the Ministry of Finance have issued administrative measures.

Mainland China and Hong Kong have reached an agreement on the enhancement of economic and trade cooperation and exchanges between the two jurisdictions under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) and signed Supplement 9 to CEPA. Supplement 9 provides for a total of 43 measures for services liberalisation and trade and investment facilitation.

In order to encourage imports and economic and social development, the Ministry of Finance has announced that China will apply lower import provisional taxes on more than 730 kinds of goods, with an average rate of 4.4% - over 50% lower than the most-favoured nation rates.

The General Administration of Customs has issued an announcement which sets out the principles to be applied in classifying imported articles and in determining their dutiable value, indicating the correct approach for articles listed (or not listed) in the relevant classification and dutiable value tables.

The General Administration of Customs has issued a formal announcement of new anti-corruption measures with respect to the giving and receipt of so-called 'red packets' - cash, securities, payment vouchers, commercial pre-paid cards or other instruments. The announcement sets out the obligations and restrictions on customs units and individual officers.

The General Administration of Customs has issued Announcement 63/2011 on the implementation of changes to the China-Singapore Free Trade Agreement Rules of Origin and Customs Procedures arising from the China-Singapore Amendment Protocol. Among other things, it deals with the retrospective issuance of preferential certificates of origin.

More updates >

International

The World Customs Organisation has released the latest amendments to the Harmonised Tariff System. Inadequate management of the changes may cause importers compliance risk, adversely affect duty payments and even influence eligibility for free trade agreements that use tariff shift rules of origin. Importers should review their products to ensure that they understand which goods may be affected.