A good point for drafting commercial contracts governed by Chinese laws

Posted on by
Reply

I am reviewing a real estate sale and purchase contract under which my client bought a villa house in Pudong Shanghai, China.  My client has paid a down payment up to almost RMB 5 million. Now because of real estate policies imposed by central government, the deal is doomed to fail. Thus, client wanted his money back but the developer, as others in the industry deeply caught in shortage of fund, threw out various execuses for not refunding the money. so client came to me.

Apparently the contract was prepared in advance by the seller and it was a well-done contract. I am not going to list that many points but one point that interested me a lot. However, I am not sure whether this shining point is intentially coined or simply resulted by mistake.

It is about an arbitration clause.  In the contract, it was stipulated that disputes are resolved by Shanghai Arbitration Commission, but the address described therein is actually the address of another arbitration institution. The mismatch caused a bit of ambiguity as to which institution is chosed by the parties.

Under Chinese laws, ambiguity on choice of institution body may lead to the invalidation of the arbitration clause in its entirety. However this is not the point about the mismatch. With the ambiguity, it leaves one of the parties to the contract the right to take the issue to court or to arbitration body to decide whether the arbitration clause is valid or not. And this is a separate legal proceeding which will consume time, and the more importantly, entertainment of the case for deciding the validity of arbitration clause will for sue get the parties trapped in a procedural issue, and bar them from moving to solve their substantive issue. And unfortunately, the time limit for deciding the validity of an arbitration clause is not clearly provided by laws or China Supreme Court, leaving the possibility of unreasonably long delay, though generally speaking, this won’t take too much time for a court to make a decision (we do notice that Beijing High Court has prescribed that court shall make a decision within two months after accepting the filing of case).

Now from my client’s point of view, this may be a real risk because it will definitely delay the return of the money even though we finanally succeed in the case. On the other hand, sided with the seller, I can see the clear benefit of using the proceeding to delay paying back a bulky amount of money. At this moment, I am not sure whether the developper will pull the trick later after we file the case with arbitration body.

The lesson is that, when drafting a contract for clients, it may be advisable to intentionally “make” a mistake in the contract which may in the end give leverage for the maker of the mistake.

Of course, it shall be closely heeded that this mistake may backfire if it is not fully understood and delicately designed. Generally speaking, the party to a contract whose rights under the contract are realized first (entirely or partially) may think of playing the trick.

Beijing cracked down the illegal foreigners

Posted on by
Reply

News had it that Beijing was stepping up special efforts to crack down foreigners of illegal entry, illegal residence and illegal employment (the “Three Illegal“), an apparent aftermath of disgraceful event involving a UK traveller sexually assaulting a Chinese girl on the street in the day, which had stirred up waves of anger and resentment among Chinese.

According to the news, Shanghai local police department will start the compaign from tomorrow, May 15, till the end of August. It will be reasonable to anticipate that foreigners in Beijing may have to live through some tough time during that period.

Three Illegal foreigners are in fact existing in big cities like Beijing and Shanghai. I often came to know that foreigners buy work visas in Shanghai in order to stay in Shanghai, and some start working in Shanghai simply on other types of visas instead of “Z” visa.

So for expats in Beijing, be ready to take out a few more times your passport and other legal documents to prove your legal stay in Beijing.

 

the dilemmas for expat employees in China

Posted on by
Reply

Recent two labor dispute cases in Shanghai I came to learn have further demonstrated the dilemmas that are faced by foreigner employees in China, which do not seem to be solved any time soon. Bear in mind, in this post, I discuss the dilemma for expat employees whose monthly salary is well above three times the average monthly salary (RMB 3896 in 2011) in Shanghai.

Case 1: a lawyer from another law firm in Shanghai after reading my article (you can find the English version of the article here) called me saying her client was just caught in the same situation where during the labor arbitration proceeding, the expat employee’s work permit was revoked by Shanghai Labor Department without giving any prior notice to the client. Now the lawyer was not so sure about her original litigation strategy under which she helped her client to reinstate the labor relationship between her client and the employer.

I am indeed surprised and disappointed that Shanghai Labor Department has not stopped their malpractice even when there has been a clear decided judgement ruling that their cancellation of expat’s work permits unilaterally without verifying whether the labor contract has been terminated legally is illegal.

Dilemma 1: Expat employees when mistreated by employers may confront their employers by taking them to arbitration or court. But given the illegal practice by Shanghai Labor Department, expat employees may well find themselves trapped in the legal proceeding when their work permits are revoked by Shanghai Labor Department.

Case 2: A Hong Konger was fired by his company in Shanghai after working in the company for only six months. His monthly salary is well above RMB 50,000. The company offered no economic compensation, much less damages (i.e. damages payable by employers to employees that are illegally fired). He sued the company for reinstatement in a bid to have a settlement with company that may result in payment of bigger amount of damages. He won an arbitration award, and failed in court which dismissed his claim for reinstatement on the ground that the company had already hired a new employee for that position, and at the same time ordered the company to pay an amount of damages of RMB 11,688, which seemed ridiculous to the employee.

I still remembered not long ago, a German expat came to me for advice on his situation where his boss fired him but offered him legal compensation based on his actual salary, he felt that he was wrongly fired and wanted to fight for more benefits. But sadly, I had to tell them if he fighted in arbitration or court, he would get less.

Dilemma 2: when an expat employee is fired by his or her employer but is offered with reasonable compensation based on his or her actual salary, even though he or she is not satisfied and feel wronged, he may end up with less compensation from their employers and more loss because of attorney fee and time. On the other hand, the employer will in the end benefit from their illegal termination since he ends up paying less.

Solutions for the Dilemmas

Well, maybe, I should not call it “solutions” but rather “pratical tips” to counter or hedge your risks of working in China. Such dilemmas are caused by poor legislation and misreading of existing rules.

For Dilemma 1

Once you decide to go to arbitration or court to solve the dispute with your employer, the only possible action to stop Shanghai Labor Department from cancelling your work permit is to inform in writing the department immediately or even before you file your case. The earlier, the better. You need to tell your department that your employer has illegally terminate your employment contract and you are going to sue the employer soon, and request the department not to revoke your work permit when the employer applies to have the work permit cancelled.

I have not tried this before, but I believe with this proper notice served on the department, they will be more careful and cautious in deciding to cancel your work permit upon your employer’s unilateral application. You may also cite the court decision of my successful case in which court declared illegal the cancellation of work permit by the department upon employer’s one-sided application.

For Dilemma 2

There is really no easy, if at all, solution for this because you cannot fight against the law.

Expat employees when find their labor contract to be terminated by employers shall try to settle disputes peacefully and get better compensation.

Probably the best thing an expat can do is to bargain for and stipulate in their labor contract some clauses addressing the dilemma. For example, if the employer terminates the labor contract without due cause, the employer shall pay certain amount of liquidated damages which is calculated based on the expat actual salary. Of course, I understand it is not gonna be anything easy for an employee to ask for such clauses or commitment from employers esp in the current world of financial crisis. But give it a try.

Another Thought on Reinstatement

Ever since the adoption of China Labor Contract Law, lawyers have been keen to advise clients to sue for reinstatement of their labor contract in arbitration and court. This has been a very successful strategy for some time from the enactment of Labor Contract Law when employers are not clear about court’s attitude on reinstatement.

Over time, courts have showed reluctance to support reinstatement which is often manipulated by employees only as a way of bargaining for higher compensation or damages, and in practice very often employers have already employed new person to fill the position, leaving it awkward for courts to support reinstatement claim.

Recent development has proved that it may not be advisable for expat employees to sue for reinstatement the long proceedings of which only prolong the anxiety and anguish on the employee who in the end get less compensation, and lose more money on attorney fee as well as, maybe more importantly, other job opportunities.

Nothing is impossible in China, you also think so?

Posted on by
Reply

It has been in place for some years from 2006 when China central government imposed restrictions on foreign individual or legal entities in buying properties in China, an move taken to rein in the then out of control price hike. This restriction is further reinforced in 2010 to the effect that each foreigner can only ”buy” one piece of residential property.

As the restriction policy is handed down from top central government, it should be assumed that all localities throughout China shall enforce the rules. So far as I know, the policy is well enforced when the Shanghai real estate market is white-hot. But it is often not the case when the local real estate market is not active.

In the past two years, with the central government’s resolute measures to cool down the property market in China, Shanghai’s local property market has seen sharp plummet in transaction volume and is right now at a standstill with interested parties waiting for the other to concede. This situation has a direct and profound impact on local government revenue, which often holds local government back from enforcing central government policies.

Just recently, I was entrusted to help a foreign individual to purchase a residential property in Shanghai. The client wanted to purchase a luxury apartment in central downtown Shanghai. But according to the central restriction policy, only foreigners who works or learns in China for a term of more than one (1) year (在境内工作、学习时间超过一年的境外个人) can be allowed to purchase residential property for personal use according to their actual needs, and as mentioned above, the policy was later made clear that any foreigner shall only buy one residential property.

The facts about the client: he has never worked in Shanghai, and is right now enrolled in a university in another city on his student visa. Apparently, the client is not qualified for purchasing property in Shanghai. But wait a minute. The central government policy is not air-tight, and it leaves ample rooms for local government to undermine or frustrate its intended purpose.

(1)  “works for more than one year” versus “have worked for more than one year”

First of all, in the central restriction policy, the one year working or learning time period requirement can be interpreted in two ways that result in dramatically different outcomes.

In the stringent, probably the purported, interpretation, it means that the foreigner buyer should have worked in China for at least one year before being entitled to buy. However, literally interpreted from the wording, it can also mean that a foreigner that just secures in China an employment contract or school enrollment of a term of more than one year is also entitled to buy. The latter relaxed interpretation will entitle a lot more foreigners buy properties in China.

Back in 2009, I helped a German client in purchasing a villa in Shanghai. Indeed, we just submitted a newly signed contract with a term of two years to bank and local government, and it worked without proving the buyer had worked for more than one year.

(2)  “with work permit” versus “without work permit”

Even in the case of stricter interpretation of the restriction rules, how to prove or evidences required to prove the one year time period can vary, leading to different results.

If the local government is serious about the one year working and learning period, it may require the buyer to present the Alien Work Permit issued by local labor department to him, and even require him to submit his or her tax records which are supposed to exist in relation to his employment. Such strict requirements can virtually weed out any fake buyer and well attain the curbing effect of the policy.

On the other hand, since the central policy does not require submission of those work permit and tax records but an employment contract only, local governments may take advantage of this loophole to allow more foreigners to buy local properties. The point is that without work permit and tax records, it is easy for any foreigner to obtain an employment contract at some tiny cost, I mean, a fake employment contract.

Not much to my surprise, my latest inquiry into the real estate transaction centre in the district where my client is going to buy property ilicited a reply that they won’t request more evidences than a simple employment contract to prove the one year time period, though they insisted that the one year period is the time period that has lapsed before purchasing property. Well, that probably means the foreigner will have to backdate his or her employment contract with some other auxiliary surpportive evidences. No big deal.

(3) possible to buy property in a different city?

Foreigners often asked whether it is possible to buy a property in a city where they are not working or learning?  For instance, will a foreigner working in Beijing be allowed to buy a residential property in Shanghai?

Based on the central restriction rules, one will reasonably infer that it is not possible because in that case it is hard for the buyer to convince real estate officials that the property is bought for self-use purpose. This is most likely true.

Notwithstanding that, in 2010, a client of mine who worked in Hangzhou city managed to buy an apartment in Chongqing in the face of central restriction rules.

So, you may also come to realize, as said by another client, that “nothing is impossible in China”.

Manage your boss

Posted on by
Reply

I have just made a post of “Manager your manager” which is written from legal perspective.

I encountered randomly an interesting article published on Harvard Business Review, entitled “Manager your boss”, purely from the business operating perspective. I think it is worth a careful read for people in any organization.

You may read this article here: Managing Your Boss -Harvard Business Report

liquidate your company properly, no kidding

Posted on by
Reply

I am helping a long-term client, a Chinese businessman from Wenzhou, Zhejiang Province with his trouble that befell him totally out of blue recently.

Client set up an entertainment company (the “Company“) back in 1996 with another two individuals in Wenzhou. In 1998, the Company guaranteed as surety the repayment of a loan taken out from a bank in favor of another company (the “Debtor“). The debtor then defaulted on the loan. The lender sued both the Debtor and the Company, and got a winning judgement that was still in the process of enforcement. The bank later spinned off the bad debt to an asset management company which in turn sold the debt to the current creditor in 2006. Meanwhile, the Company’s business license was revoked by local industry and commerce burea in 2000 for the reason the Company failed to carry out the annual inspection and three shareholders just closed the Company without going through the liquidation process as prescribed by China Company Law. But just a few days ago, this current creditor applied to the local court for a compulsory liquidation of the Company, a prelude to pursuit of unlimited legal liability against the Company’s shareholders for outstanding debts owed by the Company.

Though Client is safe at this moment, he is indeed not far away from being subjected to assume the Company’s debt owed to the creditor unless counterveiling facts are to be discovered or “created”. This raised alarm for investors, both domestic or foreign, who leave their deserted companies behind without carrying out the liquidation to formally wind up and deregister their companies.

In reality, there are hundreds of thousands of enterprises that have ceased operation and are in fact dead, but are not properly liquidated. It is often the case that such companies are abandoned  with the intention to escape heavy debts that are well greater than the value of company’s assets. However, this is actually a very clumsy strategy to shake off debts, leaving shareholders (esp in the case of natural person shareholders) of such companies exposed to greater risk that can be otherwise mitigated or managed.

As a general principle, shareholders of limited liability companies enjoy the protection of the “limited liability doctrine” under which shareholders are accountable to the debts of their companies only to the extent of the value of their contribution to the registered capital of the companies. In case that a company cannot pay off its debts, it may apply to or be brought to court for bankruptcy protection or liquidation. Shareholders won’t be called to underwrite obligations of their busted companies.

However, under Chinese corporate laws, shareholders’ limited liability are not absolute. In a few circumstances, shareholders are brought up from behind the corporate veil to pay off companies’ debts, as in the case of my Client described above. The rationale is actually simple shareholders shall take the responsibilities of not following the laws which are otherwise in their favors.

To pursue the legal liabilities against shareholders of those abandoned companies, judicial practice is that creditors shall first apply to court for compulsory liquidation of the companies, which proceeding is designed to mandatorily order shareholders to clear up the mess of their companies. If in the end, there is no assets for liquidation (such as in the case of my client, assets and financial books are nowhere indeed) or only partial liquidation can be done, the court would then make a decision to end the liquidation proceeding in which decision court will state that creditor may sue the shareholders of the company for payment of unsatisfied debts.

Creditors who find their debtors in non-operational state may consider further pursuing the company’s shareholders’ personal liability by initiating the compulsory liquidation proceeding and pushing all the way to getting the shareholders behind the company.

 

Manage your manager

Posted on by
1

A client came to my office telling a story that was shocking to an outsider. The client is a foreigner who has set up a WFOE in Shanghai two years ago producing cleaning products. As a foreigner unable to read any Chinese, she had to hire a Chinese manager as her right hand. In the WFOE, the manager is below one person only, the client, and above all other staff. This manager is a girl recommended by the client’s friend. Client trusted the manager, took the manager as an intimate personal friend, and had been very nice and generous, offering various kinds of benefits.

As a startup company, the WFOE has been growing rapidly, and the client brought in a professional financial officer. It is at the time when the client came to discover the secretive and covert self-dealings and embezzlement of company’s assets by the manager almost from the very outset of her taking position in the company. It is found that the manager had taken every opportunity to wring benefits from the company. The misconducts are mainly carried out by way of taking kickbacks from company’s suppliers and by way of using fake invoices (fapiaos) to get reimbursements.

It is a real trauma for client who is now determined to bring this wrong-doing manager to justice.

I am prompted to ponder over the incident which is quite a commonplace in reality, not only in foreign invested enterprises or companies but in domestic companies as well. With focus on foreign invested companies, there are two angles from which we can look at, analyze and comment the incident.

I  Business Culture and Employee Work Ethics

 Again, such misconducts by senior corporate officers reflect the lack of a fundamental business ethic of fiduciary duty in Chinese workplace. From my observation from a comparative perspective on western and Chinese business culture and work ethics, fiduciary duty/obligation, a concept deeply rooted in western social and legal culture, is one of the most important legal basis for sound corporate governance in the west, widely applied in determining the liabilities of directors and senior officers of a company. However, it is a different picture in China in respect of fiduciary duty.

The concept of fiduciary duty in China is like an infant compared with that in the west. It is more of an import from the west than a home-grown one. In today’s China, with the bad influence of rampant and pervasive political corruption, loyalty, honesty and faithfulness have become something rather scarce, and on the contrary, speculation, opportunism, free-riding and quick money have instead made their way into our life and society. Faced with personal gains, people who are subject to fiduciary duties such as agents, attorneys and corporate managers often betray their principals. I have known or learned such stories numerous times in my past law practice.

II  Measures and Policies for Managing Your Manager

The problem of managers betraying their companies is probably more cute in foreign invested companies where the foreign bosses due to inability to understand Chinese language are more vulnerable to scamming risks by their unscrupulous Chinese managers.

So, how to tackle the problem?

Here I would like to give my suggestions from two aspects: practical tips and legal measures.

1.  Practical Tips

(1)  Keep your manager at arm’s length. This is an important lesson individual business owners shall learn. Unnecessary intimacy will result in relaxation of vigilance against your management team. In my case, client had even invited this manager to her house in her home country when this manager visited her friend there.

(2)  Maintain reasonable check and balance in the management team. A repeated mistake committed by foreign investors is that they allow their general managers to appoint all other staff in the company. The managers will always hire their relatives and friends. As a result, the staff in the company will be loyal to the general manager instead of the company.

It is important that the financial officer shall be only appointed or engaged by the investors themsevles, who will have the courage to report any misconduct by the managers.

(3)  If possible, the company may provide office facilities such as phones and computers to senior managers and install surveilance software to track employees’ conducts during working hours.

(4)  Bosses shall be geared into alert when they discern some typical signs of misconducts by corporate managers. For example, if company is paying out without receiving due tax invoices (fapiaos), it is likely that your manager is playing tricks with company with an intention to steal money. Also, when your manager always cannot get along well with staff not directly hired by him or her, it probably means that he or she is trying to cover something by getting rid of people who he or she cannot control.

2.  Legal Measures

In addition to practical tips, to radically mitigate the risk posed by managers, companies shall strengthen corporate internal regulations to the fullest extent allowed by laws with a view to detering and detecting misconducts and to effectively replacing managers found guilty of disloyalty. Foreign investors may consider overhaulling corporate bylaws in the following aspects:

(1)  Amend company’s articles of association (“AOA“)

AOA is often likened to be the constitution of the company having the highest regulatory authority over the company. China Company Law has made it clear that AOA shall be binding on the company, its shareholders, directors, supervisors and senior officers. Senior officers in the case of private limited liability company include the general manager, deputy general manager, financial person-in-charge and other personnel designated in the AOA.

Companies shall first designate the personnel who are to be called “senior officers” of the company. Further, companies shall design and insert some detailed provisions in the AOA addressing discinplines, engagement and removal of senior officers.

(2)  Amend corporate bylaws such as employment handbook. Clear provisions regarding various misconducts such as self-dealing, embezzlement and the like shall be put in place as the legal basis for terminating employment contract and imposing penalties.

(3)  Revise the labor contract with the manager. This is a critical point. Senior managers, though not expressly given any special regards in China Labor Contract Law, are treated differently from ordinary employees in judicial practice, leaving more rooms for companies to regulate and discinpline their senior officers.

For example, since China Company Law has squarely placed the duty of care and duty of loyalty on senior officers, it will be reasonable for company to sitpulate in the labor contract with the manager that upon proving the guilt of the manager for conducting self-dealing, the company may terminate the labor contract.

Though there is still no authoritative view on the impact of China Company Law (esp provisions regarding appointment and removal of senior officers) on the employment (including termination and economic compensation) of senior officers, companies will be better off to stipulate stringent conditions towards senior officers.

(4)  Last not the least is to get your supervisor work. It is a common phenomena that supervisors of limited liability companies are often vase, dormant all the year, appointed only to meet Company Law’s requirement. However, the core value of having supervisor is to supervise the conducts of management team of the company, ensuring compliance in accordance with company’s AOA and laws.

Investors shall get their appointed supervisors to do their homework diligently, adding real value to the company.

The above is discussed from the perspective of preventing senior managers from misusing their powers. However, equally important is related to how to inspire and incent senior management team to work their best in serving the company, which will take a separate course to discuss.

make a will disposing of properties located in China

Posted on by
Reply

The number of  foreigners with some kinds of properties or assets in China has been sky-rocketing every year for the reasons that (1) more and more foreigners come to China for luck of fortune, and equally (2)  more and more Chinese citizens emmigrate and convert into foreigners. Naturally, foreign-related legal affairs have been increasing exponentially, among which is the inheritance issue.

As a way of leaving assets or properties to offspring or to beloved ones, a will is often adopted. So it is important for foreign testators to understand the legal requirements on making a will which disposes of properties located in China.

Besides the general requirements that the will-maker has the mental capacity to make the will, and that the terms of the will do not go against laws, there are formal requirements that shall be closedly heeded in order to make a valid will in China.

I  the Requirements in Forms of a Will

As learned from Wikipedia, many countries and states have stringent rules governing what kinds of will shall be held valid. China is no exception. In China Succession Law, there are types of wills:

(1)  notarial will. A will that is made by testator through a notary public agency.

Notarizing a will-making is highly recommended in China, as the law has made it expressly clear that a notarial will shall prevail over any other types of wills in the case of any inconsistency between multiple wills. In other words, a person shall only be able to amend or alter a notarial will by making a new notarial will which shall explicitly repeals the former one(s).

(2)  holographic will or hand-written will.  Such a testator-written will shall be duly signed and dated by the testator. There is no requirement on witness presence.

With personal computers widely used in our life, as a result, more and more people have relied on computers to draft a will and get the will printed and then sign and date the printed will. However, this has given rise to debate as to the validity of such printed wills. Given modern methods of forging electronic materials, it is reasonable to call into question the validity of a will that is not entirely written by testator’s own hands. Though it will be equally unreasonable to rule out the use of personal computers in making a will, we recommend that testators make their wills entirely in handwriting and do not resort to personal computers for the making.

(3) Will written by another on behalf of the testator. Such a will shall be made with more than two witnesses in presence and one of the witnesses shall be the one that writes the will. The will so made shall be duly dated with specific year, month and date, and shall be signed by the writer, other witness(es) and the testator.

As to who can serve as witness in making such a will, China Succession Law and China Supreme Court interpretation have made it clear that the following persons shall not act as witnesses: the heirs, other persons bequeathed in the will, and their (of the heirs and such other persons aforementioned) creditors, debtors and business partners, as well as people with no or limited legal capacity.

(4) sound-recorded will. China Succession Law allows a person to make its will in the form of sound-recording but there must be more than two witnesses in presence.

(5) A testator may, in an emergency situation, make a nuncupative will, which shall be witnessed by two or more witnesses. When the situation is over and if the testator is able to make a will in writing or in the form of a sound-recording, the nuncupative will he has made shall be invalidated.

 II  Disposing of Properties in Your Will

Though generally speaking, laws do not intervene the disposition and distribution by the testator of their own assets in a will, there are limits. And there are some heeds testators shall take in order to achieve your desired result of their wills.

(1) A testator must reserve or set aside necessary assets for his or her heir/successor who cannot labor or does not have a source of income. This means that even though the testator leaves in his or her will nothing to an heir who is out of her or his favor, the court will order that certain portion of the estate shall be reserved for maintaining such heir in need.

Whether an heir cannot work or does not have a source of income shall be determined at the time of the effectiveness of the will, the time of death of the testator.

(2) Reservation shall also be made for unborn child upon spliting the estates. In case the baby is stillborn, the share so reserved shall be dealt with in accordance with rules governing the  statutory succession, or the descent and distribution rules. In case the baby dies after birth, the reserved share shall be inherited by his or her heirs.

(3) A testator may impose or attach certain obligations on the heirs or legatees to qualify their inheritance. If the heir or legatee, without cause, fails to perform such obligations, he or she may be deprived by court of their right to inherit the estate concerned.

(4) Sometimes, a testator may wish to bequeath certain assets to one particular heir, intending this heir to gain full ownership to such assets. This desired result can only be attained by specifying explicitly that such assets shall be bequeathed to that person only. Without such explicit wording, such assets may turn out to be owned by another unintended person, generally the spouse of the intended heir. This is because that China Marriage Law has adopted the community property rule for marital properties of a couple. This law has provided that as a general principle, the assets or properties acquired by one spouse by way of gifting or inheritance  in the course of their marriage  shall be automatically deemed as community property, unless the gift or the will has made it clear that the assets or properties in question are intended only for one person.

III  Transfer of Inheritance Rights

To inherit estates located in China may seem to be a difficult job. Very often, one of the heirs may wish to save  the trouble by “transfering” or “assigning” his or her share in the estates to other heirs. However, strictly speaking, it is void and null to “transfer” an heir’s share in the estates under Chinese laws. In other words, agreement concluded by the heirs for transfering share in estates will not be recognized in China. Notary public office will not help to notarize such agreement, rendering it impossible to legally make the intended transfer.

So how to achieve that purpose?

While transfer of shares in estates is not allowable, heirs may “relinquish” their shares to other heirs. Relinquishing shall be made in clear and express manners. In practice, it is recommended that relinquishing be made in writing to other heirs. By relinquishing, the heir may “quit” the inheriting process taking place in China. Of course, the relinquishing heir may separately have agreement with other heirs in respect of consideration for the relinquishing.

But it shall be carefully noted that under Chinese inheritance laws, the legal consequence of relinquishing is that the relinquished share(s) will be equally divided and distributed by all remaining heirs equally. If the relinquishing heir intends to give his or her share to a nominated heir (not all other heirs), an agreement shall be entered into among all heirs to ensure that other heirs may not challenge or dispute the intended transfer.

Lastly, but probably the most importantly, the above discourse on will is based on the assumption that Chinese inheritance laws are applicable to the will.  But according to Chinese newly enacted laws on choice of law regarding foreign-related matters, inheritance under a will, unlike statutory inheritance/succession, may be governed by other laws that can be the laws of the place of testator’s regular residence or laws of testator’s nationality, at the time of the making of the will or death of the testator.

bona fide principle in Chinese laws

Posted on by
Reply

In a leasing/occupancy dispute where I represent the owners (a couple whose names are both registered on the title deed of the property) of an apartment in Shanghai, trying to take back the apartment which had been leased out to a foreigner “tanant” by the owners’ friend who was once entrusted with the keys of the apartment.

In response to my initial attorney letter in which I on behalf of my clients urged the tenants to move out of the apartment or re-sign a legal leasing agreement with and pay rents to my clients, the attorney of the “tenant” replied by throwing in a plausible ”boda fide party” argument to defend his client. According to this attorney, his client was a bona fide party because (1) the illegal lessor, the friend of the owners of the apartment, held the photocopy of the title deed of the apartment; (2) the lessor held the key to the apartment; (3) the lessor held a power of attorney granted to her by the husband owner of the property, which was forged (as my clients had never given such a POA) and (4) the leasing transaction was done through a realty firm. Sounds reasonable, right?

What this attorney is really up to is to establish at law that his client, the tenant, as a bona fide party, had reasons to believe that the lessor was acting with authority as the property owners’ agent or representative, so that pursuant to Article 49 of China Contract Law, the leasing agreement was valid and binding on the property owners.

Well, to me who have been practicing real estate laws for years in Shanghai, the argument put forward by tenant’s attorney is not well grounded. Let us leave aside whether that argument will stand to reason at court, I am more interested to introduce the concept of bona fide (third) party and its application in Chinese laws.

1.  Bona Fide (Third) Party

Bona Fide means “in good faith” in legal jargon. There is no clear or authoritative definition of the term. Generally speaking, it denotes the mental and moral states of honesty and conviction regarding either the rectitude or the depravity of a line of conducts of one’s own or others’. At laws, a bona fide actor should not be culpable and shall be protected in many situations, with a view to upholding social righteousness and boosting market transactions (to be elaborated below)

2. Prominent Application of Bona Fide Principle

(1) in the case of agency (agent-principal) relationship

Article 48 of China Contract Law:

Absent ratification by the principal, a contract concluded on his behalf by a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was extinguished is not binding upon the principal unless ratified by him, and the person performing such act is liable.

The other party may demand that the principal ratify the contract within one month. Where the principal fails to manifest his intention, he is deemed to have declined to ratify the contract. Prior to ratification of the contract, the other party in good faith is entitled to cancel the contract. Cancellation shall be effected by notification.

Article 49 of China Contract Law:

Where the person lacking agency authority, acting beyond his agency authority, or whose agency authority was extinguished concluded a contract in the name of the principal, if it was reasonable for the other party to believe that the person performing the act had agency authority, such act of agency is valid.

Bona fide doctrine is often triggered or brought into play when the validity of a contract is challenged because one contracting party’s authority or power to enter into the contract is called into question, as in the case outlined in the beginning of the post. In such situations, the most frequently cited law provisions are the two clauses above quoted from China Contract Law, in particular Article 49.

Though not explicitly stated in this Article 49, the other party contending the contract in question is valid must be a “bona fide” party who does not know or ought not to be deemed to know that its counterparty did not have the authority to conclude the contract at the time execution thereof. As result, the contract will be held to be valid and binding on the principal who was not properly represented by his or her agent. Otherwise, the contract shall be deemed as not binding on the principal, leaving the signing parties to the contract in dispute which shall be settled between them.

In my case, the occupant’s attorneys tried to make use the bona fide doctrine to protect their client, which is least likely to succeed, because the tenant ought to know that the owners, Singaporean couple, may not be able to write a power of attorney in Chinese, and furthermore, only the husband’s name appeared on the forged POA. In this sense, this tenant shall not be regarded as bona fide party.

(2) good faith/bona fide acquisition of properties

China Property Law (effective as of Oct 1, 2007) for the first time provides for the good faith acquisition legal systems under which a bona fide purchaser of property, real or personal, is able to acquire the title to the properties even though the seller may not have the right or power to dispose of the properties.

According to Article 106 of China Property Law, where a seller sells property when having no right or power to do so, the purchaser is generally unable to acquire the title of the said properties unless the following conditions are simultaneously met:

(1) the purchaser is in good faith at the time of purchase;

(2) the property is sold at reasonable price; and

(3) the property has been duly registered (in regard of real property) or handed over (in regard of personal property), as the case may be, as required by laws.

In practice, many cases arise where one spouse sells their co-owned house or apartment registered in his or her name only without the consent or permission of the other spouse. Chinese family laws generally treat properties acquired by one spouse in the life of their marriage as community property disposal of which shall be subject to mutual consents of both spouses, but on the other hand, many such houses and apartments are registered in one spouse’s name only. To the outsiders, though co-owned community property, such houses and apartments can be effectively sold by one spouse without the consent or knowledge of the other spouse whose name does not appear on the title deed of the property. In many cases, the non-disposing spouse attempts to petition to court to nullify the sale and purchase transaction for the reason of violating his or her rights in the property, however such attempts will fail for sure provided that the purchaser is bona fide at the time of transaction, has paid reasonable price and has had the property registered in his name. Courts are generally reluctant to annul such completed transaction unless it is proved that the purchaser is clearly not in good faith.

two disressed apartments in Shanghai on sale at good prices

Posted on by
1

Though no one will disagree that this is not a time for purchasing real properties in China, esp in big cities like Shanghai, we cannot deny that there are still people believing that real estate is still something worth investing in a long term in China, in particular properties that are discounted heavily due to some non-market reasons.

As a real estate lawyer, I have been handling a number of foreign-related real estate cases in Shanghai and other cities in China. Recently, I have been engaged by property owners in two cases in real estate dispute settlement. In both cases, the properties are being put on sale.

(1) in the first case, two owners defaulted under a sale and purchase contract with foreign buyer, and the buyer has filed a case against my clients for recovering the down payment and damages. If there is no “while knight” to buy the property, it is almost inevitable that the property will be sold later through court-presided auction whereby corruption is rampant and the property will be disposed at some rediculous price to the great detriment to my client, as was proved true in the high-profile case scandal involved Wu Ying whose some 50 million worth assets were sold at almost one tenth of their market value.

So it is in client’s best interest to sell the property to other buyers, even at substantial discount (to be determined later).

The property, located at central Puxi, named “Hua Shan Xia Du Yuan”, was originally sold to buyer at some RMB 18 millions.

(2) second case is a little bit simpler. The property is currently leased to a tenant by a friend (kind of special person, cannot elaborate here) of the clients who has never authorized such leasing. We are in the process to evict the tenant at this moment. Clients are eager to sell the property out even at great discount.

This property, located in Central Park (the name of the living compound), is quite big, almost 450 sq meters, worth well over RMB 20 millions.

If any of you are interested to buy property in Shanghai, you may contact me for more information. It is for sure that you will be getting a good deal. At the same time, believe it or not (as I always understand foreigners have deep suspicion about Chinese judicial system), the risks can be well managed and controlled.

my experiences of serving foreign clients as a Chinese lawyer in Shanghai

Posted on by
2

Getting engaged in foreign-related legal services for years here in Shanghai, I have found it an interesting topic to discuss how to get connected, and build good chemistry with foreign clients. In a word, never an easy job!

Based on my personal observation, the biggest insurmountable obstacle between foreign or expat clients and Chinese lawyers is the mistrust or the lack of trust, which is, though unpleasant, very natural in my opinion, because:

(1) from the macro perspective, as foreigners, they grow and live in very different culture which may give rise to tremendous cultural clash or cultural shock. Even though, lawyers like me who can speak and write English quite well, still cannot feel easily connected with foreign clients. Due to such estrangement, it is obviously not easy to win and gain trust from them. Without trust, people cannot work together.

I always think that foreign clients esp big international corporations go to big international law firms for help at much higher cost, not because they think Chinese lawyers cannot do the job well but because they find it more trustworthy and more comfortable with people who share the same culture with them.

(2) the Chinese social ecology in today is not good. Chinese people are live in an era where traditional social values are collapsing and eroding. People can and acutally want to make money without principles, morals and ethics thanks partly to this country’s hypocritical political culture. In such a context, it is not a surprise for clients to be more cautious when choosing a Chinese lawyer.

Once approached by an American lady who is actually a Chinese migrating to USA at nine years old, in relation to deal with a real estate dispute and then sell the house, as always, I want her to grant a power of attorney to me so that I can legally work for her when negotiating with counterparties. To my big surprise or shock, while she expressed her need and gratitude for my legal help, she just did not want to give a POA to me. Main reason is that she had found online a lot of fraud scandals in Chinese real estate market in Shanghai in which property owners were cheated or defrauded and she were scared. She even questioned why I made the POA so long and “complicated” (I cover representation powers in several steps from negotiating with occupants in the house, signing property sale and purchase contract with buyers, and wiring sale proceeds out of China back to her bank accounts in USA), I got no answer.

(3) in some cases, foreign clients may seem not to trust Chinese lawyers because they think Chinese lawyers are not well trained and not professional esp with respect to international legal issues such as cross-border M&A, anti-dumping.

So, how come a Chinese lawyer can win the hearts of foreign or expat clients?

I have got no ready answer at all, as I myself is still on the way to find good answers. But I do have some experiences that may make good sense.

(1) be honest. This is something very important between attorneys and clients, especially so when a foreign client is involved. In one of cases in which a commercial dispute was to be settled through court proceedings, the client in the end chose me as his attorney at law simply because he found that I was the lawyer who was honest with what his legal fee actually covered.

It is a small but often effective trick played by lawyers to their clients. Many clients, foreign or domestic, don’t really know what a lawsuit is like in China courts. A “smart” lawyer may not explain what procedures are involved in the lawsuit and just telling clients that he would represent them in court for the legal fee charged. Meanwhile, in the retainer agreement or contract, it was clearly stipulated that in consideration for the legal fee paid thereunder, the lawyer will represent clients in court trial of first instance which means that additional fee will be charged (as a customary practice here) if one party to the case appeals to the appellate court, but in the mind of the clients, he is actually thinking that for the legal fee he pays, the lawyer will represent him in the court proceedings to the end.

Immediately, after the client discovered that the other lawyer was hiding something, he decided to use my service.

(2) Be loyal. Loyalty is the most fundamental factor that underpins a good relationship between attorney and client. Client is often worried that their Chinese lawyer while dealing with the other party who is often a Chinese person may betray him or be bought by the other party.

Foreign clients in such situations are very easily getting suspicious about their Chinese lawyer’s loyalty. This is a subtle feeling. Once I represented a German client in purchasing a villa in Shanghai at a time I just started my legal career on my own, in the course of transaction, in order to get the Chinese seller to agree to hand over the house to my client earlier, I tried to be nice to that man by talking about a lot of funny things to please him, while neglecting my client who was standing at my side, puzzled. He later expressed his groan over my behavior at that time which made him very uneasy to see his lawyer laughing and joking with his deal opponent.

Another positive example is a long-term client who has always turned to me for legal help. I was initially hired by her in equity interests transfer dispute. After winning that case, she started to use my service for other investment projects. Over time, she has tested me out to be a loyal attorney, and once confided that I am probably the only lawyer she may feel comfortable working with.

(3) Be diligent and do a good job in providing services, small or big.  This is aimed to build and boost attorney’s reputation gradually through mouth to mouth marketing by clients. This takes time, but once you seed trust in your old clients, they will then introduce more clients in their circle to you.

Lately, an old South Korea client to whom I offered a labor service once introduce to me SK company that is seeking legal counsel from China. I am so happy that I am recommended by my old client, which is really an unexpected gift from god.

do not let your OEM factories ruin your brand and reputation

Posted on by
Reply

I have heard stories like this before and I believe they are definitely true: Chinese OEM factories producing products for their international clients very often manufacture more than required, and those excess products are often sold in market without the authorization and knowledge of their clients.

Recently, in a project, we notice that our client’s counterparty, a small garment manufacturer in Shanghai, is secretly selling some toys and dolls that are manufactured for international brands.

There is no need to remind international companies of the risks that will inevitably arise from their OEM’s malpractice, which will definitely degrade the goodwill and reputation of such international brands and tradenames.

Therefore, international companies that are using OEM in China shall spare no efforts to ensure that they will not be screwed by their Chinese OEM factories by engaging in selling their products without authorization and control. These companies shall strengthen their management and supervision of their OEM, esp, small OEM companies that often go all out for money with no principles given the hard time they are experiencing due to international financial crisis.

This is about drafting a good OEM contract, but more about enforcement and execution of such contracts.

Avon bribery scandal in China, not really a big deal

Posted on by
Reply

Ifeng.com ran a piece of news reporting that, according to Wall Street Journal, people familiar with the matter disclosed that federal prosecutor had submitted their evidences to jury in the case of Avon overseas corruption. It was said that auditing report found that Avon employees had paid some hundreds of thousands USD to China governmental officials and third-party consultant agencies at a time when Avon sought to obtain governmental permit to allow Avon to conduct direct sale in China. For more about the scandal, please click here.

Well, hundreds of thousands of USD is not really a big deal here in China, contrasted with scandals about Chinese businessmen.

I believe none of those big companies in China is really clean of bribery or corruption of some kinds if a thourough investigation is conducted. I believe so because the ecological environment for enterprises and enterpreneurs compells such practice which is almost indispensible for companies, domestic or foreign, to survive in China, much less making money.

Foreign investors in China are very familiar with Chinese relationship or “guanxi” culture, meaning that you need to develop vast network of people that can lend help. Very often, this means that you need to know people in the government, people that have the power to allocate resources that are otherwise not accessible via normal ways. However, it is not free to establish and maintain such critical relationships, and actually it takes a lot of money to make it work.

China is a state thousands of miles away from a real rule of law country. Governmental officials’ hands are pervasive in the market grabbing, extorting or even robbing money from businesses that are in their jurisdictions. Though China has launched high-profile anti-corruption campaign, however in a country where there is no rule of law, no independant judicial systems, Chinese officials in governments believe that they can get away from scrutiny and escape penalties. Even those disciplines enforcers and judges are corrupt themsellves, no one really gives any serious damn to the system.

I am not saying that foreign investors in China should get localized this way but saying that to operate a business in China, it is almost inevitable to be totally free of some kind of corruption practice. But for foreigners, while it is almost necessary to engage in some sort of bribery, bear in mind, you are really playing fire indeed.

English training business in Shanghai, China

Posted on by
2

[Jason's comments: this article is cited from Guardian website. This is intended to remind potential investors interested in English training of potential risk because of the already white-hot competition in the market. I am approached respectively by two investors looking to taking a bite of this big cake recently. There are a number of issues to consider and to be fully clear about. The biggest issue or obstacle is the confusion of the regulatory rules in respect of this language training activities in China. First of all, in Shanghai, three training institutions have been set up, namely, the Wall Street English, Disney English and English First. These setup was approved by Shanghai Foreign Investment Committee, instead of education department, which is equipped with the power to approve Sino-foreign contractual joint venture shcools. However, our enquiry into other cities elicted that English training was regarded as education and therefore subject to approval of local education department. This has given rise to immense confusion in the market as to what legal structure an investor may consider for their investment in Shanghai.  Secondly, the often mentioned issue about the employment of foreign teachers. Once talking to a friend who worked in Shanghai police department, I learned that WSE was once fined for failing to obtain requisite permit for hiring foreign teachers, the SAFEA permit. However due to ambiguity of related rules, law enforcers in Shanghai have been closing one eye towards failure to abide by the SAFEA rules. In practice, we believe that so long as foreign teachers who have obtained the ordinary work permit and residence permit, they should be free of problem from SAFEA.]

In South Korea, pushy parents who want their children to get ahead in learning English send them for an operation to elongate the tongue, in the belief that it will make pronunciation easier.

Such is the national obsession with having a fluent command of the language that drastic measures are taken in some cases when children are just six months old. China has not yet reached the same level of fanaticism over spoken English, but it is not far off.

Chinese children with affluent parents are packed off to classes staffed by American, Canadian and British teachers as soon as they can speak. High school students are frequently enrolled in extra-curricular classes to cram for the English component of the university entrance exam. And young professionals aspiring to a more interesting and lucrative career flock to classrooms and online lessons and even stadiums alongside tens of thousands of other evangelical linguists.

To meet this rising demand, there are now an estimated 30,000 organisations or companies offering private English classes in China. The market has nearly doubled in size in the last five years and is now worth around $3.1bn.

Disney English, a subsidiary of the US entertainment giant, has rapidly expanded since launching in October 2008, after thousands of parents signed their toddlers up for its special curriculum of Disney-themed classes. Today there are 11 schools featuring Mickey Mouse statues, Peter Pan text books and Little Mermaid teaching aids – eight in Shanghai and three in Beijing – and the company plans to double the number of locations by the end of the year.

Andrew Sugerman, Disney English’s general manager, said: “We take children from age two to 12. Parents coming to our schools want their kids to start young, to reach a higher level of English. They want their kids to be comfortable communicating with others, particularly with foreigners, to be more competitive.”

Analysts are predicting growth across the private English school sector in China of between 12% and 15% in 2010 as disposable incomes in urban areas rise and a greater proportion of that money is funnelled into educating the next generation.

Privately owned EF Education First, which has more than 130 schools under the English First (EF) banner, including many that are franchises, has witnessed fierce competition as barriers to entry have come down and companies have found it relatively easy to enter the market to meet the demand.

“Like any growing industry, specialisation and segmentation have occurred and competition is much greater than before,” said Ming Chen, EF’s executive vice-president.

In this climate, big brands – both domestic Chinese and foreign – with marketing clout, nationwide reach and access to capital, have been carving up the market and gaining share from the tens of thousands of smaller, local schools.

New York stock exchange-listed New Oriental, China’s largest private education provider with 324 learning centres and schools, is best-known for its exam preparation training courses. Since its 2006 debut, its shares have more than quadrupled in value. In a recent analyst note, investment bank Goldman Sachs pointed out that the group’s enrolments in the third quarter of the current financial year were up 18% year on year, ahead of expectations.

Chinese-owned Global Education & Technology group, which operates the Global IELTS brand, offering English language test preparation training at many of its 49 owned and 198 franchised schools, will be hoping to recreate similar shareholder value following its expected $100m initial public offering on the Nasdaq later this year.

There is also speculation that UK media giant Pearson, which last year bought the Wall Street English chain, with 39 schools in China, is preparing to invest further in the region, after earning a $1.6bn windfall from the sale of one of its subsidiaries. Analyst Lorna Tilbian at Numis in London said she expected Pearson to spend the cash on “emerging markets and digital technologies”.

As a clutch of dominant, national and increasingly professional English language schools emerges, several smaller, localised teaching institutions, with less marketing and investment firepower, have started to crack.

At the end of last year, a spate of bankruptcies at some of Shanghai and Beijing’s longest-running language schools was at least partly linked to their failure to attract new students or top teachers in an increasingly competitive market. In the fallout it emerged that teachers and pupils at the collapsed schools were owed considerable amounts in unpaid wages and course fees and that many of the staff did not have proper teaching visas for China.

EF Education First estimates that there are just 5,000 native-speaker English teachers with valid teaching visas in mainland China. With more than 300 million students in the education system who could potentially seek out private English classes, that suggests a major staffing shortfall.

To some extent, Chinese nationals with a strong command of English are able to step in, but many students – and their parents – still place greater value on native English speakers.

Disney English’s solution has been to recruit teachers with specific young-learner teaching qualifications in the US, and arrange appropriate visas. In addition the company has launched a China-wide recruitment drive.

For qualified and experienced English teachers, the dynamics of the industry in China represent an opportunity. But for the thousands of small English language schools, unable to compete with the new breed of slicker professionals, times may be about to get significantly tougher.

Notice About Administration of Foreign Expert Certificate Issued by State Administration of Foreign Affairs

Posted on by
Reply

[Jaosn's Comments: I quote this article from the official website of SAFEA. SAFEA is one of my concern because every time a foreign investor intending to set up a language training school in China always brings up this issue. News had it also that many many English training schools or centres here in Shanghai failed to obtain proper employment permits/licenses, in particular, the foreign expert certificate, for their foreign teachers. Under current rules, foreigners working as English teachers are deemed as "foreign experts" and therefore need to apply for this foreign expert cerfiticate. This seems and indeed is ridiculous and stupid practice. But it happens here in this country. To employ foreign experts, the school, centre or company shall first apply for a qualification certificate certifying that this entity is now qualifed to hire foreign experts. The problem is that except for those Sino-foreign joint venture schools, other training entities shall only apply for this qualification cerfiticate after their businesses run for more than one (1) year. A critical question arises before foreign investors, within this one (1) year, they cannot employ foreign teachers or have to do it illegally. ]

Foreign affairs Offices of Provincial and autonomous regional governments, municipality directly under the central authority, education committee, talents importing  office, general office(Bureau) of public security, ministries and commissions of the State Council, education departments and foreign affairs departments of Institutions directly under State Council:

In order to conform to the reform and opening policy, to promote  macro-administration of importing overseas talents into China, the State Administration of Foreign Experts Affairs (SAFEA) issued the notice about implementing the system of foreign expert certificate in 1994, with Ministry of Finance, Ministry of Railways , Ministry of Communications, State Administration of Foreign Exchange Control and Price Administration Department of State Planning Committee released notice about  implementing the system of foreign expert certificate for examining qualification of foreign expert in China and providing better condition for them. The measure is supported and appreciated by relevant departments, retaining institutions and foreign experts. Policy of foreign experts’ employment has changed recently, the administration of certificate administration need be improved, the relevant information is as follows:

I  the granted object of foreign expert certificate

1. Foreign Expert Certificate (cultural and educational category)

All Foreign economists and technologists with job Visa (category z), who are working in China, need apply for foreign expert certificates(economic and technologic category), Foreign economists and technologists with  other Visa, also take foreign expert certificate

2. Foreign Expert Certificate(cultural and educational category) 

All foreign experts who are employed by the retaining institutions with qualification certificate of retaining cultural and educational foreign experts and oversea agencies in China authorized by SAFEA need apply for it.  

A foreign expert can be granted a foreign expert certificate by normal contract(original one) signed with retaining institution, which is printed and issued by SAFEA. 

A cultural and educational foreign expert who is working in China according to agreement also need sign a normal contract before applying for foreign expert certificate. 

A cultural and educational foreign expert who is working to china for short term also can apply for a foreign expert certificate authorized by provincial, municipal, ministries and commissions’ departments in charge of foreign expert if it is necessary.

Staffs of oversea agencies in China, foreign teachers and administrators of cooperative school between China and foreign countries, foreign teachers and administrative staffs of school  specialized in  recruiting foreigners’ children, which is run by oversea organization and Individual  in China, apply for foreign expert certificate by legal writs. 

II  the Procedure for Residence

Within 30 days after a foreign expert enters into China, he needs to take procedure for residence by foreign expert certificate in entry and exit administrative department of Public Security Ministry.

III  the administration of foreign expert certificate

1. Foreign affairs Offices of Provincial, autonomous regional governments, municipality directly under the central authority take charge of the numeration of  local foreign expert certificate and sealing in column of license- issuing authority, then granting it to retaining institution via original canal (departments in charge such as foreign office, education committee importing talents office and more)

Steel seal of signing and issuing institution is stamped by license-issuing authority or by retaining institution authorized by license-issuing authority.

2. Central committee, relevant ministries and commissions of State Council, directly under Institution, corporation and headquarters can entrust Beijing foreign affairs Office to take charge of granting institutions directly under central authority in Beijing foreign expert certificate which also can be released by foreign affairs departments of ministries and commissions, corporation. Foreign expert certificate of local school in Beijing and other educational institution(include retaining institution under Ministry of Education) is granted by Beijing foreign affairs Office.

3. Foreign expert need hand over foreign expert certificate if they change into a new institution which should conduct foreign expert certificate again for foreign expert.

4. Before a foreign expert leaves China, the retaining institution should take back foreign expert certificate or written Off it. Signing and issuing department and retaining institution have no right to charge expert guarantee deposit.

5. According to No.105 documents [1994] issued by Foreign Expert Bureau, foreign expert certificate can be charged for printing of the certificate, but one shouldn’t exceed 50 Yuan.