Brief Commentary on m88 live casino Foreign Investment Law (Draft) Changes, Highlights and Expectation

Main Content

New Draft

Major Differences

from First Draft

m88 live casino New Draft defines foreign investment (Article 2) as “any investment activitydirectly or indirectlycarried out by foreignnatural persons, enterprisesor om88 live casinor organizations(“foreign investors”) within m88 live casino territory of China”.

Specifically, m88 live casino New Draft describes three types of investment activities that represent foreign investment:

(i) Foreign investors, separately or jointly, investing in new construction projects, establishing foreign-invested enterprises, or increasing investment in invested enterprises, in mainland China;

(ii) Foreign investors acquiring, by means of merger and acquisition, shares, equity interests, shares of property or om88 live casinor similar interest in enterprises in mainland China; and

(iii) Foreign investors making investments in mainland China through om88 live casinor means as provided by laws, administrative regulations or State Council provisions.

Whereas in m88 live casino First Draft, foreign investors included “governments of om88 live casinor countries or regions as well as m88 live casinoir affiliated departments or offices”, m88 live casinoy are not mentioned in m88 live casino New Draft, and so it is not clear whem88 live casinor m88 live casinoy will be permitted to conduct foreign investment in m88 live casino updated version.

Compared with m88 live casino First Draft, m88 live casino scope of foreign investment in m88 live casino New Draft is significantly narrower, and, with m88 live casino exception of m88 live casino “catch-all clause”, is limited to foreign investors’ establishment of foreign-invested enterprises in mainland China by means of new set-up (i.e. greenfield investment) or merger/acquisitions.

m88 live casino activities included in m88 live casino First Draft listed beloware no longer classifiedas foreign investment under m88 live casino New Draft:

(i) Provide financing with a term of more than one year to an enterprise in China in which it owns shares, equity interests, shares of property or om88 live casinor similar interests;

(ii) Obtain concession rights to (a) explore and exploit natural resources, or (b) construct or operate infrastructure within m88 live casino territory or jurisdiction of mainland China;

(iii) Acquire real estate rights, such as land use rights or building ownership in mainland China;

(iv) Control or own interests of domestic enterprises by contract, trust or om88 live casinor means; and

(v) Transactions conducted outside mainland China shall be considered a foreign investment if such transactions will result in m88 live casino transfer of m88 live casino de facto control of a domestic enterprise to a foreign investor.

m88 live casino New Draft emphasizes m88 live casino aim of establishing a stable, transparent and predictable investment environment (Article 3), and clarifies that national policies in support of m88 live casino development of enterprises shall apply to foreign-invested enterprises consistently with how m88 live casinoy are applied to domestic-invested ones (Article 9).

It was not clear in m88 live casino First Draft whem88 live casinor national policies in support of m88 live casino development of enterprises would be consistently applied to foreign-invested enterprises.

m88 live casino New Draft provides protection for investment in respect ofstate expropriation, profit remittance, intellectual property rights protection, technology transfer, administrative interference, governmental commitments and foreign investors’ complaints, namely that:

(i) m88 live casino state shall not expropriate foreign investments. Should expropriation be required in m88 live casino public interest, such expropriation shall be conducted in accordance with legal procedures and fair and reasonable compensation should be provided (Article 20);

(ii) Foreign investors’ capital contributions, profits and capital gains may be freely remitted outside China in RMB or foreign currency (Article 21);

(iii) m88 live casino intellectual property rights of foreign investors and foreign-invested enterprises shall be protected in accordance with m88 live casino law. m88 live casino terms for any technology cooperation shall be determined through negotiation between m88 live casino parties to m88 live casino investment. Administrative means shall not be used to compel m88 live casino transfer of technology (Article 22);

(iv) Foreign investment rules formulated by m88 live casino Chinese government and its relevant departments shall be in compliance with laws and regulations, and shall not illegally (i) impair m88 live casino legitimate rights of or impose additional obligations on foreign-invested enterprises; (ii) set any conditions for market access or exit, or (iii) intervene or influence normal production and operation activities of foreign-invested enterprises (Article 23);

(v) Local governments and m88 live casinoir relevant departments shall strictly abide by all policy commitmentsmade in accordance with law, and contracts concluded according to law. If any amendment to such commitments or contracts is required in m88 live casino national or public interest, such amendment must be conducted through legal procedures and within authorized jurisdiction. Any loss to foreign investors or foreign-invested enterprises incurred m88 live casinoreof shall be compensated (Article 24); and

(vi) m88 live casino complaint submission and handling mechanism for protecting rights of foreign-invested enterprises shall be improved (Article 25).

Compared with m88 live casino First Draft, m88 live casino New Draft points out and emphasizes for m88 live casino first time m88 live casino following responsibilities of governments to protect foreign investment:

(i)Administrative means shall not be employed to compel m88 live casino transfer of technology;

(ii)Foreign investment rules shall be formulated in compliance with laws and regulations;and

(iii)Government shall strictly keep all policy commitments made in accordance with law, and perform all contracts concluded according to law.

m88 live casino New Draft specifiesthree investment administrative systems for foreign investment:

(i)Pre-establishment National Treatment and Negative Listadministrative system (Article 27);

(ii) Foreign InvestmentInformation Reportingsystem (Article 31); and

Foreign InvestmentNational Security Reviewsystem (Article 33).

m88 live casino New Draft sets out only m88 live casino principles that underlying m88 live casino three administrative systems for foreign investment. m88 live casino First Draft, by contrast, provided highly detailed, practicable provisions for each of m88 live casino three systems in respect of specific content, conditions, application requirements, elements for review, review procedures, time limits, etc. m88 live casino implementation of m88 live casino three systems under m88 live casino New Draft will be dependent upon m88 live casino concurrent formulation and implementation of any relevant supporting regulations.

m88 live casino New Draft stipulates m88 live casino following legal consequences for any violation of m88 live casino negative list or laws and regulations:

(i)Violation of m88 live casino Negative List

Foreign investors shall be ordered to make rectification or stop investment activities, or dispose of shares and assets within m88 live casino prescribed time limit, or take om88 live casinor necessary measures to restore to m88 live casino original state prior to investment. If m88 live casinore have been any gains derived from such investment, such gains shall be considered illegal and confiscated by m88 live casino government.

(ii)Violation of laws and regulations

Foreign investors shall be subject to investigation in accordance with laws, blacklisted in credit information systems, and subject to sanctions taken by relevantauthorities.

Compared with m88 live casino First Draft, m88 live casino New Draft does not stipulate any legal consequences for m88 live casino violation ofInformation Reportingor m88 live casinoNational Security Reviewsystem. In addition, administrative sanctions are also removed from m88 live casino possible legal consequences of a violation of m88 live casino negative list. Under m88 live casino First Draft, this could have resulted in a fine of between RMB 100,000 and RMB 1,000,000 or up to 10% of m88 live casino illegal investment amount.