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CHINA LUNCH ROOMDoing Business in China
Wadley Business Consulting/Shanghai/Co. Ltd.
Preventing IP, Financial and Other Legal Pitfalls When Trading with Ch
ina
Business Enterprise CentreAustrade TradeStart Sutherland, St George &
Sutherland Shires
Sydney09 May 2008
Michael Wadley, Wadley Business Consulting (Shanghai)
Who we are
Wadley Business Consulting/Shanghai/Co. Ltd.
- 14 people- 5 Australian lawyers - 3 Chinese lawyers- 1 Canadian lawyer- 3 Consultants in Beijing/Syd./Melb.- In operation for 4 years, China 6 years
Michael Wadley- Australian, 18 years
corp./com. Practice in Australia
- Long China fascination, grew Asian client inward investment base
- Corporate experience, Australian listed and unlisted boards, M&A
Paul Cooper- Canadian, 15 years
lawyer- 4 years as Investment
Broker with Schroders in HK/China
- 2 years study of law in Nanjing in Chinese, fluent
in Chinese
Wadley Business Consulting/Shanghai/Co. Ltd.
Wadley Business Consulting/Shanghai/Co. Ltd
Our Key Areas of Expertise
Finance, Banking, Insurance
Litigation/Arbitration
Establishment & Operational
IssuesBusiness
Planning/ StrategyFormation
Restructuring/M&A
Tax
Compliance/Risk Management
Property
LogisticsTransport
ProactiveHands On
Value adding
It’s in the numbers
3,815 companies exporting to China (2005-06) +4,984 exporting to Hong Kong
Austrade’s China network: 2,700 companies assisted (last 12 months) 900 have made export sales
6,000 Australian invested projects in China
Wadley Business Consulting/Shanghai/Co. Ltd.
Wadley Business Consulting/Shanghai/Co. Ltd
Operating Environment Sobering Statistics (Austrade)
- 50% of 4 billion contracts signed in China are in some respect fraudulent - 40% all China products counterfeit or substandard - 66% SOE accounts defective - Underground economy 20% or more GDP
- 15 – 20% infrastructure spending – fraud/low quality work - US$75 – 90 billion to re-capitalise 3 of 4 major bank’s prelisting
Wadley Business Consulting/Shanghai/Co. Ltd
Historical Context
1910-30: Republic formed and civil law system1930’s: Civil war and Japanese invasion1930’s/1940’s” WW II and Civil war1949: Communist victory1960’s/ 1970’s: Cultural Revolution1979: “Open Door” – but no legal system1980’s: Most key laws enactedDecember 11, 2001: China joins WTO
History of the Legal System• Confucius, 'li' – Guided by correct behavior• Legalist, 'Fa' – Governed by positive laws, rewards and
punishment• 1840 – 1949, semi feudal and semi colonial• 1911 – Civil Code• 1949 – Repeal of Prior Laws• 1949 – 1979, 'Anti – Rightist' Movement, Cultural
Revolution• 1979 – Open Door, New Civil and Economic Laws
Wadley Business Consulting/Shanghai/Co. Ltd
Legal Culture
• Pre 1979, lawyers ordinary government workers• 1979 – establishment of state run law offices• 1992 – semi-private law firms: ‘No 1 Law Firm’• 1993 – law permitting foreign law firms, - No
China law• 1996 – law permitting private law firms, - No
‘cooperation’ with foreign law firms
Wadley Business Consulting/Shanghai/Co. Ltd
Law Firms Today
• Approx. 118,000 PRC lawyers (2007)• Approx. 24,000 in Beijing and Shanghai• 12,000 PRC law firms – 2000 in Beijing
and Shanghai• Annual bar exam 14% - 36,000• 220 foreign law firms including 60 from
HK/Macau
Wadley Business Consulting/Shanghai/Co. Ltd
Wadley Business Consulting/Shanghai/Co. Ltd
More Differences
“So far, a basic legal system framework has been formed and we are still developing the system. China’s goal is to construct a modernlegal system.” -- Chief Justice Xiao Yang, People’s Supreme Court –
World Jurists Conference, Oct., 2005, Beijing
The evidence ( Since 1978 ) - a new constitution
- 400 laws - 800 administrative rules
Wadley Business Consulting/Shanghai/Co. Ltd.
Presentation to
Jo Fisher Executive – Boardroom Luncheon
Michael Wadley, Wadley Business Consulting (Shanghai)
Big country - big differences
One country = 30 different markets!
Wadley Business Consulting/Shanghai/Co. Ltd
Main Intellectual Property Laws in the PRC Trademarks & service Marks Patents Copyright Unfair Competition, Passing-off Trade Secrets Domain Names Product Quality,
Advertising & Consumer Laws
Criminal Law Enterprise Names Anti- Counterfeiting Technology Transfer Customs Others: Industry and Place
Specific Laws & Regulations (e.g.. Pharmaceutical, Tobacco)
Supreme People’s Court Interpretations- Civil Cases
Wadley Business Consulting/Shanghai/Co. Ltd
State Intellectual Property Office (“SIPO”) Operates Patent Office
Local IPO Deals with patent infringements
National Copyright Administration (“NCA”) and Copyright Bureau
Copyright enforcement and policy-making
State General Administration for Industry and Commerce (“SAIC”) and local Administrations for Industry and Commerce (“AICS”)
Trademark registration, license recordal, and trademark enforcement, including anti-counterfeiting, unfair competition, advertising, company registration, etc.
State General Administration for Quality Supervision, Inspection and Quarantine (“AQSIQ”) and local Technology Supervision Bureau (“TSBs”)
Product quality and anti-counterfeiting
General Administration of Customs IP enforcement at borders
Ministry of Public Security and local Public Security Bureau (“PSBs”)
China’s main police force
Ministry of Commerce (“MOC”)/ local offices Technology licensing
China International Economic and Trade Arbitration Commission (“CIETAC”)
Arbitration of domain names, internet keywords, etc.
Other Ministries- industry- specific Tobacco, pharma, chemical, etc.
Wadley Business Consulting/Shanghai/Co. Ltd
Development of Legal System
Traditional reliance on administrative enforcementBut increasing reliance on civil courts:•1990: 2.4 million civil cases; 300 IP cases•2001: 4.7 million civil cases; 5,265 IP cases•2003: 4.8 million civil cases; 6,300 + IP cases•National growth 20%, dev. areas 40%
Wadley Business Consulting/Shanghai/Co. Ltd
IP
- It’s not just an IP jungle; it’s a battlefield
- Forget your Australia experience You are in China
- The system in there: Use it or lose it
- Do it before you talk let alone visit
Wadley Business Consulting/Shanghai/Co. Ltd
Financial
- Due diligence and reference checking
- Above again
- Litigation is more expensive and difficult than Australia; costs and logistics plus lost opportunity
- Resource the due diligence but be aware of costs
- Possession is 9/10ths of the law
- use experienced advisors
Wadley Business Consulting/Shanghai/Co. Ltd
Legal
- It’s another world – the law, customs, systems of enforcement, attitudes to contract and contractual litigation
- due diligence and reference check up
- have a contract – before you start
- use a China specialist
Wadley Business Consulting/Shanghai/Co. Ltd
Due Diligence
- More expensive with limits, less transparent
- More details and less restrictions on privacy
- On the ground – different districts
- Multipronged approach
- Do it before you buy or pay
- Know your counterpart and what drives/influences them
- Site visits
Wadley Business Consulting/Shanghai/Co. Ltd
Thank You for Your Attention. Wadley Business Consulting Shanghai
Address: Suite 5B, Crystal Century Tower
567 Wei Hai Rd, Shanghai , 200041
Tel: +86 21 6288 7299
Fax: +86 21 6288 7399
Mob: +86 13816804743
Email:[email protected]