Arrangement on Mutual Recognition and Enforcement of Judgments in Civil and Commercial Matters by Courts of Mainland And Hong Kong SAR
August 22, 2010
The Supreme People’s Court and HK SAR Government hereby make the following arrangement on recognition and enforcement of judgments in civil and commercial matters pursuant to choice of court agreements between parties concerned through consultation according to Article 95 of the Basic Law of Hong Kong Special Administrative Region of the People’s Republic of China:
Article 1 Final judgment, defined with payment amount and enforcement power, made between mainland court and HK SAR court in civil and commercial case with written jurisdiction agreement, the parties concerned shall apply to mainland people’s court or HK SAR court for recognition and enforcement based on this arrangement.
Article 2 “Final judgment with enforcement power” in this arrangement:
(1) On the mainland, it refers to:
1. Judgment of the supreme people’s court;
2. The second instance judgment and judgment made by the upper level people’s court according to judgment supervision procedure is effective, when judgment of first instance is not allowed to appeal by people’s high court, intermediate people’s court and basic people’s court (as appendix) that’s authorized to be in charge of foreign related, HK, Macao and Taiwan related civil and commercial matters of the first instance, or when the appeal is out of prescribed time limit.
(2) In HK SAR, it refers to effective judgment made by court of final appeal, court of the appeal of the high court, court of the first instance and district court.
Judgment in this arrangement refers to judgment paper, ruling paper, mediation agreement and payment order on the mainland; refers to judgment paper, order and evaluation certificate of legal expense in HK SAR.
After the party applies to HK SAR for recognition and enforcement of the judgment, if people’s court of the mainland shall legally review the case, such case should be raised by upper level people’s court of the court that makes effective judgment.
Article 3 “Choice of court agreement in written” in this arrangement refers to a written agreement defining the exclusive jurisdiction of either the mainland people’s court or HK SAR in order to revolve dispute with particular legal relation occurred or likely to occur by the parties concerned since effective date of this arrangement.
“Particular legal relation” of this article refers to contract of civil and commercial matters between parties, excluding contract of employment and contract involving natural person with individual consumption, family affair or other non-commercial purposes.
“Written form” in this arrangement refers to contract, letter and electronic data (including telegraph, telex, facsimile, electronic data exchange and email) and other forms that can physically present the carried content and can be used in the future.
Written choice of court agreement can be constituted of one or more copies.
The choice of court agreement exists independently and any change, relief, termination or invalidation of the contract won’t influence effect of the choice of court agreement, except when it’s otherwise prescribed in the contract.
Article 4 Application for recognition and enforcement of civil and commercial judgment prescribed in the arrangement, should be submitted to intermediate people’s courts of residence, living place or place of property of the applicant on the mainland, or submitted to high court of HK SAR.
Article 5 If residence, living place or place of property of the applicant are under jurisdiction of different intermediate people’s courts, the applicant shall choose one of the people’s court to apply for recognition and enforcement rather than applying it to two or more people’s courts.
If residence, living place or place of property of the applicant is both on the mainland and in HK SAR, the applicant can submit application to courts at these two places at the same time. Judgment enforcement amount of courts at both places shouldn’t exceed fixed amount of the judgment itself. Court that has partly or completely executed the judgment should provide status of executed judgment upon requirement of the other court.
Article 6 Applicant shall submit the following document for application of judgment recognition and enforcement:
(1) Application for recognition and enforcement;
(2) Copy of judgment paper with seal of court that makes the final judgment;
(3) Certificate issued by court of final judgment to prove such judgment is the final judgment referred to in Article 2 of this arrangement and can be executed at the place of judgment;
(4) Identification evidence:
1. If applicant is natural person, he shall submit ID card or notarized copy of ID card;
2. If applicant is legal person or other form of organization, they shall submit notarized copy of registration certificate of legal person or other form of organization;
3. If applicant is a foreign legal person or other form of organization, they shall submit related notarization and authentication materials.
If there’s no Chinese version of submitted document to the mainland people’s court, the applicant shall submit a correct Chinese translation.
Court at the enforcement place doesn’t need to require particular notarization for certificate issued by court prescribed in this article.
Article 7 The following items should be included in the application for recognition and enforcement:
(1) The name and living place of the party, who is natural person; name and location of legal person or other organization, and name, position and residence of the legal representative or principal;
(2) Reason of application and request content, place of property and property status of the applicant;
(3) Whether the judgment is applied in court of original place and the enforcement status.
Article 8 Applicant shall comply with law of the enforcement place while applying for recognition and enforcement of judgment of court on the mainland or in HK SAR, except for otherwise prescribed.
Application period for recognition and enforcement by applicant is two years.
During the above period, if judgment on the mainland is applied to be executed in HK SAR, it will calculate from the last day of performance period prescribed by the judgment; if the judgment requires performance in different period, it will calculate from the last day of each performance period; if the judgment doesn’t prescribe performance period, it will calculate since effective day of the judgment; if judgment in HK SAR is applied to be executed on the mainland, it will calculate from the day of judgment mandatory enforcement, which is put in the judgment; if the judgment has other prescription during performance period, it will calculate since maturity of performance period.
Article 9 For application for judgment recognition and enforcement, if debtor of the first trial provides evidence that proves one of the following situations and is proved by the court that handles the application, the judgment will not be recognized or executed:
(1) The jurisdiction agreement is invalid according to local law at the original court chosen by the parties concerned, except for jurisdiction agreement that is judged by the chosen court as being valid;
(2) The judgment is performed completely;
(3) Court of the execution place enjoys exclusive jurisdiction based on local law;
(4) The party that loses a lawsuit and doesn’t appear in court has no legal summon or hasn’t acquired legal replying time though with legal summon according to law at the original court, except for cases that original court announce service based on law or related regulation;
(5) Judgment is acquired by cheating;
(6) Judgment of the same lawsuit by court at enforcement place, or judgment of the same lawsuit request by courts abroad, or arbitration made by related arbitration institute have been recognized or executed by court at the enforcement place.
If the people’s court of the mainland believes enforcement of the judgment made by HK SAR impairs social public interests, or court of HK SAR believes enforcement of judgment made by court on the mainland violates public policy of HK SAR, the recognition and enforcement are not permitted.
Article 10 For judgment made by court of HK SAR, if the debtor confirmed by judgment has lodged suit or the procedure is still underway, the people’s court of the mainland, after checking and verification, can pause recognition and enforcement of the procedure. If all or part of the original judgment is maintained after appealing, the reorganization and enforcement procedure can be recovered; if the original judgment is overthrown, the recognition and enforcement procedure can be ceased.
If local people’s court of the mainland has arraigned adjudication of the made judgment according to judgment supervision procedure, or the Supreme Court has arraigned another adjudication, after being checked by the court of HK SAR, the recognition and enforcement procedure can be paused. If the second judgment maintains all or part of original judgment, the recognition and enforcement can be recovered; if the second judgment has changed overall original judgment, the recognition and enforcement procedure should be ceased.
Article 11 The effect of judgment that’s recognized according to this arrangement should be equal to judgment of local court.
Article 12 If the party doesn’t agree to the judgment of whether it’s recognizable or executable, he can apply to the upper level people’s court for review on the mainland, or to lodge suit based on law and regulation in HK SAR.
Article 13 The court won’t handle lawsuit, lodged by the party with the same fact, while the court is handling the application of recognizing and executing judgment of the party.
The court won’t handle judgment that’s recognized or executed if the party lodges lawsuit with the same fact.
The applicant can’t submit application for recognition or enforcement again based on judgment that should not be recognized or executed in Article 9 of this arrangement, but can lodge suit to local court with the same case fact according to law of executing place.
Article 14 Before court handles application for recognizing and executing judgment, they can adopt protective or compulsory measures for applicant property based on regulations of property preservation or assets transferring prohibition of local law and according to application of the applicant.
Article 15 If the party applies to related court for judgment enforcement, they should pay execution fee or court expense based on law and regulation on lawsuit charge of execution place.
Article 16 The bidding scope recognized and executed by courts of the mainland and HK SAR includes but not limited to fixed amount confirmed in judgment, but also interests required by the judgment, lawyer fee and legal cost ratified by the court, excluding tax and fine.
Legal cost in HK SAR refers to lawsuit fee prescribed or ordered amount in evaluation certificate of lawsuit fee by the judge or judicial executive officer.
Article 17 This arrangement is applicable to judgment made by courts of the mainland and HK SAR since the effective day (including the effective day) of this arrangement.
Article 18 If any problem occurs during implementation of this arrangement or modification is necessary, the Supreme People’s Court and government of HK SAR shall resolve through consultation.
Appendix:
Name List of Basic People’s Court Authorized to Handle Foreign-Related, HK, Macao and Taiwan Civil and Commercial Case of the First Instance (omitted)
Source: http://www.fdi.gov.cn
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Undisclosed Commercial Information – Trade Secrets
August 14, 2010
Trade secrets and undisclosed commercial information are confidential information in a commercial setting, such as formulaes, methods, technologies, designs, product specifications, business plans and client lists, that have commercial value. In Hong Kong, trade secrets and undisclosed commercial information are protected by common law of confidence. An obligation of confidence will arise whenever the information is communicated to or acquired by a person who knows or ought as a reasonable person to know that the other person wishes to keep that information confidential. An industry or trade custom or practice may also impose an obligation of confidence. The release of trade secrets and undisclosed commercial information would be detrimental to the owner or advantageous to his or her competitors or others. The remedies available for breach of confidence include injunctions, damages, account of profits and delivery up of materials containing confidential information. To enhance the protection of trade secrets and undisclosed commercial information, you should sign non disclosure agreement with everyone who has knowledge of your secrets.
Protection of trade secrets and undisclosed commercial information is of particular importance when the IP is not registrable or you find the period of patent protection (20 years) not long enough. Whereas patents enjoy a limited term of protection, trade secrets and undisclosed commercial information protection last until the information becomes public knowledge. The formulae for Coca Cola is a good example of long-kept trade secrets and undisclosed commercial information. However, trade secrets and undisclosed commercial information do not give you exclusive rights. Your competitors may independently invent an identical product or process or come up with the same ideas which they can exploit freely.
How do trade secrets and undisclosed commercial information differ from patents or copyright?
The application for a patent requires disclosure of details of invention. In other words, details of a patented invention cannot be kept confidential as trade secrets and undisclosed commercial information. As said above, patents enjoy a limited term of protection but trade secrets and undisclosed commercial information last for as long as the information remains confidential.
Copyright only protects the form in which ideas and information are expressed, but not ideas and information per se. The law of confidence protects the substance of ideas and information, no matter how they are expressed. There are statutory permitted acts for works protected by copyright but not works protected by confidence.
The above only set out some basic principles of trade secrets and undisclosed commercial information. You may seek independent professional advice for protection of your trade secrets and undisclosed commercial information from Ming Dynasty (HK) Limited.
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Sino-Japanese IPR Memorandum of Understanding: What Does It All Mean?
September 3, 2009
Ministers from China and Japan have announced plans to cooperate on the protection of IP rights in an effort to strengthen economic stability in the region. The move could have a major impact on the laws and strategies of both jurisdictions.
Signing a Memorandum of Understanding (MOU) on Sunday, economic ministers from China and Japan agreed to establish a working group to look into IP issues. “The agreement on IP rights protection signed by China and Japan is significant not only for the bilateral cooperation in the IP field, but also for the promotion of economic and technological cooperation between China and Japan,” says Wang Zhengfa, partner at Hylands Law Firm in Beijing.
Immediate results of an exchange of information could include stronger protection for geographical indications, such as those for Japanese brands that cannot be registered as a trademark in China, and vice versa. Additionally, states Danny Friedmann, consultant on Chinese IP rights and author of IP Dragon, Japan will be able to use the agreement in its fight against Chinese-manufactured counterfeit goods. “Japan can channel its frustrations and problems originating from Chinese imitations of Japanese products,” says Friedmann, “and China can profit from Japan’s successful experience in IP rights enforcement.”
The MOU between the two parties may also impact on China’s third amendment to the Chinese Trademark Law, due later this year. But as the first meeting of the working group is only pencilled in to happen by the end of the year, it may be some time before hard evidence of the agreement is seen. “An MOU is not binding,” notes Friedmann. “So this is part of soft diplomacy, to improve good will between the two nations.”
Source: http://www.worldtrademarkreview.com
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How to prepare OEM Agreements in China?
August 16, 2009
Needless to say, China has become the world’s leading manufacturing base. However, with the recent product safety scares and the constant media attention, “Made in China” has become a high-profile issue for consumers and retailers. So how does a foreign company minimize the risks of tainted/substandard products manufactured in China? In this article, we discuss contract terms which foreign companies should consider when entering into OEM relationships with Chinese suppliers. (While we highlight some of what we feel are the main issues to be covered by the agreement, we recognize that each case is unique and there is no such thing as a ‘typical’ OEM arrangement.)
Standard Form Agreements
Generally, an OEM will have a standard form agreement which they are more than willing to provide to foreign companies who wish to use their services. While this may lower costs at the outset and allow the foreign company to ‘build favor’ with their Chinese counterpart, using such an agreement is almost never advisable, and foreign companies would be wise to consult counsel, who will assist the foreign company to properly negotiate and prepare agreements.
Note that we often advise that the written agreement is preceded by preparation and negotiation on the basis of a business term sheet, which will outline the major terms of cooperation. The agreed points in the term sheet then serve as the basis for the written agreement.
Major Terms of Agreement
Below, we highlight several major (though non-exhaustive) terms which should be included in an OEM Agreement:
1. Products and Specifications: The products to be manufactured should be well-defined in the agreement, along with product specifications which should be described in detail in appendix(es).
2. Forecasts and Binding Purchase/Supply Commitments: As OEM Agreements often require that firm orders are placed through Purchase Orders, in order to ensure that there is a binding supply/purchase commitment in the agreement itself, the parties will often designate a certain minimum commitment on both sides, to produce and purchase a certain amount of product within a given time period. Aside from the minimum requirement, the buyer will often provide a non-binding forecast to supplier, such that supplier can plan and allocate adequate resources (often 6-, 12-, 18-, 24- month terms).
3. Price: For those products designated as described previously, the parties should determine firm prices, which will either be effective throughout the term of the agreement, or at least a portion thereof, subject to (we recommend) maximum periodic price increases. Further, it is beneficial to include for discounts upon meeting certain pre-determined purchase volumes.
4. Quality Control: Buyer and supplier will agree on certain terms afforded to buyer/required of seller for conducting quality control on production. Typical terms include i) access (often on short or no notice) to production sites, and ii) random testing of each batch of products. Further, the parties may, depending on the value of the contract, provide for a representative of the buyer to be on-site on a full-time/regular basis, for the purpose of assisting in quality control. (The buyer’s representative may also monitor supplier’s use of intellectual property and other improper dealings, though their effectiveness will invariably depend on his/her loyalty to the buyer.)
5. Term: The parties will determine an appropriate term for their contract, and may make the agreement renewable on request by buyer. This term should be sufficiently long so as to ensure that buyer’s initial investment can be adequately recovered.
6. Termination: Termination events, as in most agreements, will include those events which give rise to immediate termination rights (for example, unauthorized use of buyer’s intellectual property and violation of non-compete terms), and those which require a notice period and the breaching party’s right to remedy the breach (failure to supply products meeting specifications).
7. Consequences of Termination: In the event of termination, it is important for buyer specify those procedures necessary to protect its rights in the event of such occurrence. Often terms will include: sale of completed products to buyer, allowance for completion of partially completed products and sale to buyer, destruction or return of confidential information, and destruction or return of trademarks, logos, brochures, and other advertising materials.
8. Examination and Acceptance: Upon delivery of the products to buyer, it will be afforded a certain period to conduct inspection, subject to deemed acceptance in the event that a claim is not made within a certain period. Further, it is common for suppliers to require that upon buyer’s acceptance of the products, they will be absolved of all further liabilities. Note that we do not recommend that buyers wholly accept such terms (and provide a minimum carve-out and continued warranty), as buyer, after acceptance, will have little grounds for a claim (even for the use of sub-standard materials which are often difficult to visually detect).
9. Raw Materials/Components: As part of the quality control process, buyer should require that supplier provide a list of its suppliers along with purchase orders over a pre-set period to ensure that the agreed upon raw materials/components are being used.
10. Insurance: Due to the relatively unsophisticated nature of manufacturers/insurance industry in China, factories are often severely underinsured from risks. As a result, it is advisable for buyer to require that supplier obtain a minimum level of insurance.
11. Intellectual Property: All intellectual property used to manufacture the product, including trademarks, patents, copyrights, and other business secrets should be licensed to supplier, for the limited purposes of complying with its obligations under the agreement. Further, buyer should carefully draft related terms so as to restrict supplier from exercising any rights of ownership to the licensed IP.
12. Non-compete: As an OEM relationship necessarily involves substantial transfer of intellectual property and confidential information, buyer must not only be careful to ensure that additional products are not produced by the supplier, but also by its affiliated companies and senior directors and management. (Note that the implications of failing to adequately provide for such terms may result in not only the product being sold in China but more importantly in the same markets as buyer, and at significantly lower costs.)
13. Arbitration: As manufacturing tends to be concentrated in lesser-developed regions in China in addition to cost/time/reliability benefits often associated with arbitration, we advise clients to select arbitration for dispute resolution. Arbitration can be conducted in China or internationally (in any New York Convention signatory state), though domestic arbitration allows buyer access to Chinese courts for injunctive relief.
Arguably more or at least equally important as negotiating and concluding a strong contract, buyer must be carefully monitor and enforce of its terms when necessary.
Finally, although long-term relations are often desirable and we encourage buyers to find and work with reliable suppliers, as a practical matter it is imperative that buyers ensure that they have one or more alternative suppliers, in the event of required termination of the primary OEM supply arrangement.
Source: China Law Practices
http://wwwchinalawpracticeblog.com
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