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November 22, 2013

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Disputes involving overseas firms rise

Overseas companies are being urged to study local laws more closely as the number of commercial disputes involving them continue to rise as China further opens up the market to the world.

The Huangpu District People’s Court said yesterday it had heard 152 cases between 2009 and 2012 that involved foreign or offshore businesses.

Majority of the disputes involved firms from Taiwan, Hong Kong and the United States, the court said in a white paper released yesterday.

Among the common mistakes made by firms and individuals included negligence in verifying and vagueness in contracts, illegal investments, and investments made blindly without studying the local laws.

Taiwanese individuals and firms accounted for the most of the plaintiffs and Hong Kong units accounted for most of the defendants in the four-year period, the paper said.

“As China further opens up the market and a pilot free trade zone is established in Shanghai, more foreign-related disputes will occur,” said Chen Jianwei, deputy head of Huangpu District People’s Court.

“The court will enhance the efficiency to meet the challenges.”

The court recommended overseas businesses to deepen their knowledge of China’s mainland laws, enhance risk awareness, and exercise their legal rights even for defendants who may very likely lose the cases.

The paper also urged legislature to clarify application of laws, judicial departments to unify the standards of judgment, and government administrative departments to step up education and coordination.

The paper said that in 2009, disputes were mainly related to shareholder investment. Equity cases emerged in 2010, and the court started to hear disputes related to company dissolution and liabilities last year, according to the court document.



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