The “Implementation Regulations for the Foreign Investment Law” has been implemented from 1 Jan. 2020

The “Foreign Investment Law” is promulgated on 15 Mar. 2019 and has been implemented from 1 Jan. 2020. As the supplementary regulation, the “Implementation Regulations for the Foreign Investment Law” (hereinafter referred to as the “Implementation Regulations”) is promulgated on 31 Dec. 2019, and has been implemented on the following day. Compared with the “Foreign Investment Law”, the “Implementation Regulations” has provided some detailed provisions and guiding opinions. Here are several key aspects for reference.

1.The investors of a foreign-invested enterprise include Chinese natural persons.

The “Law on Sino-foreign Equity Joint Ventures” and the “Law on Sino-foreign Cooperative Joint Ventures”, both of which are repealed on 1 Jan. 2020, prescribe that the investors shall not include Chinese natural persons. However, the “Foreign Investment Law” has not explained whether the Chinese natural persons could be the investors, so the “Implementation Regulations” clarifies that the Chinese natural persons could be the investors.

3.The foreign-invested enterprises could participate in the formulation and revision of standards.

Article 13 of the “Implementation Regulations” prescribes the scope and methods for foreign-invested enterprises to participate in the formulation and revision of standards.

(1) The scope of the standards includes national standards, industry standards, local standards and group standards.

(2) The methods include, to submit project establishment proposal for a standard to the standardization administrative authority and the relevant administrative authorities, give opinions and recommendations in the process of standard project establishment, drafting, technical review for standards, as well as information feedback and evaluation, and undertake the relevant tasks for drafting, technical review of standards and foreign language translation of standards pursuant to the provisions.

Article 41 of the “Implementation Regulations” prescribes the liability of the government and the relevant authorities and their staff when they have restricted foreign invested enterprises from participating in the formulation and revision of standards.

3.To clarify the requirements on requisitioning for investments of foreign investors

Article 21 of the “Implementation Regulations” has prescribes that under special circumstances where the State implements requisitioning for an investment of a foreign investor, there are 3 preconditions: (1) for the sake of public interests; (2) such requisition shall be carried out in accordance with statutory procedures and in a non-discriminatory manner; and (3) the compensation shall be fair and reasonable (as prescribed in the “Foreign Investment Law”) has been further interpreted as the market value of the requisitioned investment.

In addition, the “Implementation Regulations” also prescribes that where the foreign investor disagrees with the requisitioning decision, it may apply for administrative review or file an administrative lawsuit pursuant to the law.

4.To restrict the policy commitments made by local governments and relevant liabilities.

The “Implementation Regulations” prescribes the definition of the policy commitments, and requires local governments shall not breach contract on the grounds of adjustment of administrative zoning, change of government, institutional or functional adjustment or replacement of the relevant accountable personnel etc.. It has also prescribes the relevant liability of the government and the relevant authorities and their staff when they have breached contract.

Those articles could regulate and restrict the administrative behaviors of local governments, and protect the legal rights and interests of foreign invested enterprises.