China’s new Foreign Investment Law (FIL) came into force on 1 January 2020. As is often the case with national legislations, the FIL only lays out the framework of the new foreign investment regime, leaving the details to be supplemented by separate implementation regulations, rules and measures. 

One of these implementation measures is the Draft Measures for Processing Complaints of Foreign-Invested Companies (Draft Measures), which China’s Ministry of Commerce (MOFCOM) released for comment on 23 March 2020. 

What Is It About?

The Draft Measures establishes a formal mechanism for handling complaints lodged by foreign-invested enterprises and their investors (collectively, Foreign Investors) in respect of:

  • administrative actions of administrative agencies which infringe upon the lawful rights and interests of Foreign Investors; and
  • problematic policies in the foreign investment arena.

Past vs. Future

China is no stranger to the concept of “foreign investment complaint mechanism”. A similar complaint mechanism was introduced by MOFCOM in 2006 under the Interim Measures for Processing Complaints of Foreign-Invested Companies (2006 Measures). 

As we shall see from the summary table below, the Draft Measures is more than a mere update of the 2006 Measures. 

 
  2006 Measures 2020 Draft Measures
Scope of Application
Foreign Investors may lodge complaints in respect of administrative actions of administrative agencies which infringe upon the lawful rights and interests of Foreign Investors. Apart from lodging complaints against administrative actions of administrative agencies, Foreign Investors may also raise concerns and make recommendations in respect of foreign investment policies.
Handling of Complaints Both local and national complaint centres will be established for handling complaints.  The respective roles and responsibilities of both national and local complaint centres are defined in greater detail. Apart from establishing local and national complaint centres, MOFCOM and relevant State Council departments will implement a joint-conference system to coordinate and facilitate the resolution of complaints at the state level, and to supervise and provide guidance to local complaint centres.
Filing of Complaints Complaints must contain certain basic information. Complaints must contain certain basic information, and may be lodged on-site, by way of letter, fax, e-mails, or online application, etc.
Resolution of Complaints

Timeline for resolving complaints: the case must be closed within 30 business days from the acceptance of the complaint. If the case cannot be closed within 30 business days, the complaint centre only needs to inform the complainant as soon as possible.

Methods of resolving complaints:

  • issuing an opinion with recommendations to the parties in order to facilitate the resolution of the complaint;
  • coordinating with the relevant administrative agency;
  • transferring the case to relevant authorities;
  • any other appropriate methods.

Timeline for resolving complaints: the case must be closed within 60 business days from the acceptance of the complaint. The timeline may be extended reasonably with the approval of the person in charge of the complaint centre.

Methods of resolving complaints:

  • procuring the parties to mediate their differences (including by way of a settlement agreement);
  • coordinating with the relevant administrative agency to revoke or change its administrative actions, or perform new administrative actions;
  • making policy recommendation to relevant authorities;
  • any other appropriate methods.
Confidentiality Complaint centres shall keep confidential the commercial secrets disclosed to them. Complaint centres shall keep confidential the commercial secrets, confidential business information and personal data disclosed to them. 
Conflict of Interest  Not specified. If the case officer has a conflict of interest that may affect his or her impartiality, then the case officer should be excused.
Other Channels of Redress  Not specified. The complaint mechanism does not exclude Foreign Investors from pursuing other channels of redress such as initiating administrative proceedings, requesting discipline inspection, and making petitions to the central government, etc.

 

All Is Well?

The Draft Measures is an improvement on the 2006 Measures. It broadens the scope of applicability, strengthens state-level supervision and coordination of complaint resolutions, provides a clearer structure for the complaint resolution process, and introduces new measures to facilitate the fair and efficient resolution of complaints.

How well will it work out in practice? More importantly, what does the Draft Measures tell us about the Chinese government’s attitudes towards foreign investment? All of these issues will be discussed in our next Legal Update.