Improved Rules on Handling Complaints of Foreign-Invested Enterprises

published on 16 November 2020 | reading time approx. 3 Minutes

by Christina Gigler

On 25 August 2020, the Ministry of Commerce of the People`s Republic of China ("MOFCOM") issued the "Rules on Handling Complaints of Foreign-Invested Enterprises" ("Rules"), which came into force on 1 October 2020 and shall repeal the "Interim Rules of the Ministry of Commerce on Complaints of Foreign-Invested Enterprises" ("Interim Rules"), which were published on 1 September 2006.

    
The Rules are based on Art. 26 of the “Foreign Investment Law of the People's Republic of China” (“FIL”), which states that the state shall establish a complaint system for foreign-invested enterprises (“FIEs”), promptly deal with problems reported by FIEs or their investors, coordinate and improve relevant policies and measures. The FIL also makes it clear that, if a FIE (or its investors) considers that the administrative acts of an administrative organ or its staff members infringe upon its legitimate rights and interests, it may not only apply for a solution through the complaint system, but also apply for administrative review or bring an administrative lawsuit. The new Rules are intended to improve the foreign investment complaint system compared to the previous system, which was based on the Interim Rules only.
   

Comparison to the previous Legal Situation

In general, the new Rules are more comprehensive and intelligible, especially regarding the procedure and the responsibilities and competences of the complaint agencies. The Rules also clarify the scope of the complaint system by stipulating that foreign-invested enterprises and foreign investors may apply to the complaint agencies for solutions to their legitimate rights and interests being infringed upon by administrative acts of administrative agencies (including organizations authorized with the function of public affairs administration by laws and regulations) and their staff members, or may report problems in the investment environment to the complaint agencies, and can submit suggestions for improving relevant policies and measures.

More clarity of the scope is further ensured by the wording that the complaints of foreign-invested enterprises referred to in the Rules do not include applications of FIEs or foreign investors for coordination to settle civil and commercial disputes with other natural persons, legal persons or other organizations. It is now precisely specified that chambers of commerce and other associations may submit issues concerning the investment environment raised by their members.

Furthermore, the new Rules state that in addition to the National Center for Complaints of Foreign-Invested Enterprises and the complaint agencies at local levels, an inter-ministerial joint meeting system as the national coordinator and top supervisory body will be established. Also, it is now clearly mentioned in the Rules that a complainant may entrust others with the complaint. In this case, in addition to the usual materials, the identity certificate of the complainant, the power of attorney issued by the complainant and the identity certificate of the entrusted party shall be submitted to the complaint agency as well.

It is important to note that certain deadlines have been extended in comparison to the Interim Rules. For instance, the new Rules extend the time limit for completing the complaint handling process from 30 working days to 60 working days after the acceptance of the complaint. For complaints involving multiple departments or complicated matters, the time limit can even be further extended as appropriate. This may collide with the time limit for the application of administrative review, as it is in principle also within 60 days from the date when the applicant acquires knowledge of the administrative act, which infringed upon his lawful rights or interests. A positive signal of the new Rules is that they do not only provide for the protection of business secrets of the complainant, but also of personal data obtained during the complaint handling process.

In accordance with Art. 10 para. 2 of the new Rules, a list of the responsible complaint agencies in various provinces/cities called the “National Directory of Complaint Agencies of Foreign-invested Enterprises” has been published. The list contains detailed contact information, such as address, email, contact person and telephone number of the competent complaint agency. Moreover, it is made clear in the Supplementary Provisions at the end of the Rules that the handling of complaints concerning enterprises invested by investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region, the Taiwan Region and Chinese citizens residing overseas, shall be governed by the Rules as well.
   

Outlook

In a nutshell, the new Rules improve and specify the procedures and strengthen the protection of rights and interests of complainants. Together with the new Guidelines of the National Center for Complaints of Foreign-Invested Enterprises, which have been released by MOFCOM on 30 September 2020, the new Rules have the potential for FIEs to obtain advice from the authorities more quickly and easily, as no extensive documents (as in court proceedings) are required.

It will be seen to what extent this improved complaint system will actually be used in practice and whether it brings long-term advantages for FIEs. As usual, at the end the significance of any reform depends on its practical implementation. In any case, the new Rules show that the government is embracing a more bottom-up approach to revising or improving its policies on foreign investment. However, the success of this system will also depend on the government's receptiveness to act accordingly.