The China Law News keeps you on top of business, economic and political events in the China.
Blawg | Newsletter Archiv

In the News
China weighs social security law for foreign workers

Edited and translated by People's Daily Online

Recently, China officially implemented the Interim Measures for Social Insurance System Coverage of Foreigners Working within the Territory of China. According to the statistics by the Ministry of Human Resources and Social Security of China (MHRSS), the number of only the foreigners holding Foreigner Employment Certificate working in China surpassed 230,000 by the end of 2010.

Some organizations and foreign people said that many foreigners working in China have paid their insurance premiums according to laws of their own countries or voluntarily, and if China also requires these workers to pay the insurance premium, it means they have to pay it twice.

An official from the MHRSS explained that, in order to give foreign workers the same treatment as citizens, guarantee their social insurance rights and interests practically and avoid the situation of foreign enterprises and workers paying the insurance premium twice, the normal international practice is to carry out a bilateral or multilateral negotiation and solve the problem by signing a governmental social insurance agreement covering mutual exemption.

In as early as 2001 and 2003, the Chinese government had signed mutual social insurance agreements with Germany and South Korea, setting relevant provisions regarding exemptions of certain social insurance premiums for the workers working in each country. Other countries, such as Japan, Belgium and France, have proposed suggestions of solving the issue for workers by negotiating and signing a bilateral social insurance agreement. China's attitude towards the suggestion is quite positive and China is preparing and arranging mutual social insurance premium exemption negotiations with these countries to solve the double-paying issue properly.

Certain foreign workers are worried that it may be difficult to draw their pensions as different countries have different rules on the age of retirement, and most of them will leave China before retirement. However, a relevant official from the Ministry of Human Resources and Social Security explained that according to the Social Security Law and the provisional rules on foreign workers paying the social security tax in China, foreign workers who meet China's requirements for receiving pension payments will be entitled to pension benefits in accordance with Chinese law.

Web link:

Application of ¡°Seller¡¯s Defense of Legitimate Source¡± in Trademark Infringement Cases Involving Special Goods

The ¡°seller¡¯s defense of legitimate source¡± appears in the third paragraph of Article 56 of China Trademark Law.

It provides that ¡°Selling goods without awareness of such goods¡¯ infringement upon the exclusive right to use a trademark shall be exempted from liability for compensation insofar as the seller is able to prove that the goods were lawfully obtained and can indicate the supplier¡¯s identity.¡± Pursuant to the provision, if the seller is unaware of the fact that the goods on sale are infringing the exclusive rights of others¡¯ registered trademarks, and is able to prove the goods were properly and lawfully obtained and indicate the identity of the supplier, then the seller is not liable for any compensation claims arising from the sale. As a matter of fact, the provision has become a last-resort guarantee of exemption from compensation liabilities for sellers entangled in disputes involving infringement upon the exclusive rights of registered trademarks.

In trademark infringement disputes, sellers allegedly selling infringing goods often make every effort to furnish all the information of suppliers in order to obtain exemption from liability for compensation. Items which may exclude the seller include Value Added Tax(VAT) invoices, commercial invoices, purchase contracts, proof of payment; some provide payment receipts, delivery lists, storage lists and other materials, while others provide business licenses, sales qualifications and other documents. Some judges also tend to focus on the basis of materials furnished by sellers, on review of whether separate evidential materials support each other and form a complete evidence chain, and direct the focus to discussions of their authenticity, legitimacy and relevance. However, this manner of evidence review still remains an examination of facts of infringement for only certain types of goods. For some special goods, judges and lawyers need to pay further attention to the issue of the applicability of the ¡°seller¡¯s defense of legitimate source.¡±

The production and distribution of food, medicines, health food, fireworks, chemical products and other goods generally relate to the safety of users¡¯ lives, therefore, China often sets out strict provisions in their production, hygiene, quality, transportation and sales, and imposes various qualification requirements for businesses engaged in the production, transportation and sales. Accordingly, laws and regulations also make provisions on the conduct of the relevant parties. If the special goods are involved in a trademark infringement dispute, the relevant laws and regulations should serve as key appraisal criteria in determining whether the seller has ¡°legally obtained¡± the goods.

Take health food for example; in accordance with the Food Hygiene Law, China¡¯s Ministry of Health promulgated Provisions on the Administration of Health Food in 1996 with specific provisions on the definition of health food, approval, production and operation, labeling, specifications and advertising, supervision and management, encompassing requirements in areas of production, marketing, monitoring and evaluation. In the last 10 years or so, the Ministry of Health has consecutively released a series of regulatory documents and technical standards, such as Provisions on the Declaration and Acceptance of Heath Food by the Ministry of Health, Notice of the Ministry of Health on Further Regulating Management of Raw Materials for Health Food, Provision on Labeling of Health Food, Good Manufacturing Practices of Health Food and Technical Standards of Inspection and Evaluation of Health Food. With the transfer of administrative authority from the Ministry of Health to the State Food and Drug Administration (SFDA) and promulgation of the Administrative Licensing Law, Trial Provisions on the Administration of Registration of Health Food formally entered into force on July 1st, 2005, detailing rules on the application, approval, raw materials and auxiliary materials, labeling and specifications, tests and inspections, re-registration, review and legal liabilities.

Moreover, laws and regulations not only set strict health food requirements for manufacturers, but also make provisions on obligations upon sellers over their obligations regarding the examination incoming goods. For example, Zhejiang Province released Provisions of Zhejiang Province on Production Quality Supervision and Management and Provisions of Zhejiang Province on Investigating Production and Distribution of Counterfeit and Shoddy Goods. Article 7 of Provisions of Zhejiang Province on Administration of Certificate Claims in Food Procurement expressly provides that in procurement of special nutritional food, health food and new resources food, the product approval certificate shall be claimed together with inspection certificates or laboratory test results.

Considering that the relevant laws, local regulations and department rules have imposed strict requirements for the production and sales of health food, stricter requirements should be set accordingly in the application of the ¡°seller¡¯s defense of legitimate source¡± as provided in the third paragraph of Article 56 of China Trademark Law. In other words, a seller should not only demand sales certificates from the supplier but also examine the supplier¡¯s qualifications, which include business licenses and production permits, products¡¯ authentication marks, marks for fine quality products and other quality marks, and manufacturer¡¯s production permits, use licensing, inspection reports, certificates and trademark registration certificates. In many disputes involving well-known trademarks of a famous pharmaceutical enterprise represented by the author, the infringing products were all disguised as ¡°health food¡± on sale mainly in supermarkets, chain drug stores and health care products firms. Manufacturers were varied, but the majority of them were ¡°shell¡± companies. Because manufacturers have inherent deficiencies, sellers can provide neither the manufacturers¡¯ production permits registered and recorded with SFDA, nor the trademark registration certificates consistent with those of the infringed registered trademarks. Pursuant to the aforesaid requirements on certificate claims by purchasers, the purchase of the seller, of course, does not fall into the ¡°legitimate¡± category, because no certificate has been claimed during the procurement, thus violating the mandatory requirements imposed by laws and regulations. In this regard, the ¡°seller¡¯s defense of legitimate source¡± is not applicable to the seller as provided in the third paragraph of Article 56 of China Trademark Law, even though the seller is able to provide the relevant payment receipts and purchase vouchers, and indicate the supplier of the infringing goods.

For a better understanding, take a more familiar and relevant case for example: opium is a medical drug whose production and distribution is strictly controlled. If it is planted and produced in private, the subsequent procurement is certainly illegal and will in no way become legal just because the purchaser has made the payment.

Furthermore, in determining whether the seller has fulfilled the obligation of certificate claims, its business scope and scale should also be taken into account and treated differently. For example, drug enterprises specializing in pharmaceutical wholesales or chain sales should, of course, shoulder more obligations in certificate claims than private food stores and have a greater burden of proof. In trademark infringement cases, some people tend to believe that as long as the seller can prove the source of goods, the seller may be exempted from compensation liabilities. At this point, the wording ¡°legal¡± has been intentionally or unintentionally ignored. However, this author holds that if judges and lawyers are able to accurately grasp the special requirements in the production, distribution and procurement of special goods, and make an accurate conclusion over the conduct of the seller in accordance with relevant laws, regulations or provisions, justice will be done in the protection of legitimate rights of trademark holders. In the meanwhile, the seller will not be bogged down in trademark infringement disputes if it strictly complies with the relevant provisions on certificate claims.

Web link:

China expected to have investments in Africa private equity funds

NAIROBI, Nov. 28 (Xinhua) -- China is seen as a latecomer in investing in Africa through the private equity funds, a strategy successfully used by sovereign wealth funds of countries like France and Germany that enables them to benefit from diversified investment returns in the continent.

Managing Director of Institutional Fundraising at the Citadel Capital Stephen Murphy said it is time Chinese investors dipped their money in private equity funds in Africa to give them additional investment leverage in private sector in addition to the public sector contracts. "Investing in regional private equity funds will help the Chinese have a wider coverage of opportunities in the continent and generate more profits from the continent's high returns," said Murphy in Nairobi on Monday.

Citadel Capital with investments of 8.6 billion U.S. dollars under control is ranked the No. 1 private equity firm in Africa. It is ranked No. 93 in the world. "So far, more interest to invest in private equity funds in Africa is coming from the European Union. That way, these investors are able to take advantage of wider opportunities in the continent," he said.

The most popular active EU funds investing in Africa's private equity funds include PROPARCO, the subsidiary of the French Development Agency that finances the private sector, FMO, the entrepreneurial development bank of the Netherlands and the KfW Bankengruppe, German-based development finance institution that provides long-term project and company financing.

He said institutions like the China Investment Corporation (CIC) , a sovereign wealth fund and China Africa Development Fund, an eventual 5 billion dollar fund to encourage and support Chinese enterprises to invest in Africa should take opportunities to invest in Africa's private equity funds.

Citadel Capital is expected to start talks with CIC next month with possibility of the fund investing in into the African private equity.

A report by global consultancy firm Ernest & Young, "Global private equity watch: Winners will emerge" names Africa alongside Poland and Turkey as garnering growing interest from private equity investors. "These markets are home to a significant number of successful family-owned and other growth-oriented companies, and also expect to see a rise in privatizations of state-owned enterprises," notes the report.

An earlier report by the same company forecast that an increase private equity exit activity in Europe and North America in 2010 will most likely benefit Africa from this year going forward. It said the natural choice or existing private equity funds was in Africa because of higher returns and wide opportunities.

Citadel Capital has invested in mining, rail and water transport, agriculture, solid water management among other businesses in 15 African countries.

Web link:

US vows to speed up visa process

BEIJING - Chinese citizens applying for US visas will face shorter wait times in the future as the US embassy vowed to speed up the visa application process.

The pledge comes amid an online campaign to stop the use of a call center which charges premium per-minute rates when setting up visa screening interview appointments.

More than 8,700 people in the United States have signed an online petition calling for an end to the 70 US cents a minute charge when making an interview appointment, required as part of the visa process.

In an exclusive interview with China Daily, Charles Bennett, minister counselor for consular affairs at the US embassy in Beijing, said the US was planning a new system that would make the interview scheduling process as easy as "booking an airplane ticket" online.

"Our call center has done very good work for us for many years, but I think we could do better," he said.

It's one of many measures the US is taking in an effort to open its doors to Chinese citizens and investors.

Several steps, such as reducing the interview-screening process, building a new consulate in Guangzhou and expanding current offices, are being taken to ease the entry process for Chinese visitors.

"If we can make some of these changes, and certainly add people and make our processes a little more efficient, it's going to benefit everybody," Bennett said.

During the summer, when students apply for visas for the fall semester and tourism reaches its height, applying for a visa can take up to 100 days.

By increasing staff and eliminating inefficiencies in the application process, the US hopes to shorten the waiting time for visitors, making it easier to travel to the US without having to plan three months ahead during the peak season.

For Chinese business travelers, who often get caught in the mix during the peak season, a quicker interview process means fewer chances of missing a golden opportunity.

"Sometimes it's not possible to plan a couple months ahead, sometimes you can lose opportunities," said Chris Murck, president of Beijing American Chamber of Commerce.

"It would clearly be advantageous to limit the waiting period to two weeks max."

According to the American Chamber of Commerce's 2011 white paper, 36 percent of businesses said they avoid arranging meetings for suppliers, customers and employees in the US because of the difficulty and waiting time required for US visas.

Still, the demand for US visas from China has skyrocketed in the past two years.

In 2010, the US received roughly 800,000 Chinese visitors, more than double the figure 10 years ago, according to the Department of Commerce. With the tourists, businesspeople and students contributing roughly $5 billion to the US economy in 2010, the move is not just an attempt to strengthen ties but also a chance to draw overseas spenders.

"You see a lot of people who, because of the current economic conditions in the US, see increasing the number of foreign tourists to the US, Chinese and others, as something that could be very beneficial to the US economy," Bennett said.

"On the other hand, our primary job still is to protect our borders. That's why we're here, that's why we interview people."

Web link:

Chinese investor blasts Iceland rejection

A Chinese billionaire whose bid to build an eco-resort in Iceland was rejected says security concerns about his project were unfair and misplaced.

Huang Nubo's plans to buy a 115-square-mile tourist farm in northeastern Iceland and turn it into a high-end resort featuring hot-air balloon rides and a golf course were rejected Friday by Iceland Interior Minister Ogmundur Jonasson, who cited the country's laws on foreign investment.

He also said the sale of such a large area of land -- fully 0.3 percent of the country's landmass -- to foreigners was unprecedented and represented a possible threat to the Iceland's independence and sovereignty.

But Huang, chairman of the Zhongkun Investment Group, said Sunday the rejection smacked of anti-Chinese prejudice while some reports indicated Icelandic officials were concerned about the geopolitical implications of allowing a Chinese foothold near its Arctic deep-water ports.

"The denial reflects the unjust and parochial investment environment facing private Chinese enterprises abroad," Huang told the English-language China Daily newspaper.

In the interview, he pointed a finger at Western countries for employing "double standards," asserted that while they are eager to "encourage the opening of the Chinese market," they "close their doors to Chinese investments."

He urged fellow Chinese entrepreneurs to think twice before investing in Europe or risk being caught up in political fights they not have anticipated.

Bao Yunjun, chairman of the Private Economy Research Association at Zhejiang University, told the newspaper the rejection of the planned $200 million project is evidence of a lingering Cold War mentality that maintains "investment from private Chinese entrepreneurs is a threat to national safety."

Iceland's foreign ministry initially welcomed Huang's announcement of a major investment in the debt-strapped country, saying it would be a boon to tourism and could serve a link between the Vatnajokull and Jokulsargljufur national parks in the glacial and mountainous northeast region.

Huang's reputation as a poet and world traveler -- he climbed Mount Everest -- also proved attractive.

But critics also noted his close ties to the Chinese Communist Party, having worked as a minister in the Chinese Central Propaganda Department and Ministry of Construction, the BBC reported.

His bid ran into trouble when he applied for an exemption from laws barring non-EU nationals from buying land. Jonasson rejected that request last week.

A statement on the Interior Ministry's Web site cited laws requiring that companies purchasing real estate have headquarters within Iceland and that the majority owners be Icelandic citizens.

While the ministry has the power to grant exemptions from the requirements, Jonasson said he chose not to do so because "it is impossible to ignore how large an area of land ¡­ is involved in the purchasing plans of the company, and there is no precedent for such a large area of Icelandic land to have been placed under foreign control."

To make an exception to the law in Huang's case would set a "dangerous precedent," he told the Financial Times, adding he was troubled by the "fire sale" character of the transaction.

"When a nation is in distress and its currency is weak, that is the time to be on your guard against those who would attempt to buy our national resources cheaply," he said.

The minister had previously warned of the "international ramifications" of such sales, the BBC said.

Web link:

Wind to provide 3% of power

WIND will provide 3 percent of China's electricity by 2015, doubling from the current level, the State Electricity Regulatory Commission said yesterday.

Power generated from wind turbines may reach 190 billion kilowatt-hours in 2015 in China, or 3 percent of the nation's total electricity, Shi Yubo, vice chairman of the SERC, said yesterday in Beijing. Wind output was 58.3 billion kWh in the first 10 months of this year, or 1.5 percent of total.

China's wind market has doubled its accumulated installed capacity annually between 2005 and 2009. Last year, the country added another 18.9 gigawatts, bringing the total to 44.7GW and surpassed the United States as the nation with the biggest installed capacity.

But citing tighter approval rules for wind projects and rising debts of wind farms, analysts said annual installation may have peaked in 2010.

Industry officials have said the National Development and Reform Commission, the country's top economic planner, is consolidating project approval from local governments to cool the heady growth and also allow more time to work out problems connecting newly-installed turbines to power grids.

An SERC report released yesterday said China's grid-connected wind capacity totaled 39.24GW as of August. Shi of the SERC forecast the capacity to reach 100GW by 2015.

To reach that goal is not easy, Shi Lishan, vice director of the renewable energy department of the National Energy Administration under the NDRC, said on Thursday in Shanghai.

"In the past, the problem was that we didn't have the equipment. Now the problems are grid connections and (stable) operations, as well as market constraints," the NDRC's Shi said.

The SERC report also said China's exploitable land-based wind resources are 2,380GW, and offshore resources at 200GW, citing a survey by the China Meteorological Administration. These estimates differ from previous industry projections, which put exploitable wind potential offshore at 750GW.

Web link:

New cargo index to help city's hub target

SHANGHAI Shipping Freight Exchange Co plans to launch a new shipping rate derivative based on coastal coal freight rate as part of efforts to provide more shipping related financial derivatives to help the city meet its goal to be global shipping hub.

Trading of the contracts based on the China Coastal Bulk (Coal) Freight Index will officially start next Wednesday and this will help shipping companies and cargo owners to avoid fluctuating freight rates through forward freight agreement.

The dry bulk freight index will be based on nine routes from northern ports in the country to destinations ports including Shanghai and Ningbo. The index will use the rates applicable on September 1.

The freight exchange requires 20 percent of margin for each trader, and the index will be updated daily.

Although Shanghai has seen a strong growth in its throughput of dry bulk cargo and became the world's top container port in 2010, it is still lacking in many shipping-related financial products and services.

Shipping financing and other maritime services are also key in enhancing the industry as a whole and will help the city sail toward its goal of a global shipping hub by 2020.

Earlier this year, the exchange launched derivatives based on container freight, the first in the domestic market. The container freight index is based on rates of shipping routes to the United States and North America.

Web link:

Court: Shenzhen Company is owner of iPad trademark

International electronics giant Apple might have to spend a small fortune in China or stop using the name iPad on its tablet computer because the iconic trademark has actually belonged to a little-known Chinese company for more than a decade.

On Nov 5, the Intermediate People's Court in Shenzhen, Guangdong province, rejected Apple's claims in a lawsuit against flat screen maker Shenzhen Proview Technology over the iPad trademark.

Back in 2000

As early as 2000 - long before Apple unveiled the iPad - Hong Kong-headquartered Proview International Holdings Ltd developed a tablet computer and registered the iPad trademark in markets including Europe, Mexico, South Korea, Singapore, Indonesia, Thailand and Vietnam between 2000 and 2004.

The company's Shenzhen subsidiary registered the trademark in China in 2001.

But compared to Apple's iPad, an immense hit across the world today, Proview's tablet bearing the same name was not successful a decade ago.

In late 2009, a Proview subsidiary in Taiwan sold 10 trademarks, including two related to the name iPad, to a small UK company called IP Application Development (IPAD) - which is owned by Apple - for 35,000 pounds ($54,600).

IPAD later transferred rights for the iPad trademarks to Apple Inc for only 10 pounds.

Apple applied for ownership of the two iPad trademarks before it began selling its tablet in China, but Chinese trademark authorities rejected the application because they were already owned by Proview Shenzhen, another affiliate of the Hong Kong parent Proview International, and not included in the Taiwan unit's sales to IPAD.

Apple and IPAD then filed a lawsuit in early 2010 against Proview Shenzhen, but the recent court verdict found that the Shenzhen company is not bound by the 2009 deal.


Proview in turn sued Apple retailers in the Guangdong cities of Shenzhen and Huizhou seeking an immediate ban on the sale of iPads.

It also plans to ask for 10 billion yuan ($1.6 billion) in compensation from Apple. Courts in the two cities will start hearing the cases later this month and early next month.

"No matter how successful Apple's iPad is, the trademark belongs to Proview Technology, and that is an unchangeable fact - unless it buys the trademark (from the Shenzhen company)," said Liu Chunquan, a lawyer at the Panocean Law Firm in Shanghai.

"Someone may ask if iPads will be banned from the Chinese market if Apple fails to win the case. The answer is yes - if we firmly execute the court's ruling," he said.

Smuggling rampant

But that does not mean iPads will vanish from China. More are smuggled from overseas than are purchased from authorized Apple outlets, said Li Yi, secretary-general of the China Mobile Internet Industry Alliance.

"But authorized Chinese retailers of the iPad would be greatly influenced," said Li.

He added that the likelihood of Apple finding a new name to call its tablet computer is "less than the chance of a comet hitting the Earth".

Liu agreed, noting that "most companies would not like to build a new brand instead of using one that already has good fame and solid base of consumers".

Xiao Caiyuan, a lawyer for Proview Technology, said that "Apple is such a giant and has a good image so people don't imagine it could possibly infringe on our intellectual property rights".

'We will endure'

"People always think it's the small companies infringing on large companies' IPR," he said. "But if Apple appeals, we will endure it."

Other observers note the Shenzhen company, now saddled with more than 400 million yuan in debt, is using the case to struggle out of financial trouble.

China Daily attempted to contact Apple's Beijing-based spokeswoman Carolyn Wu for comments, but she did not answer phone calls and requests to reach her were unsuccessful.

Web link:

HTC loses to Apple in final patent infringement ruling

Taiwan's HTC Corp. has violated a patent owned by Apple Inc., the U.S. International Trade Commission (ITC) ruled Tuesday, marking HTC's latest loss in a long legal battle between the two smartphone makers.

A six-member panel of the ITC partially upheld the preliminary findings of a patent complaint filed in March 2010 by Apple against HTC, saying that the world's No. 4 smartphone maker had infringed on one of Apple's four patents related to portable electronic devices, or the "647" patent.
The ITC will impose a ban on some of HTC's smartphones on April 19, 2012 to provide a transition period for U.S. carriers, according to a notice on its website.

HTC, a major vendor of smartphones running on Google's Android operating system, said in a Tuesday statement that it respected the ruling.

The ruling came hours before the Taipei stock market opens. Shares of HTC closed up 1.25 percent at NT$445 a day earlier.

On July 15, an administrative law judge of the commission ruled that HTC had violated the "647" and "263" patents in making its smartphones.

The 647 patent describes a "system and method for performing an action on a structure in a computer," while the 263 patent refers to a "real-time signal processing system for serially transmitted data."

Analysts said the 647 patent appears to be related to the core of Google Inc.'s Android operating system, which is widely used in HTC smartphones.

"HTC's recent moves, including slashing its fourth-quarter revenue guidance and positioning in the China market, indicated that the company was preparing for a possible loss in this case," said David Chen, a senior analyst at the Taipei-based Market Intelligence and Consulting Institute (MIC), in a recent interview with CNA.

"But China as a mid- and low-priced smartphone market cannot make up for HTC's loss if it suffers a sales ban in the United States," Chen said. "The company may need to redesign its products or turn to other platforms, like Windows."

Joey Yen, a senior analyst at International Data Corp. (IDC), said that developing a self-owned operating system, such as Samsung's Bada OS, could partly ease Android makers' pressure from rival Apple, but this may create uncertainties for HTC.

"Self-owned operating systems allow room for imagination, but are dependent on a company's strength," Yen said. "HTC may not have enough manpower or capital to develop one since it has put a lot of resources into the Android and Windows platforms."
HTC CEO Peter Chou said on Aug. 19 that HTC was not interested in having its own operating system and will stick to the Android and Windows platforms.

Based on information from the smartphone supply chain in Taiwan, Yen said, many of HTC's component makers are conservative about the outlook for the fourth quarter of this year, which is in line with HTC's huge revision of its fourth-quarter guidance.

HTC's guidance was lowered to NT$104 billion (US$3.42 billion) from its previous forecast of between NT$125 billion and NT$135 billion, one day after HTC subsidiary S3 Graphics Co. failed in a patent infringement lawsuit against Apple.

The ITC ruled Oct. 17 in another case that Apple had not violated HTC's four patents related to technologies for power management and phone dialing.

On Nov. 22, the ITC announced that Apple's Mac OS X system had not infringed on texture compression patents held by S3, pushing HTC to review its US$300 million acquisition of the U.S. graphic chipset designer in July.

Web link:

China urges EU to rethink carbon tax

CHINA opposes the European Union's carbon emissions tax on airlines, the Foreign Ministry said yesterday.

Spokesman Liu Weimin said many other countries also opposed the EU move, and China hoped the EU would act with caution and settle the issue in a positive and pragmatic way through consultation with relevant countries.

On Wednesday, the European Court of Justice in Luxembourg dismissed arguments by US airlines and allowed the EU to impose the tax on routes to or from Europe next year.

The system will inevitably increase the price of air tickets for international flights, a senior official with the China Air Transport Association said yesterday.

The move is expected to cost Chinese airlines an estimated 743 million yuan (US$117.39 million) in 2012, or about 300 yuan for each ticket for flights between China and Europe, said Chai Haibo, deputy secretary general of the association.

"Since the airlines have to undertake the huge extra charges, they will inevitably transfer some of the costs to consumers," Chai told Shanghai Daily.

The increase in the cost of tickets to Europe will cause price rises on other international routes, said Sun Lijian, deputy director of the School of Economics of Fudan University.

Sun said that since Europe had the world's most advanced low carbon technologies, the EU also wanted to use the new system to bring more foreign orders to its member countries.

"This is a trade barrier in the name of environmental protection and will strike a wide blow to passenger benefits and the international airline industry," Xinhua news agency said in a commentary. "It will be difficult to avoid a trade war focused on an aviation 'carbon tax.'"

According to the EU plan, airlines flying to or from Europe will have to buy permits from the Emission Trading System from January 1 at a cost of 15 percent of the carbon emissions they generate, with large fines for airlines that don't comply.

Aircraft with annual carbon emissions of less than 10 thousand tons will be exempt.

However, a Boeing 777 from Shanghai to London emits over 200 tons of carbon dioxide. If the plane has three flights to Europe a week, the exemption quota could be used up within a few months.

A total of 33 Chinese airlines, including Air China, China Southern and China Eastern airlines will be affected by the tax.

The system will affect even those smaller airlines that have no European routes, because airlines will have to pay for the carbon emissions generated when taking back planes from planemakers based in Europe, said Wang Zhenghua, chairman of Shanghai-based Spring Air.

Wang said it would cost the airline about 20,000 yuan in tax to bring a plane back from, for example, Airbus headquarters in France under the new system.

China's aviation watchdog has urged the EU to drop the plan to promote sustainable development of the industry.

"The EU should at least make a distinction between developing and developed countries," said Li Jiaxiang, director of the Civil Aviation Administration of China.

The air transport association, representing the 33 Chinese airlines, is preparing to challenge the move in European courts by the end of the year, said Chai.

"We know the result would most probably be the same as that for the US airlines, but will still take the action as a measure of protest."

Web link:

Shengli Oilfield Aims To Boost Crude Output

CHINA'S second largest oil field, Shengli Oilfield, aims to boost its crude oil output to 27.5 million tons in 2012, up 160,000 tons from the target this year.

As the flagship oil producing unit of China's state-owned petroleum giant Sinopec, Shengli Oilfield has met the 2011 plan of 27.34 million tons of output, trailing only behind PetroChina's Daqing Oilfield in output.

Located in the Yellow River delta bordering the Bohai Sea, the Shengli Oil field was discovered in 1961 and its development began in 1964, with daily production of about 650,000 barrels.

China's crude oil production rose 6.9 percent in 2010 to exceed 200 million tons, according to the National Statistics Bureau.

Web link:

First South China Sea law research center established

HAIKOU, Dec. 19 (Xinhua) -- A center for the purpose of conducting research on legal issues regarding the South China Sea was founded in south China's Hainan province on Monday.

The center is the first established in China for the research on such issues, local authorities said.

The center is aimed at promoting the country's strategy of development in the South China Sea and help construct a legal system for this region, and it will act as a think tank for resolving relevant maritime issues, according to Liu Kangde, secretary of the Chinese Communist Party (CPC) Committee of Hainan University.

The center is co-founded by Hainan University and the Hainan Federation of Social Science Circles.

Liu said the center will carry out researches on areas related to the South China Sea such as marine economics, petroleum and gas exploration, tourism development and marine environmental protection.

Web link:

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial and intellectual property matters. For further information on any issue discussed in this edition of China Law Digest , or for all other enquiries, please e-mail us at or visit our website at

© Lehman, Lee & Xu 2012.
You may share this document with your friends or colleagues, either by forwarding this message to them (provided that the contents of this message, including all notices, are preserved in their entirety), or by directing them to the online edition at here. You may use short excerpts from this document in your own work (provided that each such excerpt shall not exceed three sentences in length; no more than twenty percent of this document, by word length, may be excerpted; no more than twenty percent of your work, by word length, may consist of such excerpts; each such excerpt shall be attributed to Lehman, Lee & Xu, with such attribution to include the Internet address of this document’s online edition; and your work shall not disparage Lehman, Lee & Xu). All other rights reserved.
This document has been created for educational purposes for clients, potential clients and referrers of legal services to Lehman, Lee & Xu, and to alert readers to the services provided by Lehman, Lee & Xu. It is not intended to serve as definitive legal advice, and should not be relied upon as such. Lehman, Lee & Xu does not endorse any personal opinions which may be contained herein.
We hope that you enjoy The China Law Digest . However if you no longer wish to receive it, please click here to unsubscribe.