Interpretation on Several Issues Regarding the Application of the "People's Republic of China Foreign Investment Law"

Interpretation on Several Issues Regarding the Application of the "People's Republic of China Foreign Investment Law"

(Adopted at the 1787th meeting of the adjudication committee of the Supreme People's Court on December 16, 2019; to take effect on January 1, 2020.)

The following Interpretation is made on issues regarding the application of the law by people's courts hearing cases of disputes over investment contracts between equal entities, based on trial practice, and in order to correctly apply the "P.R.C. Foreign Investment Law", to lawfully and equally protect the lawful rights and interests of Chinese and foreign investors, and to create a stable, fair, and transparent business environment under the rule of law.

Article 1: 'Investment contract' as used in this Interpretation refers to agreements formed by foreign investors, meaning foreign natural persons, enterprises or other organizations, so as to either directly or indirectly make investments within [mainland] China, including contracts for the establishment of foreign-invested enterprises, contracts for the transfer of shares or stock rights, contracts for the division of assets or other types of interests, contracts for new construction, and so forth.

This Interpretation applies to contract disputes arising from foreign investors' acquisition of rights and interests through methods such as donations, division of assets, enterprise mergers, or enterprise divisions.

Article 2: Where parties argue that an investment contract regarding a sector other than those included on the negative list for foreign investment referred to in article 4 of the Foreign Investment Law is void or invalid because the contract was not approved or registered by relevant regulatory departments, the people's courts are not to support them.

Where investment contracts provided for in the preceding paragraph were signed before the Foreign Investment Law took effect, but the people's courts had not yet made and effective judgment at the time the Foreign Investment Law took effect, the contracts' validity is to be determined by the application of the preceding paragraph.

Article 3: Where foreign investors invest in sectors for which investment is forbidden by the negative list for foreign investment, and parties argue that the investment contract is invalid, the people's courts shall support them.

Article 4: Where foreign investors invest in sectors for which investment is restricted by the negative list for foreign investment, and parties argue that the investment contract is invalid on the grounds that it violates special management measures restricting entry, the people's courts shall support them.

Where prior to the people's courts making an effective judgment, parties employ necessary measures to satisfy the requirements of special management measures for entry, and parties advocate that investment contracts provided for in the preceding paragraph are valid, they are to be supported.

Article 5: Where before an effective judgment is made, parties argue that an investment contract is valid because the foreign investment negative list has been adjusted and foreign investors' investments are no longer in prohibited or restricted sectors, the people's courts shall support it.

Article 6: People's courts may apply this Interpretation as a reference in hearing cases of disputes arising from investment in the mainland by investors from the Hong Kong or Macao Special Administrative Regions, Chinese citizens who have established residence abroad, or investors from the Taiwan region.

Article 7: This interpretation takes effect on January 1, 2020.

Where judicial interpretations released by this court before this interpretation is implemented are inconsistent with this interpretation, this interpretation is controlling.