February 01, 2011

PRC Law on the Application of Laws to Foreign-Related Civil Relationships

Issuing Body: Standing Committee of the National People's Congress
Issuing Date: October 28, 2010
Effective Date: April 1, 2011

Seeking to gather and systematically organize Chinese law governing foreign-related civil relationships, China's top legislative body has enacted the PRC Law on the Application of Laws to Foreign-Related Civil Relationships (Foreign Relationship Law), which is scheduled to take effect on April 1, 2011. Until now, Chinese law pertaining to foreign-related civil relationships has been scattered among various laws and regulations, such as the General Principles of Civil Law of China, the PRC Contract Law, the Opinions of the Supreme People's Court on Several Issues Concerning Implementation of the General Principles of the Civil Law of China, and others. The Foreign Relationship Law does not supersede those other laws; rather, it provides core principles for interpreting and applying Chinese laws to the most common types of foreign-related civil relationships.

Under PRC law, a "foreign-related civil relationship" is a civil legal relationship in which one or both parties is an alien, a stateless person, or a foreign legal person; the subject of the civil legal relationship is within the territory of a foreign country; or the legal facts that produce, alter or annihilate the relationship of civil rights and obligations occur in a foreign country.

The Foreign Relationship Law regulates foreign-related civil relationships in six areas: the rights and responsibilities of parties to the relationship; marriage and family; inheritance; property rights; creditors' rights; and intellectual property rights. General principles of the Foreign Relationship Law regarding foreign-related civil relationships include the following:

  • The principle of closest relation—if there are no provisions in PRC laws and regulations concerning the specific application of laws to a foreign-related civil relationship, then the laws with the closest relationship to this foreign-related civil relationship shall be applied.
  • The principle of autonomy of will—the parties to a foreign-related civil relationship have the right to explicitly choose which laws are applicable to the foreign-related civil relationship, albeit in accordance with relevant PRC laws and regulations.

Key provisions of the Foreign Relationship Law are summarized below.

Provisions Relating to the Rights and Responsibilities of Natural and Legal Persons

The Foreign Relationship Law broadly addresses the rights and responsibilities of natural and legal persons involved in a foreign-related civil relationship:

  • When determining the "civil rights capacity" and "civil acts capacity" of a natural person (respectively, the individual's entitlement to rights and responsibility for civil obligations; and his or her rights or obligations as a result of behavior), the laws of "habitual residence" shall apply (generally, where the individual has lived for the past year).
  • When judging the civil rights capacity and civil acts capacity of organizations and institutions, or the rights and obligations of shareholders of a legal entity, the laws at the locality of registration shall apply.
  • The parties concerned have the right to choose by agreement which laws apply to trust relationships.
  • The parties concerned have the right to choose which laws apply in arbitration.

Provisions Relating to Marriage and Family

  • Marriage procedures shall be valid if they conform to the laws at the locality where the marriage is established, or to the laws at the habitual residence or state of nationality of one party.
  • When judging issues related to the personal relationship between husband and wife, the laws at their mutual habitual residence shall apply.
  • When judging issues involving property between husband and wife, the husband and wife have the right to choose the applicable laws at the habitual residence, one state of nationality, or the locality of the main properties of one party.

Provisions Relating to Property Rights

  • The laws at the locality of immovable properties shall apply to property rights relating to the immovable properties.
  • The parties concerned have the right to choose by agreement the laws applicable to rights over movable properties.
  • In disputes involving negotiable securities, the laws at the locality of the realization of the rights of negotiable securities or other laws that have the closest relation with the negotiable securities shall be applied.
  • For a pledge of rights, laws at the locality of the establishment of the right of pledge shall be applied.

Provisions Relating to Creditors' Rights

  • The parties to a contract have the right to choose by agreement the laws that apply.
  • For disputes involving employment contracts, the laws at the work locale of employees shall apply. If it is difficult to determine the work locale of an employee, the laws at the main business place of the employer shall be applied.
  • The laws at the place of tort shall be applied to liabilities for tort, unless the parties have a mutual habitual residence, in which case the laws of that locality shall apply. If parties choose applicable laws by agreement after a tort takes place, their agreement shall prevail.

Provisions Relating to Intellectual Property Rights

  • Where protection of intellectual property rights is claimed, the laws at the locality where protection is sought shall be applied to the ownership and contents of the intellectual property right.
  • The parties concerned have the right to choose by agreement the laws applicable to the assignment and license of intellectual property rights.

Conclusion

In passing the Foreign Relationship Law, the Standing Committee of the National People's Congress has systematized and modernized China's laws pertaining to foreign-related civil relationships, eliminating many conflicts in existing law. Once the Foreign Relationship Law becomes effective and is implemented in real-life cases, relevant legislative authorities may well issue more detailed rules and regulations.

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