The Interpretation of the Supreme Peoples Court on Several Issues Concerning the Application of the Foreign Investment Law of the Peoples Republic of China, as adopted at the 1787th Session of the Judicial Committee of the Supreme People’s Court on December 16, 2019, is hereby issued now and shall take effect on January 1, 2020.

Supreme People’s Court

December 26, 2019

FS [2019] No. 20

Interpretation of the Supreme Peoples Court on Several Issues Concerning the Application of the Foreign Investment Law of the Peoples Republic of China

(Adopted at the 1787th Session of the Judicial Committee of the Supreme People’s Court on December 16, 2019 and effective as of January 1, 2020)

To properly apply the Foreign Investment Law of the Peoples Republic of China, equally protect the lawful rights and interests of domestic and foreign investors in accordance with law, and create a stable, fair, and transparent law-ruled business environment, the following interpretation is made, based on trial practice, on the application of law by the peoples courts in hearing cases involving disputes arising from investment contracts between persons with equal legal status.

Article 1 In this Interpretation, the term investment contracts refers to relevant contracts entered into by foreign investors, i.e., foreign natural persons, foreign enterprises, or other foreign organizations, when directly or indirectly investing in the territory of China, including a contract for establishment of a foreign-invested enterprise, a contract for transferring shares of stock of a joint-stock company, a contract for transferring equity in a limited liability company, a contract for transferring shares in property or other like rights and interests, or a contract for establishing a new project, etc.

This Interpretation shall apply to a contractual dispute arising from acquiring a right or interest by a foreign investor through accepting a gift, partitioning a property, or merger or separation of enterprises.

Article 2 For an investment contract formed in a field other than those listed on the Negative List for Foreign Investment Entry provided in Article 4 of the Foreign Investment Law, a people’s court shall not entertain a claim made by a party thereto that the contract is invalid or has never taken effect owing to the fact that the contract has not been approved by or registered with the relevant administrative department.

Where an investment contract as referred to in the preceding paragraph was signed before the Foreign Investment Law takes effect, and the people’s court has not made a final judgment or ruling by the time when the Foreign Investment Law takes effect, the preceding paragraph shall be applied when determining the validity of the contract.

Article 3 A people’s court shall entertain a claim made by a party to an investment contract that the contract is invalid owing to that fact that the foreign investor is investing in a field where foreign investment is prohibited as set forth in the Negative List for Foreign Investment Entry.

Article 4 A people’s court shall entertain a claim made by a party to an investment contract that the contract is invalid owing to the fact that the foreign investor is investing in a field where foreign investment is restricted as set forth in the Negative List for Foreign Investment Entry and the special administrative measures thereof are violated.

Where, before a people’s court makes a final judgment or ruling, the party has taken necessary measures to satisfy the requirements of the aforementioned special administrative measures, the people’s court shall entertain a claim made by the party that the investment contract provided in the preceding paragraph is valid.

Article 5 Where, before a people’s court makes a final judgment or ruling, the Negative List for Foreign Investment Entry has been adjusted so that the investment made by a foreign investor is no longer listed on the Negative List as a prohibited or restricted field, the people’s court shall entertain a claim made by a party thereto that such investment contract is valid.

Article 6 This Interpretation may be applied by reference when a people’s court hears a case involving a dispute arising from investment in Chinese Mainland by an investor from Hong Kong Special Administrative Region or Macau Special Administrative Region or by a Chinese citizen who has settled abroad and invests in Chinese Mainland and Taiwan.

Article 7 This Interpretation shall take effect as of January 1, 2020.

Where there is any discrepancy between this Interpretation and any other relevant judicial interpretation made by this Court before this Interpretation takes effect, this Interpretation shall prevail.