law school outline: hong kong study abroad

Hong Kong Study Abroad

  1. Arbitration

  1. Overall trend is decentralization and getting the judiciary and government out of the arbitration process.
  2. Usually binding
  3. International (parties in different states or K to be performed in state other than where parties� business is)

  1. Arbitration vs. litigation

  1. Advantages

  1. Arbitration is private, litigation is not
  2. Freedom to choose arbitrators
  3. Continuity of arbitrator
  4. Flexibility and adaptability of arbitration system
  5. Lack of international court

  1. Disadvantages

  1. Not necessarily less expensive than litigation
  2. Arbitrators have limited powers: No power of subpoena or enforcement of award without court assistance (which looses privacy).

  1. Process

  1. Agreement to arbitrate (consensual). Usually references standards established by an arbitration organization. Generally recognized and enforced by courts. May exist as:

  1. Clause in a contract ("clause compromissoire") covers future disagreements.
  2. Submission agreement ("compromis") covers existing disputes.

  1. Powers of the tribunal, granted by agreement to arbitrate

  1. Tribunal is chosen by parties

  1. Effectiveness of award

  1. Award is final and binding, subject to limited rights of appeal
  2. Enforceable by legal processes, including treaties and conventions which give recognition and enforcement to awards.

  1. Forms

  1. International vs. commercial: Defined by law and by characteristics of circumstance.
  2. Specialized dispute may necessitate specialized arbitrators
  3. In law vs. in equity: Generally held in law, but arbitrator can be granted the power to rule in equity, as Amiable Compositor. Extra-legal arbitration may disregard certain legal or contractual requirements in the interest of equitable solutions (within limits).
  4. Ad hoc v. Institutional

  1. Ad hoc: Parties make up their own rules, customized for their own situation. No reference to arbitration institutions. Provides flexibility, but dependent upon cooperation between parties and may allow for delay tactics.
  2. Institutional: Administered by arbitration institutions which provide model clauses. Provides convenience, security and prestige (courts are more likely to enforce awards from prestigious arbitration institutions due to assurance of due process...), but expensive and institution may create delays.

  1. Legal framework

  1. Arbitration agreement
  2. National laws: Confer legitimacy upon agreement and award, used for enforcement, incorporates treaties and international conventions into binding laws. Current trend towards liberalization of national laws to provide a high degree of autonomy for arbitration. National law impact on arbitration process:

  1. Capacity to enter into arbitration agreement
  2. Enforcement of arbitration agreement
  3. Law of place of arbitration (local courts may review arbitration even though none of the parties are related to the locality)
  4. Procedural, substantive and remedy law
  5. Enforcement of awards

  1. Delocalization debate: Desire to create international commercial court which would bypass national laws.
  2. UN has passed the UNCITRAL Model Law on International Commercial Arbitration (1985). Delocalizes arbitration, limits intervention of national courts, allows for court support for arbitration

  1. Exists in 5th schedule to Arbitration Ordinance
  2. Party autonomy is fundamental
  3. Parties have more control over process than judiciary.
  4. Implemented in HK, with changes:

  1. Conciliation
  2. Settlement agreements
  3. Rules of evidence: Wide leeway in what evidence is admissible.

  1. International conventions

  1. Bi-lateral treaties
  2. Multi-lateral treaties and international conventions
  3. NY Convention of 1958: Reciprocal enforcement of arbitration awards. Problem with HK awards being enforced in China due to one country situation.
  4. Moscow Convention of 1972: Compulsory arbitration of certain commercial disputes.

  1. HK

  1. Domestic disputes: Governed by Arbitration Ordinance. Both parties can consent to be bound by UNCITRAL model law.

  1. English Arbitration Act (1950) was replaced by Arbitration Ordinance (1963), amended in 1982.
  2. Parties must agree to arbitrate.
  3. Stay of litigation proceedings available if necessary.
  4. Appeal only with leave of court and on a point of law.
  5. Award enforceable in many other jurisdictions via New York Convention (ratified in 1977). Problem re: awards rendered between HK and China post 1997 � are they domestic or international?

  1. International disputes: Governed by UNCITRAL model law.
  2. HK International Arbitration Centre (HKIAC) provides forum and model clauses/rules (based on UNCITRAL) for domestic and international arbitrations. Independent of government interference.

  1. PRC

  1. Domestic: China has long encouraged the use of arbitration and conciliation as preferred methods for resolving disputes. Traditionally preferred Sweden, but HKIAC becoming more popular. Domestic arbitration is done through bodies of the PRC (problem: Can the infrastructure support this?).
  2. International: CIETAC (China International Economic and Trade Arbitration Commission) and CMAC (China Maritime Arbitration Commission) are the only two Chinese international arbitration committees.

  1. They have exclusive jurisdiction over international and maritime disputes subject to arbitration in China.
  2. No ad hoc arbitrations allowed in China.
  3. Trend towards decentralization which puts commission branches in each SAR
  4. Part of the government but supposedly not influenced by the government.

  1. China Arbitration Commission supervises arbitration commissions and arbitrators
  2. Awards enforceable internationally through 1958 New York Convention, ratified in 1987.

  1. Arbitrability

  1. Any dispute regarding contract, property or rights are arbitrable. Family matters are not subject to arbitration.
  2. The agreement creating the arbitration must be voluntarily entered into by both parties. Parties may choose the government arbitration commission and the arbitrators from that panel.
  3. An arbitration clause in a K can be severed from an invalid K.

  1. Bankruptcy

  1. Forms

  1. Individuals: Insolvency (US Chapter 7)
  2. Corporation/Business: Liquidation ("winding-up")

  1. US Chapter 11: Company reorganizes, allowing future income to pay debts.
  2. Corporate rescue in HK usually does not exist.

  1. Most businesses are personally held, therefore when the business goes under, the owner goes under also as the company loans are usually personally guaranteed by him.
  2. Bank gets first dibs in liquidation.
  3. Companies hold off as long as possible before going to liquidation because there are no benefits to liquidation.
  4. Proposal exists to encourage restructuring under a provisional supervision system. Provisional supervisor will take control of the company. Includes stay for 30 days (renewal for 6 mos), but does not protect against those who own most of the assets (i.e. banks have no stay against depositors).

  1. History

  1. Most cultures have had bankruptcy law � occasionally harsh, involving death or banishment. Usually penal in nature.
  2. Early England applied death penalty for uncooperative debtors. Replaced by debtors prison for entire family. Created disgrace to family name, therefore family often bailed out debtor.
  3. US: One of the Declaration of Independence signers ended up in debtors prison in the US; debtors prison soon eliminated

  1. Asian Meltdown

  1. Underlying financial problems in Asia caused greater insolvency.
  2. Existing Asian insolvency law liquidated the companies rather than keeping them in business (i.e. restructuring under Chapter 11), which would return more to creditors.
  3. US companies are now buying out the devalued HK companies, rather than the HK companies going bankrupt.
  4. Most of the insolvent businesses are in the textile and trade businesses.

  1. Debt Collection

  1. Suing is inefficient if debtors have no $
  2. Non-insolvent debtor: "Grab law" = first come, first serve, judgments.
  3. Insolvent debtor: Basic principles of bankruptcy law

  1. Cooling off period ("stay"): Specific creditors can�t go after assets because assets will be used to pay creditors generally.
  2. Prioritization of creditors

  1. "Pari passu" means that all creditors will share equally. But some are more equal than others, i.e. secured creditors, bankruptcy attorneys, employees, IRS. Unsecured creditors generally equal, but they might only get 10% (alternative is chancing getting a judgment).

  1. Trustee appointed to represent creditors.

  1. HK Modern Bankruptcy Law: New system is much more efficient than old system, results in savings = more money to creditors.

  1. Commencement upon failure to comply with bankruptcy notice, failure to satisfy judgment debt, fleeing from a debtor, failure to comply with voluntary arrangement
  2. Jurisdiction exists if connection with HK at time of petition (resident or done business within last three years); (old law required connection at time of petition and at time of act of bankruptcy).
  3. Petition carries with it the power to appoint interim receiver (protects assets from creditors, similar to trustee) and stay pending proceedings. Must be requested.
  4. Statement of Affairs
  5. Public or private examination, if necessary
  6. Bankruptcy order
  7. First meeting of creditors, if necessary
  8. Discharge (automatic after a period of time, with cooperation). Old system rarely discharged bankruptcy.

  1. Avoidance powers (power to avoid certain transactions and distribute the assets to the creditors)

  1. Fraudulent (old) / Unfair (new) Preference: Paying one creditor over another is prohibited in certain circumstances.

  1. Criteria

  1. Look back 6 months (2 years in the case of associate or family member)
  2. Dominant intention to prefer
  3. Unable to pay debts

  1. Defense: Pressure by creditor to get debtor to pay.

  1. Fraudulent conveyance law: Hard to show fraudulent intent.
  2. Transfer at undervalue: No fraudulent intent needed. Transfer made within last five years.

  1. Cross border insolvency

  1. Process

  1. Liquidator or trustee of HK bankruptcy company or individual will try to get foreign assets through turnover order.
  2. Simultaneously, foreign creditors will also be trying to get those assets.

  1. Liquidator needs a stay to hold off foreign creditors.
  2. If creditors grab assets, those transactions can be avoided.
  3. Foreign laws may be more friendly towards creditors.

  1. Theories

  1. Territoriality: Each nation has its own jurisdiction over assets in its nation.
  2. Universality: Bankruptcy commenced in one jurisdiction is recognized worldwide. Simpler process, therefore more assets to divide.

  1. Cross border cooperation: By cooperating, country may risk the best interests of its citizens in some cases, but may benefit its citizens in other cases. Other countries may give their citizen creditors priority over foreign creditors.
  2. Company�s residence is generally its PPB, not incorporation state.
  3. Legislation

  1. 303(b)(4) allows liquidator to go to US and use US bankruptcy law.
  2. 304 allows for mini-insolvency proceeding in the US to administer the US assets, in cooperation with the HK insolvency proceeding.

  1. Foreign law will apply if it is intended to apply outside of home jurisdiction and if it meets minimum threshold requirements.

  1. 305

  1. Civil Litigation

  1. Adversarial common law system, ensured to continue by BL8. The judiciary is maintained under BL81.
  2. Court structure: Tribunals Court of First Instance Court of Appeal Court of Final Appeal
  3. Legal profession

  1. Barrister ("counsel"): Has right to appear as advocate in court, drafts litigation documents. May not interview client without solicitor presence. Contracts with solicitor � not with client.
  2. Solicitor: Instruction solicitor acts as a middle man between client and barrister, but cannot be working together (i.e. sharing office space). Solicitor have no right of audience in superior courts (Court of Final Appeal, Court of Appeal, Court of First Instance). Joint right of audience with barristers in inferior courts.
  3. Counsel may take as long as s/he wishes to present case, interruptions by o/c are minimal. Counsel never leaves the bar when addressing court or witnesses.

  1. Price

  1. Contingency fees are illegal � unethical.
  2. Attorneys fees are very high, very little pro bono.
  3. No right to counsel for criminal D if unable to pay for one
  4. Cost order is available: Loosing party pays winning party�s costs. Costs are based on a set rate (not necessary actual costs). Winning party must pay loosing party�s legal fees if damages award is smaller than rejected settlement offer.

  1. Process

  1. Jurisdiction: Small Claims Tribunal limited to $15k (no lawyers allowed), District Court limited to $120K, Court of First Instance unlimited. Court of Appeal has no original jurisdiction.
  2. Proceedings commenced through writ of summons which must be acknowledged (D �s notice of intention to defend action) within 14 days of receipt, otherwise default judgment.
  3. Pleadings

  1. Statement of claim: Sent with writ or within 14 days of receipt of D �s notice of intention to defend action.
  2. Defense
  3. Reply (by p to D �s defense) within 14 days of receipt of defense, used to deny any allegations in defense. Not necessary unless D counterclaims, in which case p must reply or deemed admitted.

  1. Summary judgment available if p can show that D has no defense to action, or when D fails to give defense to Writ of Summons.
  2. Interlocutory applications, heard before a Master

  1. Application for amendment
  2. Application for further and better particulars
  3. Interrogatories
  4. Discovery: Within 14 days of close of pleadings, both parties must exchange list of all relevant documents they hold (subject to some exceptions).
  5. Anton Piller order: Allows one party to enter the premises of the other to seize documents. AKA civil search warrant. Ex parte.
  6. Mareva injunction: Freeze assets of other party.

  1. Summons for directions: p applies to the Master for directions on outstanding matters. Ex parte.
  2. Setting of trial date
  3. Trial: No jury for civil cases unless defamation, malicious prosecution, false imprisonment.
  4. Execution of judgment

  1. Fieri facias: Seizure and sale of goods.
  2. Garnishment
  3. Charging order: Lien on land or shares
  4. Prohibition order: Keeping the person in HK
  5. Examination of assets to determine most effective means of execution
  6. Bankruptcy

  1. Company Law of PRC

  1. State owned enterprises

  1. Dominant form of ownership
  2. No responsibility to the market, no incentive to perform.
  3. Guaranteed jobs for life (in theory).
  4. Eliminated social instability caused by fluctuating market (state controls the market).
  5. Development rate is 8.2% vs. capitalist countries which are 51%.
  6. Employees have control over who runs the company through elections
  7. Governing law

  1. State Owned Enterprises Law (1987)
  2. Urban C.E.. (1991)
  3. Rural C.E. (1996)
  4. Foreign EJV (1990)
  5. F CJV (1986)
  6. F WF (1988)
  7. Private E (1987)

  1. Company Law (1993) introduced capitalism

  1. Makes companies independent from government and accountable for profits, etc.

  1. Since 1979, privately owned companies have increased their numbers.

  1. Government can control market through macro adjustment, but not directly control enterprises.
  2. Governing law

  1. Company Law (1993)
  2. Foreign Investment Enterprises Law can supersede Company Law if conflict or omission in Company Law
  3. Private Law (1997)

  1. State Administration of Industry and Commerce (SAIC) administers business licenses.
  2. Security regulation

  1. SCSC
  2. CSRC: Directly supervises market
  3. Foreign investment in companies controlled by MOFTEC (1995).

  1. Certain special economic zones (5) supplement Company Law with more detailed laws; also to initiate an experiment for national reform. SEZ�s can deviate from national law. Applies to Guangdong & Fujian (1981), Hainan (1988), Shenzhen (1992), Xiaomen (1994).
  2. Types of control of company

  1. Limited Liability Company

  1. 2-50 shareholders
  2. Minimum capital contribution
  3. Articles of association
  4. Business name
  5. Organizational structure
  6. Permanent business place
  7. Government approval for certain types of businesses
  8. Business registration

  1. Joint Stock Company

  1. Capital

  1. Minimum of five promoters
  2. Minimum $10M capital contribution for domestic company, $30M for foreign company. Must be actual cash � not future earnings.

  1. Raised by promoters (companies, not people); or
  2. Raised by issuing public stock, but promoters must retain 35% (public gets 65%).

  1. No individual can own more than .5% of a company.
  2. Around 700 companies traded in 2 stock exchanges (Shenzhen and Shanghai)
  3. Domestic shares

  1. A Share:
  2. B Share: Traded in foreign currency (Shenzhen in HK$, Shanghai in US$)

  1. Foreign listed shares

  1. H:
  2. N: NYSE
  3. S: Singapore
  4. J: Japan
  5. L: London

  1. Articles of association
  2. Government approval for all businesses

  1. Governance of companies

  1. Shareholder�s meeting: Organ of power
  2. Board of directors: Executive body

  1. Fiduciary duty: Complete ban on seeking personal gains through powers in the company. Cannot be waived through disclosure. Does not include holding shares of the company, however shares cannot be sold during time in office.
  2. Director can be held personally liable for losses resulting from illegal acts of the board if the director did not object on the record. (only in a joint stock company)
  3. No quorum requirement

  1. Supervisory board: Watchdog which supervises financial conditions and market performance of company, and conduct of board of directors
  2. Employees do not have a say in the running of the company other than as a consultant on major decisions.

  1. Problems

  1. Heavy government control and involvement
  2. Poor enforcement of laws

  1. Contracts

  1. Traditional model

  1. Public ownership of the productive resources
  2. Economic planning

  1. Relevant laws governing K

  1. General Principles of Civil Law (GPCL)

  1. Applies to civil K�s, property relationships, personal relationships between citizens, between legal persons, and between citizens and legal persons.
  2. Principles

  1. Equality in status
  2. Voluntaries, fairness, exchange of equal values, honesty and good faith
  3. Compliance with laws and policies of the State
  4. Non-breaching party must mitigate damages.

  1. Natural / legal person

  1. Capacity for civil rights and civil conduct
  2. Capacity for civil conduct
  3. Legal person

  1. Established in accordance with law
  2. Possession of necessary property or funds
  3. Possession of organization and premises
  4. Ability to independently bear civil liability (including for illegal operations).

  1. Voiding K�s

  1. Void civil acts (�58)

  1. Those performed by those without capacity or without the level of capacity required for that conduct.
  2. Those performed against the true intent of the person as a result of cheating, coercion, exploitation, fraud.
  3. Illegal K, including evasion of law

  1. Voidable civil acts (�59)

  1. Serious mistake
  2. Patently unfair

  1. Losses from voided K fall with the erring party.

  1. Foreign Economic Contract Law (FECL)

  1. Applies to K�s between enterprises or other economic organizations of the PRC and foreign enterprises, other economic organizations and individuals.
  2. �7 requires that all foreign economic K�s be in writing.
  3. Choice of law

  1. Express choice applies.
  2. If no express choice, law most applicable will apply, defined by UN.
  3. International sale of goods: Seller�s law generally applies. If K entered into at buyer�s business, or if K based on a bid by buyer, then buyer�s country law applies.

  1. Economic Contract Law (ECL)

  1. Applies to K between legal persons of equal civil standing, other economic organizations, individual industrial and commercial households and rural contracting households.
  2. �3 requires all economic K�s be in writing except those intended for immediate performance.
  3. Liability for breach (�29) and liquidated damages (�31) are provided for. Damages are the amount suffered by the non-breaching party. For international sale of goods K, expectation damages (lost profits) are awarded.
  4. Non-breaching party must mitigate damages.
  5. Force majure (disaster voids the K); requires certification from proper governmental agency to prove that the disaster occurred.

  1. Other laws
  2. Administrative regulations
  3. Local regulations and rules
  4. Judicial interpretation by the Supreme People�s Court (SPC)

  1. Criminal Law

  1. Crimes are acts which endanger society.

  1. Acts

  1. Endangering state or public security
  2. Disturbing order of socialist market economy
  3. Infringing upon rights of person and democratic rights of citizens
  4. Property
  5. Disrupting social administration
  6. Endangering national defense
  7. Violating military duty

  1. Execution

  1. No public statistics on execution numbers
  2. Almost every offense is punishable by execution

  1. No one has been killed for political offenses since 1957, per CCP orders.

  1. Can be suspended to life in prison.

  1. Inprisonment

  1. 40% for >5 years
  2. 60% for < 5 years
  3. Maximum sentence is 20 years. Above 20 years is life in prinsonment.
  4. Minimum sentence is 6 months. Under 6 months is "criminal detention." Inprisonment is in a distant prison. Detention is in a local jail.

  1. Administrative penalties may be imposed for public order offenses (acts not serious enough for criminal punishment).

  1. Acts

  1. Disturbing public order
  2. Impairing public security
  3. Infringing upon citizen�s rights of person
  4. Encroaching on property
  5. Impairing administration of social order
  6. Violating fire control
  7. Violating traffic regulations
  8. Violating residence control
  9. Prostitution
  10. Narcotics
  11. Gambling and pornography

  1. Punishment

  1. Apology
  2. Fines

  1. Re-education through Labor (labor camps): 1-3 years of "administrative incarceration". Sentence can be extended 1 year for poor performance.

  1. Counter-revolutionaries
  2. Gang members who commit crimes
  3. Repeat offenders
  4. Disturbing public order
  5. Those who counsel others to commit crimes.

  1. Drug law

  1. Personal use: 3 year sentence
  2. Trafficking: Life sentence. Presumed even if a relatively small amount is possessed.
  3. Possession presumed of contents of location of which D has key or control over place where drugs are found.

  1. Environment

  1. Air pollution: Mainly caused by vehicles

  1. Diesel engines
  2. Effort being made to restrict number of private cars (increasing cost of ownership), improve performance of existing cars.
  3. Gradual switch to LPG for taxis.
  4. Not much industry, but one coal burning electric company.

  1. Water pollution

  1. No general sewage treatment, although some new developments have them
  2. Sewage goes into the sea
  3. Sea water used for flushing on HKI

  1. 40% of HK is country parks

  1. Governmental Structure of Hong Kong

  1. Judiciary

  1. Court of Final Appeal replaces House of Privity as supreme court (BL82)
  2. Maximum of one justice from a foreign CL nation may sit on the panel at a time.
  3. HK�s legal structure and system is overwhelmingly western; mostly white judges, although chief justice must be Chinese. Localization effort (affirmative action) may result in lower quality.
  4. Not independent � lack of separation of powers, corruption, etc.
  5. No judicial review of acts of state (BL19)

  1. China wanted total control of HK politics. China gave HK the common law and free market to support the economy, but they wanted to replace the UK governor with a Beijing representative who would be more powerful than the legislature. Opposite may be happening. Amount of democracy has been increased since handover, but the dictator isn�t as benevolent as before.
  2. Elections

  1. Democracy: Provide control and legitimacy to government
  2. Communism: Provides legitimacy, but not control.
  3. Universal franchise under BL45 and BL68 is expandable for resolutions, but not re: chief executive.

  1. Chief Executive: Tung

  1. BL45: Ultimate goal is to elect by suffrage in 2007
  2. Nominated by legislature, approved by Beijing
  3. Accountable to legislature, but not dismissal by legislature without Beijing approval.
  4. Can dismiss legislature once per term.
  5. If he refuses to sign a bill that a new LegCo passes, after he dismissed the prior LegCo, he must resign. Same if new LegCo refuses to pass a bill he approves.

  1. Legislature

  1. Historically, legislation is drafted by the ExCo. LegCo just rubber stamped ExCo. LegCo could introduce private member bills if they did not affect revenue...often used to challenge government.
  2. BL68: Ultimate goal is to elect by suffrage in 2007
  3. "Constituted" by (fixed) elections
  4. Consists of 60 members

  1. 30: Functional (business leaders)
  2. 10: Election Committee, appointed by Beijing (to be phased out)
  3. 20: Geographical representatives, democratically elected (to be increased to 30)

  1. First legislature was dismissed by Beijing, replaced by hand-picked ones. 1998 elections: 60% of popular vote was for democracy supporters, resulted on 40% of the seats going to democratic supporters.
  2. Legislation is subject to review by NPC standing committee. Committee can invalidate any legislation not in conformity with the BL regarding affairs within the responsibility of the Central Authorities.

  1. Governmental Structure of PRC

  1. During the 20th century, China has cycled between centralization and decentralization.
  2. Chinese Communist Party (CCP)

  1. Structure

  1. CCP
  2. NPC Standing committee
  3. Political Bureau of CCP
  4. Party Committee

  1. Propaganda dept.
  2. Personnel dept.
  3. Disciplinary
  4. Political and legal

  1. Party Group

  1. State planning (antithesis of a market economy)
  2. State ownership of means of production

  1. Moving towards privatization via disbursement of shares

  1. Integration of government and economic enterprises/units

  1. Administrative Bureau runs the state owned companies

  1. Central Authority

  1. NPC Standing Committee � does most of the lawmaking for PRC and HK.

  1. Specialized Delegate Committees
  2. Administrative Offices

  1. NPC - Rubber stamp for laws made by Standing Committee. No term limits, but max age 60. 2,000 members.

  1. Delegate Constituency Groups

  1. President of PRC

  1. Local authority

  1. State Counsel

  1. Ministry of Public Security: Criminal investigations.

  1. Provincial
  2. Municipal
  3. District

  1. Supreme People�s Procuratorate: Prosecution and some investigation.

  1. Provincial
  2. Municipal
  3. District

  1. Supreme People�s Court
  2. Central Military Commission
  3. Provincial congresses & governments

  1. Judiciary

  1. Structure

  1. Supreme Peoples� Court (SPC) � court of last resort. Supervises lower courts, does not traditionally adjudicate until recently. No original jurisdiction.

  1. Judicial Committee
  2. President

  1. Adjudicatory bodies

  1. Civil division
  2. Economic division
  3. Other division

  1. Non-adjudicatory bodies

  1. Administrative offices
  2. Research offices

  1. Higher Peoples� Court

  1. Only real court of appeal
  2. One located in each province

  1. Intermediate Peoples� Court

  1. Most foreign related litigation begins here, as BPC judges aren�t qualified to handle IP and/or foreign cases at BPC
  2. At least one located in each large city.

  1. BPC (general district court of first instance)

  1. Other specialized jurisdiction courts: Military, railway, water, forestry, etc.
  2. Appeals: Case can be appealed once, by party, president of court, other supervisors.
  3. Independent, subject only to the law. (Art. 126 of 1982 Constitution).

  1. History of Hong Kong

  1. Early history

  1. NT population in 1850�s was Cantonese, Hakka, boat people. All "han-chinese."
  2. Early pre-UK government: Too far from Peking, hard for Peking to rule, but Peking did have some outposts and a presence. Customary law governed.
  3. British-East-India Company was first trade company (monopoly). Sold opium for silver which created economic and social problems in HK. UK liked because economically beneficial � strengthened empire.

  1. Colonialization

  1. HKI: 1842 via treaty, in perpetuity. Cession as a result of Opium War.
  2. Kowloon: 18__ via treaty, in perpetuity

  1. Kowloon walled city was not owned by anyone, became a really bad place because of lack of police.

  1. NT: 1898, leased for 99 years (expired 7/1/97)

  1. No one seriously proposed keeping HKI and Kowloon but giving back NT. HKI and Kowloon are too dependent upon NT.
  2. UK regarded lease as a cession for a period of years, which allowed the exclusion of the landlord (China).

  1. Cession under UK colonialization

  1. Transfer of sovereignty
  2. Pre-cessional law retained until replaced
  3. Prerogative (privilege of the Crown)

  1. Resumption vs. Transfer of Sovereignty

  1. China maintains that UK acquired HK illegally, due to unequal treaties and therefore they were not valid. That would make 1997 a "resumption."
  2. UK maintains it was a transfer because the treaties were valid.

  1. Decolonialization

  1. WWII began worldwide decolonialization.
  2. UN supported decolonizing HK
  3. Nixon�s trip to China and admitting China to the UN led to UN eliminating HK from colony list, at China�s request. China felt this was a matter to be solved between UK and China, not by the UN. This meant that HK would not follow the UN�s plan to independence, but rather return to China directly. This result was not foreseen by the UN.

  1. Negotiations for handover

  1. UK pressured by HK business community to negotiate continued UK rule
  2. 1979: Cultural revolution in China opened up China to outside world (Deng Xiaoping)

  1. Legal system revised for one which responded to the market and direct (central) government control
  2. UK saw this as a window of opportunity to continue UK rule; China rejected this possibility; began negotiations leading to 1984 Sino-British Joint Declaration Treaty.

  1. UK nor China wanted independence for HK.
  2. When China rejected continued UK rule, UK asked for continued management, as China had refused to take Maccau from the Portugese previously. China rejected this as well, therefore negotiations had to be about how HK would be administered under Chinese rule.
  3. Differences between UK and China: Political structure, economy, personal rights (existed in HK despite lack of democracy), civil society (well organized private sector in HK).
  4. Goal: Return HK to China, maintain separate systems which are antagonistic.
  5. Resulted in 1 country, 2 systems; developed by China in the 1970�s to deal with Taiwan. Long term goal was complete reunification with PRC.

  1. China wants HK to work under this system as an incentive to Taiwan to adopt the same system

  1. Joint Declaration (1984): Article 3 is China�s promise to UK re: system to be established in HK. UK wanted more, so Annex I was added which is very detailed. Also called "China�s Basic Policies re: HK." Became Basic Law, more or less.

  1. Between the JD and BL (13 years), HK and China became much more similar.

  1. Drafting the Basic Law

  1. From 1984 to 1997, UK and PRC negotiated for terms of BL. HKese largely excluded from discussions.
  2. Drafters

  1. Drafting Committee (mainlanders)
  2. BLCC (HKese appointed by PRC)
  3. PRC
  4. Public debate

  1. Tiananmen Square reduced Hkese participation because China became wary of democracy (BL23 � anti-subversion law)

  1. 50 year separation

  1. Currency linked to US$; separate from PRC. Reserves supporting HK$ belongs to Hkese.
  2. Separate tax systems
  3. Separate trading status
  4. Market economy vs. Socialism
  5. Separate legislature, although PRC can make some laws re Hkese under Annex 3, but those are very minor.
  6. Common law
  7. Judiciary
  8. Autonomy; Deng: "Hong Kong People Ruling Hong Kong"

  1. Asymmetrical, i.e. Puerto Rico/US
  2. Based on lifestyle, not race
  3. Created by entrenchment of existing (UK) practices.

  1. HK$ must be backed by US$
  2. Low taxes
  3. No deficit financing
  4. No welfare
  5. No tariffs and quotas

  1. Human Rights

  1. Existence

  1. 19th century trend: Human rights exist when proved.
  2. 20th century trend (post WWII): All humans have basic rights
  3. Evolution of Positive Human Rights Law

  1. Magna Carta (1215)
  2. Declaration of Independence (1700�s)
  3. Constitution�s Bill of Rights

  1. Compromised certain human rights (blacks) to further US development. OTOH, framers didn�t consider that blacks and women are "people."

  1. French Declaration of the Rights of Men
  2. International Declaration of Human Rights (1948 � UN)

  1. International Covenants (1966). Joint Declaration and BL39 maintained these covenants in HK through the handover. PRC is not a signatory to these Covenants.

  1. International Covenant on Civil and Political Rights (ICCPR). Associated with democracy. Civil and political rights, expression, fair trial, movement, association, etc. Ratified by US.
  2. International Covenant on Economic, Social and Cultural Rights (ICESC). Associated with socialism. Food, clothing, shelter, education. Not ratified by US.
  3. Requirement for signatories to submit reports regarding compliance to treaty bodies. PRC (while not a signatory) has agreed to submit reports regarding HK.

  1. Smaller but more detailed treaties (racial discrimination, torture, etc.) carried over to HK as PRC was a signer to the treaties.

  1. Different cultures

  1. Are cultures really that different?
  2. Relativism

  1. Each culture applies own concept of human rights. Western/US concept of HR can�t be applied everywhere. Asian countries want to apply their own Asian values (but not all of Asia is the same � if all of Asia had same values, why inter-Asia wars?).
  2. Argument of differences between the cultures as a reason not to apply HR is usually made by those in power wanting to retain power.

  1. Universalism (predominant view): Every human being has the same human rights, which are inherent in being human and are universal. Universal, or American?
  2. Communitarianism: Good of the people (culture) before the rights of the individuals.
  3. America would most likely not be able to manage China as America would like China to manage China, i.e. because of the large population.

  1. Forms of national rights / defenses to human rights

  1. Right to develop free of western values (but everyone participated in Universal Declaration on Human Rights in 1948).
  2. Sovereignty. This argument ended at WWII with the birth of the modern human rights movement because sovereign state is who commits most of the violations, therefore international community acts as check and balance in the form of the UN, tribunals, etc.
  3. Development of nation

  1. HK Bill of Rights

  1. Prompted by Tiananmen Square
  2. China objected to its existence on the basis that the Bill of Rights could not supersede other legislation (per Joint Declaration), and said Bill of Rights would not survive handover. Therefore, Bill of Rights was written to mirror ICCPR language, therefore content would not be inconsistent with Joint Declaration.
  3. BOR supersedes existing inconsistent legislation (this is a principle of common law, therefore acceptable to PRC). Necessitates that subsequent legislation be construed as consistent with ICCPR.
  4. Letters Patent (HK�s colonial constitution) and BL39 protects rights and freedoms under ICCPR.
  5. BOR Part III (Exceptions and Savings) represents the reservations the UK insisted upon when signing the ICCPR.
  6. Applies to public authority only, not private sector (�7).

  1. Equality

  1. May be against human nature because we try and set up hierarchies
  2. Continuum

  1. Express policy of discriminatory laws and policies in both public and private sector.

  1. Found in most of the world, including Muslim countries
  2. State of HK in late 1980�s, until Tiananmen Square (1989). Examples:

  1. Women can not run for village offices in many NT villages.
  2. To get married under the age of 21, have to get father�s approval (not mothers).
  3. Women were expressly prohibited from performing many tasks which were deemed dangerous, therefore paid less.

  1. Some official discriminatory laws/policies, but no express policy of nondiscrimination. No mandated discrimination in private sector.
  2. Express policy or law requiring equal protection of law (bill of rights?) and government policies. But no interference with private sector.
  3. Gradual introduction of laws prohibiting discrimination in private sector.

  1. Present state of HK in 1998.

  1. Some form of affirmative action (positive discrimination).

  1. HK law

  1. Lack of laws based on:

  1. In NT, need to respect traditional laws.
  2. Free market "myth". Government does not intervene in pollution or discrimination, but they have complete control over the property market and public housing (~20% of the people are in public housing) and health services. Therefore, the government does not practice non-intervention, but positive intervention where they intervene selectively, i.e. where it is best for the businesses.
  3. Businesses do not want it, and they have a large say in government.
  4. Able to be maintained because of complete lack of democracy until 1991. LegCo consisted of business members who wanted status quo and were focused on short term profits.

  1. Race

  1. Historical problem as a colony with racial discrimination against Chinese. At one point, Chinese were prohibited from living on the Peak.

  1. Gender (SDO)

  1. UK did not want to interfere with customary law. NT customary law prevented all women (including daughters) from inheriting land. Applied to everyone in NT � not only Chinese, and applied to New Towns. Finally changed in 1994 under pressure from property developers (New Territories Land Exemption Ordinance).
  2. Antidiscrimination laws introduced, prompted by handover and Tiananmen Square (which caused marches in HK).

  1. New airport project
  2. Educational policies to reduce "brain drain"
  3. Bill of Rights � modeled after ICCPR

  1. Applies to government and public but not to private sector (�7)
  2. Supersedes previous conflicting legislation (�3) related to government and public but not private sector (�7).

  1. 1991 was the first elected LegCo, and ceased being a rubber stamp and began an active role in women�s rights and rights of disabled.

  1. LegCo (Martin Lee and Anna Wu) began introducing antidiscrimination bills. No revenue implications, so governor couldn�t veto. Government preempted vote by introducing a more conservative alternative covering gender and disability (DDO).

  1. Small House Policy (1971): Indigenous NT villagers are given a grant of land to build a small house. Indigenous villagers are only males, descending down male line.

  1. Disability (DDO)
  2. Sex harassment

  1. America and UK: To prove sex harassment, you have to prove sex discrimination (unfavorable treatment)
  2. Australia expressly defines sexual harassment and makes it illegal.
  3. HK: SDO �2.6 prohibits unwanted sexual conduct where in the circumstances, a reasonable person would anticipate that the conduct would intimidate or humiliate the person.

  1. Age, race, family status and sexuality discussions took place in �95-�97.

  1. This new LegCo was mostly elected, either directly or thorough (then) very broad functional constituency representatives (which China threw out on the night of the handover).
  2. Government said that family status was the only group worthy of legislative protection, and that was the only one that LegCo passed (FSDO).

  1. Applicability and enforcement

  1. Government, education, housing
  2. Large clubs
  3. Employment

  1. Employers are vicariously liable if they do not comply with the laws and an employee commits an offense. No liability of employer took all practicable steps to comply.

  1. Exemptions for genuine occupational qualification (height of a police officer).
  2. If a discriminatory act is done for two or more reasons (one of which is legal), it is assumed done for nonlegal reasons.
  3. No affirmative action requirements, but voluntary affirmative action is exempt.
  4. No cap on damages, limited injunctive relief available but very rare due to freedom to K.
  5. EOC is not very aggressive in enforcement, so women�s groups are encouraging greater aggressiveness.

  1. Future? No more anti-discrimination laws because Basic Law makes it hard to introduce such bills (BL74) and China nor businesses are not interested in such procedures.

  1. IP

  1. US has pressured China and HK to protect IP. China wanted to comply in order to encourage the importation of high tech info and products. In the past, China has argued that it was a developing nation and could not afford to pay royalties.
  2. HK does not discourage the purchase of pirated software: it is illegal to import, not illegal to export (contra China where it is illegal to import and export).
  3. Assignment

  1. Rights can be assigned, and assignee can enforce those rights.
  2. Allows US company to assign rights to Asian company to produce and/or distribute product for a fee.
  3. Assignor looses rights to the product.

  1. License

  1. Licensee cannot sue, only licensor.
  2. Gives licensor greater income from the use of the product.
  3. US company may assign an exclusive license to a company for production and/or distribution of a product in Hong Kong for a fee.

  1. Methods of protection

  1. No IP protection without government protection.

  1. Strong monopoly restricts the flow of information.
  2. Loose monopoly decreases productivity.

  1. Copyright

  1. Does not require registration � arises automatically upon creation of an original tangible medium. Registration serves as prima facie evidence in litigation, but is not required.
  2. Retroactive to date of creation.
  3. Monopoly granted by government on the use of the work for a period of time given to the author or author�s employer
  4. Extends for the life of the author + 50 years
  5. Covers software, multimedia which is dynamic

  1. Patent

  1. Creator makes the information on the product publicly available via a central authority (i.e. US Patent and Trademark Office) and in exchange the government grants a monopoly on its use to the maker or maker�s employer.

  1. Encourages free exchange of information, but discourages copying of products.

  1. Extends for 20 years.
  2. Not retroactive.

  1. Trademark

  1. Protects order of the market by creating a monopoly for labels
  2. Restricts competition in the market
  3. In the US � protects 2 dimensional and 3 dimensional (products) and sounds.

  1. International protection

  1. Paris and Berne Conventions (UN)
  2. Universal Copyright Convention (UCC)
  3. GATT (General Agreement on Trade Tariffs) discussions developed the Trade and Related Aspect of IP Rights (TRIPS - 1994). TRIPS is a requirement for WTO membership. Provides an enforcement mechanism for protection of IP. China is not yet a WTO member. HK is.

  1. Chinese IP law

  1. History

  1. Chinese culture says that authors create for the government in exchange for a good life, honor, etc. rather than a private monopoly.
  2. The defeat of China by Japan led China to want to integrate western ideals in order to strengthen China. China studied western governments, and decided that the French and German legal system was best suited to China�s desires for a strong central leader. Japan had also adopted this system.
  3. The first half of the 20th century had a lot of revolutions, not much chance for IP law to take effect.
  4. PRC under Mao did not recognize IP as they had no formal legal system. Deng later opened China to the west, and instituted a formal legal system.
  5. Deng and Carter reached an agreement for the exchange of high tech information, and China agreed to respect American IP.

  1. Offering foreigners rights entices them to give technology to China. Greater rights given to foreigners than locals.
  2. Somewhat contra to socialist society.

  1. Modern

  1. Trademarks recognized since 1982 under the SAIC, supervised by State Council. Does not apply to 3 dimensional (products such as Coke can or a toy) or sounds.

  1. Applications processed by the Trade Mark Office (TMO). AIC (Bureau of Industry and Commerce) is located in each major city.
  2. Disputes and grievances go to the Trademark Review Board.
  3. 1982 Trademark Law allowed registration by international companies/foreign companies.
  4. Mark must be distinctive. Trademark Office determines if the mark is distinctive enough.
  5. Prior use not needed, but can indicate distinctiveness. In US, first user has senior status (notice jurisdiction). In China, first to file has senior claim (race jurisdiction). Permits preemptive registration of potentially valuable marks.
  6. Well-known marks: Established by use. Scope of recognition must be judicially determined. International recognition � Hong Kong and China will recognize well-known marks from other nations, if product has high volume use in HK/China. Hard and expensive to establish � must use good faith.

  1. Patents recognized since 1984 under the STC, supervised by the State Council.

  1. Applications processed by China Patent Office. Local patent offices can mediate disputes as an alternative to courts.

  1. Borrowed German technology and expertise from the German Patent Office.
  2. Electronically linked to international patent system which allows for the process of international patents.
  3. Types of patents

  1. Technical solution which is submitted is what is protected by the patent. Requirements:

  1. Must be a new product which has never in the past been published or disclosed
  2. Degree of inventiveness must be of sufficient amount to distinguish it from other similar products
  3. Industrial applicability: Certain technology should not be monopolized, i.e. human surgeries.
  4. Protection for 20 years.

  1. Utility model: Tangible object with utility, never before published. 10 year protection. Encourages individuals and small business people to make small inventions.
  2. Design protection: Protects for 10 years. Must be more than a modification of an existing product (substantive change required). Includes design of clothing, candy, etc. Must be applicable to an industrial product.
  3. Process invention: Formula

  1. Disputes and grievances go to the Patent Review Board.

  1. Copyright

  1. Negative impact: Increases expense of education (foreign materials will cost a lot) and would restrict the creation of propaganda materials.
  2. Ministry of culture in 1984 issued a regulation allowing Chinese (not foreigners) to copyright work.
  3. In 1990, China adopted a law permitting foreigners to acquire copyrights if their work was published in China first, or within 30 days of publishing in another country. Does not protect the majority of foreign works.
  4. 1992: China adopted the Berne Convention.
  5. Due to retroactive aspect of copyright, a cut off date of ___ was established in the 1992 Sino-US Memorandum of Understanding. Works used before that date are considered "public domain." (see The Walt Disney Case handout)
  6. Foreign works must be registered with ___
  7. Status as an author gives certain moral rights:

  1. Integrity of work is protected. Changes which lower the integrity of the work (adapting a book for a film, etc.) are protected.
  2. Right to publish
  3. Right of paternity (parent) over the work

  1. Level of originality required for copyright is low in America and UK, only investment/labor into a work is required. In China, creativeness of author is the requirement.
  2. Beuracracy under CCP & State Council

  1. Propaganda Department: Handles education.
  2. Bureau of press and publicity (censor)

  1. National Copyright Administration (NCA)

  1. Enforces copyrights administratively, as a national enforcement agency.

  1. Copyright Bureau (provincial)
  2. Local offices

  1. Hard to enforce bootleg software/videos because Chinese law recognizes private use, and private use can extend to 2nd cousins, 3rd cousins, etc.

  1. Unfair Competition Law (1993)

  1. Based on doctrine of good faith (GPCC � 1986).
  2. Includes preemptive registration of trademarks with malice.

  1. Damages: Only actual (not potential or consequential) damages suffered by publisher are recoverable.

  1. HK IP law

  1. Patent system is now electronically linked to mainland CPO. Eventually the CPO will be the only patent system for HK.
  2. Right now, Chinese patents, trademarks and copyrights do not apply in HK without separate registration.

  1. Fair use exception (not covered)

  1. International Law

  1. World Court

  1. No compulsory jurisdiction. Countries must agree to jurisdiction (compromis).
  2. No precedent.

  1. Legal obligation: Countries can change their method of acting, unless there is a legal obligation to act in a certain way.
  2. Sources of international law

  1. Pino juris
  2. Customary international law: Custom (indicated by a general pattern of behavior) is the most important way that international law is formed. Binds all states unless they object.

  1. Objecting state exempted from customary international law.

  1. Treaties

  1. Forms

  1. Codify customary international law
  2. Creation of new duties
  3. Contractual obligation created between parties: Enforceable (practa stunt servanda) but not sources of law.

  1. General principles of law (equity, double jeopardy, etc.)

  1. Jurisdiction

  1. Prescriptive
  2. Adjudicative
  3. Enforcement
  4. Territorial
  5. Nationality

  1. US citizens must pay US taxes regardless of residence
  2. Citizens of one country must follow their home laws while abroad (i.e. treason)

  1. Treaties are generally not inherited by a new ruling country. Therefore, treaties signed by HK would not be absorbed by PRC, without specific provisions in Joint Declaration or BL. Inheritance does occur when both HK and PRC are parties to a treaty.

  1. Property

  1. Real

  1. HK

  1. Land registration ordinance (recording)

  1. 1843-1991: Race system, regardless of actual or constructive notice.
  2. 1991-present: "Busdriver Wong case" (Wong v. Cheng) modified old system to allow interests that are not in writing to be excluded from recording, and allowed protection in whatever way is possible (possession).

  1. Trusts

  1. Requirements

  1. Intent to transfer
  2. Presumption of advancement

  1. In loco parentis (?)

  1. K for sale of land

  1. Agent acts for both sides
  2. Provisional Agreement (PA) is binding

  1. Vendor has advantage if purchaser backs out � retains deposit

  1. PA replaced by formal Sale and Purchase Agreement (SPA)
  2. Differences between PA and SPA: If purchaser is the only one benefiting (unilateral), consideration or seal required. If bilateral, no consideration needed.
  3. Time is of the essence: Performance must be complied with exactly or else repudiation (more than just breach) and vendor keeps deposit.
  4. PA and SPA should be registered ASAP to protect title.
  5. Vacant possession must be given. No trash, etc.

  1. Land ownership

  1. All land is owned by government, leased to "owners."

  1. June 30, 2047 is the end of the lease.
  2. St. John�s church is the exception: Fee simple so long as used for Anglican church.
  3. Breach of lease (i.e. building without a permit) means government can reenter and take entire building without compensation. Alternative is for the government to take out a lien ("first charge") against the unit owner for the cost of bringing the unit into compliance.

  1. Right as unit owner

  1. Tenants in common
  2. Right of exclusive possession of owned unit
  3. Rights in common with other owners (utility easements)
  4. Rights in common for common parts (elevators, hallways)
  5. Deed of mutual covenant: Easements, regulations, restrictive covenants. Automatically runs with the land if registered.

  1. Building manager, who is usually a subsidiary of the developer, sets fees, arranges repairs (usually via developer), etc.
  2. Owners� incorporation: The unit owners run their own management (similar to a co-op).

  1. Developer can reserve rights to walls and roofs to put up advertisements, name building. Must pay for these reserved rights by contributing to fees.

  1. Clan-owned land (lineage land)

  1. No right to sell in customary law because rights of future heirs. Courts said it was ok to sell though. Proceeds distributed:

  1. Per capita = each person gets an equal share
  2. Per stirpes = divided by family tree branch, then per capita within each branch.

  1. Mortgages

  1. Purchase price ($10M). Bank valuates at $8M. Mortgage for 70% ($5.6M) for 10-15 yrs. Family has to finance remainder ($4.4M).

  1. Families often pool money to buy houses according to hierarchy (first son, etc.). May protect assets from later bankruptcy.
  2. Allows property values to decrease around 40% before banks get worried.

  1. Transfer of title

  1. Imposes right of foreclosure. Transfers title to mortgagee, who can sell and keep all profit.

  1. Creation of equity of redemption

  1. Contractual: Express time stipulation.
  2. Pure equity: Unfair for X to loose land by being late in repaying.

  1. Damages

  1. Liquidated: 10% to 25% of the purchase price
  2. Forfeiture: Equitable intervention if frustration, accident, surprise, mistake, equitable fraud, etc. Relieves damages.
  3. Restitution (unconscionability; doesn�t protect against forfeited deposit)

  1. D has land that doesn�t belong to him
  2. Received and retained at the expensive of the p
  3. Unjust for D to retain

  1. Estoppel

  1. Foreseeable reliance to the detriment of the p ; acts as consideration for waiver or variation of preexisting term.
  2. Waived term can be reinstated upon notice.

  1. NT Law (NTC)

  1. Customary Chinese law applies

  1. Transfers down male lineage � not intestate to wife unless land is exempted from NT law
  2. Owned by clans
  3. Tongs � Tso (?)

  1. New modifications as of 1994

  1. Land assumed to be exempted from NT law, so modern law applies.
  2. In cases of customary law, statute now applies intestate law.
  3. NTC law applies to the land, not the person (Chinese people).

  1. PRC

  1. Decline in socialism has resulted in increase in civil law, change in property laws.
  2. Chinese property law is codified, adopted from French and German.
  3. Ownership is exclusive (1 owner having rights over a thing) and corporal (concrete).

  1. Not divided into estates nor future interests, no distinction between equitable and legal title, no trusts. This results in less flexibility, but doesn�t tie up land like in America. In America, we have a bundle of sticks that we can spread out all over the place. They keep their bundle tightly held.
  2. Usufruct: Right to use and enjoy the things or property of another, their substance remains unimpaired (no waste). Greater right than an easement.

  1. Ownership

  1. Socialist

  1. State
  2. Collective

  1. Non-Socialist

  1. Individual
  2. Private
  3. Foreign

  1. People can own the means of production "within the limits of the law." No laws yet allow people to own means of production, therefore the state still owns all the means of production.
  2. Land ownership

  1. Rural

  1. Old system (1949-1978): Land was owned by communes, people worked in teams on the land. No individual pieces of land. No freedom of movement. No decision making ability.
  2. 1978 reforms: Household Responsibility System. Land contracted (leased) in exchange for certain amount of product. Any product above state�s share producer can sell/use. You can keep it in your family for the length of the contract (30 yrs). Land is still owned by gvmt or collectives.

  1. Urban

  1. Official theory was that land has no value.
  2. Institutions (schools) were given the untransferable right to use land.
  3. In 1986/1988, the land management law was revised to allow for development of land and transfer of some land through a lease (both from gvmt and from private owners). Land is still ultimately owned by the government.

  1. Personal

  1. K for purchase gives a right (chose in action) to take action to enforce the K

  1. Novation: Substitution of one party for another party. Occurs when party to K assigns their right (chose in action) to another person.

  1. Pawnbroking: Exchanging gold/silver for lending money. Closely monitored by police. Legislation similar to UCC Article II regarding a secured interest in items being sold/bought. Four months after default, pawnor receives title.
  2. Usury: Lending money with an expectation of interest was historically prohibited. Abolished the prohibition in 1854. Currently 60% is the limit, and 40%-60% requires court permission.
  3. Bill of Sale: X sells to Y, executes a bill of sale, but X keeps possession. Bill of sale protects Y against third parties (Z) via constructive notice. If X sells to Z, Y can sue X for fraud and attach assets.
  4. Charge

  1. No transfer of title nor possession.
  2. Penal bond: Borrowing money for a very short time with a promise to pay a penalty if late payment. Penalty is not technically interest, therefore no usury problem. Usually coupled with a promissory note and a right of execution against property.

  1. Lien

  1. Possessory

  1. Bankers & solicitors can keep everything in their possession
  2. Cannot sell without permission by legislation

  1. Equitable
  2. Non-possessory

  1. Bailment
  2. Romulpa: S supplies raw materials to B, B owes $ to S. S puts in a retention of title clause. When B manufacturers raw materials into finished product, S looses retention of title to raw materials. Title passes automatically to B when B improves them. S retains interest in proceeds of sale, and clause should have protected that interest as well as the interest in raw materials.
  3. Debenture
  4. Tortious interference with contract
  5. Flawed Account: Bank owes A money, A owes Bank more money. A can�t collect from Bank unless Bank collects from A.

  1. Sources of HK Law

  1. Common Law

  1. Judge made via disputes rather than civil or enumerated laws
  2. Hierarchical reliance on precedence (consistent, integrity)
  3. Flexibility and adaptability
  4. Inquisition vs adversarial (?)
  5. Existing UK common law was transferred to HK on April 5, 1843. That was the cut-off date after which no additional UK statutory law transferred, as HK then had its own legislature.
  6. Integration of HK laws into mainland (Canton) put on hold by Tiananmen Square
  7. Rooted in HK; tradition; part of the culture since 1849
  8. Provides rational law under which capitalism can thrive (Max Weber).
  9. Courts use other CL country decisions as persuasive authority.
  10. Will CL survive?

  1. Maj. Says no because of BL158, no separation of powers, limited judiciary review.
  2. Wacks says yes, because benefits (credits) outweigh debits. HK�s society is too conservative to change, despite China�s pressure. No immediately available alternative system.

  1. Chinese Customary Law

  1. Largely replaced in Kowloon and HKI, but NT retained.
  2. Leeway given to Chinese in dealing with new laws re: land, marriage, etc.
  3. Customary law was reinstated in 1971, but concubines were not reinstated.

  1. Basic Law

  1. Established by 1984 Sino-British Joint Declaration and PRC Constitutional Law ___, which allows for SARs.
  2. HK�s constitution, a creature of PRC ___.
  3. Relationship of BL to CL

  1. BL8 preserves and protects the CL from legislative changes
  2. BL superior if conflict

  1. BL18 extends mainland laws to HK via Annex 3
  2. Interpretation of BL is done by Standing Committee of NPC (BL158)

  1. David Ma case (1998) upheld BL158: China established HK�s first legislature without elections, challenged by Ma. Court said this was legal because China is a sovereign power, therefore BL may be meaningless.
  2. Under UK, "Letters Patten" allowed for questioning of legislation.
  3. Judicial cases re BL and China must be referred to Standing Committee, not the Court of Final Appeal.
  4. BL17: NPC can also interpret BL without a case to clarify the BL. Must consult with the Committee on Basic Law first. This was done twice, both before the establishment of the SAR.

  1. BL protects capitalism for 50 years, from 1997. Established by Sino-British Joint Declaration Treaty � Chinese usually obey treaties
  2. China has superiority re defense and foreign affairs
  3. Subversion not recognized by CL, but BL23 requires legislation outlawing subversive acts.
  4. Privacy protected: Government must disclose info they have on a person upon request by that person. New China News Agency (arm of PRC) refused to turn over Emily Lau�s file to her, HK refused to prosecute NCNA. Adaptation of Laws ordinance provides sovereign immunity to government � Apply to NCNA? Yes for now.
  5. BL160: Designed to continue the legal proceedings through the establishment of the SAR
  6. Maccau reverts on 12/20/99; no legal infrastructure, therefore Maccau�s Basic Law will likely fall to PRC law.

  1. Taxation

  1. Levels of taxation

  1. Classical: Taxes paid at corporate level and at individual (dividend) level (US & Japan).
  2. Integrated/imputed: Either the corporation or the shareholder pay taxes, but not both (Singapore).
  3. Tax haven: No taxes.

  1. Hong Kong and PRC never tax dividends. HK only taxes the corporation.

  1. Jurisdiction

  1. World Wide / Citizenship

  1. Residents taxed on income, regardless of where earned or where living.

  1. Subsidiary is not the same legal entity as the parent company; branch is the same legal entity as the parent company. Therefore, if a branch in a foreign jurisdiction earns $$, both the foreign and home country can tax. Parent company can be taxed when it receives income from subsidiary. Double tax relief will prevent excessive taxation.

  1. Non-residents taxed on domestic source income
  2. US, Japan & Philippines

  1. Source: Taxed on income coming from the source (Hong Kong, Singapore).

  1. Capital gains

  1. Sale or disposal of asset produced or bought not for the purpose of selling at a profit, by a person who does not trade in that product on a regular basis.
  2. Does not exist in Hong Kong and Singapore; does exist in the US, Japan and PRC.

  1. Double tax relief

  1. If $100 is earned, and the local jurisdiction taxes 48%, and the home (world wide) jurisdiction taxes 52%, the net income will not be $0. The home jurisdiction credits the local tax, so the total tax would be 52%. Tax credit only goes up to the level of the domestic tax � does not exceed.
  2. Can be established unilaterally or by treaty, and most countries do in order to encourage trade and investment.

  1. Treaty shopping: Shop around to find the country with the best treaty, i.e. in tax havens. Some treaties have anti-treaty shopping provisions which state that corporations cannot be created in certain countries (Netherlands) by non-residents.

  1. Not a problem in HK because HK does not tax foreign income.

  1. Controlled foreign corporation: Anti-deferral.

  1. Corporation may use a subsidiary to earn income in a lower-tax foreign company to escape higher home taxes.
  2. Home country with controlled foreign company legislation tax the parent company for the income of the subsidiary.
  3. Without legislation, the income would eventually trickle up via dividends. But the home jurisdiction wants the taxes now, not later.
  4. Only applies when foreign jurisdiction tax is lower than home.
  5. Does not apply when subsidiary is an active business, i.e. not a sham created to exploit lower tax.
  6. Exists in US and Japan, not Asia or tax havens.

  1. Tax planning: Keep your money where the taxes are lower, and defer transferring money to the parent company for as long as possible.

  1. Trade and Investment Law

  1. China less effected by economic problems due to high regulation of trade and investment. Open markets with freely convertible currencies are hardest hit by economic problems (Indonesia currency down 70%).

  1. China�s largest investment area was southeast Asia. Economic problems have reduced that, allowing western countries to have a heavy influx of investment and control.

  1. After WWII, US and UK set up World Bank, IMF and WTO to operate as vehicles of global capitalism.

  1. China wants to get into the WTO on advantageous terms, so most of its recent foreign related legislation has been with an eye towards joining the WTO and in compliance with GATT. GATT is now a subdivision of WTO.
  2. WTO agreements (criticized as globalization of US legislation, loss of state sovereignty, under GATT they are supposed to deal with trade but often they go beyond).

  1. TRIMs: Trade Related Investment Measures; affects national treatment (encourages foreign and domestic corporations to be treated the same). Mandates transparency.
  2. TRIPs: Trade Related Intellectual Property Rights; applies US IP law to other countries.
  3. GATS: General Agreement on Trade and Services. Does not allow for discrimination against banks coming to a foreign country.

  1. China is increasing the convertibility of the Chinese currency to comply with WTO requirements and to enter the WTO, but the recent economic problems will slow this process. Accounts payable are convertible, but not capital principle without Chinese approval.
  2. GATT created to regulate international trade; now being used to infiltrate the countries� economies. GATT principles which are required for admission to WTO:

  1. Nondiscrimination

  1. Between FIEs (foreign companies) and SOEs (State Owned Enterprises).
  2. National treatment

  1. Reciprocity between the states

  1. MFN status

  1. Transparency (vs. secrecy in China)
  2. Progressive elimination of non-tariff barriers
  3. Price and trade decision making reform
  4. Safeguards

  1. Foreign investment

  1. Foreign Investment Enterprises (investment vehicles, usually organized as limited liability companies)

  1. Sino-foreign enterprise joint venture (EJV)
  2. Sino-foreign cooperative joint venture

  1. Legal Person Cooperative Joint Venture
  2. Non-Legal Person Cooperative Joint Venture

  1. Wholly Foreign Owned Enterprises (WFOE)

  1. Applicable laws

  1. Joint venture legislation (EJV/CJV)
  2. Foreign Investment Enterprise legislation
  3. Foreign Enterprise Contract Law (FECL; foreign K law)

  1. General Principles of Civil Law

  1. PRC � Article 18 specifies the structure of a LLC and how the governance should work.

  1. Risk

  1. Forms of risk

  1. Capital
  2. Exposure to unlimited liability
  3. Changes in applicable law

  1. Managed via FSR and joint venture contract

  1. Representations and warranties
  2. Conditions precedent
  3. Termination

  1. Foreign trade

  1. Very few Chinese companies are allowed to engage in foreign trade. Most of these companies are joint venture trading firms (in Shenzhen and Shanghi) or FTC�s (Foreign Trade Corporations).
  2. China is providing Market Access, vs. Structural Reform

  1. Market Access: Reducing tariffs and non-tariff barriers to acceptable levels. China maintained this was adequate for admission to WTO.
  2. GATT now says structural reform is necessary (which will take years to accomplish). Phased in reform, if permitted by GATT, would allow China to stall.

  1. Entities involved

  1. Foreign company
  2. Foreign Rep. Office registered in PRC

  1. Branch of foreign company
  2. Negotiates terms of K with local company, but FTO must sign the K and exchange monies.
  3. Not a legal person.

  1. Chinese Local Company (end-user)
  2. Chinese Foreign Trade Operator (FTO)

  1. FTO signs K on behalf of Chinese Local Company.
  2. FTO converts currency between foreign company and PRC company.

  1. Issues

  1. Quotas imposed by PRC
  2. Foreign currency
  3. Customs
  4. Legal status of FTO (liability): Only FTO is liable to foreign company under Chinese law. Local company is not liable to foreign company.

  1. Structures

  1. Simple

  1. Foreign company FTO local company

  1. Complex

  1. Negotiations: Foreign company Rep Office local company
  2. K: Foreign company FTO local company

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