The Complaint Mechanism for Foreign Investment

As the Foreign Investment Law of the People’s Republic of China which has already come into effect at the beginning of 2020 had already stated, China shall establish a complaint mechanism for foreign-funded companies to timely solve the problems reported by them or their investors, and coordinate and improve relevant policy measures. On October 1st, 2020, the Rules on Handling Complaints of Foreign-Invested Enterprises issued by the Ministry of Commerce came into effect, which specifies the mechanism more clearly.

1. What can be deemed as a Complaint?

According to Article 2 of the Rules on Handling Complaints of Foreign-Invested Enterprises, when a foreign-invested company or a foreign investor believes that its legitimate rights and interests are infringed upon by any administrative behavior by the relevant authorities, it may apply to the complaint handling agency for coordination to resolve the case. The complaint may also contain the company’s report regarding the existing problems in the investment environment and the company can propose to amend the relevant policies and measures.

In the meantime, chambers of commerce or associations established and joined by foreign companies may make complaints in regards to the existing problems in the investment environment raised by its members, and submit specific suggestions on policies and measures.

2. How to file a Complaint?

Currently, each province in China (mainland) has one or two departments responsible for complaint handling. The details in regards to the personnel responsible for such complaint handling, including phone numbers, email and office address can be found on the website of the Ministry of Commerce.

A company may subsequently submit written complaint materials on site, by letter, fax, or email as listed on the website. Within seven working days after the authority’s receipt of the complete set of complaint materials, the relevant department shall make a decision on whether to accept the complaint. Generally, the authority needs to close the handling of the complaint within 60 working days from the date of acceptance of the complaint.

Depending on the specific situation of the complaint, the authority may organize meetings, invite the company and the accused party to attend the meetings jointly, state their opinions and discuss a solution to the complaint. According to the needs of handling complaints, the complaint handling agency may listen to the opinions of relevant experts on professional issues.

3. What will a Complaint Handling Agency do?

According to the differing situations of complaints, the authority may take the following steps in order to handle complaints:

1. Encourage the company and the accused party to reach an understanding (including settlement agreement);
2. Coordinate with the accused party;
3. Make a suggestion to the government to improve the relevant policies and measures; or
4. Adopt any other handling methods that the authorities deem appropriate.

If the settlement agreement is successfully reached between the company and the accused party, it will be binding on both parties. If the accused party fails to perform the agreement, it will bear the corresponding administrative liability.

4. How will the company be protected?

In order to reduce the concerns of foreign companies and investors, the Rules clearly stipulate that no entity or individual may suppress or retaliate against companies or investors who report or apply for coordination to resolve an issue through the complaint mechanism for foreign investment.

If the authorities and their staff abuse their powers, neglect their duties, engage in malpractices for personal gain, or disclose to or illegally provide to others trade secrets, confidential business information or personal privacy which they come to know in the complaint handling process, they will be administratively punished or be held criminally liable.

As a great improvement of the complaint mechanism for foreign investment, the Rules on Handling Complaints of Foreign-Invested Enterprises aims to consolidate the expectations and confidence of foreign companies and investors on the investment environment of China. It will work as a “visible hand” to prevent foreign investment from unfair treatment and facilitate integration within China. If you are interested and want to obtain more information, please feel free to contact info@dandreapartners.com.