China issues judicial interpretation on Foreign Investment Law

China's Supreme People's Court (SPC) on 26 December 2019 issued a judicial interpretation applicable to the Foreign Investment Law, aiming to optimize the business environment and equally protect the legitimate rights and interests of Chinese and foreign investors. 

The interpretation will take effect on 1 January 2020, the same day when the Foreign Investment Law comes into effect.

According to the interpretation, China courts will not support contracted parties who claim that investment contracts formed in the areas not included in the Special Administrative Measures for Foreign Investment Access (Negative List) are void because the contracts have not been approved or registered with the relevant administrative authorities.

Investment contracts formed in the areas where foreign investment is restricted by the Negative List can still take effect as long as the parties concerned take necessary corrective measures to meet the requirements of the Negative List before China courts make effective judgments.

Investment contracts that fell within the prohibited or restricted areas on the Negative List when they were signed can still be deemed effective if the Negative List loosens restrictions before effective judgments are made by China courts.

The interpretation will also apply to the civil cases and commercial affairs of relevant disputes arising from the investments in the Mainland China by the Chinese citizens settled overseas or by investors from Hong Kong, Macao or Taiwan.

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