Morrison & Foerster partners Gordon Milner and Paul McKenzie were quoted in a recent Bloomberg article titled “China’s New Investment Law Puts Foreign Firms on Notice,” in which they provided insights into the impact that the new legislation may have on more than 300,000 foreign joint ventures in China.
Mr. Milner pointed out that “the potential headache lies not so much in any actual changes required, but the fact that many may need to amend existing contracts to comply – and that could open everything for negotiation, including fundamental commercial agreements.”
“It’s like re-opening wedding vows. If you have to repeat the wedding vows, maybe your partner doesn’t want to stick by the same terms anymore,” said Mr. McKenzie. “Some of the world’s largest automobile makers and chemical companies – among other international businesses – will be impacted.”
Earlier this month, Mr. Milner was also quoted in a South China Morning Post piece titled “China Set to Vote on New Law Aimed at Levelling Playing Field for Foreign Investors.” As Article 22 of the new draft explicitly prohibits administrative agencies and their staff from using administrative means to force the transfer of technology, Mr. Milner commented that the principle has been welcomed and has “likely been included to assuage concerns raised by the U.S.” during trade talks. “However, many of the current issues with forced technology transfers arise from the complex interplay between different regulations, rather than from express legal obligations, and it is questionable how effective the high-level prohibition will be absent a root-and-branch review of those underlying regulations.”