As the first move to tap into the Chinese market, many foreign enterprises will establish a representative office in China. According to the Regulation on the Administration of Registration of Resident Representative Offices of Foreign Enterprises, the resident representative offices of foreign enterprises (hereinafter as the “Representative Offices”) refer to the working organizations established by foreign enterprises within the territory of China to conduct non-profit activities related to the business of foreign enterprises. Representative Offices do not have the qualification for a legal person. Now that Representative Offices are not legal persons, it is natural to wonder whether such Representative Offices have the capacity to sue or be sued.

As Chinese lawyers engaged in foreign investment for a long time, we are going to analyze this issue on the basis of a case from the Supreme People’s Court of China, which is a dispute about the infringement on trademark rights between the Kunming Representative Office of Hong Kong China Yun Copper (Group) Co., Ltd. and Yunnan Yunruizhixiang Cultural Communication Co., Ltd. After the retrial, the final judgment was issued as Zui Gao Fa Min Shen 2897 [2018].

1. Case Briefing

Kunming Representative Office of Hong Kong China Yun Copper (Group) Co., Ltd. holds that it shall have the right to represent its parental company in the civil proceedings in the mainland of China and file a lawsuit on the grounds that its lawful rights and interests have been violated. Its reasons are as follows:

(1) Kunming Representative Office is a lawful organization registered in accordance with the Regulation on the Administration of Registration of Resident Representative Offices of Foreign Enterprises, which has obtained the account opening permit from the People’s Bank of China in accordance with the law and opened different bank accounts;

(2) It is Kunming Representative Office’s nameand trade name lawfully registered in Yunnan Administration for Market Regulation that are violated by Yunnan Copper (Group) Co., Ltd. rather than that of China Yun Copper (Group) Co., Ltd.

2. Judgment of the Supreme People’s Court

The Supreme People’s Court holds that in accordance with the Civil Procedure Law of the People’s Republic of China, any citizen, legal person or other organization may be a party to a civil action. As per the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China, the other organization stipulated in the Civil Procedure Law refers to such organization that is lawfully established with certain organizational structure and property yet without the qualification for a legal person, including: (1) sole proprietorship enterprise that is lawfully registered and has obtained the business license; (2) partnership enterprise that lawfully registered and has obtained the business license; (3) Sino-foreign cooperative joint venture or foreign-invested enterprise that is lawfully registered and has obtained the business license in China; (4) branch or representative office of social groups that is lawfully formed; (5) branch of legal persons that is lawfully established and has obtained the business license; (6) branch of commercial banks, policy banks and non-bank financial institutions that is lawfully established and has obtained the business license; (7) township enterprise and sub-district enterprise that is lawfully registered and has obtained the business license; (8) other organization that meets the conditions specified in this clause.

In this case, it is clear that Kunming Representative Office does not have the qualification for a legal person. Whether it has the capacity to sue depends on whether it belongs to the “other organization” stipulated in the Civil Procedure Law.

Though Kunming Representative Office claimed that it has registered according to the  Regulation on the Administration of Registration of Resident Representative Offices of Foreign Enterprises and has certain organizational structure and property, it has not acquired the business license. Based on the provisions of the Civil Procedure Law and the Interpretation thereof, “other organization” refers to the enterprise branch that has obtained the business license or social group branch that is lawfully formed. As can be seen, Kunming Representative Office does not belong to legal persons or other organizations that are eligible for filing a lawsuit specified in the Civil Procedure Law and therefore does not have the capacity to sue.

3. Conclusion

In view of this case, we can get a glimpse of the opinions of the Supreme People’s Court in this regard. Although Representative Offices are registered and have certain property of their own, they do not have business licenses and therefore, do not belong to the “other organization” stipulated in the Civil Procedure Law. As a result, they are not eligible to sue or be sued. In practices, after the registration procedures Representative Offices will get a registration certificate rather than a business license from the market supervision administration. Besides, in some cases it is reasoned that based on the Regulation on the Administration of Registration of Resident Representative Offices of Foreign Enterprises, Representative Offices do not have the qualification for legal persons and thus they do not have the capacity to sue or be sued; instead, the foreign enterprises they represent shall bear the legal liabilities for all the activities conducted by Representative Offices in the mainland of China.

If you have any potential or existing disputes concerning your representative office in China and need assistance from Chinese lawyers, please contact us via administrator@legalandwise.com.

 

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