2013-01-03 22:36:37
Since 2011,China’s economy has been the second largest one globally, more and more investors regard China not just as "Global Factory"but also the market. Considering the challenges of establishing a wholly foreign owned enterprise (WFOE), many foreign investors prefer to forming joint ventures with local partners.
Undoubtedly, a well-drafted JV agreement could protect the interest of the investors when venture disputes happen. Disputes usually arise because of business strategy, transactions partners and internal compliance policies etc. Although it is a tough job to negotiate how to address such issues, but it is much easier when drafting the agreement consideirng all parties are eager to commence business quickly.
A well-drafted contract should stipulate an efficient dispute resolution mechanism. According to China Civil Procedure Law, any lawsuit regarding a dispute arising out of a Sino-foreign Joint Venture Contract must be adjudicated in a Chinese competent court. Considering the local protectionism, generally speaking, arbitration is preferred option for foreign investors when disputes arise. Attention pleas,any arbitration agreement should demonstrate a clear intent to arbitrate and appoint a specific arbitration forum, otherwise, the arbitration clause could be possiblly declared to be invalid
If arbitration becomes inevitble, foerign investors should prepare evidence necessary to support their claims. therefore, when drafting JV agreement,a foreign investor should seek to state in the JV agreement for access to key documents and information including contracts, invoices, production records, delivery receipts, financial statements and meeting minutes etc.