Capítulo V. Conclusiones

Regulation on the Administration of Commercial Franchises

2007-02-06 From: The State Council

Order of the State Council  (No. 485)

The Regulation on the Administration of Commercial Franchises, which was adopted at the 167th executive meeting of the State Council on January 31, 2007, are hereby promulgated and shall come into force as of May 1, 2007.

Premier Wen Jiabao  February 6, 2007

Chapter I General Provisions  Article 1 This Regulation is formulated for the purpose of regulating commercial franchises, promoting the healthy and orderly development of the commercial franchise industry and maintaining the market order.  Article 2 The engagement in commercial franchise within the territory of the People’s Republic of China shall be governed by this Regulation.  Article 3 The term “commercial franchise” (hereinafter referred to as “franchise”) as mentioned in this Regulation refers to such business operations by which an enterprise owning a registered trademark, enterprise mark, patent, know-how or any other business resource (hereinafter referred to as “franchiser”) confers the said business resource to any other business operator (hereinafter referred to as “franchisee”) by means of contract, and the franchisee undertakes business operations under the uniform business model as stipulated by the contract, and pay franchising fees to the franchiser.  No entity or individual other than enterprises may engage in the franchise business as a franchiser.  Article 4 The principles of free will, fairness, honesty and good faith shall be followed for engagement in franchise activities.  Article 5 The commercial administrative department of the State Council shall be responsible for supervising and administrating the franchise industry all over the country according to this Regulation. The commercial administrative department of the provinces, autonomous regions, or municipalities directly under the Central Government and the commercial administrative department of the people’s government of the cities divided into districts shall be responsible for supervising and administrating the franchise industry within its own jurisdiction according to this Regulation.  Article 6 Any entity or individual has the right to tip off any act against this Regulation to the commercial administrative department, and the commercial administrative department shall, after receipt of such tip-off, handle it in a timely manner.  Chapter II Franchised Operations  Article 7 A franchiser for engagement in franchise activities shall possess a mature business model and the ability to provide long-term business guidance, technical support, business training and other services to the franchisee.  A franchiser for engagement in franchise activities shall have at least two direct sales stores, and have undertaken the business for more than a year.  Article 8 A franchiser shall, within 15 days after having concluded a franchise contract for the first time, report it to the commercial administrative department for archival filing according to this Regulation. If a franchiser engages in any franchised operations within the scope of a province, autonomous region, or municipality directly under the Central Government, it shall be put on the archives of the commercial administrative department of the province, autonomous region or municipality directly under the Central Government; and if a franchiser engages in any franchised operations within the scope of two or more provinces, autonomous regions, or municipalities directly under the Central Government, it shall be put on the archives of the commercial administrative department of the State Council. For the archival filing, a franchiser shall submit the following documents and materials to the commercial administrative department:  (1) a photocopy of the business license or enterprise registration certificate;  (2) a sample franchise contract;  (3) a brochure for franchised operations;  (4) a market plan;  (5) a written commitment and relevant certification materials proving that the provisions in Article 7 of this Regulation are followed; and  (6) other documents and materials prescribed by the commercial administrative department of the State Council.  In case the product or service for franchise cannot be dealt in until it is approved, the franchiser shall also submit a relevant approval document.  Article 9 The commercial administrative department shall carry out the archival filing and give a notice to the franchiser within 10 days after receipt of the documents and materials prescribed by Article 8 of this Regulation. In case the documents or materials submitted by the franchiser are incomplete, the commercial administrative department may require the franchiser to supplement relevant documents or materials within 7 days.  Article 10 The commercial administrative department shall publish a name list of franchisers that have been put on archives on the government website, and renew the name list in a timely manner.  Article 11 For engagement in franchise activities, the franchiser and the franchisee shall conclude a franchise contract in writing.  A franchise contract shall include the following main contents:  (1) basic information about the franchiser and the franchisee;  (2) contents and term for the franchise;  (3) type, amount and payment method for the franchising fees;  (4) specific contents and methods for providing business guidance, technical support, business training and other services;  (5) quality, standards and guaranty measures for the product or service;  (6) sales promotion, advertising and publicity about the product or service;  (7) the protection of rights and interests of consumers and the assumption of compensation liabilities in the franchise; (8) alteration, rescission and termination of the franchise contract;  (9) liabilities for breach of the contract;  (10) dispute resolution methods; and  (11) other matters as stipulated by the franchiser and the franchisee.  Article 12 The franchiser and the franchisee shall stipulate in the franchise contract that the franchisee may unilaterally rescind the contract within a certain term after the franchise contract has been concluded.  Article 13 The franchise term stipulated in the franchise contract shall not be less than three years, unless it is otherwise agreed upon by the franchisee.  The preceding paragraph shall not be applicable when the franchiser and the franchisee renew the franchise contract.  Article 14 A franchiser shall provide a brochure for franchised operations to its franchisees, and shall continuously provide business guidance, technical support and business trainings, etc. to the franchisees according to the stipulated contents and methods.  Article 15 The quality and standards of the product or service for franchise shall conform to the laws, administrative regulations and the relevant requirements of the State.  Article 16 In case a franchiser requires a franchisee to pay expenses before a franchise contract is concluded, it shall explain in writing to the franchisee about the purposes of these expenses and the conditions and method for the refund of these expenses.  Article 17 The expenses for promotion and publicity as collected by a franchiser from a franchisee shall be used for the purposes as stipulated in the contract. The information about the use of expenses for promotion and publicity shall be timely disclosed to the franchisee.  A franchiser shall not resort to frauds or misleading in the promotion or publicity, and the advertisements it releases shall not contain any publicity content that any franchisee has obtained the proceeds from engagement in the franchise.  Article 18 Without consent of the franchiser, a franchisee shall not transfer the franchise to anyone else.  A franchisee shall not divulge to anyone else or allow anyone else to use the business secret of the franchiser it has accessed to.  Article 19 A franchiser shall, in the first quarter every year, report the information about the conclusion of franchise contracts in the previous year to the commercial administrative department.  Chapter III Information Disclosure  Article 20 A franchiser shall, according to the provisions prescribed by the commercial administrative department of the State Council, establish and implement a perfect information disclosure system.  Article 21 A franchiser shall, at least 20 days before signing a franchise contract, provide the information prescribed by Article 22 of this Regulation and the text of the franchise contract to the franchisee in written form.  Article 22 A franchiser shall provide the following information to the franchisee:  (1) the name, domicile, legal representative, registered capital, business scope of and basic information about the franchised operations of the franchiser;  (2) the basic information about the registered trademark, enterprise mark, patent, know-how and business model of the franchiser;  (3) type, amount and payment method of franchising fees (including whether the guaranty bonds should be collected as well as the conditions and methods for guaranty bonds);  (4) prices and requirements for providing products, services and equipments to the franchisee;  (5) specific contents, methods and implementation plans for continuously providing business guidance, technical support, business training and other services to the franchisee;  (6) specific measures for guiding and supervising the business activities of the franchisee;  (7) the investment budget for the franchise outlet;  (8) the quantity, distribution and business evaluation of current franchisees within the territory of China;  (9) digests of the financial statements and audit reports as audited by the accountant firm for the recent two years;  (10) the conditions about franchise-related lawsuits and arbitration for the recent five years;  (11) whether the franchiser or its legal representative has ever conducted major illegal business operations; and  (12) other information prescribed by the commercial administrative department of the State Council.  Article 23 A franchiser shall provide authentic, accurate and complete information to its franchisees, and shall not hide any relevant information or provide false information.  In case the information provided by a franchiser to any of its franchisees has been significantly changed, the franchiser shall notify it to the franchisee in a timely manner.  In case a franchiser hides any relevant information or provides false information, the franchisee may rescind the franchise contract.  Chapter IV Legal Liabilities  Article 24 In case a franchiser does not meet the requirements prescribed in Paragraph 2 of Article 7 of this Regulation but engages in the franchise activities, the commercial administrative department shall order it to make a correction, confiscate its illegal proceeds, impose a fine of more than 100,000 yuan but less than 500,000 yuan on it, and make an announcement about it.  In case an entity or individual which is not an enterprise engages in franchise activities as a franchiser, the commercial administrative department shall order it or him to stop the illegal business operations, confiscate its or his illegal proceeds, and impose a fine of more than 100,000 yuan but less than 500,000 yuan on it or him.  Article 25 In case a franchiser fails to put itself on the archives of the commercial administrative department according to Article 8 of this Regulation, the commercial administrative department shall order it to do so within a time limit, and impose a fine of more than 10,000 yuan but less than 50,000 yuan on it; and if it fails to do so within the time limit, it shall be fined more than 50,000 yuan but less than 100,000 yuan, and an announcement shall also be made.  Article 26 In case a franchiser violates Article 16 or 17 of this Regulation, the commercial administrative department shall order it to make a correction, and may impose a fine of less than 10, 000 yuan; where the circumstances are serious, it shall be fined more than 10,000 yuan but less than 50,000 yuan, and an announcement shall also be made.  Article 27 In case a franchiser violates Paragraph 2 of Article 17 of this Regulation, the commercial administrative department shall order it to make a correction, and impose a fine of more than 30,000 yuan but less than 100,000 yuan on it; where the circumstances are serious, it shall be fined more than 100,000 yuan but less than 300,000 yuan, and an announcement shall also be made; and if a crime is constituted, it shall be subject to criminal liabilities.  In case a franchiser resorts to frauds or misleading by making use of advertisements, it shall be punished according to the relevant provisions in the Advertising Law.  Article 28 In case a franchiser violates Article 21 or 23 of this Regulation, and a franchisee tips it off to the commercial administrative department and the tip-off is found to be true upon verification, the commercial administrative department shall order the franchiser to make a correction and impose a fine of more than 10,000 yuan but less than 50,000 yuan on it; and where the circumstances are serious, it shall be fined more than 50,000 yuan but less than 100,000 yuan, and an announcement shall also be made.  Article 29 In case any entity or individual cheats the property of someone else in the name of franchise and a crime is constituted, it or he shall be subject to criminal liabilities; and if no crime is constituted, it or he shall be punished by the pubic security organ according to the Law of the People’s Republic of China on Public Security Administrative Punishments.  In case any entity or individual engages in pyramid selling in the name of franchise, it or he shall be punished according to the Regulation on Prohibiting the Pyramid Selling.  Article 30 In case any functionary of the commercial administrative department abuses his authorities, neglects his duties or resorts to cheats and a crime is constituted, he shall be subject to criminal liabilities; and if no crime is constituted, he shall be punished according to law.  Chapter V Supplementary Provisions  Article 31 The license of trademarks and patents involved in the franchised operations shall be implemented according to the laws and administrative regulations on trademarks and patents.  Article 32 Relevant associations and organizations shall, under the guidance of the commercial administrative department of the State Council, formulate the provisions on franchises according to this Regulation, strengthen guild self discipline, and provide relevant services for the parties involved in the franchise.  Article 33 Any franchiser that has engaged in franchise activities before the implementation of this Regulation shall be put on the archives of the commercial administrative department according to this Regulation; and if it fails to do so within the time limit, it shall be punished according to Article 25 of this Regulation.  The franchiser prescribed in the preceding paragraph shall not be applicable to the provisions in Paragraph 2 of Article 7 of this Regulation.  Article 34 This Regulation shall come into force as of May 1, 2007.

Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures

2001-03-15 From: The National People's Congress

Article 1  With a view to expanding international economic co-operation and technical exchange, the People’s Republic of China permits foreign companies, enterprises, other economic organizations or individuals (hereafter referred to as "foreign joint ventures") to joint with Chinese companies, enterprise or other economic organizations (hereafter referred to as "Chinese joint ventures") in establishing joint ventures in the People’s Republic of China in accordance with the principle of equality and mutual benefit and subject to approval by the Chinese Government.

Article 2  The Chinese Government protects, in accordance with the law, the investment of foreign joint ventures, the profits due to them and their other lawful rights and interest in a joint venture, pursuant to the agreement, contract and articles of association approved by the Chinese Government.

Joint ventures shall follow the provisions of the laws and regulations of the People’s Republic of China in all their activities.

The state does not practice nationalization and expropriation of a joint venture; under special circumstances, the state, in accordance with the needs of social public interest, expropriates a joint venture pursuant to legal procedures and offers corresponding compensations.

Article 3  The joint venture agreement, contract and articles of association signed by the parties to the venture shall be submitted to the competent authorities of foreign economic relations and trade (hereafter referred to as approval authorities), and the approval authorities shall, within three months, decide whether to approve or disapprove them. After approval, the joint venture shall register with the state competent authorities of administration for industry and commerce to obtain a license to do business and start operations.

Article 4  A joint venture shall take the form of a limited liability company.

The proportion of the investment contributed by the foreign joint venture (s) shall generally not be less than 25% of the registered capital of a joint venture.

The parties to the venture shall share the profits, risks and losses in proportion to their respective contributions to the registered capital.

No assignment of the registered capital of a joint venture shall be made without the consent of the other parties to the venture.

Article 5  Each party to a joint venture may make its investment in cash, in kind or in industrial property rights, etc.

The technology and the equipment that serve as a foreign joint venture’s investment must be advanced technology and equipment that actually suit our country’s needs. If the foreign joint venture causes losses by deception through the intentional use of backward technology and equipment, it shall pay compensation for the losses.

The investment of a Chinese joint venture may include the right to the use of a site provided for the joint venture during the period of its operation. If the right to the use of the site does not constitute a part of a Chinese joint venture’s investment, the joint venture shall pay the Chinese Government a fee for its use.

The various investments referred to above shall be specified in the joint venture contract and articles of association, and the value of each (excluding that of the site) shall be jointly assessed by the parties to the venture.

Article 6  A joint venture shall have a board of directors, which shall have its size and composition stipulated in the contract and the articles of association after consultation between the parties to the venture, and the directors shall be appointed and replaced by the parties to the venture. The Chairman and the vice-chairman are determined by the parties to the venture or elected by the board of directors. Either party of the Chinese-foreign joint ventures may be the chairman and the other shall assume the office of vice-chairman. In handling major problems, the board of directors shall reach a decision through consultation by the parties to the venture, in accordance with the principle of equality and mutual benefit.

The board of directors is empowered, pursuant to the provisions of the articles of association of the joint venture, to discuss and decide all major problems of the venture: expansion programmes, proposals for production and operating activities, the budget for revenues and expenditures, distribution of profits, plans concerning manpower and pay scales, the termination of business and the appointment or employment of the president, the vice-president(s), the chief engineer, the treasurer and the auditors, as well as their powers and terms of employment, etc.

The offices of president and vice-president(s) (or factory manager and deputy manager(s) shall be assumed by the respective parties to the venture.

Contracts shall be entered into in accordance with the law to prescribe the recruitment, dismissal, remuneration, welfare, labor protection, labor insurance, etc..

Article 7  The staff employees of the joint venture may establish trade unions in accordance with the law, carry out the activities of the trade union and defend the lawful rights and interests of the employees.

Joint ventures shall provide necessary conditions for the activities of the trade unions thereof.

Article 8  After payment, pursuant to the provisions of the tax laws of the People’s Republic of China, of the joint venture income tax on the gross profit earned by the joint venture and after deduction from the gross profit of a reserve fund, a bonus and welfare fund for staff and workers, and a venture expansion fund, as provided in the articles of association of the joint venture, the net profit shall be distributed to the parties to the joint venture in proportion to their respective contributions to the registered capital.

A joint venture may enjoy the preferential treatment of reduction of or exemption from tax pursuant to relevant state taxation laws or administrative decrees.

A foreign joint venture that reinvests in China its share of the net profit may apply for refund of a part of the income taxes already paid.

Article 9  A joint venture shall, with its business license, open a foreign exchange account at the banks or other financial organizations approved by the state foreign exchange control administrative organs to handle foreign exchange business.

The pertinent foreign exchange transactions of a joint venture shall be conducted in accordance with the regulations on foreign exchange control of the People’s Republic of China.

In its operating activities a joint venture may directly raise funds from foreign banks.

All insurances of joint ventures shall be procured at the insurance companies within the territory of the People’s Republic of China.

Article 10  The Joint venture may purchase the materials such as raw materials, fuels, etc. as needed within the approved scope of business either on the domestic or international market according to the principle of fairness and reasonableness.

A joint venture is encouraged to market its products outside China. Export products may be distributed to foreign markets through the joint venture directly or through associated agencies, and they may also be distributed through China’s foreign trade agencies. Products of the joint venture may also be distributed in the Chinese market.

Whenever necessary, a joint venture may establish branches outside China.

Article 11  The net profit that a foreign joint venture receives after fulfilling its obligations under the laws and the agreement and the contract, the funds it receives at the time of the joint venture’s scheduled expiration or early termination, and its other funds may be remitted abroad in accordance with the foreign exchange regulations and in the currency specified in the joint venture contract.

A foreign joint venture shall be encouraged to deposit in the Bank of China foreign exchange that it is entitled to remit abroad.

Article 12  The wages, salaries and other legitimate income earned by the foreign staff and workers of a joint venture, after payment of the individual income tax under the tax laws of the People’s Republic of China, may be remitted abroad in accordance with the foreign exchange regulations.

Article 13  The contract period of a joint venture may be decided differently according to its particular line of business and circumstance. The joint ventures of some trades should decided the contract period; and other may or may not decide the contract period. A joint venture that has set a contract period should, if the parties to the joint venture agree to extend the contract period, apply to the approval authorities six months ahead of the expiration of the contract period. The latter should make the decision of approval or disapproval within one month as of the date of application.

Article 14  In case of heavy losses, failure of a party to fulfill the obligations prescribed by the contract and the articles of association, force majeure, etc, the contract may be terminated through consultation and agreement by the parties to the venture, subject to approval by the approval authorities and to registration with the state competent authorities of administration for industry and commerce. In cases of losses caused by a breach of contract, the financial responsibility shall be borne by the party that has violated the contract.

Article 15  Disputes arising between the parties to a joint venture that the board of directors cannot settle through consultation may be settled through mediation or arbitration by a Chinese arbitration agency or through arbitration by another arbitration agency agreed upon by the parties to the venture.

Where no arbitration clauses have been included in the joint venture contract or no written arbitration agreement have been reached after a dispute arises, any party may bring a suit with the people’s court.

Article 16  This Law shall come into force on the date of its promulgation.

Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures

2000-10-21 From: The Standing committee of the National People's Congress

(Adopted at the First Session of the Seventh National People’s Congress on April 13, 1988,amended according to the Decision on Revision of the Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures adopted at the 18th Meeting of the Standing Committee of the Ninth National People’s Congress on October 31, 2000)  Article 1 This Law is formulated to expand economic cooperation and technological exchange with foreign countries and to promote the joint establishment, on the principles of equality and mutual benefit, by foreign enterprises and other economic organizations or individuals (hereinafter referred to as the foreign party) and Chinese enterprises or other economic organizations (hereinafter referred to as the Chinese party) of Chinese-Foreign Contractual Joint Ventures (hereinafter referred to as contractual joint ventures ) within the territory of the People’s Republic of China.  Article 2 In establishing a contractual joint venture, the Chinese and foreign parties shall, in accordance with the provisions of this Law, prescribe in their contractual joint venture contract such matters as the investment or conditions for cooperation, the distribution of earnings or products, the sharing of risks and losses, the manners of operation and management and the ownership of the property at the time of the termination of the contractual joint venture.  A contractual joint venture, which meets the conditions for being considered a legal person under Chinese law, shall acquire the status of a Chinese legal person in accordance with law.  Article 3 The State shall, according to law, protect the lawful rights and interests of the contractual joint ventures and of the Chinese and foreign parties.  A contractual joint venture shall abide by Chinese laws and regulations and may not injure the public interests of China.  The relevant State authority shall exercise supervision over the contractual joint ventures according to law.  Article 4 The State shall encourage the establishment of productive contractual joint ventures that are export-oriented or technologically advanced.  Article 5 For the purpose of applying for the establishment of a contractual joint venture, such documents as the agreement, the contract and the articles of association signed by the Chinese and foreign parties shall be submitted for examination and approval to the department in charge of foreign economic relations and trade under the State Council or to the department or Local government authorized by the State Council (hereinafter referred to as the examination and approval authority). The examination and approval authority shall, within 45 days from the date of receiving the application, decide whether or not to grant approval.  Article 6 When the application for the establishment of a contractual joint venture is approved, the parties shall, within 30 days from the date of receiving the certificate of approval, apply to the administrative department for industry and commerce for registration in order to obtain a business license. The date of issue of the business license of contractual joint venture shall be the date of its establishment.  A contractual joint venture shall, within 30 days of its establishment, carry out tax registration with the tax authorities.  Article 7 If the Chinese and foreign parties, during the period of operation of their contractual joint venture, agree through consultation to make major modifications to the contractual joint venture contract, they shall report to the examination and approval authority for approval; if the modifications include items involving statutory industry and commerce registration or tax registration, they shall register the modifications with the administrative department for industry and commerce and with the tax authorities.  Article 8 The investment or conditions for cooperation contributed by the Chinese and foreign parties may be provided in cash or in kind, or may include the right to the use of land, industrial property rights, non-patent technology or other property rights.  Article 9 The Chinese and foreign parties shall, in accordance with the provisions of the laws and regulations and the agreements in the contractual joint venture contract, duly fulfill their obligations of contributing full investment and providing the conditions for cooperation. In case of failure to do so within the prescribed time, the administrative department for industry and commerce shall set another time limit for the fulfillment of such obligations; if such obligations are still not fulfilled by the new time limit, the matter shall be handled by the examination and approval authority and the administrative department for industry and commerce according to relevant State regulations.  The investments or conditions for cooperation provided by the Chinese and foreign parties shall be verified by an accountant registered in China or the relevant authorities, who shall provide a certificate after verification.  Article 10 If a Chinese or foreign party wishes to make an assignment of all or part of its rights and obligations prescribed in the contractual joint venture contract, it shall be subject to consent of the other party or parties and report to the examination and approval authority for approval.  Article 11 A contractual joint venture shall conduct its operational and managerial activities in accordance with the approved contract and articles of association for the contractual joint venture. The right of a contractual joint venture to make its own operational and managerial decisions shall not be free from any interference.  Article 12 A contractual joint venture shall establish a board of directors or a joint managerial institution, which shall, according to the contract or the articles of association for the contractual joint venture, decide on the major issues concerning the venture. If the Chinese or foreign party assumes the chairmanship of the board of directors or the directorship of the joint managerial institution, the other party shall assume the vice-chairmanship of the board or the deputy directorship of the joint managerial institution. The board of directors or the joint managerial institution may decide on the appointment or employment of a general manager, who shall take charge of the daily operation and management of the contractual joint venture. The general manager shall be accountable to the board of directors or the joint managerial institution.  If a contractual joint venture, after its establishment, chooses to entrust a third party with its operation and management, it shall be subject to the unanimous consent of the board of directors or the joint managerial institution, report to the examination and approval authority for approval, and register the change with the administrative department for industry and commerce.  Article 13 The employment, dismissal, remuneration, welfare benefits, occupational protection, labour insurance, etc. of the staff members and workers of a contractual joint venture shall be specified in contracts concluded in accordance with law.  Article 14 The staff and workers of a contractual joint venture shall, in accordance with law, establish their trade union organization to carry out trade union activities and protect their lawful rights and interests.  A contractual joint venture shall provide the necessary conditions for the venture’s trade union to carry out its activities.  Article 15 A contractual joint venture shall establish its account books within the territory of China, file its accounting statements according to relevant regulations and accept supervision by the financial and tax authorities.  If a contractual joint venture, in violation of the provisions prescribed in the preceding paragraph, does not establish its account books within the territory of China, the financial and tax authorities may impose a fine on it, and the administrative department for industry and commerce may order it to suspend its business operation or may revoke its business license.  Article 16 A contractual joint venture shall, by presenting its business license, open a foreign exchange account with a bank or any other financial institution, which is permitted by the exchange control authorities of the State to conduct transactions in foreign exchange.  A contractual joint venture shall handle its foreign exchange transactions in accordance with the State regulations on foreign exchange control.  Article 17 A contractual joint venture may obtain loans from financial institutions within the territory of China and may also obtain loans outside the territory of China.  Loans to be used by the Chinese and foreign parties as investment or conditions for cooperation, and their guarantees shall be provided by each party on its own.  Article 18 The various kinds of insurance coverage of a contractual joint venture shall be furnished by insurance institutions within the territory of China.  Article 19 A contractual joint venture may, within its scope of operation approved, import materials it needs and export products it produces. A contractual joint venture may, in adherence to the principles of fairness and rationality, purchase on both the Chinese and the world market the raw and semi-processed materials, fuels and other materials it needs within the approved scope of operation.  Article 20 A contractual joint venture shall, in accordance with State regulations on tax, pay taxes and may enjoy the preferential treatment of tax reduction or exemption.  Article 21 The Chinese and foreign parties shall share earnings or products, undertake risks and losses in accordance with the agreements prescribed in the contractual joint venture contract.  If, upon the expiration of the period of a venture’s operation, all the fixed assets of the contractual joint venture, as agreed upon by the Chinese and foreign parties in the contractual joint venture contract, are to belong to the Chinese party, the Chinese and foreign parties may prescribe in the contractual joint venture contract the ways for the foreign party to recover its investment ahead of time during the period of the venture’s operation. If the foreign party, as agreed upon in the contractual joint venture contract, is to recover its investment prior to the payment of income tax, it shall apply to the financial and tax authorities, which shall examine and approve the application in accordance with State regulations concerning taxes.  If, according to the provisions of the preceding paragraph, the foreign party is to recover its investment ahead of time during the period of the venture’s operation, the Chinese and foreign parties shall, as stipulated by the relevant laws and agreed in the contractual joint venture contract, be liable for the debts of the venture.  Article 22 After the foreign party has fulfilled its obligations under the law and the contractual joint venture contract, the profits it receives as its share, its other legitimate income and the funds it receives as its share upon the termination of the venture, may be remitted abroad according to law.  The wages, salaries or other legitimate income earned by the foreign staff and workers of contractual joint ventures, after the payment of the individual income tax according to law, may be remitted abroad.  Article 23 Upon the expiration or termination in advance of the term of a contractual joint venture, its assets, claims and debts shall be liquidated according to legal procedures. The Chinese and foreign parties shall, in accordance with the agreement specified in the contractual joint venture contract, determine the ownership of the venture’s property.  A contractual joint venture shall, upon the expiration or termination in advance of its term, cancel its registration with the administrative department for industry and commerce and the tax authorities.  Article 24 The period of operation of a contractual joint venture shall be determined through consultation by the Chinese and foreign parties and shall be clearly specified in the contractual joint venture contract. If the Chinese and foreign parties agree to extend the period of operation, they shall apply to the examination and approval authority 180 days prior to the expiration of the venture’s term. The examination and approval authority shall decide whether or not to grant approval within 30 days from the date of receiving the application.  Article 25 Any dispute between the Chinese and foreign parties arising from the execution of the contract or the articles of association for a contractual joint venture shall be settled through consultation or mediation. In case of a dispute which the Chinese or foreign parties is unwilling to settle through consultation or mediation, or of a dispute which they have failed to settle through consultation or mediation, the Chinese and foreign parties may submit it to a Chinese arbitration agency or any other arbitration agency for arbitration in accordance with the arbitration clause in the contractual joint venture contract or a written agreement on arbitration concluded afterwards.  The Chinese or foreign party may bring a suit in a Chinese court, if no arbitration clause is provided in the contractual joint venture contract and if no written agreement is concluded afterwards.  Article 26 The detailed rules for the implementation of this Law shall be formulated by the department in charge of foreign economic relations and trade under the State Council and reported to the State Council for approval before implementation.  Article 27 This Law shall come into force as of the date of its promulgation.