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Fundamentals Level – Skills Module, Paper F4 (CHN)

Corporate and Business Law (China) June 2011 Answers

1 This question requires candidates to explain the term judicial interpretation made by the Supreme People’s Court, and state the rule of applicable law which is contained in the Judicial Interpretation on the Application of the Contract to deal with the special circumstances under which a contract was concluded before the date of implementation of the Contract Law but the dispute is brought after that date to the people’s courts.

(a) (i) The term judicial interpretation refers to the interpretations, made by the national supreme judicial authorities (the Supreme People’s Court and the Supreme People’s Procuratorate), toward the general matters, or specific inquires brought by the local judicial authorities relating to specific application of laws in their judicial practices.

(ii) The legal basis for the Supreme People’s Court and the Supreme People’s Procuratorate to formulate a judicial interpretation is the authorisation of the National People’s Congress (NPC). On 10 June 1981, the NPC Standing Committee adopted a Resolution on Strengthening the Work of Law Interpretation which authorises these two nationaljudicial authorities to give judicial interpretations on matters of the application of law.

(b) In accordance with Article 1 of the Judicial Interpretation on the Application of the Contract Law issued by the Supreme People’s Court, if a dispute brought to the people’s court is relevant to a contract concluded before the date of the implementation of the Contract Law, the former provisions of the three contract laws shall apply, except that this Interpretation provides otherwise. Where there was no provision as contained in any one of the former contract laws, relative provisions prescribed in the Contract Law may apply.

2 This question requires candidates to explain the situations that create legitimate possession, state the right of claim of a possessor against various tortuous activities and explain the rules of compensation to a right holder for his property under the Property Law of China.

(a) In accordance with Article 241 of the Property Law, legitimate possession can be created on the basis of a contractual relationship. Any use, proceeds and liability in relation to the possession of the immovables or movables shall be governed by the contract. However, the provisions of law shall be applied to deal with the matters concerning the use, proceeds and liability that arise from legitimate possession of immovables or movables if there is no such stipulation in the contract or the stipulations are not clear.

(b) In accordance with Article 245 of the Property Law, where a movable or immovable under possession is infringed upon, the possessor is entitled to request the return of the original property. Where any act impairs the possession, the possessor shall be entitled to request the elimination of impairment or danger. Where any damage is caused by infringement or interference, the possessor shall be entitled to claim damages.

(c) In accordance with Article 244 of the Property Law, a right holder shall be entitled to request the return of any insurance proceeds, damages or indemnities paid on the damage to or destruction or loss of his property which is under a possession. Where such compensation falls short of adequate compensation for the damage to the right holder, the mala-fide possessor shall be liable to indemnity the holder.

3 This question requires candidates to explain the relevant restrictions on the period of probation in a labour contract, and state the special matters in relation to the probation under the Labour Contract Law.

(a) In accordance with Article 19 of the Labour Contract Law, where a labour contract stipulates a term of less than three months, it is not allowed to contain a provision of probation. Where a labour contract is one that will expire upon the completion of certain designated work, it is not allowed to contain any provision with respect to probation.

(b) In accordance with Article 19 of the Labour Contract Law, if a labour contract contains the term of probation, it shall comply with the following conditions:

(i) Where the term of a labour contract is not less than three months but less than one year, the probation period may not exceed one month.

(ii) Where the term of a labour contract is more than one year and less than three years, the probation period may not exceed two months.

(iii) Where the term of a labour contract is more than three years or non-fixed, the probation period may not exceed six months.