Research On Legal Risk And Prevention Of China 's Foreign Project Contracting

With the development of global economic integration, cooperation among nations becomes more and more frequently, which can give foreign project contracting a very broad field in future. Foreign project contracting provides an important channel for economic and labor cooperation, resource exchange and marketing communications between countries, simultaneously creating tremendous market opportunity to nations and companies. Ever since China’s accession to the WTO ten years ago, foreign project contracting showed a good development trend with continuous increment of project contracting levels and growing large-scale projects. Optimization of project contracting from structures and fields involving petrochemical, transportation, electricity and electronic communications realizes a turnover of foreign project contracting from quantity to quality.Although in recent years Chinese contractors overseas made certain achievements in project contracting, it still should be noted that the foreign contracted projects are facing a grim situation with increasing risks. Unexpected risk events resulting in increased project costs, schedule delays and losses occurred with contractors’lack understanding of the specific circumstances in target country, unfamiliar with the local laws, regulations and relevant policies and lacking of their own experience. For any contractor, the risk faced by foreign project contracting is an unavoidable fact with no doubt. In normal condition, the risk of foreign project contracting mainly includes political risk, financial risk, legal risk, technical risk and project management. In summary all of these risks are associated with local laws and regulations. Only when the differences of local social environment, the legal system and international practice are well understood, the risk of foreign project contracting can be effectively reduced. Then a smooth progress of the project can be ensured. Therefore, it is very important to better improve the legal risk prevention in foreign project contracting.Based on this purpose, this paper analyzed the legal risks that might exist in our overseas project, elaborated a legal performance risks, preventive measures, and responded solutions in detail based on external influenced factors such as perspective of the legal risk, the concept and features of foreign project contracts, and legal sources. Although legal risks in foreign project contracting process varied a lot, these risks can be summarized as contract-related risks, tax-related risk, labor-related risk, environment-related risks and intellectual property related risk. Therefore, this paper discusses the presence and preventive measures of legal risks from the five aspects mentioned above, covering the contract items, scope, possible disputes, tax policy, fiscal, tariff rates, labor policies, labor relations, environmental regulations, public opinion, independent intellectual property core technology and patents. Although many differences exist in different countries of legal environment, background and traditions, many practices can not be copied. Still effective experience can be learned. Therefore, in the end of this paper, considering implementation of "go-out" policy proposed by our country, and the actively explored international market background in future, several points were given to ensure the contractor be able to better respond to legal risks in overseas project contracting to prevent detours and help them better prepare.In this paper, through the study of foreign project contracting legal risks and countermeasures, the understanding of project management and related sensitive factors will be elaborated; the allocation and use of project resources will be timely improved; the confidence of project will increase. Besides, it should be reminded for project managers in foreign project contracting process that it is necessary to focus on the flexible adjustment of the risk response measures, and also to attach importance to the relevant contracts and understand the uniqueness of local laws and regulations, establish in advance means of prevention to strengthen the legal risk management and control capabilities. So the legal risks can be effectively prevented. In addition, the study of this paper should provide guidance and planning for Chinese enterprises to carry out scientifically foreign engineering contracting business, establish the correct legal concepts and consciousness, and lay a solid foundation for the stable development of foreign project contracting.