Legal Issues Of China’s Foreign Investment Approval System

A contract concluded during the formation, modification, etc. of a foreign‐funded enterprise does not take effect until it is approved by the foreign‐funded enterprise examination and approval organ in accordance with the laws and administrative regulations. The approval of the contract submitted by the foreign‐funded enterprise (hereinafter referred to as the approval)share the same characteristics with the administrative license. Judicial practice in the past regarded the contract without the approval as invalid, which has brought dilemma to the trial of the relevant dispute. The Supreme People’s Court has worked out new provisions, known as ‘Provisions of the Supreme People’s Court on Several Issues concerning the Trial of Disputes Involving Foreign‐Funded Enterprises (I)’, and solved some problems, such as the validity of the contract, the obligation to get approval, the interests of the actual investors, etc. According to the provisions, contracts without approval don’t enter into force instead of being invalid; and in this circumstance, the party to the contract attached to the approval obligations is required to apply for approval. However, it still leaves some problems unsolved, such as the interests of the actual investors, etc. Thus these puzzles will be discussed in the following essay and emphasis will be laid on both theory and cases.