how china operates, law-wise

  1. 6,931 Posts.
    Also from the South China Morning Post, for educative purposes. About 3 yrs ago I met a non Chinese guy with a small business in China but he lived with it.



    Monday, November 25, 2002

    Investors claim court stripped them of hotel
    Four foreigners dispute an order pushing them out of a US$4m Dandong property

    MICHAEL JEN-SIU in Beijing

    Prev. Story | Next Story


    Alleging that a local court stole their business, a group of foreign investors has appealed an order to push them out of a US$4-million joint-venture hotel in Dandong, Liaoning province.
    But an arrest chilled mediation processes.

    In April, an intermediate court in Liaoning province made two Australians, a Canadian and an American - from Hong Kong-based FAM Engineering - abandon the 220-room Dandong International Hotel and sent 50 police officers to enforce the order by changing the management company.

    They also removed the joint venture's imported hotel furniture and sanitary equipment, one of the foreign partners said.

    Despite the foreign side's protest, the court put the hotel under receivership and appointed a management company to run it, according to a statement from FAM.

    The court stepped in claiming the 50-50 equity joint venture was insolvent.

    According to the foreign venturers' statement, the Chinese side, Dandong Tourism, lost money by illegally transferring hotel construction loans.

    The venture took over the hotel building in 1992 and opened it in 1994. In a statement, FAM said the foreign partners did not know about the loan transfers.

    But a Dandong Tourism representative surnamed Cai said the foreign side should have known, since everything was done through a reputable bank.

    Ms Cai said the Dandong city tourism bureau was now responsible for the hotel's management.

    The dispute illustrates the risks faced by foreign investors operating on the mainland ventures despite advances in laws to protect them, United States citizen Lawrence Liu, an engineer and one of the four investors said.

    He suspected that, because the three-star hotel had broken even and begun to show signs of earning money, the city may have used the court to gain control.

    "We lost everything," Mr Liu said. "They kicked us out. No reason. It's a way to rob foreign investors."

    Beijing-based joint venture lawyer Alexander May, a partner with law firm Shuang Cheng, said the court should not have put the hotel into receivership without the foreign partner's consent.

    The other choice was liquidation, Mr May said. If the foreign side thought its local partner did something improper with loan money, they had to file a separate lawsuit for damages.

    Mr Liu said he and his brother Alex, a Canadian citizen, and Australian partners Patrick and Nelson Choi were interested in the hotel 10 years ago because the Hong Kong economy then was flat and relatives in Guangdong province convinced them China welcomed foreign investment. He said the hotel was the first joint venture in Dandong and his team's only mainland foray.

    In October the Liaoning governor's deputy secretary set up two mediation meetings, but at the second one, in Beijing, a representative of the foreign investors was put under house arrest, the foreign investors said in a statement.

    They claimed their lawyer's telephone lines were also bugged, and did not answer calls.

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