- Country or region
- China
- Trade topics
- Dispute settlement
- Context
- WTO - Case launched by the EU
Summary of the case
- Complaint by: EU
- Complaint against: China
- Third parties: No third party
Through its domestic legislation, China restricts the access and operation of foreign investment in its territory, by conditioning the approval of foreign investments upon performance requirements, including requirements related to the transfer of technology and the conduct of research and development in China.
In addition, China imposes measures that adversely affect the protection of intellectual property rights of foreign companies, which transfer technology into China, including in the context of joint ventures with Chinese companies. In this respect, China discriminates against foreign companies by imposing on them conditions, which are less favourable than those applicable to the transfer of technology between Chinese companies. Investment into China is regulated inter alia through a system of negative lists/catalogues which, depending on the sector concerned, classify investments as “encouraged”, “restricted” or “prohibited”.
In certain sectors Chinese legislation requires foreign investors to establish joint ventures with Chinese companies, and/or imposes caps on the equity that foreign investors can hold. Joint ventures between foreign and Chinese companies need to obtain the necessary approvals by the Chinese authorities to be established in China.
Chinese legislation also imposes a number of sector-specific requirements on companies, including Sino-foreign joint ventures and other types of foreign-invested companies, to obtain certifications, licenses, permits or other types of administrative approvals to operate their businesses in China.
Through its domestic legislation, China conditions the right to invest in China, including the possibility to access and operate in the Chinese market by foreign investors, foreign invested companies and joint ventures between foreign and Chinese companies, upon performance requirements, including in relation to the transfer of technology and the conduct of research and development in China, contrary to China's WTO obligations.
In addition, through its domestic legislation, China imposes a different set of rules on the import of technology, including industrial property rights, other intellectual property rights and undisclosed information ("intellectual property rights"), than the rules, which are applicable to technology transfers occurring between Chinese companies.
The Chinese measures at issue discriminate against foreign holders of intellectual property rights, and restrict the foreign right holders' ability to protect certain intellectual property rights in China, contrary to China's WTO obligations. China imposes restrictions on the rights of foreign intellectual property right holders to freely negotiate market-based contractual terms in licensing and other technology-related contracts concerning the transfer of technology to China.
Notably, China appears to impose mandatory contract terms for contracts concerning the import of technology into China that discriminate against and are less favourable for foreign intellectual property rights holders. In addition to being discriminatory, these mandatory contract terms also appear to restrict intellectual property right holders who import technology into China in their ability to protect their intellectual property rights in China.
Relevant WTO provision: Paragraph 7.3 of Part I of the Protocol on the Accession of the People's Republic of China;; Paragraphs 49 and 203 of the Report of the Working Party on the Accession of the People's Republic of China to the WTO; Articles 3, 28.1, 28.2, 33, 39 of the TRIPS Agreement; Article X.3(a) of the GATT 1994 and Paragraph 2(A)2 of the Protocol on the Accession of the People's Republic of China
Status
- Consultations requested: