Chasing foreign investors who abandon Chinese ventures

With the economic downturn hitting Asia hard, a significant number of foreign investors in China have simply closed their factories and vanished, leaving unpaid workers, unpaid social insurance, unpaid taxes and worried local and national officials. The shuttering of a significant number of small South Korean-owned companies in Shandong was the impetus for the joint issuance of new guidelines by four government ministries.

    The Working Guidelines on Cross-border Pursuit of Liability and Initiation of Legal Action by Relevant Interested Parties in Connection with Abnormal Withdrawal from China of Foreign Investors (外资非正常撤离中国相关利益方跨国追究与诉讼工作指引) (Working Guidelines) were published on November 19 2008 by the General Offices of the Ministry of Commerce, Ministry of Foreign Affairs, Ministry of Public Security and Ministry of Justice. They aim to help so-called Chinese Relevant Interested Parties to initiate legal action against foreign investors that have “abnormally withdrawn”, and pursue foreign investor accountability.

    The Working Guidelines make it more likely that the Chinese government will attempt to use litigation as well as judicial assistance and extradition treaties to force foreign investors to return to China to face liability, both civil and criminal.