Laws of the People's Republic of China

the Economic Tribunal of the Supreme People's Court

Reply to the Letter on the Issue Arising from Shen Canxiong v. Kunming Phosphate Factory Contract Dispute Concerning the Original Contract Shall be Deemed Dissolved after Establishment of the Equity Joint Venture Kunming Yuntong Phosphate Factory

Fa Jing [1992] No. 210

To the Higher People's Court of Yunnan Province:

The Request from Your Court on the Issue Arising from the Shen Canxiong vs. Kunming Phosphate Factory Dispute Case on the Contract Concerning the Original Contract Shall be Deemed to be Dissolved in Fact after the Establishment of the Equity Joint Venture Kunming Yuntong Phosphate Factory (Yun Gao Fa [1992] No. 59), has been received. After deliberation, the reply is hereby given as follows:

In accordance with the Provisions on the Township Enterprises Contracted Operation Responsibility System, the enterprise under the contract operation responsibility system remains its nature of collective ownership by the socialist working people. The whole property (including the newly accumulated property after the enterprise being contracted) of the enterprise is still collectively owned by the whole working people who establish the enterprise concerned. Therefore, the contractor, within the contracting period, shall not establish an equity joint venture with foreign businessmen by means of investing total property of the enterprise of Chinese part, nor can it obtain the status of a shareholder. We agree on your court's opinion, namely, it can be confirmed that, after the establishment of the equity joint venture, the contract between Shen Canxiong and Kunming Yuntong Phosphate Factory is deemed to have been dissolved in fact. But the other rights and obligations in the course of the contract shall be dealt with appropriately in the way of seeking truth from facts, so as to fairly protect the lawful rights and interests of employer and the contractor.

Economic Tribunal of the Supreme People's Court

December 17, 1992