There are provisions on confidentiality, status of parties, warranties and ownership of improvements, and clauses not to be included in import technology contracts. These restrictions are more permissive than their equivalents in the 1985 regulations, which had provided that a contract could not prevent the recipient’s use of the imported technology after the contract expired, and the term of a contract was limited to 10 years unless there was special approval. On the other hand, the new restrictions cannot be waived by ‘special approval’.
It is not yet clear whether Moftec would actively enforce this position with respect to foreign-law-governed contracts that are ‘free’ – and so need only post facto registration, intended to be automatic with no substantive review of the contract. It could be argued that these restrictions should not apply to contracts governed by foreign law – a choice of law that China’s Contract Law clearly permits. However, there is a risk, should enforcement be sought in China, that a choice of foreign law that avoids prohibitive provisions of Chinese law might be found ineffective.
This article was written by James Dunlap, senior associate of the international law firm Freshfields Bruckhaus Deringer. For further information on this topic, please contact him by email (firstname.lastname@example.org) or telephone (+852 2846 3400).