Chinese apps today face intense scrutiny, if not outright bans, in certain key overseas markets. Lawyers say that the situation demands that they adjust their thinking about how they operate in certain countries, and come up with fresh strategies for the same.

 

Since June, Chinese mobile applications have faced restrictions or outright bans in overseas markets like India and the U.S. And other countries like Australia and Japan have been hinting that they are considering the same.

This means that Chinese Internet companies with overseas operations do not just have to worry about normal business risks, they also have to take political and legal risks more seriously into consideration.

In fact, every company operating in overseas markets must comply with local laws, and risks brought about by failing to do so are becoming increasingly common.

According to Sun Yan and Li Ran, two partners at Tian Yuan Law Office, there are, at the basic level, some common legal risks faced by Chinese apps in foreign markets.

 “(These include) intellectual property infringement, unfair competition, antitrust, data compliance etc. Those risks are closely related to the characters of Apps, the operations of which usually touch issues of product development, collection of users’ data and competition with other Apps in the Apps stores,” they say.

However, these most recent bans are different.

“We can’t deny that those bans are to a great extent due to political reasons, and foreign governments are banning those apps on ‘national security’ grounds. But they did also impose those bans within the legal systems,” Sun and Li say.

Take India as an example. “The Indian government has banned more than 100 Chinese apps according to the Chapter 69 of the Information Technology Act and article 9 of the Information Technology (Procedure and Safeguards for Blocking of Access of Information by Public) Rules 2009. And they’re still expanding the list,” they add.

POSSIBLE REMEDIES

Legal risks usually have corresponding legal remedies. Sun and Li point to a series of possible remedies in both India and the U.S.

For Chinese apps operating in India, they suggest “affected companies seek local remedies first. If that is not working, they should also consider remedies on the international level.”

To be more specific, Chinese apps are currently being reviewed by a government-constituted committee in India. When facing those investigations, companies should “pay attention to the protection of trade secrets, and also apply to the committee to provide concrete reasons behind the ban.”

If the ban was upheld by the committee, then companies could “apply for constitutional review to the Supreme Court of India.”

Finally, if all endeavours failed, Chinese companies could consider “possible international remedies stipulated by the Sino-Indian Bilateral Investment Trade signed in 2007,” they say.

However, possible legal remedies in the U.S. are “rather complicated.”

“Since there’s no similar bilateral investment treaty between China and the U.S., companies can only seek remedies under U.S. domestic laws,” Sun and Li say.

Besides, considering the U.S. can issue bans according to the International Emergency Economic Powers Act and by issuing president executive orders, “companies should take corresponding remedies according to the specific situation … It should also be noted that CFIUS also have the power to investigate foreign investments, even force foreign companies to sell their Apps businesses in the U.S.”

KNOW THE LAWS IN ADVANCE

These bans have put the skids on the globalization dreams of Chinese Internet companies. For those who are already or are planning to do business overseas, how can they tackle these legal risks, given the current situation?

Sun and Li suggest that companies should extend the mindset of tackling legal risks to the whole lifecycle of their overseas operations. They should gain knowledge of local laws and policies in advance and adjust their operations accordingly, and also “seek for advice from legal experts in the whole process to mitigate the legal risks behind every single business decision.”

Their second suggestion relates to building a rapport with the local authorities.

“Chinese companies could consider collaborating with local business entities to actually run the business. They should use local talent to manage the branch, therefore to maintain a good relationship with the local government,” they say.

Of course, companies land in disputes overseas even if they have done nothing wrong, they can always choose to defend themselves. “By hiring professional lawyers, companies have every reason to protect their due rights,” Sun and Li say.

 

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