Can the representative office in China take legal action?
The full name of representative office in China of a foreign enterprise is “permanent representative office of foreign enterprise in China”. The representative office (“RO”) usually acts as a representative of the parent company to carry out relevant business contact, receive guests, strengthen the relationship and cooperation between the parent company and local enterprises and governments, and deal with some local issues on behalf of the parent company.https://www.law-office-in-china.com/start-business-in-china/
Foreign capital or foreign representative office is not an independent legal entity, so it cannot carry out direct commercial activities of profit nature. Shanghai, Beijing and Guangzhou are the three places where foreign representative offices are more established.https://en.wikipedia.org/wiki/Representative_office
According to Chinese laws, the representative offices of foreign enterprises in China are not allowed to engage in profit-making activities. The RO can only engage in market research, publicity and promotion, display of product or service related to the products or services of foreign enterprises, or liaison activities related to the products and business of foreign enterprises. But in practice, the RO set up by foreign enterprises in China may sign contracts on behalf of foreign enterprises and cause disputes. So can the representative office of a foreign enterprise in China initiate litigation or arbitration in China?
In judicial practice, the general view is that the representative office in China is funded by the foreign companies thus it can NOT be recognized as an entity with independent assets. According to Article 52 of the judicial interpretation on the civil procedure law, the RO is not a legal entity which may independently take legal action in China. To this point, as for civil litigation and arbitration of any disputes in China, the foreign enterprise shall be involved as a party.
In addition, Article 13 of the Minutes of the Second National Conference on The Adjudication of Foreign-related Civil Commercial & Maritime Affairs also makes it clear that if the representative office set up by a foreign enterprise in China is qualified as the subject of litigation, the disputes involving the representative office shall be attended by the foreign enterprise as a party to the litigation.
Therefore, when a foreign enterprise acts as a plaintiff or applicant, if it only takes its representative office as the main body to file a civil lawsuit or apply for arbitration, the court will usually reject the lawsuit request or the arbitration application will be rejected by the ruling of the arbitration institution.
If the representative office of a foreign enterprise in China shall be named as the defendant in a lawsuit or respondent in an arbitration, and the foreign-related legal procedures shall be applied.