?Excuse Me Sir a Stop Order is in place preventing you
from leaving China?
That will be the last thing you want to hear when you are about to leave China at
airports or other border crossings in China. However, this risk exists if the foreign
employee or the company he or she works for is involved in litigation in China
and he or she is the legal representative, person in charge or holds a position of
key responsibility in the company.
Recently, a client WFOE consulted our office regarding an ?immigration stop
order? which had been imposed on its legal representative (an Australian). The
WFOE was involved in an employment litigation in which judgment had been
entered against the WFOE and a stop order had been applied for and issued
against the legal representative of the WFOE, pending enforcement of the
judgment. This order was then notified to the PRC Immigration authorities by the
The legal representative was therefore prevented from leaving China. What is of
particular concern is that such orders appear possible to obtain from the Chinese
court before a final judgment is obtained and therefore potential abuse of these
orders exists especially in civil cases which may involve (1) a WFOE and
Chinese domestic company or where (2) there is a claim between the WFOE and
a Chinese national.
The further question arises that if the PRC Company Law 2005 and General
Principle of Civil Law 1987 are supposed to enshrine the concept of ?limited
liability?, then the rationale for a stop order is to ensure the presence of a key
executive only for the purpose of giving evidence in civil proceedings and is not
supposed to extend to the provision of security by that individual or restriction on
an individual?s rights of travel until enforcement of a judgment is obtained against
the company for whom he or she is employed.
Below, we summarize the current regulations concerning restrictions on
foreigners from exiting China.
A. In what situations will an Immigration Stop Order be made preventing a
foreigner from leaving China?
In accordance with Law on Foreigners Entry and Exit of Chinese Territory,
foreigners may be banned from leaving China in the following situations:
(1) They are suspects in criminal cases;
(2) They are involved in civil cases that are yet to be settled;
(3) They have as an individual committed other violations of Chinese laws.
In this article, we discuss the restrictions that may be imposed in economic and
commercial disputes. The revised China Civil Procedures Law state that persons
(natural or corporate) subject to enforcement proceedings may be banned from
leaving the country.
Based on these rules, it can be inferred that after a case is heard by the court
until the completion of enforcement of the judgment, an order can be issued by
the court to the PRC immigration authorities preventing the foreigner from exiting
China at any time.
B. Who is at risk of being subject to a Stop Order?
For individual foreigners involved in Chinese litigation, they themselves are at
This question often arises where a foreign invested company with a foreign
management team is involved in litigation. Foreign managers/representatives are
very concerned whether they will be banned from leaving China because their
company is litigated against.
In this regard, the judicial interpretation on the China Civil Procedures Law has
made it clear that if the person subject to enforcement/execution is a corporate
entity, the legal representative, person-in-charge and other directly responsible
person may be banned from exiting China.
C. How long will a Stop Order preventing a person from leaving China remain in
The regulations provide a maximum of 30 days however an applicant who seeks
the stop order and/or the Court itself is free to extend the stop order on its own
volition. However, there is no clear limitation on the length of an immigration stop
order. Certain judicial comments have been made suggesting a maximum period
of 90 days should be applied but in practice the stop order can be in place
indefinitely. Upon meeting certain conditions, the stop order will be lifted.
D. Corporate Bankruptcy
According to China Bankruptcy Law, during the period from the date of the
Chinese court accepting a bankruptcy case to the date of completion of the
bankruptcy action, the court may order that relevant persons of the company
which is the subject of the proceeding not to leave China. Such persons shall
include in the first place the ?legal representative? of the company, or by
application to the court, could extend to ?financial officers and other executives?.
So where your company in China is going to be involved in litigation or possibly
be subject to bankruptcy proceedings, it may be prudent to consider whether (a)
key executives should be removed from corporate positions that may render a
key employee or manager exposed to an immigration stop order and prevent her
or him from leaving China. Also, (b) consider whether contracts in China should
be made subject to arbitration rather than litigation as a dispute forum to
minimize the risks of such a court order being made or available to be made.