CHINA Law and Practice Contributed by: Jeff Liu, Jeanette Wang, Yulong Lai and Yun Bi, Shihui Partners
Final Remedies • Damages: The most common remedy, and damag - es are usually limited to actual damages (damages incurred and loss of expected interests). • Specific performance: Courts may order the completion of a closing or share transfer, though they remain cautious if performance is practically impossible. • Termination: Available for fundamental breaches, allowing the non-breaching party to exit the deal and seek restitution. • Declaratory relief: Used to confirm the validity or invalidity of corporate actions and board resolu - tions.
(3) whether the continued performance of the contract would be manifestly unfair. Regarding closing conditions, courts adopt a strict contractual interpretation but also apply the “good faith” principle. If a party intentionally prevents a con - dition from being satisfied to escape the deal, the court may deem that condition fulfilled. For regulatory conditions, courts examine whether the party exer - cised “best efforts” to obtain approval; failure due to genuine government rejection typically allows for ter - mination without liability. Termination rights are generally upheld if they align with specific contractual triggers or constitute a “fun - damental breach”. However, courts may also consider “transaction stability”, meaning they may be hesitant to grant rescission for minor or technical breaches, preferring to award damages instead. 8.4 Disputes Over Regulatory Efforts and Remedies Disputes over regulatory obligations are primarily resolved by assessing the standard of effort (eg, “best efforts” or “reasonable commercial efforts”) defined in the contract. Courts and tribunals examine whether the obligated party acted in good faith and exhausted all reasonable administrative steps to secure approv - als. 8.5 Forum, Procedure and Remedies In China, M&A disputes are primarily resolved through arbitration or courts. • Arbitration: Preferred for private equity and cross- border deals due to its confidentiality and the expertise of commissions such as CIETAC, SHIAC or BIAC. It is the default for contractual breaches if an arbitration clause exists. • Courts: Retain mandatory jurisdiction over statu - tory corporate disputes (eg, validity of resolutions, shareholder derivative suits), typically at the com - pany’s or defendant’s domicile. Interim Remedies Parties frequently utilise asset preservation (freezing bank accounts or equity). This is crucial for preventing the disposal of target assets.
9. M&A Litigation Relating to Regulatory Decisions
9.1 Judicial Challenges to Regulatory Actions As noted in 5.9 Transparency, Confidentiality and Judicial Review , the NSR decision is final and cannot be appealed in court. It is not common for a merger control or sectoral decision to be challenged in court. The first and only judicial challenge against a merger control decision publicly disclosed is the one noted in 4.9 Appeals and Judicial Review of Merger Deci- sions . 9.2 Standing and Access to Courts For merger control cases, the transaction parties impacted by regulatory decisions have the standing to challenge the regulator’s conditional approval deci - sion or prohibition decision (in particular, the notifying parties impacted in conditional approval cases, and the transaction parties in prohibition cases). However, the parties have no standing to challenge uncondi - tional approval decisions. The AML does not grant other entities standing to challenge merger review decisions, nor does public precedent support the standing of any third parties so far. 9.3 Standard of Review and Deference to Regulators There is only one case that challenges a merger review decision (see 4.9 Appeals and Judicial Review of Merger Decisions ), in which the court upheld the
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