How To Sue A China Company (Part 4)

How can you arbitrate against Chinese companies in the U.S and in China? How can you litigate against Chinese companies in China's courts?

This is Part 4 of this series on how to sue a China company. This is the final post explaining what you can do to try to secure redress against a Chinese company that owes you money or has wronged you.

Part 1 of this series focused on how to effect service of process on a Chinese company under Hague Convention rules and on jurisdictional issues involved in suing a Chinese company. Part 2 was on conducting discovery against a Chinese company. Part 3 discussed overall litigation strategies and how to enforce a judgment against a Chinese company. This final post will focus on arbitrating against Chinese companies in the United States and in China and on litigating against Chinese companies in China’s courts…

Arbitration in the United States. China is a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, so its courts generally will enforce foreign arbitral awards from recognized foreign arbitral bodies. Chinese courts, however, are much less likely to enforce foreign arbitral awards obtained by default. Chinese courts also sometimes stall foreign arbitration award cases for years as a way to avoid enforcement while making their enforcement numbers look better than they really are.

Arbitration in China. China has some legitimate arbitral bodies, with the China International Economic Arbitration Commission (CIETAC) being the most prominent. Generally, China’s arbitral bodies allow little to no discovery and they oftentimes allow no live testimony either. Expect your case to be tried on the documents.

It typically makes sense to provide for English language arbitration and as many foreign arbitrators as your Chinese counter-party will accept.

Suing in a China Court. If suing a Chinese company in the United States does not make sense (see Part 3 as to why it usually does not), pursuing litigation in China may. Though China’s court system is very different from that to which American lawyers are accustomed, it is more navigable than many American lawyers believe it to be. Foreign companies can and do win cases against Chinese companies in Chinese courts. Before suing in a Chinese court, though, it is important to understand some basics about its court system.

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First, though Chinese courts will enforce the law prescribed in a contract, Chinese judges place more emphasis on the overall context and “fairness” of the case and much less on legal technicalities than their American counterparts. For example, if a company executes a contractual obligation poorly because of an incompetent or uncaring employee, a U.S. court would almost certainly hold the company liable for all damages arising from the breach. A Chinese court, on the other hand, might either not find liability or severely limit the damages, believing it unfair to penalize a company for the incompetence of one employee.

Second, Chinese courts prohibit nearly all discovery. Companies suing in China without a strong case at the outset seldom prevail. This also means that you should have your proof ready to go before you sue, especially since the time from filing to trial is usually less than a year.

Third, Chinese courts base their rulings almost exclusively on documentary evidence, not testimony.

Fourth, settlement is rare in Chinese business litigation matters. The cost of litigating is almost always much lower than in the United States, and once a complaint has been filed, settling a case is often viewed as losing face. The Chinese company you are suing may prefer to lose the case and blame it on the judge than to settle and be viewed as having been at fault.

Fifth, Chinese courts rarely issue large damage awards, no matter the case. Chinese companies generally operate at low margins and Chinese courts are loath to badly harm a functioning business or to cause layoffs. In particular, Chinese judges are hesitant to award damages for lost profits or for pain and suffering. Chinese courts simply do not award the sort of damages available in a U.S. court.

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Sixth, though the ability to collect on judgments in China is improving, it is still not near to the level of the United States. Chinese courts often lack the authority and fail to receive the assistance from other law enforcement agencies necessary to force collection on their judgments. In addition, Chinese companies sometimes find it more cost effective to avoid a judgment by shutting down and re‐opening under a new name.


Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.