International Law

American companies often come to us with a “great business idea” that turns out to be prohibited for foreign companies in China. When we give them the bad news, their first response is usually: “But that makes no sense.” Some then suggest that all we need to do is meet with the “right people” in the Chinese government to explain how their business will create jobs and boost China’s economy. We tell them that will never work.

China has deliberately limited foreign involvement in certain industries (e.g., publishing and the Internet) to be able to control those industries. The Chinese government is more concerned with social harmony and the contentment of its citizens than with economic numbers, and you should always factor this into your China business decisions. China’s slowing economy only heightens the government’s focus on contentment.

If you are doing business in China, or even just considering it, you should be mindful of the following…

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Dinesh D’Souza

* The United States is launching air strikes against ISIS in Syria and Iraq, but some have been compelled to wonder whether it’s legal under international law. Of course it’s legal, under the Rule of ‘MERICA, F*CK YEAH! [BBC]

* Dewey know whether this failed firm’s former COO can get out of paying $9.3M to its bankruptcy trustee? Dewey know whether we’ll ever be able to stop using this pun? Sadly, the answer to both questions is no. [WSJ Law Blog]

* Marc Dreier of the defunct Dreier LLP has been ordered to testify in person in his firm’s bankruptcy case in Manhattan, but he’d rather stay in the comforts of his prison home in Minnesota. Aww. [Bloomberg]

* Dinesh D’Souza won’t have to do hard prison time for his campaign-finance violations. Instead, he’ll be spending eight months in a “community confinement center,” which sounds just peachy. [New York Times]

* Northwestern Law is launching a campaign to fundraise $150M to be spent on an endless supply of Chick-fil-A sandwiches financial aid for students and curriculum improvements. [National Law Journal]

I am often asked what foreign companies doing business in China need to know to stay out of legal trouble. I usually respond as follows:

  • Are You Operating Legally?  Generally speaking, if you are doing business in China for more than a few weeks, you need to form a legal entity there (i.e., a Wholly Foreign Owned Entity (WFOE), a joint venture, or a representative office. Assuming, of course, that your business scope is permissible; some businesses that are perfectly legal in the United States or in Europe are proscribed in China.

There are five more things you need to know in order to stay out of legal trouble in China…

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My firm’s clients often ask how their contracts with Chinese companies should be signed and/or chopped (affixed with the company seal). We typically respond with something like the following:

Each Chinese company has only one “legal representative” (a term of art under Chinese law), who is identified as such on the company’s business license. Any agreement signed by a Chinese company’s legal representative is binding on the company, whether or not a chop is affixed. However, to enforce a contract that is not chopped, you must prove that the signature on the contract really belongs to the Chinese company’s legal representative. Therefore, if you can get the contract chopped, you should.

Larger Chinese companies often do not have their legal representative sign their contracts. In this situation, you need to be particularly vigilant about securing a proper chop.

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A great many of our most polarizing political discussions involve deciding what we should be able to sell. Pot legalization, for instance, is oftentimes framed as a debate over whether we should be able to smoke marijuana cigarettes at our leisure. But that debate’s over. It’s been won by the High Times crowd a thousand times over, no matter how many times a kid gets popped on a possession rap. No, the schism involves the sale of weed. The business of it. News articles about Colorado are less interested in doofuses smoking pot and more interested in the brave, new world of pot dispensaries. The business of America is business and all that.

This weekend brought news of a burgeoning overseas market in human organs. And gay eyeballs. If you can’t see the connection, allow me…

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With the media recently paying so much attention to foreign (read American and British) businesspeople getting in trouble in China, my firm’s China lawyers have been getting a large number of calls lately from worried Americans based in China. These callers are asking the following kinds of questions, and we are giving the following kinds of short answers (needless to say, our long answers are much more nuanced):

1.  Should I leave China? Not unless you or your company have violated Chinese law in such a way that you are at risk for going to jail. Let’s talk about whether or not that is the case…

double red triangle arrows Continue reading “China: Should I Stay Or Should I Go?”

China joint ventures are notorious for their high failure rate. An old Chinese saying that is often applied to joint ventures is “same bed, different dreams.”[1] Far too often, American companies and Chinese companies rush into joint ventures without ever discussing their respective dreams.

Many years ago, a client about to fly to China to meet with a potential Chinese joint venture partner asked for my help. I compiled a list of issues to raise at that meeting, and have provided a similar list (honed a bit more each time) to subsequent clients facing the same situation. The goal of raising these issues is to determine whether the two companies share the same dreams, and whether the Chinese company is JV worthy. Currently, this list includes the following questions:

double red triangle arrows Continue reading “China Joint Ventures: You’ve Got To Love The One You’re With”

Is cruelty-free makeup legal in China? Nope!

Many years ago, an American credit reporting company called seeking help with forming a subsidiary in China. This company told me of their extensive and expensive market research demonstrating that China had a tremendous pent-up demand for their credit reporting services. As I listened, I kept thinking that unless the law had changed recently, foreign companies were prohibited from engaging in such business without a Chinese joint venture partner.

So I asked politely if anyone had determined whether their planned business would be legal in China. They paused and said they had not, and I suggested that we do so straightaway. After ten minutes of research, I reported back that credit reporting was barred to foreign entities seeking to go it alone. This company never went into China.

Flash forward to the present. Organic, cruelty-free cosmetics have become big business, including in China, where many who can afford such things would not be caught dead putting made-in-China products on their skin. American cruelty-free cosmetic companies are being contacted in droves by Chinese companies seeking importation and distribution deals…

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Rule number one for succeeding at doing business in China is to have a good partner. The odds of having problems with a Chinese company are much lower when you deal with a “legitimate” Chinese company. That means rule number two is making sure that you are dealing with a legitimate Chinese company.

But how do you do that? How do you distinguish between a Chinese company that is legitimate and one that is not?

The following are the basics for making that determination…

double red triangle arrows Continue reading “China Due Diligence: Just Ask”

The traditional arguments against going to law school are: (1) there are too many lawyers and not enough jobs; (2) tuition and student loan debts are too damn high; (3) the high-paying or high-powered jobs are available only to the top students of the top schools; and (4) most “JD Advantage” jobs could have been obtained without a law degree.

The typical response to the above is something along the lines of, “That won’t apply to be because I’m going to put in the work and be one of the top students.” Now those of us who lived through law school might find this amusing and even ridiculous. But we can’t really blame them for their determination. We were their age once. Back then, the world was a playground and full of opportunities. If 0Ls today know all of the risks and can obtain a decent scholarship at least for the 1L year, then they should take a shot and see where they fall on the bell curve.

Today, I am going to talk about a few issues regarding law school and law practice that have not been discussed (at least extensively) amongst the law school critics. The issues apply to most students (even the top students) of almost every law school….

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