Daily Review: Two China Law Blog posts for you today, both of which should be both interesting and applicable to anyone engaged in doing business in or with China.
Why you don’t need to pay the Chinese companies you owe money to…
Dan Harris of the Harris & Moure law firm posted his advice that foreign companies who owe a Chinese company money skip out on the bill. Why? Because there’s “nearly a 100% chance they [the Chinese company] will never sue you.” Wow, pretty bold legal advice there, right? Of course, Dan’s “NOT” suggesting that people not pay their debts and he DOES offer three experiences and examples as to why he says what he does. Here’s the first one:
1. About a year ago, a client had come to me for a consultation regarding a dispute it was having with its Chinese OEM supplier. The Chinese company was threatening to sue my client for about $350,000, per its invoices. My client was refusing to pay the Chinese company due to a spate of bad product. My client was seeking a $150,000 credit for the bad product and the Chinese company was refusing and threatening to sue. I advised my client not to pay anything, based on two legal maxims. One, possession is nine-tenths of the law, and two, never fund someone who is threatening to sue you.So I met with this US client last week on something completely unrelated and I asked him “whatever happened with that Chinese supplier that had been threatening to sue you?” His response was that absolutely nothing has changed. Every few weeks, the Chinese company emails seeking its $350,000 and threatening to sue. My client responds by offering $200,000 in full settlement and the Chinese company refuses. We laughed and moved on.
Yeah, the whole “laughed and moved on” bit has a particularly sinister ring to it. Read the rest of the post at China Law Blog »
Enforcing contracts in China is actually better than in the UK or Japan. Surprise!
Most foreigners (and most Chinese) who have ever been to China are familiar with the Chinese habit of “winging” things, which is essentially getting things done, but perhaps not in the wisest, safest, or most proper way possible or with the best, intended, or desired results. This attitude often extends to adherence of the law and, specific to this case, “legal contracts”. Steve Dickinson, also of Harris & Moure, explains why foreign lamentations of poor Chinese contract enforcement are often self-fulfilling prophecies inconsistent with the truth:
Every year the World Bank publishes its Doing Business rankings. This report ranks 181 countries by ease of doing business. The rankings can be found here. As might be expected, China ranks about in the middle of this list. It is ranked number 83 on the list. Not the worst, but still a challenging place to do business. China gets low scores in areas that are quite familiar to me in my daily practice: Starting a Business 151, Employing Workers 111, Paying Taxes 132.
However, in the category of Enforcing Contracts, China is rated as number 18. This means that China has one of the best systems in the world for enforcement of contracts. Compare that with India, which is rated 180 out of 181 countries, or Brazil, which is rated at 100. The China rating is actually better than the United Kingdom, which comes in at 23, and better than Japan, which comes in at 21. It is therefore a serious mistake to place China in the same category as some of its developing country competitors.
Given the facts, why do people continue to say that Chinese contracts are not worth the paper on which they are written?
Steve then cites three reasons:
- Chinese companies violate contract terms because they believe foreign companies won’t sue.
- Many contracts foreigners enter into are unenforceable in China because they were a) not written in Chinese, b) not subject to Chinese law, and/or c) provides for enforcement outside of China.
- Many contracts foreigners draft are too vague for Chinese courts that prefer clear and simple contracts.
The tired saying of “When in Rome…” seems to come to mind here, but business people should be a pragmatic sort, right? Read the full an unabridged original at China Law Blog »
Kai,
All three of your most recent posts are fantastic. Now I’m using jimdo and reconsidering my thoughts on Chinese contracts all while checking out Alex’s photos.
Dan is a wannabe China guy twat sitting in his law office in Seattle talking about legal matters he has little knowledge and even less experience of. Try not paying a Chinese company when you have assets in China Dan. Right or wrong, they’ll turn up and run you out of town, taking whatever assets they can find. This is the sort of asshole American advice we dont need. If you need advice – go to a law firm in China not Seattle based armchair lawyer blogs.
[Editor's Note: Please do not use multiple aliases/e-mails to post these sort of comments]
Harris has been useing multiple aliases under proxy servers to slate his competition and promote his law firms China practice. Which is ironic given he doesn’t have an office in China, isn’t a China lawyer and is generally regarded as a bit of a dickhead in actual China Legal circles. If you want cred over China legal issues, you might want to look at getting your content elsewhere. This guy is a moron sitting on his fat ass in a two bit town in North America, and this type of comment “Dont pay your China supplier” is utterly irresponsible. I speak for many when I say he has no idea of, nor any experience about his subject matter. Wannabe China expert but without a registered firm in China. Totally fake, with a big mouth. A typical Seattle resident. Get lost Dan Harris, your time is over. Faker!!!!!!
I think people would take you a lot more seriously if you used a real name, a real e-mail address, and articulated some real complaints that weren’t interspersed with unsubstantiated ad hominem attacks. Instead, you sound like a petty individual with a grudge trying to wage a smear campaign over the internet.
If Christie’s knew better, it should have made the auction contract enforceable in China so it can now sue the deadbeat Chinese bidder and get him pay for that ugly rabbit head statue from the Summer Palace.
Now, here is what CAN be done to get it returned to China: Since the current owner of the statue, the former gay partner of YSL (forgot his name), reportedly said he would give it back to China for free if China frees Tibet (i.e. a unilateral contractual offer), China should go ahead to free Tibet (e.g., a dog named “Tibet”). A Chinese court should than hold that the unilateral contract has been performed with satisfaction and the offeror’s performance is due. What if he refuses? I’m sure the YSL company has employees in China who can be arrested for tax-evasion using fapiao.
“Most foreigners (and most Chinese) who have ever been to China are familiar with the Chinese habit of “winging” things, which is essentially getting things done”
Getting things done?
You’re forgetting the bit in the middle that involves humble supplication before the host followed by fifty-three rounds of ‘pass the bai jiu’, each in a different restaurant. And then the negotiations.
And if the hosts don’t like the way things are going, there’s always the ‘kidnap an employee’ strategy to move things along in the preferred direction. All perfectly in accordance with chinese law, of course.
Please don’t take things out of context in order to make an oversimplified rant about something you’ve probably experienced more by reading the internet than in person, stuart. I think you’ve made enough comments on CNR to convince others that you look down upon the Chinese already.
Unbelievable!!
Look down upon Chinese? Seriously, Kai, I do no such thing.
I was merely injecting a little dry humour into your day, which is clearly a little stressful with the troll invasion ‘n all. Well, you say rantato…
Transcendental meditation for you this afternoon.
Thinly-veiled contempt as dry humor? If you say so, stuart, but if anyone questions my criticism of you, they’re free to review the comments you’ve made on this website. Cheers.
On this site, ‘if I say so’ is definitely other readers’ best guide as to my inclinations and meanings.
I welcome a review of my comments as long as they include those that you deleted.
Once again, stuart, your comments were deleted for irrelevant instigation and general trolling. I have a copy of them in my e-mail if you’d really like me to embarrass you with them. Otherwise, please just behave, stuart. I don’t go on your blog and try to start fights with you. You should, at the very least, return the favor.
“I have a copy of them in my e-mail if you’d really like me to embarrass you with them.”
It would certainly be appropriate if they were placed in the cyber slots for which they were intended. Embarrassed? Doubtful.
I don’t ‘troll’ and I don’t start fights. What’s more when I convey a difference of opinion I do so with the kind of courtesy which is very often missing in the replies to my comments. Instigation? To a degree, but discussion is a good thing, don’t you think?
stuart, I’ve written you an e-mail because I’m personally embarrassed that I’ve let our personal disagreements pollute the CNR for which I am responsible for. I don’t wish to contribute to that pollution further, so, please check your e-mail.
I’m sorry if you feel I’ve contributed to a ‘pollution’ of CNR. If I didn’t respect the site’s ability to raise issues and get vibrant exchanges going I wouldn’t visit. Nor would CNR be on my blogroll.
Anyway, I’ll try to take two steps back instead of one before responding in future.
I look forward to your email, Kai. Perhaps there’s a problem – just checked; nothing yet.
My bad, wrong domain name. Forwarded.
I am very amused by your arguments. You guys certainly put a smile to my face.
Thanks