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Quick Question Friday, China Law Answers, Part XXXV

Friday, November 18, 2016 5:20
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China Attorneys

Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

One of the more common questions (by far) we receive from our fellow lawyers is something like the following:

I have just drafted a contract between my client and its China-based licensee. I am planning to use a AAA arbitration clause because I have heard that China enforces formal arbitrations. Does this make sense to you?

My answer (and that of the other China attorneys in my firm) is usually something like the following:

I have no idea what will make sense for your client on this particular contract because I have never seen this contract and I have no idea what your client’s goals are nor do I know anything about what is being licensed or about the Chinese company on the other side. Without all of these things (and more), there is no way that I can opine on this.

I then sit back and wait for the “fun part,” which comes maybe 40 percent of the time and looks something like this:

Right, but if I wanted to be safe and make sure that I am not getting my client into any major problems, would you agree that arbitration in an international contract is the way to go?

My typical response to this is to say that it is not clear to me whether you are seeking my views on international contracts in general or this one in particular but since I do not know enough to opine about this one in particular I will opine about international contracts in general and to that my answer is no.

In tomorrow’s post, I will explain why when contracting with a Chinese company it is so important to do the right thing on your dispute resolution provisions and why there is never one answer on what to choose. Most importantly, tomorrow’s post will set out some of the factors we frequently use in making this decision and it will also rail against those (and there are many) who just assume choosing arbitration is the “safe” or “default” choice.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.


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