China Debts and Layoffs and Hostage Situations

We used to write frequently about Westerners being held hostage in China over debts and over layoffs. Then we pretty much stopped.

We stopped because these posts always seemed to anger someone. Actually many someones. And they did so without really pleasing anyone.

But I am getting the strong feeling that the number of hostage situations involving Westerners is increasing at the same time the Chinese government and its police (both national and local) are more concerned with maintaining harmony among its own citizenry than about one foreigner being held in a mediocre hotel room. Getting a Chinese company paid on a debt will do more to advance social harmony than busting in and freeing a sole foreigner.

So why am I writing about it now? I can only very vaguely explain, but let’s just say that I am aware of a foreign company that had one of its employees seized in China over an alleged debt and it was anything but pretty.

But what I can tell you — what I will scream to you — is that HOSTAGE TAKING in China is real. Most importantly, I can tell you the advice my firm’s China lawyers give to our clients laying off workers in China or closing a facility in China or in a financial dispute with a company in China is — if possible — to stay outside China when negotiating resolution of these issues and to heed the following:

• If you are in a financial dispute with a Chinese company, the best thing to do is not go to China at all. if you have to go or if you truly believe there is little risk, at least take precautions.

• If you must go to China, think about using a bodyguard or two and think very carefully about where you stay and where you go. Most importantly, be careful with whom you meet. If you owe money to a company in Xiamen, meet with them in a hotel lobby in Shanghai or Beijing and not in their conference room in Xiamen.

• Consider preemptively suing the Chinese company that claims your company owes it money. This allows you to plausibly claim that you (or your employee) have been seized not because your company owes a debt, but out of retaliation for having sued someone. If you are going to sue, carry proof of your lawsuit with you at all times while you are in China. This shifting of reasons can be very powerful when seeking police help.

• Do not believe sending someone who is not a company owner to China will make any difference.

Hostage situations in China are rare, but not as rare as most believe. In the end, you are the one who knows the situation and the Chinese company(s) with which you are dealing, so you are the one who must make the decisions on whether to go or not. All I am saying is to at least be mindful of the risks.

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.