How to Sue a Chinese Company, Part 3

This series of posts addresses how to sue a Chinese company that owes you money or has wronged you. Part 1, How to Sue a Chinese Company: The 101,  was on how to effect service of process on a Chinese company under the Hague Convention Service of Process rules and on the jurisdictional issues involved in suing a Chinese company. Part 2 dealt with conducting discovery (or not) against a Chinese company you have sued outside China — mostly in the United States. This third post in the series discusses litigation strategies against Chinese companies and how to enforce a foreign judgment against them — again, mostly in the United States. We are writing this series on suing Chinese companies now because our international litigation and arbitration lawyers have seen a massive uptick in disputes between foreign and Chinese companies and both the China-based litigators and international litigators with whom we talk are seeing the very same thing.

Litigation Strategies. U.S. companies hold many advantages over Chinese companies in U.S. litigation. American jurors generally view Chinese companies unfavorably and that is even truer today than five years ago. See U.S. Views of China Turn Sharply Negative Amid Trade Tensions.

Chinese companies frequently try to skirt U.S. discovery rules and bringing this to the court’s attention often can cost the Chinese company credibility or force it to incur sanctions. Perhaps most importantly, Chinese companies generally underestimate the importance of U.S. trial court decisions, often holding back on vigorously defending a lawsuit until appeal. From Chinese Companies Court Disaster:

Appeals in China are usually de novo, meaning that if a trial court judge disagrees with your version of the facts, you can make another attempt to tell your side of the story at the appellate level. But in the U.S., appeals courts take as a given the trial court’s findings of fact and will hear only disputes about the trial judge’s interpretation of legal questions. This means that in America you rarely get more than one chance to put forth your version of the facts, so you had better do it right the first time. In China the fight often begins only once a case hits the appeals court.

Just yesterday, a Chinese lawyer friend of mine explained another reason why Chinese companies tend to ignore U.S. discovery rules and even U.S. court orders: “they are used to getting away with ignoring the rules in China and the Chinese courts are simply not all that powerful.”

Foreign Court Judgments In China. U.S. judgments have virtually no value in China. There is no treaty nor any reciprocal arrangement between China and the United States regarding recognition or enforcement of civil judgments. For these reasons, Chinese courts will nearly always disregard U.S. judgments. See China Enforces United States Judgment: This Changes Pretty Much Nothing. Note though that this is not necessarily true of all country’s judgments, especially those from the approximately 40 countries that have a treaty with China for the mutual enforcement of court judgments. China also generally enforces court judgments on a reciprocal basis from countries that clearly enforce Chinese court judgments.