Doing business with Chinese manufacturing firms is a difficult deal because the other foreign party does not have enough power over the business contracts. More often than not those firms ask Chinese business lawyers “how to sue a Chinese company?” This is a dreaded part of doing business with China but here we will throw light on the process to sue a Chinese company in case they have indulged in breach of contract.
In fact, to the surprise of lot of business persons, the practice of suing companies is increasing at a rapid pace. Lawyers on litigation and arbitration practice are doing really well and are helping foreign parties to some justice against breach of contract. A number of lawyers do not get this right and that is why it becomes imperative to talk about the practice. In the beginning, one should know that suing a Chinese company in a US court at random will not provide the desired result; that is, collection of money. So what is the way to sue them and achieve the desired result in case the Chinese company has wronged you?
Know that the Chinese companies handle litigations poorly and that can be a positive and also a negative for the foreign companies. Here we are going to throw light on both the parts but mainly on the process. The steady increase in business transactions between Chinese and other companies from the rest of the world has also given rise to a number of disputes and litigations against the Chinese manufacturing companies. Chinese lawyers dealing with such litigations recognize a pervasive hindrance to successful resolution; the overwhelming task of collecting on any judgements achieved. Chinese courts usually do not enforce US judgements. Also, they have acquired the power to enforce their domestic awards entirely of late.
Suing a Chinese company in US can only be result oriented when the company has some assets in the United States. Then there is a chance of achieving a tangible result. However, if the Chinese company has no assets then the only choice may be to sue them in China.
Authority is the principal issue in international legal disputes. Suing a Chinese company in USA is similar to suing it any other part of the world. It involves contact inquiry. Asahi Metal Industry Co. vs. Superior Court of California, Solano City 480 U.S. 102 (1987) is the best example to find out the details regarding such litigation. An American business organization generally faces no jurisdictional obstruction to suing a Chinese company in Mainland China. Chinese courts actually have jurisdiction over international litigation involving foreign petitioner against a Chinese organization (Civil Procedure Law of the People’s Republic of China, Articles 3 and 237). However, jurisdiction is entirely different in Mainland China, Hong Kong and Taiwan and hence proper research is required.
Suing in the United States
The typical differences in suing the Chinese company by a USA organization from other organizations across the world lies in litigation strategy, discovery and service of process. If necessary, the judgement can be executed in China and enforced too.
Service of Process
China is a member of the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters. Any kind of service for a Chinese company has to comply with this convention. The Chinese Central Authority of Beijing has the power to implement the rules of the convention over the companies that are part of the convention. The Chinese Central Authority has been designated by the Bureau of International Judicial Assistance, Ministry of Justice of the People’s Republic of China.
China’s Ministry of Justice requires any foreign company to submit certain documents for suing a Chinese company in US court. The documents:
- The entire United States marshal Form USM-94
- Chinese translation of all the documents must be provided at court
- The original English documents need to be served as proof of the court’s seal serving the summon.
- Photocopy of each document served at court.
Though China did not make a particular reservation in terms of translating the documents, the Ministry of Justice in China advised the US Embassy located in Beijing to serve documents translated in Mandarin Chinese. It makes complete sense to adhere to the advice because Ministry of Justice is the government authority in China. The documents are sent to a local court which will take the proceedings forward by Ministry Justice of China. Chinese courts are usually slow in their proceedings and if the company sued is a powerful local entity, then expect the proceedings to be even slower. It usually takes 3-6 months for the proceedings to begin. However, you can call or mail the court to expedite the process.
However, China has formally objected to service by mail under Article 10 (a) of the Hague Convention on Service. The objection was considered valid by US courts. Refer to DeJames vs. Magnificence Carriers, Inc., 654 F.2d 280 (3d Cir. 1981), cert. den.
We will continue to discuss on this topic and in more details in the coming posts.