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NNN Contracts, Arbitration and Litigation in Chinese Courts

Chinese and Vietnamese lawyers get asked several questions, among which one of the most important ones is- “what to put in the Chinese NNN contract and the Vietnamese contract for doing business there?” This questions pertains to the selection of venue most of the times. The western clients are confused most of the times regarding the rules and laws for business in this Asian land. In fact, here are some points regarding the same:

  • Lawsuit in the courts of the home country of the western client
  • Vietnamese lawsuit in their court
  • Vietnamese arbitration
  • Mediation outside Vietnam

Each of these situations have their pros and cons and that is why picking the exact venue actually depends on the particular situation. This is true for both China and Vietnam.

Pros and Cons of Each Situation

The pros and cons for each situation has been explained below:

  • Lawsuit filed at the home country has the advantage of prevailing above the others. Lawsuit filed from America, Australia and Europe also need huge upfront filing fee or arbitration fee. However, the cons outweigh the pros which is the fact that neither China nor Vietnam enforces the court judgments of most of the foreign countries. Therefore, if you are suing any Chinese company and you prevail, even in that case, it will not be enforced in the respective country. You should also bear in mind that it filing lawsuit is the most expensive option.
  • The biggest advantage for litigation in the Chinese or Vietnamese court is that the courts are best to enforce monetary judgments; they do not enforce laws on intellectual property rights. These courts are not well equipped to handle commercial matters and are mostly biased regarding home companies. Vietnam is worse in this case than China.
  • The biggest advantage of Vietnamese or Chinese Arbitration is that there are good chances that an English arbitration can be enforced. The biggest negative is that there is an absence of good arbitrators. The cost is very high for doing it in Chinese or Vietnamese. Moreover, hiring translators is also a difficult task. It is advised that the arbitration is properly documented by a Chinese lawyer.
  • The biggest benefit for arbitration outside China and Vietnam is that you can choose any of their states and you will get almost good arbitrators. The biggest negative involved in this is that, the foreign arbitration takes lot of time to be pulled off. However, you have to bear in mind one thing, that is foreign arbitrators are not allowed in China arbitration. Their laws prohibit Chinese arbitration.

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The Chinese law firms have prepared a huge number of contracts providing all the above mentioned provisions. There are no hard and fast rules regarding any of these, but there are conventions regarding Chinese laws, rules and regulations. Sometimes, facts are published which create lot of confusion. However, most awards are settled instead of being enforced. Sometimes, the courts do not do anything; they just stay mum and that hurts the entire system.

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