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.

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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China Business Lawyer Advising on Stealthy Translator for Foreign Companies

All kinds of business documents must be done in Chinese- that is an unwritten rule in China where the foreigners have been doing business. Chinese business lawyers often get asked on this topic by their clients and they have to reply in a proper way so that the business clients do not get disillusioned badly while doing business in China. Many business organisations desiring to do business with China contemplate on making a request to the Chinese government regarding hiring a Chinese translator since all the business documents must be drafted in Chinese so that they can be enforceable.

Sometimes, the government does not want the foreigners to get a translator from outside because they do not trust these people and feel like they will bust their system. They provide the excuse of having confidential information and therefore they need trustworthy people involved in the business and not someone that they cannot trust. Any kind of contract, particularly the NNN contract must appear in Chinese to make it enforceable under Chinese law. But the Chinese party most of the times ignore the plea.

When the Chinese party ignores the request, the obvious question that arises is whether they can be trusted by the foreign party because in absence of a translator the Chinese counterpart can do anything to the foreign business party. Since, they will not understand anything the Chinese people include in their contact, it will be easier for them to cheat on the foreign company. When asked why they do not want any Chinese translator, they provide reasons which sound more like excuses. There are lot of down sides to this practice. More often than not, foreign companies are being played here.

Some Markers Proving Foul Play:

While the situation might be different in different cases, still some common markers exist which can make the situation and their intention clear. The markers are:

  • Close Relationship with Government- This has necessarily got nothing to do with the demand or need of a Chinese translator. However, this is their subtle way of threatening the foreign company. If they mention the government, it straight away means that they can use their close relationship with the Chinese government to prevent the foreign company from doing business in China. This is misuse of power, but that is validated in China.
  • The Real Reason- The obvious question comes to mind regarding this. Why are they afraid of letting in a translator? The legitimate and honest Chinese companies generally clarify on this matter whereas the fraud ones do not. Well, this is a valid litmus test for Chinese companies before you want to work with them. This is a real problem situation and it is clarified when you approach Chinese manufacturers to work with them. The real standard fo a Chinese company is often displayed when it comes to bringing a translator along to do business.
  • Scary Situation- Yes, this situation is particularly scary for you because the Chinese companies only tend to translate what they think is right for you to know and the rest is kept unknown. This definitely increases the risk of doing business with them. The fact that the Chinese company will translate the terms of the contract for you is frustrating and scary too.

However, the situation is not so bleak after all. You can definitely do something to counter this malpractice. You can hire someone and take him/her with you to China and introduce that person as dealing with your business on your behalf. This will make the Chinese company listen to you and the translator as well. This person should neither look Chinese nor speak Chinese in front of the Chinese company. Instead of that, he/she should only speak Chinese in your presence. This is generally the advice provided by the Chinese lawyers to all their foreign companies. They are referred to as the stealth translators and they are quite helpful in saving the business. They often bail out the foreign companies in rough situations and explain the provisions contained in the contracts which are extremely important while doing business in China.

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