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Forum Selection Clauses. Do NOT Try These At Home
2009-08-10 15:45:00
I just got an email from a small tech company in China asking me whether its contract should call for Chinese or Russian law. My response was pretty much that I had no idea because it would depend on what was in the contract and what was most important. There is no way to know what law someone should prefer unless you first know what really matters. In my response, I also told them that the choice of forum could be as or even more important. My tiny law firm ("boutique" when I am trying to sound highfalutin) has made well over $100,000 the last couple of years fighting over badly written forum selection clauses in international contracts. Our clients (who consulted us for the first time only after they had signed these agreements and right before they were ready to sue on them) could easily have avoided the entire expense had they only done things right with their forum selection clauses in the first place. Here are the cases: 1. One had a provision calling for arbitration...
More About: Home , Forum , Selection

China Blogs: That's The way, Uh-Huh Uh-Huh, We Like It, Uh-Huh, Uh-Huh
2009-08-10 12:52:00
I often receive email complaints from bloggers whose blogs are not on our blogroll. Increasingly, they favorably compare themselves to blogs on our roll, along with sometimes veiled or not so veiled complaints about those blogs. Though China Law Blog has been in existence for more than three years, we have never really provided an explanation for our blogroll, so here goes. In this intermittent series of posts, I am going to go through our blogroll in alphabetical order and explain, five blogs at a time, why each blog has made it there. Our blogroll basically consists of those blogs we like and which we think our readers will like or should be reading. We tend to like blogs that are unique in their content, well written, or consistently helpful. If we really like a blog, it makes it on no matter what. The less we like the blog, the more we have to believe it can be helpful to our readers. If a blog has not posted for a couple of months, we start seriously consider removing ...
More About: Blogs

China's Ten Most Beautiful Churches
2009-08-09 17:59:00
I am into architecture. I love buildings and my impression of places oftentimes stems from the buildings. If buildings can speak to a people and to a history (and I am convinced that they do), religious buildings oftentimes speak the loudest. They can tell us who was up, who was down, and when. I was delighted when a client sent me this "Top ten most beautiful churches in China " and I wanted to pass it on. I have seen only two of the churches on this list, but now that I know about the others, I am going to try to knock down a few more..... Anything missing from this list?
More About: Churches , Beautiful

Doing Business With China? Don't Look To The UCC
2009-08-09 13:38:00
United States domestic business lawyers live and breathe the Uniform Commercial Code (UCC). Let's turn to Wikipedia for an explanation of how the UCC came into being and why it is so important: The Uniform Commercial Code (UCC or the Code), first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America. This objective is deemed important because of the prevalence of commercial transactions that extend beyond one state (for example, where the goods are manufactured in state A, warehoused in state B, sold from state C and delivered in state D). The UCC deals primarily with transactions involving personal property (movable property), not real property (immovable property). The UCC is the longest and most elaborate of the uniform acts. It has been a long-term, joint project of the National Conference of Commissioner...
More About: Business , China , Doing business

Law Firms Getting Scammed And What It Has To Do With China.
2009-08-09 03:10:00
If you are a lawyer, you have probably gotten one: an email from a company (usually in China , Hong Kong or Taiwan) saying they want to retain you to help them collect on debts owed to them by American companies. WATCH OUT. It is almost certainly a scam. And it works as follows: The company retains you to collect on its debts from some company and then that company very quickly agrees to settle and to send you a check. You get the check, deposit in your trust account and then send your client's share to it and retain your contingency fee. The problem arises a few weeks later when your bank reports the check to have been a counterfeit and you are on the hook. These emails are getting sent out every day and law firms are getting snared. For more on these scams, check out asiabizblog, which has been writing on these for a while.
More About: Firms

Chinese Prostitutes And Government Officials, And Why You Should Listen To
2009-08-08 20:25:00
A recent survey of more than 3,000 Chinese found that less than 7.9% of them trust their government officials. The media have been reporting on how 7.9% trust prostitutes, which are more trusted than the government. As one would expect, this survey has received considerable blog play: -- Chinese Trust Prostitutes More Than Party Cadres --Chinese Trust Prostitutes More Than Government Officials --Chinese Trust Prostitutes More Than Politicians (The Huffington Post) --Chinese Trust Prostitutes Over Politicians --Prostitutes Better Than Officials In China --Chinese Trust Prostitutes more than Politicians Most of the posts focus on how this Interesting Poll">poll should come as no surprise and how the same results are likely in the United States. I agree, but this post is going to be about business, not politics. I thought of this survey today in the context of a China matter we previously handled. I am going to have to be fairly vague here to avoid revealing anything that c...
More About: Listen

When The Chinese Government Talks You Should Listen.
2009-08-08 09:31:00
One of the misconceptions foreign businesses often have about China is that their providing China with a few hundred jobs means they wield real influence. They start to believe that because some local government official has been solicitous, that they are somehow protected from all the bad things they read about that happens to other foreign companies in China. For so many reasons, this is just not true. One of those reasons is economic prosperity is not the be all end all of the Chinese government. Yes, China sees the gloriousness in being rich, but that is absolutely not the government's highest priority. Its highest priority is to stay in power and maintain the status quo. China Digital Times just translated an article quoting China's Vice Minister of Foreign Affairs, Dai Bingguo: To ensure the US-China relationship develops forward in a stable, healthy and long-term way, it is very important to mutually understand, respect and support the other side, and defend our o...
More About: Government , Listen

China's Business Laws. Ignore Them At Your Peril.
2009-08-08 08:53:00
Very interesting and very thoughtful post up over at Think China , entitled, "Are rules meant to be broken?" The theme of the post is that one needs to learn to "tiptoe through the gray areas of China law." I disagree. Think China has this to say: There are many rules and regulations in China that are ignored systematically. One of the hardest things for an outsider to master is the art of tiptoeing through the gray area. If you use the western interpretation of the law, you will find PRC laws paralyzing – if you are going to be a boyscout about it, you will not be able to get anything done. * * * * The Chinese legal system is more similar to parenting. Just because other kids have an iphone doesn’t mean you can have it too. When I said no more TV ever, I really meant no more TV until I change my mind. When I said you’re grounded for life, you can of course go to school… and after school activities, and if you behave well, I won’t say a word when y...
More About: Business , Laws

China's Mafia.... Whaddya know?
2009-08-06 20:16:00
I have often wondered about the mafia in China . I have asked lawyer friends about it and I usually get pretty much the same answer: "The Communist Party destroyed it and has continued to keep it at bay. It can have no rival. That's in Hong Kong and Macao, not here." I was always skeptical. Today, China Stakes ran a story, entitled, "China's Mafia Economy Spreads Its Wings," painting a much worse picture than what I had been told. The article focuses on Chongqing, which is "notorious" for its mafia influence. The numbers, if correct, are pretty stunning: In 2008, loan sharking in Chongqing is estimated to have totaled over 30 billion yuan, equal to 1/3 of the city's total fiscal income. The total assets of one gang reached over 3 billion yuan, a quarter of which came from loan sharking. I have to say though that none of our clients have ever told us of having mafia problems in China, though I also have never asked. So what is going on out there? How big is China's maf...

Wanna Be A China Lawyer? Creeps Need Not Apply.
2009-08-04 16:28:00
And the sign said long haired freaky people need not apply So I tucked my hair up under my hat and I went in to ask him why He said you look like a fine upstanding young man, I think you'll do So I took off my hat I said imagine that, huh, me working for you Signs, by the Five Man Electrical Band At least three times a week, I get emails from earnest young college and law students seeking advice on what they should do to become international (usually China ) lawyers. My advice is pretty simple. Study hard, get killer grades, and learn your languages, both spoken and written. I should also tell them not to be a creep, but I figure either they are or they are not. But even these things do not (especially these days) mean you will get hired and they certainly do not mean you will be effective. For that there are the intangibles. My firm recently went through a massive interview process for a legal assistant and, though this may sound weird, that process is pretty much the same...
More About: Lawyer

How To Succeed With Your China Business. Well....Sorta.
2009-08-04 08:02:00
Cn Reviews does a nice job covering an interesting discussion on doing technology business in China . Though the discussion seemed to focus on the tech industry, what was said pretty much applies to all businesses. I will note what was said (in bold) and then comment. 1. Cheap Labor is not to be found in Beijing and Shanghai. I always get irritated with statements like this, mostly because I only hear statements like this from company executives trying to convince the public that they are in China for reasons other than cheap labor. I completely buy into the idea that companies go to China for way more than cheap labor. In fact, I would estimate that well over half of the companies my firm has helped take into China in the last year had reasons for going there that had absolutely nothing to do with Cheap labor; most were going there to better sell into Asia. But, the reality is that even though labor in China is way more expensive than it was five years ago, and even though wh...
More About: Business

U.S. - China Relations. Normalization, Not Democratization.
2009-08-03 05:39:00
I wrote this post back in September, 2008, but forgot to put it up. I rediscovered it today and though it is definitely dated (it was written by Kissinger with an eye towards the US Presidential elections) the core of it still very much holds true and still merits a post, I think. I love it when someone can take my meandering, somewhat inchoate thoughts on a subject and concisely sum them up with a pithy line. Henry Kissinger did that for me today on what the role of the United States should be with respect to democratization in China . Kissinger did that in the context of a excellent New York Times article, entitled, "Foreign Policy Factions Unsure Who Will Prevail,." The article discusses how the United States does not have unlimited international power so it must ration that power wisely. Then comes Kissinger's money quote -- and like him or not, this is a guy who knows foreign policy: "Our major effort with the Soviets,” he [Kissinger] said, recalling his time as Pr...
More About: Relations

China Patents Work And I Have The Proof.
2009-08-02 20:06:00
Axiom: Chinese businesses do not waste money. Axiom: Filing patents in China is expensive. Axiom: Chinese businesses are filing patents in China like crazy. Conclusion: Filing patents must be worth the money; in other words, they have value. According to Intellectual Asset Management Blog (h/t IP Dragon), "for the first time invention patent grants made to domestic [Chinese] entities are outstripping those made to foreign concerns. According to SIPO statistics, in the first six months of 2009 Chinese applicants received 18,634 patents, while applicants from overseas took 17,737; that's 51.2% and 48.8% respectively. In 2008, Chinese applicants were awarded 49.7% of the 93,706 invention patents granted by SIPO." Chinese and China patent filings are having and will continue to have worldwide implications: Clearly, all of this has major implications for granting authorities, in-house patent departments and private practice firms across the world. What a great time it is to be ...
More About: Work , Proof , Patents

China And The Swine Flu. When Pigs Fly.
2009-08-02 13:04:00
If you are not reading Absurdity, Allegory and China , you should be. It just did an excellent post, entitled, "One Flu East," on what could happen to you if you come to China with an elevated temperature or even if you just come in on a plane near someone with an elevated temperature. The gist of the post is that you will be quarantined and there will be no special dispensations. The implicit message of the post, and one which applies to foreign businesses in China as well, is that once the Chinese government gets committed to something (and I mean really committed), it is difficult if not impossible to budge them. There is this idea that "guanxi" or just blame importance can cause the government to bend and that can be true. But there are certain central tenants that can take hold within the government that can become pretty much immutable. I do not know how many times I have had to tell foreign companies that do business in China that they have gone beyond the point at whic...
More About: Pigs

China Socialpreneurs
2009-08-02 00:21:00
Crossroads blog has a post up listing China Corporate Social Responsibility related twitterers, broken out between "China Social Entrepreneurs," "China Treehuggers," and "NGOs." If you twitter and have an interest in China CSR, I urge you to check it out.

How To Get Your Business Into China. Legally.
2009-08-01 16:58:00
Spoke with a company last week that is interested in hiring people in China to oversee its China purchasing and quality control and stake a beachhold for selling its products there as well. This company asked me to set out the basics on what my firm would propose to do for them to get them going in China. I just wrote the email and figuring I might as well kill two birds with one stone, I have modified it slightly to make up this post. Here's my email: This is to follow up on our recent telephone conversation regarding what it will take for your company to hire employees in China legally and the additional actions you should take to operate legally in China and to protect your company there. 1. In order to hire people in China, you must first create a legal entity in China. There are three basic types of legal entities for foreign companies seeking to go into China. One is the joint venture in which the foreign company forms a sort of partnership with a Chinese entity. Th...
More About: Business

The China Company Within A Company. Been There. Done That.
2009-07-31 08:55:00
FT.com wrote an interesting story the other day of a German advertising company whose employees had set up their own company within a company. The thrust of the article is that this sort of thing is peculiar to China and foreigners had better beware. I have received no fewer than three emails from people sending me the article suggesting I should write on it. Okay, I will, but only to say this sort of thing goes on all the time and it is certainly not peculiar to China. Not at all. The article necessarily focuses on China and it quotes someone who wrongly paints this deception as a China-foreigner thing: There is an attitude among many in the Chinese business community that foreigners are rich and stupid and therefore fair game; that deceiving them is somehow acceptable in a way it wouldn’t be if they were Chinese,” says one intellectual property lawyer who has worked in China for nearly two decades, and who asked not to be named to avoid repercussions for his business. ...
More About: Company

How To Avoid Getting Kidnapped In China. Plan In Advance Or Go Home.
2009-07-29 02:47:00
The other day, in a post entitled, "China Hostage Situation. Now IS A Good Time To Pay Your Debts," I wrote about some U.S. executives who were being held hostage in China over nonpayment of a business debt. Their US based company had gone bankrupt and when they went over to China to explain all this to their Chinese suppliers, they were taken hostage. I have since learned that they were eventually released, though I do not know whether a payment precipitated that release or not. My friend Shaun Rein, of The China Market Research Group just came out with an article for Forbes, entitled, "How To Avoid Getting Kidnapped In China." Shaun's thesis is that if you are going to do business with another company in China, you should find an "uncle" first who will be able to mediate any disputes that might arise between the two of you: Before entering a partnership with a Chinese company, you should find an "uncle"--a person both parties trust who will be able to mediate differences. Th...
More About: Home , Plan

The Foreign Corrupt Practices Act. Can You Say China Relevant?
2009-07-27 04:06:00
I was talking with Kevin O'Keefe the other day about law blogs. Kevin is the founder of LexBlog, which dominates the market for setting law firms up on blogs. Despite originally being from Wisconsin (he now lives in Seattle), Kevin knows more about law blogging than any guy alive. Despite the recession, his business is still growing by leaps and bounds, which caused me to ask him if he had any plans to expand beyond legal blogging. His response to that was that legal blogging has barely just begun and there are still a huge number of legal arenas that are under-served or not being served at all. I agreed with him and then we started talking about how certain blogs are so good and so comprehensive they just fill "the space." One of the things I love about being an international lawyer is that I get to remain somewhat of a generalist. Yeah sure, there are certain things (OEM contracts, for example) that I have done hundreds of times, but there are other things of which I need...
More About: China , Foreign , Relevant

Suing Chinese Drywall Manufacturers. Why All The Bother?
2009-07-24 16:22:00
Someone just emailed me an article on Chinese Drywall, with the question, "why do you think these lawyers are spending so much to serve the Chinese defendants." My short answer is that I have no clue. I will backtrack a bit first. The article is entitled, "Chinese-Made Drywall: A Multi-Defendant, Multi-Claim, Multi-District Litigation Has Litigators Multi-Tasking," and it is more a pitch for a bunch of money making seminars than an article designed to impart real information. With that caveat now in place, here are the "offending portions." [Ervin] Gonzalez dug in to the potential defendants, starting with a primer on how the product is made. Gypsum is mined from a quarry, heated to dry, then rehydrated to form a slurry, a paste that is then sandwiched between materials. The mining process raises questions as to whether the contaminants are natural or whether pollutants migrated from, say, a nearby farm where pesticides were used. The ingredients are supposed to be in...
More About: Manufacturers

China Hostage Situation. Now IS A Good Time To Pay Your Debts.
2009-07-23 02:25:00
Just got an email from a regular and very much trusted reader. The email (with all identifiers removed) is as follows: Consumer product company had a rep office – staffed with people with US passports. Company had financial problems and needed to file for bankruptcy. The company sent one of their executives to China to advise their suppliers that they were declaring bankruptcy and would be unable at this point to pay their outstanding balances. As you can imagine, the Chinese suppliers did not take this well, and they stormed the rep office and are now holding the US citizens hostage - literally. Its been days now –and neither the police nor the embassy will help to extract the people. The whole thing was obviously not handled properly from the start – but this has turned ugly pretty quickly. Each factory is mainland owned. I’ll let you know how this turns out – I’m not involved – just hearing most of this second-hand. I hope to write a happy ending to this sto...
More About: Time , Good , Situation , Hostage

What's Happening With China Legal? Read Asia Legal Blog To Find Out.
2009-07-21 15:21:00
When I worked in BigLaw, I, along with most of the other associates at my mega-firm, could hardly wait for the next issue of American Lawyer Magazine to hit our law firm's library. That magazine did a pretty decent job keeping us informed of what was going on in the legal world, and even within our own firm. It would give ratings to working as an associate at the big firms, with a commentary. My friends and I would always try to get quoted, though always anonymously. One year we bet on who would get quoted. I won by saying that we associates were pretty well informed of firm goings-on because we would get so much coverage in the American Lawyer. Now, if you want to read law firm rumors, the best place is Above the Law, (which had my firm down for a merger with Baker & McKenzie!) but it does not carry much on Asia . Asia Legal Blog is written by a legal headhunting firm so it is not going to go off on a rumor, but it is a good and free source of goings on in the Asian legal...
More About: China , Find

China Joint Ventures. Find Me A Good One....
2009-07-16 06:17:00
Excellent article by Tina Wang up on Forbes.com. The article is entitled "KKR's Concrete Lessons In China " and it is subtitled, "A KKR-led group bought into a Chinese tycoon's cement business. Over a year later, who's in charge?" It is on a KKR cement industry joint venture in China and like so many stories on joint ventures (not just in China but just about everywhere), it reads like a bad spy/war novel. It reminds me a bit of a chapter (or two) from Jack Perkowski's book, Managing the Dragon, where Jack very graphically writes about one of his China joint ventures gone bad. Jack's story is so incredible, that if my firm had not represented parties in similar situations (right down to the unbelievable parts), I would never have believed it. Let's just say one of my favorite joint venture stories involved a client who after being hung head first outside a high floor window in Russia he decided he would gladly relinquish his controlling interest after all. For addition...
More About: Find , Good , Ventures

China's Rio Tinto Arrests. Everyone Just Move Along....
2009-07-14 12:26:00
By Steve Dickinson The recent detentions of four Rio Tinto executives has caused much concern. However, the situation has been misunderstood by most in the West because of a failure to understand the legal background. The Rio Tinto employees are accused of conducting industrial espionage. Specifically, they are accused of bribery and theft of trade secrets. These acts are crimes under Chinese law. Therefore, if the accusations are factual, the four Rio Tinto employees are subject to criminal sanction in China , with typical prison sentences of up to four years. The only thing unusual about this case is the decision of the Chinese government to treat the matter not as a commercial trade secrecy violation, but rather, as a theft of state secrets. I assume the reason for this is that the allegedly stolen information is in fact highly secret and damaging to the position of the Chinese companies in the iron ore price negotiations with Rio Tinto. The Chinese are probably avoiding a crim...
More About: Arrests , Move

Enforcing Contracts In China. Way, Way Better Than You Think.
2009-07-13 13:23:00
By Steve Dickinson At a recent meeting of foreign businesspersons in Qingdao, I sat next to a very unhappy man who loudly stated: “Chinese contracts are not worth the paper they are written on.” I told him: “Your statement is not true. As a matter of fact, the Chinese courts do very well at enforcing clear written contracts.” As usual, I was greeted with disbelief. The problem with this person’s statement is that it becomes a self-fulfilling prophecy. People who think China will not enforce contracts tend to ignore the issue. They either enter into no contract at all or they enter into a poorly drafted contract or they enter into a contract that is not enforceable in China. This is the actual story for this particular individual. As he now knows, this attitude about Chinese contract enforcement is a mistake. My view of the Chinese contract enforcement process is based on over 30 years of experience in China. However, I am clearly not the only person who has come to this ...
More About: Contracts

Owe Money To A Chinese Company? No Need To Pay.
2009-07-10 06:03:00
If you owe money to a Chinese company for product and you cannot pay all of your creditors, skip out on the Chinese company. Near as I can tell, there is nearly a 100% chance they will never sue you to recover. I am NOT advocating not paying your debt, but I am saying that if you have to choose among your creditors on who to pay, the Chinese company should be your choice. I am saying this based on the following: 1. About a year ago, a client had come to me for a consultation regarding a dispute it was having with its Chinese OEM supplier. The Chinese company was threatening to sue my client for about $350,000, per its invoices. My client was refusing to pay the Chinese company due to a spate of bad product. My client was seeking a $150,000 credit for the bad product and the Chinese company was refusing and threatening to sue. I advised my client not to pay anything, based on two legal maxims. One, possession is nine-tenths of the law, and two, never fund someone who is t...
More About: Money , Company

Exporting To China 101
2009-07-08 23:28:00
A client recently sent me a blogpost and asked me if I "thought it made sense." The post is entitled "Organizing Your Export Trial Run," and, yes I do. Not only does it make sense, but it also has a slew of very helpful links. So if you are in the business of exporting to China (or to anywhere else), you should check it out.

Hey Sucker, We've Got Your China Trademark And Your're Goin'
2009-07-08 12:51:00
Over the last six months or so, my firm's work for Chinese companies going international has zoomed, and with that, my knowledge of how Chinese companies "handle" foreign companies has zoomed as well. One of the things I have learned is that Chinese companies understand the value of trademarks -- YOUR trademark. Let me explain. I am going to have to be very vague here so as to avoid revealing any confidential information, but I can be specific enough so you can get the gist. Two stories: 1. Chinese company manufactures product for US company. Product ships from China with US company name on it and US company distributes it throughout North America. China company also sells its product in North America under its own brand name. US company is trying to get Chinese company to lower its prices and Chinese company is balking. US company is talking of finding another manufacturer. Chinese company tells me that people in China "very friendly" to them registered the US compa...
More About: Trademark , Goin

Sex! Drugs! Prostitution! China And The US By The Numbers.
2009-07-07 20:27:00
The Aimee Barnes Blog just did a post, entitled, "Sex, Drugs , Weapons and Cash: China vs United States," comparing the United States and China on all sorts of numbers/statistics relating mostly to sex, drugs, crime and health. It makes for fascinating reading, particularly, if (like me) you are the kind of person who remembers off the top of your head, exactly what Bob Gibson's ERA was in 1968 (1.12). Check it out.
More About: Prostitution , Numbers

Cultural Norms As Law Enforcement Mechanism. Why Demand Letters Still Work
2009-07-07 13:12:00
Wikipedia defines a demand letter as a "letter stating a legal claim (usually drafted by a lawyer) which makes a demand for restitution or performance of some obligation, owing to the recipients' alleged breach of contract, or for a legal wrong." Typically, these letters conclude with the lawyer threatening to sue or the non-lawyer letter writer threatening to go his or her attorney. Such letters have become so commonplace in the United States that they most of the time fail to instill much fear into or much action from their recipient. I know of some lawyers who no longer will write such letters, believing that US companies will not seriously discuss any settlement until sued. I know of a company that manufactures a somewhat dangerous product and it receives maybe 100 lawsuit threatening letters a year from around the world. Before I started representing this company, they would respond to every letter by seeking a quick out of court settlement. I convinced them to change...
More About: Work , Letters , Law Enforcement , Cultural , Mechanism