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Quick Question Friday, China Law Answers, Part XXVI
Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.
Last week, I talked about how we so often get asked by American lawyers to help them enforce a U.S. court judgment in China. I then explained how China pretty much never enforces those judgments.
In response to that post, one of our own international trade lawyers stopped by my office and essentially chewed me out, by posing the following to me: why do you write about how China does not enforce U.S. court judgments without also explaining the various other options companies have for collecting on those judgments?
Good point, and so here goes.
If you have a U.S. judgment against a Chinese company, your inability to enforce it in China does not mean you should just give up. On the contrary, you have a whole host of other options, including the following — all of which are real life examples of how we have been able to collect money owed to our clients by Chinese companies:
- Go after the Chinese company’s assets in the United States. Obviously if the Chinese company owns real estate in the United States, it’s pretty easy. But there are also all sorts of non-obvious assets that can be seized, including (my personal favorite) any U.S. trademarks, copyrights or patents held by the Chinese company. You would be surprised at how often it is that Chinese companies own such things. Another non-obvious asset is funds owed or to be owed to the Chinese company by American companies. Just by way of one example, many years ago we seized millions of dollars in funds owed to a Chinese company that passed through a New York bank.
- Take your U.S. judgment against the Chinese company to some other country that enforces U.S. judgments. Canada, the United Kingdom, Taiwan and South Korea immediately come to mind. Hong Kong does not semi-automatically enforce U.S. court judgements but it does give them a lot of weight.
- Sue the Chinese company in China. Chinese courts used to mostly reject such lawsuits but that is rapidly changing.
- Make the Chinese company’s life so miserable that it eventually pays. You can threaten to go after the company owner’s assets in the United States or elsewhere. You can threaten to do whatever you can to prevent the company owners from ever setting foot in the United States. You can threaten to do whatever you can to publicize the non-payment. In certain situations, these sorts of things can be incredibly effective.
- Sometimes the U.S. company has multiple contracts with the Chinese company that owes the U.S company money and sometimes one of those contracts provides for disputes to be resolved via arbitration, not litigation. And sometimes you can bootstrap your claim onto that one contract and get an arbitration award, which has a much better chance of being enforced (once converted to a Chinese court judgment) in China than a U.S. court judgment.
So, in other words, just because you may not be able to take your U.S. court judgment to China and enforce it there, does not mean you should not be looking at all sorts of other options to collect.
We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.
Source: http://www.chinalawblog.com/2016/08/quick-question-friday-china-law-answers-part-xxvi-2.html
