How to select a lawyer when doing business in China: Part 1
Introduction to how to select a lawyer when doing business in China
Are you planning to invest in China?
Are you buying from China?
Wanna sell to China?
Regardless which group you fall into, you probably already realize that there are major differences between the legal system in China and back home. To emphasize this point, in this two-part blog series, we’ll take an inside look at some “China issues” that lawyers “back home” often get wrong.
Hometown vs China Lawyer for China projects
I am not saying your hometown lawyers are not good lawyers. But do they have the expertise you need? Maybe they have partners in China. OK, that’s a start.
Maybe they are giving you feedback based on US law. That’s not so good for your China issues.
The best option is to have advice from a registered lawyer in China and they tend to be Chinese.
For example, an experienced China based lawyer will comprehend in great detail each of the scenarios given below. But the typical lawyer back home (and maybe even a few readers) will be left with head’s spinning after reading what’s really going on in the examples below.
China Scenario: Why does my Chinese supplier keep shipping me defective merchandise?
Domestic lawyer’s (wrong) answer:
“Chinese suppliers are bad, they don’t care about quality, find a new supplier.”
Experienced China lawyer’s explanation:
“Because the margins are tight, the seller wants to lock in the buyer for multiple orders. But the buyer won’t promise to place additional orders until the first order arrives. Sadly, too many buyers forgot to have clear terms in the PO/Contract about how defects will be handled. Sellers can exploit this to their advantage in the following way:
When the seller ships out the order, the seller “makes an error” and under-ships the number of units and/or they make sure a certain percentage are defects (on purpose).
Since the novice buyer didn’t have a contract that would clarify what happens in the event of defects or under-shipment, the seller is now in the driver’s seat. Mr. Li will say “sorry for the defects, it was a mistake, won’t happen again, we’ll give you replacement products on the next order”. Just like that, Mr. Li has his buyer locked in for the next order!”
How to protect yourself from missed lead times and contract violations?
Here are some strategies that really work, and don’t cost much:
“Have a well written, bi-lingual contract, under official chop. A custom contract can be done up by an English speaking Chinese lawyer for just a few 100 USD.”
So in my opinion, a buyer is just plain crazy to disregard this important step. Make sure your contract with your supplier should be in Chinese as Chinese courts only recognize Chinese language whenever you decided to go to court if they violated something in your contract.
“Apply a level of independent QC at the factory or consider having the product inspected 100% at an assembly/inspection facility.”
- How to find an affordable lawyer in China that speaks English
- Three Legal services foreign companies in China should not overlook!
- China sourcing: Negotiation, Contracts and Payments
About the Author: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
Learn more about Mike and AsiaBridge Law at