Introduction/ Target Audience
It’s no secret that doing business in China is quite different than back home. As such, English-speaking Chinese lawyers and business advisors are often retained to bring the foreign business person up to speed on how to get things done in China.
This article is written for readers who wish to know when to hire a lawyer and when to hire a consultant.
- Introduction/ Target Audience
- Balancing Legal Counsel with Business Advice
- Example: Drafting terms for “Force Majeure” in contracts with Chinese partners in China
- Additional Resources
- About the Author
We take a close look at the “force majeure” terms in a China contract as one concrete example of why it helps to have the support of both a local lawyer and an experienced China business advisor when negotiating a deal in China.
Balancing Legal Counsel with Business Advice
Can lawyers provide their clients with business advice? Yes.
Can business consultants provide clients with legal counsel? No.
Then why not engage a Chinese lawyer for both international business and legal advice?
1. The hourly rates of lawyers generally outpace consultants.
2. A combination of a lawyer and business advisor offers a more comprehensive and strategic look at the issue in question.
3. It’s rare to find a Chinese lawyer that also understands the impact of their advice on your business back home.
So, having both a local Chinese lawyer and an international business advisor (assuming both are professional and experienced) on your team will not only save you money and offer global coverage, but also offer deeper insight than hiring just one or the other.
As a general rule of thumb, English-speaking Chinese lawyers in China are very good at stating what the law says and how it is likely to be interpreted in a China court. While an experienced international business advisor will explain how the Chinese partner is likely to manipulate the situation, how to monitor your partners and what strategies you can implement (beyond the contract itself) to offer additional protection.
How do the business advisory services integrate with the legal services provided by lawyers in the AsiaBridge Law network?
Our consultants serve in a business advisory services role rather than legal counsel. The primary role of the lawyer in the AsiaBridge Law network is to ensure that the strategies and tactics developed by business advisor are legally sound under Chinese law and that documentation required to execute the strategy is properly prepared and, where necessary, filed and approved.
For example, when addressing the wording for the “Force Majeure” clause in a contract with a Chinese supplier, the lawyers and consultants in the AsiaBridge Law network each bring a different but complimentary view to the table.
Drafting terms for “Force Majeure” in contracts with Chinese partners in China
Just about “any lawyer” can explain to a client that Force Majeure refers to a clause found in a contract to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations.
A bilingual lawyer will go one step further to suggest that a basic bilingual template could be written as follows:
Force Majeure. Except with respect to the payment of money, neither party shall be liable for any failure or delay in its performance under this Agreement due to causes, including, but not limited to, acts of God, acts of civil or military authority, epidemics, earthquakes, riots, wars, sabotage, and governmental actions, which are beyond its reasonable control; provided that the delayed party: (i) gives the other party written notice of such cause and (ii) uses its reasonable efforts to correct such failure or delay in its performance. The delayed party’s time for performance or cure shall be extended for a period equal to the duration of the cause.
However, an experienced China Business Advisor should comment that:
In the US, for example, the scope of force majeure is generally limited to very large events like wars and “acts of God” such as natural disaster. As such, it is very rarely invoked. Chinese businesspeople are more liberal in the scope of what they consider to be “beyond their control” and subject to force majeure.
Here are the two most common examples:
1. Changes to government policy. For example, if Beijing changes the tax code/ environmental law or export quota, it could have an impact on the Chinese party’s bottom line. They may try to invoke force majeure to nullify the contract and renegotiate.
2. Changes in the supply chain. For example, if a sub supplier goes out of business and forces the Chinese party to find a new sub-supplier at a higher cost, they may invoke force majeure as an excuse to raise the price to you.
In response, an experienced Chinese lawyer should explain:
Even if the Force Majeure term is removed from the contract, some Chinese courts may consider the concept of Force Majeure as being built into the Chinese legal system itself and applicable weather it is found in the specific contract or not.
However, removing the Force Majeure clause makes it harder for the Chinese party or a Chinese judge to enforce Force Majeure. Therefore, we generally do not include a Force Majeure clause unless the client specially requests it, for example, in situations where the client is concerned that they may need the protection of Force Majeure on their end.
More whitepapers & video tutorials on related subjects can be found https://www.asiabridgelaw.com/resources/
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, Mike is the author of “The Essential Reference Guide to China Sourcing” (available on Amazon).
Learn more about Mike and AsiaBridge Law at https://www.asiabridgelaw.com/business-advisory-services/