International Law

All?s Fair in China Litigation

By Stan

Dan makes a good point about the concept of “fairness” in dispute resolution:

Chinese courts tend to give large account to what is “fair,” not just to what the law says. This means that if a Chinese company is late on a contract because its own supplier was late in delivering it a necessary component part, the Chinese court may very well excuse the delay. This means that if the price of a necessary component part jumps precipitously, a Chinese court might very well excuse the Chinese supplier for substituting in a cheaper part. Many times, Westerners ascribe Chinese court rulings to corruption, when they very well might have been due to equity.

Fairness is a fundamental concept in Chinese law (e.g. Civil Law). This often drives foreign disputants nuts, who perceive judges as pulling opinions out of their asses without any grounding in a legal principle with which the foreigner is familiar. It is often chalked up to corruption, but there are other possibilities.

I was involved in an arbitration recently, and the actions of one of the panel members was a bit unorthodox. This is an ongoing matter, so I’ll just say that in this case, there was no corruption going on, it wasn’t a matter of “fairness,” it was — get this — the arbitrator was trying to move the case off his docket as soon as possible so he could take a scheduled trip overseas. Surprised the hell out of my client when they found out about it.

Life is weird and much more complicated than we realize.

One more point on this topic. Judges have a lot of discretion in China, which makes it difficult to guess how they are going to rule. There is a good way to minimize this discretionary power — make your contracts as detailed as possible.

In Dan’s example above of the parts supplier, perhaps some sort of liquidated damages clause might be appropriate. It could always be overturned by a judge that considered it too large an amount, but it’s worth a try.

In many other areas of commercial disputes, detailed agreements may solve the problem entirely. In my experience, although judges will very often bring “fairness” into a case in a gray area, they are much more likely to follow a specific contract provision.

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Full post as published by China Hearsay on June 04, 2009 (boomark / email).