International Law

Chinese Companies Court U.S. Disaster.

By Dan

I had an article published by the Wall Street Journal on how Chinese companies are mishandling their overseas legal matters. The article is entitled, "Chinese Companies Court Disaster: Doing business in America means also learning how to navigate the U.S. legal system." I believe it requires a subscription to the Wall Street Journal, but I also think that you can email it to yourself and then view the entire article that way.  

In it, I discuss how Chinese companies are coming over to the United States ill prepared for our legal system. Though this is true of most foreign companies that come to the United States, the huge differences between our two systems, and even the way Americans feel about China, have made things even tougher for Chinese companies:

Anecdotal evidence at my firm and others suggests lawsuits in the U.S. against Chinese companies are increasing. Chinese companies face certain general disadvantages that will be hard for them to overcome anytime soon. For instance, many American jurors seem to reflect broader public unease about China as an economic threat, and are more likely to assume all of its companies engage in unscrupulous business tactics and produce shoddy products. And Chinese companies face the same problems that dog any company litigating outside its home country—unfamiliar rules and the like.

To put it bluntly, Chinese companies are making big mistakes when they come over here, and I am aware of some that have had to pack up and go home because of this:  

But Chinese companies are needlessly putting themselves at an even deeper disadvantage by making basic mistakes. The first is a failure to do the planning necessary to avoid lawsuits in the first place. In the U.S., companies generally view lawyers as counselors whose job includes helping their clients prevent legal problems, while also making sure the company is best positioned if a lawsuit does pop up (for instance, by helping to draft precisely worded contracts). In China, executives tend to view lawyers as technicians whose job is simply to navigate the court system when a lawsuit arises, rather than as strategic legal planners. This has been a factor in the growing area of U.S. intellectual property litigation against Chinese companies, where often a competent American lawyer would have warned the Chinese manufacturer early on of potential IP problems with a product had the company sought counsel.

For more, check out the full article.  

Full post as published by China Law Blog on August 27, 2010 (boomark / email).