Is It Hard to Sue a Chinese Company?
No. In fact, it won’t be any harder than if you were to sue any other company.
You should first decide to file a lawsuit in China or elsewhere. Both have their pros and cons, but filing a lawsuit in China is also a good option.
If you are going to file a lawsuit in China, then this article can help you evaluate your situation.
1. You should first consider suing this company in China or in another country
Will you file the lawsuit in China or somewhere else (eg. the place of your domicile), provided that both have jurisdiction over your case?
To answer these questions, we need to compare the litigation in China with that in other countries.
For instance, If you sue in China, it will be very convenient to enforce the judgment in China. Whereas, if you sue in other countries, currently there might be some problems with the enforcement, because not all foreign judgments are enforceable in China.
If you sue in China, in the absence of choice of law by both parties, your case is likely to be governed by Chinese law. Whereas, if you sue in other countries, your case is likely to be governed by the law of the forum state (lex fori), eg. the law being that of your country.
Chinese courts only allow the Chinese language for litigation.
The civil preceding in China follows the general rule that “the burden of proof lies with the party asserting a proposition”, so you bear the duty to provide evidence in support of your allegations. Whereas, the civil proceeding in other countries, at least in common law countries like the United States, follows the evidence discovery rule, which greatly reduces the difficulty for courts to obtain evidence but forces litigants to disclose the evidence against them.
If you are still undecided about where to sue, please read our previous post “Suing in China vs Suing in Other Countries: Pros and Cons”.
In the following text, we focus on the situation where you file a lawsuit against a Chinese supplier before Chinese courts.
2. You need to decide whether to sue in China
Even if you are not in China, you still can file a lawsuit with Chinese Courts
But in this case, you need to hire a Chinese lawyer to file a lawsuit with Chinese courts on your behalf.
The lawyer can file a lawsuit and handle all relevant procedures on your behalf, even without requiring you to come to China at all.
In addition, according to Chinese law, you can only hire Chinese lawyers for representation in litigation.
3. You need a network of Chinese lawyers
In an earlier post “Which Chinese court should I file my case?”, we have mentioned:
You are very likely not to file a lawsuit with a court in Beijing or Shanghai, but in a city with many factories, an airport, or a seaport hundreds of kilometers or thousands of kilometers away.
It means that the elite lawyers gathered in Beijing and Shanghai may not be able to help you any better.
With the advantage of knowing local rules and regulations well, local lawyers can find more effective solutions. It is really beyond the reach of lawyers in Beijing and Shanghai.
Therefore, Beijing and Shanghai lawyers are not ideal options, and you should employ a local lawyer.
For more information about a lawyer network in China, please read an earlier post “Sue a Company in China: Who Can Give Me a Lawyer-Network in China?”.
4. You need to consider whether the amount of the claim can cover the court costs and attorney fees in China
The costs you need to pay mainly include three items: Chinese court costs, Chinese attorney’s fees, and the cost of notarization and authentication of some documents in your country.
(1) Chinese court costs
If you bring a lawsuit to a Chinese court, you need to pay legal fees to the court at the time of filing.
The court costs depend on your claim. The rate is set on the scale of rates and denominated in RMB.
Roughly speaking, if you claim USD 10,000, the court cost is USD 200; if you claim USD 50,000, the court cost is USD 950; if you claim USD 100,000, the court cost is USD 1,600.
In China, court courts are calculated with a progressive system in the RMB Yuan. For its schedule, please read our post What Are Court Costs in China?
If you win as a plaintiff, the court costs will be borne by the losing party; and the court will refund the court cost you paid previously after receiving the same from the losing party.
(2) Chinese attorney’s fees
Litigation lawyers in China generally do not charge by the hour. Like the court, they charge attorney’s fees according to a certain proportion, usually 8-15%, of your claim.
However, even if you win the case, your attorney’s fees will not be borne by the losing party.
In other words, if you request the Chinese court to order the other party to bear your attorney’s fees, the court will generally not rule in your favor.
That being said, however, there exist some exceptional circumstances where the losing party shall cover legal fees.
If both parties have agreed in the contract that the breaching party should compensate the opposing party by covering his attorney’s fees in litigation or arbitration, and they have clearly stated the calculation standard and confines of attorney’s fees, the court is likely to support the payment request of the winning party. However, at this point, the court will require the prevailing parties to prove they have actually paid the fees.
(3) Costs of notarization and authentication of some documents in your country
When you sue, you need to submit relevant documents to the Chinese court, such as your identity certificate, power of attorney, and pleadings.
These documents need to be notarized in your country, and then authenticated by the Chinese embassy or consulate in your country.
The rate of this charge is up to your local notary and the Chinese embassy or consulate. Usually, it costs you hundreds to thousands of dollars.
5. You need to have the legal right (standing) to sue
As long as you are ‘directly affected’ pursuant to Chinese law, you may file a lawsuit with the court.
First, you must be directly affected by the defendant.
You need to figure out whether you have the right to file a lawsuit against the person or business you have a dispute with. To file a lawsuit with the court, you have to be someone directly affected by the legal dispute you are suing about.
For example, you are directly affected if you signed a contract with the defendant who then breached the contract. The term “contract” mentioned here may include a formal contract, or an order placed on the e-commerce website, or just an agreement in email.
Or, you are directly affected if the products made or sold by the defendant injured your physical health or property due to non-conforming quality.
Or, you are directly affected if you found that the defendant infringed your intellectual property rights, such as pirating your works.
Second, you must be a natural person or a legal entity.
Only an “actual legal entity” may start a lawsuit in China.
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