How do I take legal action against a Chinese company?
You need to determine where you are going to sue, and what law is applicable to your case. You can then assess whether you have the right to file a lawsuit based on the applicable law.
If you are planning to file a lawsuit in China, then we have prepared 8 tips for you in this article to help you evaluate your potential legal action.
If everything is OK, then you can move to start legal action in China.
In addition, as a China-based cross-border trade risk management agency, we can assist you in managing your case. For our services, please click HERE.
1. You should first consider suing this company in China or 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 the 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”.
Generally speaking, it is advisable for you to turn to Chinese courts for disputes with china’s company.
Because it costs less to sue in Chinese courts. Moreover, Chinese courts are trustworthy for the enforcement of commercial contracts.
For more information, please read our post ‘Why Can You Turn To Chinese Courts for Disputes With Chinese Suppliers?’.
In the following text, we focus on the situation where you file a lawsuit before Chinese courts.
2. You should find the legal Chinese name of the company
You need to know whom you can sue and then identify its legal name in Chinese.
When you are preparing to file a lawsuit, you need to find out exactly who the defendant (the person or business you are suing) is, so you can name the same correctly on your claim.
If you want to sue the other party, you need to know its legal name in Chinese.
You may see the name of a Chinese enterprise on the contract or the name of a Chinese manufacturer on the package. But these names are likely to be in English or other languages, rather than in Chinese.
All Chinese individuals and enterprises have their legal names in Chinese, and they have no legal or standard names in foreign languages.
In other words, their English names or names in other languages are named by themselves randomly. Usually, it’s hard to back-translate their weird foreign names to their legal Chinese names.
If you don’t know their legal names in Chinese, then you won’t be able to tell the Chinese court whom you are suing. Therefore, Chinese courts will not accept your case.
We can check relevant information or search online to find the legal Chinese name of the Chinese defendant as far as possible, and prove to the Chinese court that the Chinese name found and the foreign name provided point to the same subject.
3. You should have the legal right (standing) to sue the company.
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.
4. If you are not in China, you can still file a lawsuit with Chinese courts
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.
- 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 “Who Can Give Me a Lawyer-Network in China?”.
6. 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.
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.
7. You need to prepare all the evidence before the other party knows that you are going to sue him
The evidence rules in China is “the burden of proof lies with the party asserting a proposition”.
Therefore, you bear the duty to prepare all evidence in support of your claims, and cannot expect the other party to disclose the evidence he/she has collected.
Additionally, in Chinese courts, parties often lie to deny or falsify facts. And the practice is rarely punished under Chinese law. Consequently, when the other party denies the evidence, the judge is often unable to make an accurate judgment and likely disbelieves the evidence you present. However, the other party is usually deemed to admit the evidence produced by himself. And the judge will probably not accept the other party’s denial in court.
Of course, if he/she knows you’re going to sue him, he’s likely to be alert.
This will prevent you from gathering the appropriate evidence from him.
Bearing this in mind, you should lead the other party to express the key facts in writing before he/she knows you are going to sue, as Chinese judges tend to accept documentary evidence.
8. You need to prepare the documents to file a lawsuit in China
Apart from pleadings and evidence, foreign companies in Chinese courts need to complete a series of formalities, which can sometimes be somewhat cumbersome. Therefore, it is necessary to spare sufficient time (and costs) to get ready.
Specifically, If you are a foreign company, then you need to prepare the following documents:
- Business license of your company, to indicate who you are;
- Bylaws or resolution of the board of directors of your company, to indicate who is your company’s legal representative or authorized representative in this lawsuit;
- Certified documents, to indicate what is the name and position of your company’s legal representative or the authorized representative;
- Passport or other identity documents of your company’s legal representative or the authorized representative;
- Power of attorney, to mandate a Chinese lawyer and signed by your company’s legal representative or the authorized representative;
- Notarization and authentication documents, to prove the authenticity of these materials as described above.
It will take you some time and cost to prepare the above documents.
For these documents, the description in more detail are as follows:
(1) Certificates of Subject Qualification: ‘who am I’ and ‘who represents me’
To participate in China’s civil litigation, the certificates of subject qualification that foreign companies need to submit include:
- Business License, or the certificate document on good standing issued by enterprise registration authority;
- Documents certifying the status of the legal representative or the authorized representative (e.g. the company‘s bylaws, resolution of the board of directors, etc.);
- Documents certifying the identity (“identity certificate”) of the legal representative or the authorized representative, including his/her name and position;
- Passport or other identity documents of the legal representative or the authorized representative.
If a foreign company has a legal representative, like a Chinese company’s registered ‘legal representative’, he or she may also participate in the litigation on behalf of the company. In order to certify his or her status, the foreign company generally needs to submit its bylaws or other similar documents.
As for the foreign company without a legal representative, it is required to specifically empower an ‘authorized representative’ to participate in the lawsuit. In this respect, the foreign company needs to submit a related board resolution made pursuant to its bylaws.
(2) Power of attorney: ‘who is my lawyer’
The foreign companies often need to mandate Chinese lawyers, and hence need to submit the power of attorney to the courts. The power of attorney shall be signed by the legal representative or the authorized representative as described above.
(3) Notarization and authentication: ‘my instruments are authentic’
Most of the subject qualification documents and the authorization procedures of foreign companies are formed outside the territory of China. In order to confirm the authenticity of these materials, Chinese laws require that the content and the formation process of the materials be notarized by a local foreign notary (the step of “notarization”), and then be authenticated by the Chinese embassy or consulate in that country so as to certify that the signature or seal of the notary is true (the step of “authentication”).
The time and cost you will spend on notarization and authentication depend on the notary and the Chinese embassy or consulate where you are located. We suggest you consult your local lawyer or notary.
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