If you are required to pay a deposit or make a prepayment before you can get the goods delivered by Chinese suppliers, then you need to beware of moral hazard. The best way is to find a trustworthy company and sign a good contract.
You can claim debt recovery from its shareholders. Normally, due to the very nature of companies (legal persons), it is very difficult for you to claim debt recovery from a Chinese company’s shareholders. Once the company is canceled, however, you will have opportunities to do so.
You are entitled to unilaterally terminate a contract with a Chinese company only if the conditions for rescission as agreed in the contract or under Chinese law mature. Otherwise, you can only terminate the contract with the consent of the other party.
Can I initiate arbitration proceedings against Chinese companies in my country and then have the awards enforced in China? You probably don’t want to go to faraway China to sue a Chinese company, and you don’t want to agree in the contract to submit the dispute to an arbitration institution that you don’t know about.
Can I sue Chinese companies in a district court in California, U.S., or in Paris, France, and then enforce a judgment in China from those courts? Most likely, you don’t want to have to go so far away as to sue a Chinese company. You may just want to take your case in the court on your doorstep because you are more familiar with your home state.
Most of the foreign arbitral awards are enforceable in China. In 2019, the foreign arbitral awards are recognized and enforced, with a success rate of 87.5%. In 2018, the success rate is 87.5% too.
You should state in your contract such loss may be incurred in advance. As such, at least you should inform the supplier of such loss in the course of execution of the contract and seek his/her consent.
Chinese courts prefer to accept written contracts with the parties’ signature.
However, with certain preparations made, contracts and orders confirmed by emails may still be accepted by Chinese courts.
If you find a China supplier’s legal name in Chinese, you can initiate an action before a court or file a complaint against it. If not, you cannot do anything. All Chinese individuals and enterprises have their legal names in Chinese, and they have no legal or standard names in foreign languages.
Chinese judges lack commercial knowledge, flexibility and time to understand transactions beyond the contract text.
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.
Chinese judges like to see a formal contract with well-written terms signed by both parties. In the absence of a contract, the court may accept purchase orders, emails, and online chatting records as a written informal contract.
You probably want to terminate the contract and get a refund or even compensation.
It is very likely that you are not going to file a lawsuit with a court in Beijing or Shanghai, but in a small or medium-sized Chinese city unfamiliar to you.
You will need a bilingual contract, preferably with the same content in both languages.
You shall have the Chinese company stamp on the contract and have its legal representative sign hereon.
As we said before, you can turn to Chinese courts for disputes with Chinese suppliers. In fact, if you need to settle disputes in China, China’s arbitration is also a good option, even better than litigation.
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.
It costs less to sue in Chinese courts. Moreover, Chinese courts are trustworthy for enforcement of commercial contracts.
For the recognition or enforcement of foreign arbitral awards in China, the average length of proceedings is 596 days, the court costs are no more than 1.35% of the amount in controversy or 500 CNY, and the attorney’s fees are, on average, 7.6% of the amount in controversy.
