If the Chinese defendant directly affects you, you, as a natural person or a legal entity, have the legal right to sue in China. The Chinese legal system allows individuals and organizations to seek remedies and claim damages through the court system.
However, legal disputes can be daunting, even more so when they cross international borders. If you find yourself in a situation where you’re considering a lawsuit against a company in China, it’s imperative to tread carefully. China’s legal landscape is unique, and a misstep can cost you dearly.
Here we will outline five common mistakes foreign companies often make when suing a company in China and offers advice on how to avoid them.
Mistake 1: Lack of Familiarity with Chinese Laws
The first mistake many make is a lack of familiarity with Chinese laws, especially those related to corporate disputes. An inadequate understanding of these laws can lead to fatal errors in your lawsuit.
Chinese corporate laws are nuanced and complex. They dictate the responsibilities and rights of all parties involved in a corporate dispute. Without a comprehensive understanding of these laws, you risk making avoidable mistakes that can jeopardize your case.
Mistake 2: Overlooking Jurisdictional Issues
Non-Chinese companies can file lawsuits with Chinese courts if the court has jurisdiction over the case. However, a common mistake that we often see is overlooking jurisdictional issues. China’s legal system is regionally based, and it’s crucial to understand which court has jurisdiction over your case.
Jurisdiction refers to the specific geographical area where a court has the authority to make legal judgments. Misunderstanding or overlooking jurisdiction can lead to filing the case in the wrong court, which can delay or even dismiss your case.
Mistake 3: Inadequate Legal Representation
The third common mistake is not securing adequate legal representation. Having an experienced Chinese lawyer who understands China’s legal landscape is invaluable in navigating its complexities.
When choosing a lawyer in China, look for someone with a solid track record of handling similar cases. They should be well-versed in Chinese law and have a strong understanding of the legal culture in China.
Mistake 4: Misunderstanding Contractual Agreements
The fourth mistake is misunderstanding contractual agreements. A contract is at the heart of most corporate disputes, and a misunderstanding can lead to a weak case.
Contracts are vital and carry significant legal weight. Misinterpretation or overlooking key clauses and not identifying the Chinese party by its legal name and legal person or a lack of using a Chinese business seal can lead to a flawed argument and weak legal standing.
It’s essential to have your legal representative thoroughly review any contract involved in the dispute to understand the rights, obligations, and potential loopholes.
Mistake 5: Inadequate Evidence Collection
The fifth common mistake is inadequate evidence collection. Like any legal system, evidence plays a crucial role in China. There are strict regulations and protocols for presenting evidence. Failing to adhere to these rules or not providing enough convincing evidence can significantly weaken your case.
Therefore, you must collect evidence when you communicate with Chinese companies, for example, emails, WeChat messages, etc.
This goes back to the first step you should take before signing a contract and cooperating with a Chinese company: verify the Chinese company. And to sue a company in China, you need to know its legal name in Chinese, as Chinese courts seldom accept foreign language names. Thus, you want to ensure you have the Chinese legal name of the company, its business registration number in China, and the address of the company.
Suing a company in China is not a straightforward task. It requires a comprehensive understanding of Chinese laws, a good grasp of jurisdictional issues, adequate legal representation, an understanding of contractual agreements, and meticulous evidence collection. Avoiding these common mistakes can significantly improve your chances of a successful outcome.
- Why is understanding Chinese laws so important? Understanding Chinese laws is crucial because they dictate the rules and procedures that govern any legal dispute in China. A lack of familiarity can lead to costly mistakes.
- How can I ensure that I have the right legal representation? When choosing a lawyer, look for someone with a proven track record in handling similar cases in China. They should be well-versed in Chinese law and have a strong understanding of the local legal culture.
- Why is understanding contractual agreements so vital? Contracts form the basis of most corporate disputes. Misunderstanding or overlooking key clauses can weaken your case and negatively impact the outcome.
- What are the consequences of overlooking jurisdictional issues? Overlooking jurisdictional issues can lead to filing your case in the wrong court, which can delay proceedings or even lead to the dismissal of your case.
Contact us if you need help with background investigation of Chinese companies, protecting patents, trademarks, verification of contracts to the law in China, or help with other legal challenges that you have in China.
If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Manager, Jan Erik Christensen, at firstname.lastname@example.org. We look forward to hearing from you and helping your business succeed in China.