The risks of using English as the governing language in contracts in China

INTRODUCTION

The decision to use a foreign language as the governing language in contractual agreements in China can lead to significant legal challenges for foreign entities. While drafting contracts in a familiar language offers comfort, it overlooks the critical legal nuances of the Chinese judicial system. This article focuses on the imperative of using Chinese as the governing language in contracts and the problems associated with court-appointed translations, including inaccuracies and misinterpretations.

1. THE PREFERENCE FOR CHINESE IN CHINA’S LEGAL SYSTEM

In China, although there is no legal mandate specifying the use of Chinese in contracts, the judicial system displays a clear preference for it. When disputes arise, courts rely heavily on contracts drafted in Chinese, primarily due to the legal community’s proficiency in the language. Foreign language contracts often lose their intended meaning when subjected to the interpretation process in Chinese courts.

2. THE PERILS OF COURT-APPOINTED TRANSLATORS

A significant risk for contracts drafted in foreign languages arises from the reliance on court-appointed translators. When a dispute goes to court, the non-Chinese contract must be translated into Chinese. The translation process, however, is fraught with risks:

  • Inaccuracies in Translation: Court-appointed translators may not always accurately capture the nuances of legal terms used in the original foreign language contract. Legal concepts can be highly nuanced, and even small errors in translation can lead to substantial changes in the contract’s interpretation.
  • Legal Misinterpretations: Translations that inaccurately convey the intent of the contract can lead to misinterpretations under Chinese law. This can result in judgments that deviate significantly from the contract’s original terms and intentions.
  • Delays and Additional Costs: The process of obtaining a court-appointed translation can introduce delays and additional costs, complicating the dispute resolution process.

3. ENSURING ENFORCEABILITY AND LEGAL CONSISTENCY

Contracts not drafted in Chinese are at a disadvantage in terms of enforceability. Discrepancies between the original contract and its Chinese translation can lead to legal ambiguities, undermining the enforceability of the agreement. Chinese courts tend to interpret contracts based on their understanding of Chinese legal principles, which may differ from the interpretations intended in the foreign language version.

4. THE RISK OF RELIANCE ON COURT-APPOINTED TRANSLATIONS

Relying on court-appointed translations introduces a layer of unpredictability in legal proceedings. These translations are not always subject to the same level of scrutiny and accuracy as professional legal translations. This can result in translations that are not only incorrect but also legally detrimental to the foreign entity involved.

5. ADOPTING A CHINESE-LANGUAGE STRATEGY

To mitigate these risks, foreign businesses must:

  • Use Chinese as the Governing Language: Drafting contracts in Chinese ensures consistency in legal interpretation and enforceability in Chinese courts.
  • Engage Professional Legal Translators: If a foreign language contract is necessary, using professional legal translators familiar with both languages and legal terminologies can reduce the risk of inaccuracies.

CONCLUSION

Choosing Chinese as the governing language in contractual agreements in China is crucial to ensure legal clarity and enforceability. The risks associated with court-appointed translations, including inaccuracies and misinterpretations, underscore the perils of relying on foreign languages in Chinese contracts. Foreign entities must navigate these legal complexities by aligning their contractual practices with the nuances of the Chinese legal system, ensuring their business interests are adequately protected.

 

FAQs

Q1: Why is it risky to use English as the governing language in contracts in China? A1: Using English can lead to legal challenges due to the Chinese judicial system’s preference for Chinese. English contracts may lose their intended meaning during interpretation in Chinese courts, leading to potential legal misunderstandings and disputes.

Q2: Is there a legal requirement to use Chinese in contracts in China? A2: No, there is no legal mandate requiring the use of Chinese in contracts. However, the Chinese judicial system clearly prefers and is more proficient with contracts drafted in Chinese.

Q3: What are the risks associated with court-appointed translators? A3: Court-appointed translators can introduce inaccuracies and legal misinterpretations, often failing to capture the nuances of legal terms used in the original English contract. This can lead to incorrect judgments and additional costs and delays.

Q4: Why are contracts not drafted in Chinese at a disadvantage? A4: Contracts not drafted in Chinese face enforceability issues. Discrepancies between the English version and its Chinese translation can create legal ambiguities, making it harder to enforce the contract as originally intended.

Q5: How does reliance on court-appointed translations impact legal proceedings? A5: Reliance on court-appointed translations introduces unpredictability and a lack of scrutiny in legal proceedings. This can lead to incorrect and legally detrimental translations for the foreign entity involved.

Q6: What steps can foreign businesses take to mitigate these risks? A6: Foreign businesses should use Chinese as the governing language to ensure consistency and enforceability in Chinese courts. If an English contract is necessary, they should engage professional legal translators who are familiar with both languages and legal terminologies.

Q7: Why is choosing Chinese as the governing language crucial in China? A7: Choosing Chinese ensures legal clarity and enforceability. It avoids the risks associated with court-appointed translations, such as inaccuracies and misinterpretations, thus protecting the business interests of foreign entities under the nuances of the Chinese legal system.

 

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 janerik@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.

Contact us if you need help with drafting of contracts that follows Chinese laws and are enforceable in China, background investigation of Chinese companiesprotecting 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 Managers Jan Erik Christensen, at janerik@ncbhub.com  or Milla Chen, at huimin.chen@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.