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How To Collect On A U.S. Judgment Against A Chinese Company.

By Dan Harris on Posted in Legal News

We have written many times of how Chinese courts will not enforce United States judgments. Because of this, U.S. judgments have pretty much no value in China and if your only collection plan is to sue in the United States and then take your judgment to China, you are making a big mistake.

We see this mistake all the time when U.S. lawyers call us seeking our help to collect on a U.S. judgment they have just secured for their clients. We tell them of how their judgment has no value in China and then we wait for the long pause while the lawyer is presumably thinking of how to explain to its client why it has charged it so much to get something that will likely be worth so little.

For our writings on enforcing United States judgments in China, check out the following:

But note how I have NOT said that securing a United States judgment is always a waste of time and how I say merely that such a judgment “will likely be worth little.” A United States judgment against a Chinese company can lead to collection, but for that to occur, one must know about the operations of the Chinese company and one must be prepared to be legally creative in figuring out how and where to act in using the United States judgment to go after the Chinese company’s assets.  

We are right now working on just such a case and since I just set out some of the options in an email, I figured I might as well post them here as well, especially since we are working so deep background on this that my posting it cannot possibly tip off anyone:

Here are the methods we typically use to try to collect on US judgments against Chinese companies that do not have hard assets in the United States: 

  1. If it has vessels, seize those. Not likely here, but I mention it because it can be so easy.
  2. If there are US companies that owe it money, go after that money.
  3. If there are US companies that will owe it money, go after that money.
  4. Take the judgment to a country that will enforce US judgments and seize the Chinese company’s assets there (South Korea is the best and most typical). Canada can be quite good too. There are others.
  5. Take the judgment to Hong Kong and use it to get a summary judgment against the Chinese company there. (This can be quite expensive) There are other countries where this might make sense.
  6. Write a letter to the defendant, in Chinese, letting them know all of the problems you intend to inflict on it if it doesn’t pay. Those will include alerting various US governmental bodies about this company’s conduct and doing whatever else you can do to make sure this company does not rip off an American company again.

We would need to know more about the company and its operations to come up with additional options and to tell you more about the likelihood of success and the expected costs of each of the above.

There you have it. Using a United States judgment to collect from a Chinese company. Difficult, but not impossible.

  • http://www.wxtmc.com/ Maier

    Perhaps, but should be hard, China is a very strange country.

  • http://www.chinesedrywallvictim.com Brian Jones

    Let’s hope Taishan comes forward and does what is right. Just can not believe Fallon gave them more time to get “their stuff together”. They had plenty of time – time before their 1st trial and the time before they decided to appeal the judgement.

  • Twofish

    One problem here is that you may find that the Chinese company has good lawyers that structured its overseas operations so that you can’t collect, and you have to look at the type of judgment.
    Overseas courts tend to be willing to enforce ordinary commercial judgments, but if you just got a $5 million tort default judgement, good luck getting even Canada to enforce that. Also, you may well find that all of the overseas operations of the Chinese company are run through a subsidiary of a offshore BVI corporation and hence are judgment proof.
    One thing about commercial judgments is that in they end, they are about money, so if you make the time and expense of collecting the judgment more than the amount of the judgment, then one side will just give up.

  • Twofish

    Something else that worked for a while but no longer works, is that its really easy to seize maritime vessels, and for a few years the Second Circuit was allowing maritime attachments of assets that went through NYC banks. What happened was that the courts got flooded with cases from Rule B attachments so that they reversed the decision. Also banks hated the rule since they were getting pulled into commercial disputes.
    http://www.mikkelborg.com/news.php?id=3637
    From a legal point of view the Jaldhi decision is fascinating to read, because it basically states that “the real reason we are reversing is that we are getting flooded with weak cases, but to reverse we have to come up with a legal justification and so here it is.”

  • http://www.master-insurance.com Ringo Ma

    As a risk management and insurance advisor, we always suggest our American clients to include hold harmless, indemnification, insurance and surety bond clauses in the contracts they’d sign with Chinese counterparties. Usually it works pretty well that no insurance/bond, no deal.