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Suing Chinese Companies For Product Liability. It Is Possible….

Posted in Legal News

In the last couple of years, we have seen a tremendous increase in cases involving U.S. companies (and lawyers) wanting to sue Chinese companies for Chinese manufactured product that has injured someone. These cases coming to us typically involve one of the following scenarios:

  • A US retailer or importer is being sued by someone injured by a product sold or distributed by the American company. The injured party has sued the retailer/importer/distributor because suing and collecting from the Chinese manufacturer will be so difficult. The retailer/importer/distributor (or its subrogated insurance company) wants our assistance in figuring out who to sue in China and how to go about doing so.
  • A US lawyer representing an injured consumer wants our assistance in figuring out who to sue in China and how to do so in a way that will actually lead to the injured consumer receiving real money.
  • A US company or US lawyer just secured a judgment against a Chinese manufacturer and wants our assistance in figuring out how to collect on that judgment.

So what do we usually suggest?

Suing Chinese companies in either the United States or China is difficult.

If you sue the Chinese company in the United States, it will likely claim that the United States lacks personal jurisdiction over it. This can be very effective for the Chinese company that does business only in China and that has been smart enough to set up an intermediary company in Hong Kong (usually) that ships the product to the United States. Here’s the scenario: China company manufactures widget and sells it to Hong Kong company. Hong Kong company then sells the widget to American company and China company then claims it never did any business with the United States and thus cannot be subject to personal jurisdiction there. The trick then becomes trying to show that the Hong Kong company is essentially the China company. This is not going to be easy.

Even assuming that you can convince a US court to assert jurisdiction over the Chinese company, the Chinese company may not even bother fighting against your getting a judgment against it. The problem is that Chinese courts do not enforce US judgments and so for your US judgment to have any value, you must be able to use it to collect from the Chinese company outside of China, in a country that will enforce your US judgment.

You can usually sue the Chinese manufacturer in China, but this approach has its own set of difficulties, ranging from the difficulty in securing evidence to enforcing any judgment (which will probably be a lot less than the judgment would be in the United States).

But there options beyond suing in the US and China. Many countries enforce US judgments and so US companies must start “thinking globally” in deciding what actions to pursue against Chinese manufacturers.

When we are brought on to assist in seeking compensation from Chinese manufacturers, the first thing we do is to seek to locate where the Chinese company has assets. We then research whether the country (or countries) where the Chinese company has assets will enforce a US judgment.

For example, assume the Chinese company has assets in Korea, Canada or England. If you can get a money judgment against the Chinese company in the United States, you likely will be able to “convert” that US judgment to a Korean or a Canadian or an English judgment and then use that judgment to collect on the Chinese company’s assets in the particular country.

As Chinese companies continue going global, you can expect it to become easier to collect on judgments against them, so long as you realize what must be done to accomplish that.

For more on what it takes to sue a Chinese company, check out the following:

  • http://www.sinoblawg.com/ Doroto

    Hi Dan, that is really something to say about suing a Chinese company. I have thought about this approach before and i am glad that you confirm it in your post. The key is to figure out where a meaningful asset of the Chinese company is located.