Just received an email from a friend stating/asking the following (note that I have changed some elements of the email to strip it of any even potentially identifying information):

I am heading off again to work for a few years at our China Rep Office.  My new employment contract with the head office says that [foreign country] law will apply.  Will it?  And what if there is a conflict between [the foreign country] law and China’s laws, which will control?

We get this question far too frequently and we have seen way too many employment contracts written as though U.S. law (it was actually not a U.S. company in the above instance) applies all around the world. The reality is that if you are working for a Chinese company in China (be it a Rep Office, a WFOE, a JV, or whatever), Chinese law is going to apply to your employment relationship.  I know of no country that would allow otherwise.  I mean, imagine if a United States subsidiary of a Pakistani company were to claim in a U.S. court that it should not be required to pay overtime because their contract with the employee calls for Pakistani law and Pakistani law does not provide for that, or that it can discriminate against women because there is no such law prohibiting that in Pakistan?  Even if the employee at issue were a Pakistani citizen, there is absolutely no way in the world a U.S. court would go along with any of those arguments.  In fact, the argument is so bizarre I am not even aware of anyone ever having made it.

Any employer-employee relationship between a Chinese company and an employee working in China is going to be governed by China law, no matter what the contract says.  So in China there would be no conflict of laws because Chinese law would simply apply. This is why we also advocate for drafting China employment contracts and employee manuals with Chinese as the official language.  Chinese courts and Chinese administrative bodies are the only rightful jurisdiction for China labor law disputes stemming from employment in China (yes, this is true for expats too) and so it only makes sense to have these documents in the language they are sure to understand.

Here is a more interesting/complicated related question: what would happen if a U.S. company had a contract with a U.S. citizen and that contract provided that the U.S. citizen would go work at the U.S. company’s WFOE for a few years and that contract called for application of U.S. law.  Now as I have said above, no Chinese court would apply anything but Chinese law to this relationship, but what would happen if the U.S. citizen were to flip around and sue the U.S. company in a U.S. court for failing to abide by some particular U.S. law?  I do not know the answer to this question (any U.S. employment lawyers out there), but I can tell you that if it were to benefit my client, I would argue that Chinese law applies and I think I would prevail on that.  But, I can also tell you that if it were to benefit my client, I would argue that U.S. law applies.

Anyone know how a U.S. court would rule?

Yesterday, I did a post, entitled, “Drafting A China Manufacturing Agreement. Watching The Sausage Get Made,” seting out many of the questions we typically ask our clients before we begin drafting their OEM agreements. A reader, Phil,  left us the following comment to that post:

Can I ask about the wording of your agreements in Chinese? A deal I’m involved with has been running into a lot of trouble because the American law firm who wrote our contracts have written them in highly complex legalese, very different to the language of Chinese law and standard Chinese contracts. In the third tier city where we are trying to operate, our partner and potential collaborators are having real trouble just reading and understanding the documents. (I’m a translator, and I’m reasonably sure that both sides are right on this – the contracts are correct, but they really are very difficult to read.)
How does your firm walk the line between the conventions of English (American) legal drafting and Chinese drafting?

Great question.

We write our contracts the modern way. By that I mean that we eschew legalese (and using strange words like “eschew“) and we strive to avoid unnecessary boilerplate. This is true of our contracts in both English and in Chinese. Most importantly though, we do not really need to “walk the line between the conventions of English (American) legal drafting and Chinese because of how we draw “the connection” between our English version of a contract and its Chinese version.

When we draft a contract for a client, we first draft it in English. We do this for the benefit of the client and we work with the client using the English language contract. Once we have finished the contract in English, we then move on to re-writing it in Chinese. Notice how I did not say “we then translate it into Chinese.” We use lawyers and only lawyers to take the English and re-write it into Chinese and the re-write is not a direct translation. 

Just the other day, in an effort to save a few bucks, a potential client asked me if we would reduce our flat fee on a contract by $300 if he had his own people translate our English version into Chinese. My response was that if we gave such discounts, it would be greater than $300, but that my firm will not do a China contract unless we do both the English and the Chinese. As I wrote in “No China Translation. What Were You Thinking?” and in “Dual Language China Contracts Double Your Chance Of Disaster,” we do not write dual-language contracts. The contracts we write have one official language and that language is nearly always Chinese.