International Lawyers

There is an expression applied to those who do something particularly unwise in China: “checking one’s brain at the gate.”

I got a call the other day from an American who told me he was owed more than $250,000 by someone in China.  The American told me he had given this person in China the money so the two of them could start a business in China together.  The Chinese person was now holding on to the money, claiming it as a gift. The American was exploring his options for getting the money back. I asked the American to send me any writings that indicated the purpose of the more than $250,000 he had transferred.  He told me he had no such writings.  He then said that he had been told written agreements were of almost no value in China so he had not bothered with any.

Unfortunately, this is not an isolated example.  We are always getting contacted by companies who bought millions of dollars of product from a Chinese manufacturer with no written mention of quality standards.  We are aware of American companies that brought their “great idea” to China for production, showed their great idea to a Chinese manufacturer without requiring the signing of any sort of trade secret or confidentiality agreement (NDA Agreement), and then had their great idea stolen from them.  We have had calls from companies claiming to be owed millions in commissions from Chinese companies, but without any written commission agreement. We are aware of companies whose former employees have taken nearly all of their China business for lack of any employee trade secret or non-competition agreements. We know of an American company that was blocked from exporting its product from China because someone in China had registered in China the trademark the American company had been using for the last five years.

And the excuses are nearly always the same. “We were told business in China is based on relationships and written contracts would interfere with that and are just not done.”   “We just felt we did not have time to do these sorts of things.”  “The whole reason we went into China was to save money.”  “Nobody told us.”

I thought of all this today after coming across an interesting New York Times article, entitled “Crouching Corruption, Hidden Fraud,” James Ku writes this article in the first person about his stint as the manager of a Shanghai start up company.  Mr. Ku writes that he, like “some of the world’s most experienced business people … made the mistake of ignoring basic business principles when chasing China’s seemingly limitless potential for profit.”

In addition to my law firm’s China work, we do a ton of legal work for other emerging market countries and I cannot remember a single instance involving a country other than China where someone checked their brains at the gate. I bet nobody woke up this morning and said to themselves, “hey, everybody else is going into Cambodia so I better get in there today.”  I wish I could say this about China.

Everyone knows China is booming, but everyone should also know it has plenty of risks that require mitigation just like everywhere else.  In other words, don’t check your brains at the gate.

What do you think?

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network. 

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.