Nice post today over at Asia Business Intelligence on the value (or lack thereof) of US judgments against Chinese companies. The post is entitled, “What Happens When Your Chinese Supplier Says: Sure, Go Ahead, Sue Me!”[link no longer exists].

The gist of it is that Chinese courts basically ignore US judgments and here is why this is important to know:

Here lies an important lesson for American companies doing business with China. Don’t expect you can take an American judgment against a Chinese company to China and sue upon it. Your American judgment will not be recognized. Your more likely remedy would exist when the Chinese company has established sufficient presence in the US, such that you can sue the company in an American court. But unless that Chinese company has assets in the US upon which you can levy, you are unlikely to recover very much at all.

What implications does this have, exactly? For importers, for example, the Golden Rule is to guard your money carefully — before you even enter into a transaction with a Chinese exporter. Do not pay up front and then expect to receive product. You may not receive it once the money has left your hands. You will simply have no recourse.

This post is wrong to say “You will simply have no recourse,” because there is recourse to the extent that you can hire a licensed China attorney and sue the Chinese company in China. But it is right to say there is no point in suing in the United States.

We wrote on this same issue back in March, 2006, in a post entitled, Enforcing Foreign Judgments in China — Let’s Sue Twice. In that post, I talked about how the China lawyers at my firm get many calls from United States and European lawyers and companies seeking our help getting their US or European judgments enforced in China against Chinese companies, and then I played out a typical such call:

Caller: I have a two million dollar judgment against Chinese company X in China, can you help me enforce it?

China Lawyer: Is it a default judgment here in the United States?

Caller: Yes.

China Lawyer: The Chinese courts don’t enforce United States’ judgments and though they often at least look at the basis for a United States judgment on the merits, they don’t give any credence whatsoever to United States default judgments. Did you discuss this possibility with your U.S. lawyer before you sued here?

Caller: [long silence] …. Yes. He told me getting a judgment here couldn’t hurt?

China Lawyer: Did he charge you to get it?

Caller: Yeah. I had to pay him and I had to pay all sorts of people to get that company served in China.

China Lawyer: Sorry.

We concluded that post with this advice:

Bottom Line: Don’t bring a lawsuit outside China against a Chinese company without first making sure there is some benefit in doing so.

Our advice stands.

Dan Harris

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

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My 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.

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

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am 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 me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus 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.