This is part 2 of our series on how to sue a Chinese company. This series of posts addresses what to do should do to seek redress against a Chinese company that owes you money or has wronged you. It is based on an article I wrote for Bloomberg Law and on an article I wrote for the Wall Street Journal, Chinese Companies Court Disaster. Please note that instead of using footnotes, this post uses brackets, , instead.
The first post in this series focused on how to effect service of process on a Chinese company pursuant to the Hague Convention and on the jurisdictional issues involved in suing a Chinese company. This post focuses on how to conduct discovery against a Chinese company.
Once a U.S. company succeeds in serving a Chinese company in a U.S. lawsuit, discovery can begin. Because the Chinese company is now party to a U.S. lawsuit, it is technically bound by normal discovery rules. However, discovery in China can be difficult. Apart from the restrictions placed on discovery by the Chinese government, Chinese companies are not accustomed to U.S.‐style discovery, and they often consider compliance to be optional.
China prohibits even voluntary depositions from being taken on its soil. In its declaration on accession to the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters, China stated it did not consider itself bound by Articles 16‐22 of the Convention, portions of which would grant consular officers the right to oversee depositions. In 1989, China permitted a limited deposition in the matter before the U.S. District Court for the Northern District of California. U.S. v. Leung Tak Lun, et al., 944 F.2d 642 (9th Cir. 1991). However, China advised the United States that the particular grant of authority for that deposition should not be regarded as a precedent. Indeed, there is no subsequent record of China permitting a deposition. At worst, conducting a deposition in China may lead to arrest, detention, or expulsion.
Instead, the best way to depose a China‐based witness is for the witness to come to the United States. However, if the witness is unable or unwilling to do so, there are several additional options available. One common method is to fly the potential deponent to Hong Kong or to a neighboring country and conduct the deposition there, either in person or telephonically from the United States. [telephonic depositions require court approval from the U.S. court under Federal Rule of Civil Procedure 30(b)(4)] Another possibility is to conduct a telephonic deposition of the witness in China. But because even a telephonic deposition technically occurs entirely within China, it almost certainly runs afoul of China’s prohibition.
Under the Hague Convention on Evidence, China has agreed to allow some limited discovery of documents. Articles 1 and 2 of that Convention provide for document discovery by means of a Letter of Request issued by the court where the action is pending and transmitted to the “Central Authority” of the jurisdiction where the discovery is located. The Central Authority is then responsible for transmitting the request to the appropriate judicial body for a response. However, Article 23 permits a signatory country to “declare that it will not execute Letters of Request issued for the purpose of obtaining pre‐trial discovery of documents as known in Common Law countries.” China has executed such a declaration and, therefore, document discovery for trial purposes is permissible. The “fishing expedition” discovery for which the United States has become known, however, is not.
Yet even for the document discovery authorized in China, it is unlikely that the Chinese Central Authority will instruct a Chinese court to compel production. The U.S. State Department made the following accurate summary of how China tends to respond to U.S. court document discovery requests:
While it is possible to request compulsion of evidence in China pursuant to a letter rogatory or letter of request (Hague Evidence Convention), such requests have not been particularly successful in the past. Requests may take more than a year to execute. It is not unusual for no reply to be received or after considerable time has elapsed, for Chinese authorities to request clarification from the American court with no indication that the request will eventually be executed. See China Judicial Assistance by the U.S. Department of State.
Part 3 of this series will focus on litigation strategies when suing a Chinese company and enforcing U.S. judgments against such companies. Part 4 will discuss arbitrating against Chinese companies and suing them in China.