One law does not a legal system make
One law does not a legal system make

I assume every lawyer has had a client who starts out emphatically stating exactly what the law is and exactly what you as the lawyer should do for them in light of that law. The biggest problem with this sort of client is they are usually wrong. They are wrong because they usually have read just one law and, without any context, they assume it applies 100% everywhere. A classic example in the United States is those who believe First Amendment free speech rights apply everywhere, when in fact they most certainly do not. A U.S. employment lawyer once told me it is commonly believed private sector employers cannot fire someone for what they say. This is dead wrong.

I thought of this today after reading a New York Times article on artificial intelligence, entitled, The End of Lawyers? Not so Fast. Among other things, this article concludes that robots will not be replacing lawyers any time soon. One reason no doubt for this is that real life human to human (and judges and bureaucrats are human) can trump the written. All of this is to segue into what I see as an example of a potential client who sought to interpret Chinese law as a computer might.

A while back, I got an email from a U.S. company instructing me to force a particular Chinese company into a China bankruptcy and then use that bankruptcy to seize the Chinese company’s assets and then sell them at a judicial sale to generate funds to ensure payback on the debt. This company (the email was from a non-lawyer) not only told me exactly what I needed to do to achieve all this but they included a really cursory English language write-up of a PRC Supreme Court judicial interpretation making “clear” how “easy” it would be to do what they were proposing we do. As a nice finishing touch, the U.S. company noted that because taking this action would be “so clear” and because they are just a “small company,” they would “expect” our fee for doing this would be low.

My response (which I no longer have so I am really just winging it here) stated as follows:

What you provided me is one judicial interpretation, standing alone. What matters in China (and in pretty much every other country of which I am aware) is not just what one law says, but how things are actually done. Here in the United States, when our firm has a large litigation matter in another state we bring in local counsel even though we are eminently capable of reading the court rules. But just reading the court rules is not enough because they are always going to be silent on many things and even sometimes flat out wrong in terms of how a particular court or even a particular judge handles thing. Without knowing the local flavor, you can be lost. This is even “more true” in China and this is certainly true of China bankruptcies, which are still very rare in China.

And here is the thing about China bankruptcies. Whenever I talk with other China attorneys about their experience with China bankruptcies they look at me like I have two heads and mumble something about how there pretty much is no such thing. Sometimes they will jokingly lecture me about how one should not expect a Chinese judge to “break harmony” by putting a Chinese company under and throwing people out of work. But on one level they are not joking and I just do not see a Chinese court throwing a Chinese company into bankruptcy in favor of you getting paid on your $270,000 debt. That is just not how Chinese courts operate.

So though we would be happy to take on this matter for you, you should realize it is anything but the sure thing you seem to believe it will be and it will be anything but cheap either.

Back in 2011, in The Basics on China Litigation, I listed out a number of “rules” for litigating in China and one of them was that you should “think about the equities of your case, not just the law. Ask what is fair and what would be good for China.” Putting a Chinese company into bankruptcy to pay a foreign company on a debt does not jibe with this rule. This Reuters article nicely sums up the realities of China bankruptcies: “Courts also have wide discretion on whether to accept bankruptcy filings and must work closely with local government officials, who are generally more concerned about jobs, local tax revenues and social stability than creditors.”

I never heard back from the US company that wanted us to push their Chinese debtor into bankruptcy, so I have no idea whether they decided to pursue the involuntary bankruptcy or just sought out another lawyer who would tell them what they wanted to hear. But there is definitely a very simple lesson to be learned here: one translated law does not a legal system make.

China laws as written versus China laws in real life: there is a connection, but it sure isn’t one to one.

You agree, right?

 

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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.