Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments or phone calls as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a quick general answer and, when it is easy to do so, a link or two to a blog post that provides some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.
I got a super-short email this morning from a U.S. lawyer I do not know, asking me “What language should I use for a contract with a Chinese tech company.” I am going to give my answer below and direct him to this post.
That depends. It depends in large part on where you are going to have disputes resolved. If you are going to have disputes resolved in a US court or before a Canadian or British arbitrator you are probably going to want to have it be in English. But then you probably should have US or Canadian or British law apply to it. If your contract is calling for disputes to be resolved before a Chinese court, it should probably be in Chinese. I first ask where the dispute should be resolved so as to most benefit my client and after I make that exceedingly difficult decision the right language usually becomes crystal clear.
For various reasons (chiefly enforcement) we draft most of our contracts provisions stating that disputes will be resolved in a Chinese court. At that point it becomes critical for the contract to actually be enforceable in China. That usually means the following there things are critical:
1. The contract be governed by Chinese law. Chinese law will permit your contract to be governed by foreign law. However, because Chinese courts will require you to prove every relevant element of foreign law choosing foreign law for a dispute in a Chinese court almost never makes sense. Having to prove foreign law will be expensive and will likely lead to delay. Most importantly, the other side will dispute the application of foreign law, rendering your case and even any judgment you receive uncertain.
2. The governing language of the contract should be Chinese. Chinese law will permit you to provide for English as the governing language of your contract, however Chinese courts will only work with Chinese language documents. This means your contract will need to be translated into Chinese by a court appointed translator. The translator is often not particularly skilled and the resulting translation is often simply wrong. Even when the translation is correct, the other side will usually dispute the translation, leading to delays and ultimate uncertainty in the decision. Having someone else translate your contract after you sue means you will not know exactly what it is on which you are suing until after you get the translation back. Sometimes Chinese courts simply refuse to hear a case that involves contracts in a language other than Chinese.
3. The contract should be enforceable in a Chinese court with jurisdiction over the Chinese company. This normally means jurisdiction in a court in the district where the Chinese company has its principal place of business.