international litigation lawyers China

As China’s relationship with the outside world continues to deteriorate (especially with the United States and to a somewhat lesser extent with  Australia and Europe) the number of lawsuits and potential lawsuits between Chinese and foreign companies is rising. Lawyers do best in times of great change and that is even more true of attorneys that focus on litigation and arbitration and litigation thrives in down times. Thriving  companies see lawsuits as a distraction; sinking companies view it as a lifeline. During downtimes, lawsuits are a way to secure profits.

In part one of this series, How to Sue a Chinese Company, The 101, we focused on jurisdiction and service of process issues and we noted the following:

This post assumes you have brought a lawsuit against a Chinese company in the United States and deals with how to conduct discovery against that Chinese company. Why are we writing about suing a Chinese company in the United States right after noting how Chinese courts rarely enforce U.S. judgments? Because despite this, there are often very good reasons to sue Chinese companies in the United States, first among them is because the Chinese company has assets in the United States. Second, it sometimes will make sense to get a U.S. judgment and then take that judgment to another country in which the Chinese defendant has assets and which enforces U.S. judgments. We have found South Korea, Canada, Hong Kong, Taiwan and the United Kingdom to be excellent for this.

Discovery

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 a party to a U.S. lawsuit, it is bound by the normal discovery rules of whatever court in which it is the defendant. However, discovery in China can be difficult/impossible. Apart from the restrictions placed on discovery by the Chinese government, few Chinese companies are accustomed to U.S.‐style discovery, and they often consider compliance to be optional.

Deposition Discovery

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 that it would not be 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 U.S. v. Leung Tak Lun, et al., 944 F.2d 642 (9th Cir. 1991) but advised the United States that its grant of authority for that one deposition should not be regarded as precedent and there has been no subsequent record of China permitting a deposition. Conducting a deposition in China may lead to arrest, detention, or expulsion. In other words, don’t even think about it.

The best way to depose a China‐based witness is to have that 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 by video or telephone from the United States. Deposition by written questions is yet another option.

Document Discovery

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 in which the legal action is pending. The court/judge should transmit its document discovery request 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, though document discovery for trial purposes is permissible, the “fishing expedition” discovery for which the United States has become famous is not.

Yet even for the document discovery authorized in China, it is unlikely 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.

 

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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.  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.