International contract lawyer

Got the following email from a reader curious as to how my law firm’s China lawyers draft contracts for China:

Can I ask about the wording of your law firm’s agreements in Chinese. I am a translator helping a U.S. company on its contracts and — to put it mildly — things are not going well. The deal I’m translating for has been running into a lot of trouble because the American law firm that wrote the contracts has written them in highly complex legalese. In the second tier Chinese city where the U.S. company is looking to do business, our partner and potential collaborators are having real trouble just reading and understanding the documents. The American lawyers keep saying the contracts are good and that they need to be this complex. They total 78 pages. I’m reasonably sure both sides are right on this — the contracts are correct, but they really are very difficult to read.

How does your firm walk the line between the conventions of English (American) legal drafting and Chinese drafting?

Great question, and the below is my answer.

We write our China contracts the modern way. We do this to simplify, to reduce negotiation time (and failures) and to reduce costs. This means we eschew legalese (and using strange words like “eschew”) and we strive to avoid unnecessary boilerplate. This is true of the contracts we draft in both English and in Chinese and in whatever other language we are using. Most importantly though, we do not need to “walk the line between the conventions of English (American) legal drafting and Chinese because of how we draw “the connection” between our English version of a contract and its Chinese version.

When we draft a contract for a client, we first draft it in English. We do this for the benefit of the client and we work with the client using the English language contract. Once we have finished the contract in English, we then move on to re-writing it in the foreign language Notice how I did not say “we then translate it into Chinese.” We use lawyers and only lawyers to take the English and re-write it into the foreign language and the re-write is not a direct translation. So for China it is a Chinese language China-style contract. In fact, because it is the Chinese side of the contract that is almost always the official version, we view that as THE contract and the English portion as the translation. See Dual Language China Contracts Double Your Chance Of Disaster, in which we wrote about how we do not write dual-language contracts. The contracts we write have one official language and that language is nearly always Chinese.

Just the other day, in an effort to save a few bucks, a potential client asked if we would reduce our flat fee on a contract if he had his “own people” translate our English version into Chinese. My response was that we will not do a China contract unless we do both the English and the Chinese. It is just too risky otherwise.

Way back in 2015, in Using English-Language Contracts in China: My Q&A with China Law Blog, plain language contract guru Ken Adams interviewed co-blogger Steve Dickinson on drafting Chinese contracts. The below are the key portions of that interview, focusing on the importance of keeping the contract simple.

 

Ken Adams: What proportion of contracts between Chinese companies (or government agencies) and non-Chinese companies are in English? If the contracts are in English, is it mandatory that the parties enter into a Chinese-language version too? If so, which controls?

Steve Dickinson: Chinese law provides that the parties are free to choose the language of their contract. If the contract is in two languages, the parties are free to choose which language will control. If the contract is in Chinese and in English and the parties do not specifically choose a governing language, a Chinese court or arbitration panel will take the Chinese version as controlling. If the contract is in English, then the court or arbitration panel will appoint a translator to do the translation. These translators are often not very good, which causes many problems in litigation/arbitration, since the case gets sidetracked in disputes about translation.

Contracts involving a foreign party in China are almost always done in a dual-language format, with English almost always the other language. For example, every contract between Russian and Chinese parties I have ever seen is dual-language, Chinese and English.

Ken Adams: How do Chinese lawyers and businesspeople respond to the traditional (in other words, dysfunctional) prose you find it most English-language contracts? Have they adopted it by osmosis?

Steve Dickinson: Chinese lawyers and businesspeople usually reject traditional U.S. contract language outright. The Chinese use simple contract language. Often, U.S. companies insist on using U.S.-style common-law contracts. The Chinese side never reads the English; they have the document translated into Chinese and they work with the Chinese. When litigation occurs in China, the Chinese court will often say, “This contract is just a translation of a standard U.S. contract. Obviously, the Chinese side did not understand any of it. Therefore, we are going to ignore the key provisions on which you are relying and we are not going to enforce them.” Many banks and investment funds have learned this to their detriment. For example, many foreign-drafted futures contracts have been thrown out in China because the courts concluded that the Chinese party simply did not understand the contract. The result is that the Chinese companies got a free ride, which is not a trivial issue.

It is a much deeper issue than language. Chinese courts, Chinese lawyers, and Chinese business people are not going to agree to legal provisions that have no meaning under Chinese law. If you expect to litigate in China, your document must be in accord with Chinese law. If you expect to be able to enforce your contract in China, you must have a contract that is in accord with Chinese law. Much bad U.S. contract writing involves using ten words to express one concept and drafting provisions so as to address every single possible contingency. For China, only the concept is important. Another motivation for bad U.S. contract writing is to try to draft around case law or statute. China does not care about cases or U.S. statutes. Chinese courts and arbitrators do not allow drafting around the provisions of black letter Chinese law and they do not allow for results that they think are either unfair or in bad faith. Thus, the real issue is not so much bad U.S. drafting methods. The real issue is how the Chinese court views the motivation behind the contract.

I should also add that Chinese lawyers have major problems interpreting U.S. and British common law contracts. Their standard approach is to guess at the meaning and then mistranslate and then work with the mistranslation, leading to disaster on all counts.

I estimate that 99 percent of our contracts are less than 15 pages, and that includes both the English and the foreign language.
In other words, keep it simple.
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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.