Whenever a Western company loses a business dispute, it usually
accepts the ruling of the court and pays up (assuming appeal is no
longer possible). Chinese businessmen tend to hold a different
view: it ain't over until it's over.
When entering into a transaction with a Chinese counterpart,
enforcement of the agreement should already be taken into account
during negotiations. A (foreign) bank guarantee or escrow is of
course a good solution, but this is often a non-starter for the
Chinese side.
Many foreign investors hold the view that arbitration outside
China is the best way to settle disputes. This is, however, based
on a limited understanding of how enforcement in China works in
practice. We often advise clients to opt for a Chinese language
agreement (with English translation) under Chinese law, with
dispute resolution in China.
