How to sue a company in China

8 min.

19. November 2021

Due to the corona pandemic the demand for Chinese products especially in the medical sector has increased rapidly. That is why a growing number of companies do business with Chinese suppliers or firms. Unfortunately, the Cooperation with firms in China does not always work smoothly, but sometimes turns out to be very asymmetric: Maybe you ordered face masks from China and already paid for it but the quality you are receiving is not satisfying – or even worse – you do not receive your products at all. Instead, you get empty promises and delays.

If you are facing problems like this with your Chinese partner there is no need to accept the situation. In contrary: Fight for your right and there is a great chance for you to win – so how to sue a company in China?

Ecovis Heidelberg has dealt with many cases in which German companies have successfully sued Chinese factories for failure to deliver goods in a timely manner, and we would like to share our experience in cross-border litigation against Chinese companies.

*(After our German client had transferred money at the designated time, the Chinese supplier failed to fulfill the contract and deliver the agreed amount of goods at the designated time. Because of that our German client missed the peak-time of the demand and therefore lost sales. After unsuccessful negotiations with third parties in Germany, our client pursued juristic consultation and remote assistance with the lawsuit in China.

In the end, we sued the firm in China and our client could get the paid money back. The whole process took only around 3-4 months. )*

Overall, the predictability of legal decisions in China is getting much better. According to our experience, the treatment of foreign and Chinese firms before Chinese courts is fair and equal – if the correct strategy is chosen.

How to proceed?

For analyzing if suing the contractual partner is a good option and finding the right strategy, you should consider following points:
Do you have written contractual arrangements?
Who is your contracting partner? (private firm or state-owned enterprise)?
Where is the contracting partner based in China (different location leads to different strategy)?
What is the volume of EUR/RMB in dispute?
Is there any agreement about the jurisdiction /court?
Do you want to block the contrary’s bank account?

You should consider that litigations concerning
real estate disputes
disputes arising from harbor operations
inheritance disputes
disputes arising from the fulfillment of contracts between Chinese-foreign joint-ventures, contracts between Chinese-foreign jointly operations and contracts between Chinese-foreign cooperation for exploration and development of natural resources

are under the exclusive jurisdiction of the Chinese courts.

In legal disputes concerning any other areas the parties can choose between foreign or Chinese jurisdiction. The location of the court just must be “actually connected” to the dispute.

Such can be
the place of domicile
the place where the contract has been signed
the place where the contract is performed
the place where the subject matter is located.

Which documents are needed?

If you decided to sue a company in China documents demanded by the Chinese courts are:

power of attorney
subject qualification document
representative figure’s identity document
extraterritorial evidence

For blocking the contrary’s parties account, an application for preservation of property is also needed.

How to legalize the documents?

Documents formed abroad should generally be notarized and authenticated abroad, and then be translated and notarized by a Chinese notary office before it can be used as effective evidence for court prosecution.

Which court in China is responsible?

According to Chinese law, major foreign-related cases are under the jurisdiction of intermediate people’s courts, and foreign-related cases that are not „major“ are delegated to the jurisdiction of basic people’s courts. Foreign-related cases are under the jurisdiction of foreign-related courts or special collegiate bench, and foreign-related civil disputes are not subject to small claims procedures. The scope of arbitration must be contract disputes and other property rights disputes (mainly refers to disputes caused by torts).

Summary

As a foreign company solving a dispute with a Chinese company can be a very time consuming and complicated process. With the right strategy and knowledge about the Chinese law system, litigation can end successfully.

Ecovis Richard Hoffmann Heidelberg is a German law firm specialized in dealing mainly with Chinese customers and Chinese related issues. If you have any questions, do not hesitate to contact us.