Legal issues involving Chinese (PRC) business parties

Some thoughts and insights I learned from my recent trip to Shanghai, China.

1:  When doing business in China, draft agreements / contracts in Chinese, use Chinese law as governing law, be very detailed about addressing all possible scenarios, be specific about enforcement provisions. Then the likelihood of successful enforcement of contract is higher.

2: How civil law suits are treated in Chinese courts vary depending on the province and city. Cultural variances matter. Local knowledge of legal culture and practice is key. It’s important then to have a bridge between you and the local Chinese lawyer who can speak both your language and Chinese, understand the legal nuances of what the Chinese lawyer is advising, and thus translate that legally (not linguistically) and advise you accordingly. Singapore lawyers can play that role.

3: When doing cross-border business or international trade with Chinese parties, do your due diligence, ensure contracts are drafted properly with the Chinese party properly identified and dispute resolution and enforcement terms properly defined. Creative ways to do due diligence are necessary. Consider performance bonds and personal guarantees where much is at stake.

4: China is party to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. So that is a good process to adopt. It’s not uncommon for Chinese parties in international contracts to choose SIAC for arbitration.

Likelihood of enforcement of foreign arbitration awards vary across provinces and cities. Again, culture matters. This is corroborated by research on this (

5: Enforcement of foreign court judgments in Chinese courts depends on reciprocity. If Chinese court judgments are recognised and enforced in that foreign court, the Chinese court will also recognise and enforce that foreign court’s judgment. Good to know that there have been enforcements of Chinese court judgment in the Singapore High Court (Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2014] SGHC 16) and conversely, of a Singapore High Court judgment in the Nanjing People’s Intermediate Court (Kolmar case).

6: The Belt & Road Initiative (BRI) will present many legal issues for stakeholders. China will set up 3 international commercial courts to address disputes arising from the BRI. Details are not finalised. Perceived lack of neutrality may be a concern. But enforcement against Chinese parties may be more likely. Conversely, Chinese parties may find it difficult to enforce against their foreign counterparties. Neutral dispute resolution avenues such as SIAC or ICC may be helpful.

7: The number of BRI projects and opportunities will continue to increase. There will also be spillover benefits from the BRI to smaller businesses and SMEs across South-East Asia. Consider joint venture structures with the Chinese parties. Conduct legal and financial due diligence. Negotiate with Chinese in Chinese. Singapore lawyers can be the cultural, linguistic and consultancy bridge between the Chinese and our other ASEAN friends.

8: Chinese businesses and individuals are keen to take their funds out of China and invest in Singapore and ASEAN businesses or acquire them to scale their own business and get a foothold in the wider regional market. Take advice on the best way to take and win, or lose to a competitor who does.

9: The Chinese market remains a huge one for Singapore and other SEA businesses to venture into. There are still Chinese blue oceans. Many cities are still expanding and growing rapidly. Again, having professional advisors and consultants to bridge the cultural, linguistic, relational gap is extremely helpful. Singapore businesses must be daring. We met a few Singapore business people who came out here years ago and took the risk, and have done well.

10: The Chinese are increasingly placing more weight on trade mark protection, as their own Chinese brands grow. A more level playing field may therefore be assuring for foreign businesses going in. As for other types of intellectual property (IP), e.g. patents and designs, well you should apply for them anyway.

#CovenantChambersLLC #ChineseLaw #SingaporeLaw #SingaporeLawyer

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