My law firm’s international dispute resolution lawyers are often asked to write demand letters to Chinese companies that owe money to our clients. These letters are very different from what we would write were we seeking to collect money owed by an American or European company.
Demand letters to American and European companies are typically fairly long. They usually spend considerable space setting out the facts and the relevant law. They then usually conclude by stating what we would expect to get from a court and then conclude by talking about how it is in everyone’s interest to seek resolution and towards that end, we will accept something less than what the court (or jury) would give us.
The recipient of these letters usually responds by pointing out the holes in our client’s case and emphasizing how difficult and expensive it will be for us to pursue litigation to collect anything. Something over 95% of U.S. business law cases settle.
China is different.
In When Your Supplier is not Arguing to Win, David Dayton of the Silk Road International Blog explains some of this difference and posits that Chinese companies simply do not care about arguing towards a logical conclusion:
Americans tend to argue to resolve specific points (words, dates, statistics, etc.). Ideally those individual points will be acknowledged and eventually the argument will reach a “logical” conclusion—each side’s specific points have been resolved to some mutual agreeable level. I guess you can say that you “win” an argument by getting as many of your specific concerns resolved to your satisfaction as possible (without giving up too many to the other side). This interpretation doesn’t preclude win/win either—you still want to get as many of your personal issues resolved as you possibly can, you’re just going about it by allowing the other side the same goal in the hope that it’ll actually get both of you a better resolution in the end.
But in 12 years in China, I can honestly say that I’ve only had this progressing-to-a-logical-conclusion type of argument a couple of times (and no, I’ve NEVER had a win/win type factory relationship—even when we’ve consciously tried to structure it—there just isn’t enough mutual trust on either side). It seems to me that both the point of and the process of arguing is completely different in China.
David has worked with hundreds (thousands?) of Chinese factories and whether you choose to believe him or not, we have found that the most effective demand letters to Chinese companies usually consist of one to two pages and dispense pretty much entirely with the law and are rather light on the facts as well. Our demand letters (always in Chinese) typically set out as fact (without any explanation) that the Chinese company owes our client X dollars from its failure to do Y. We then let the Chinese company know in no uncertain terms how miserable and expensive we will make their lives if it does not pay our client and fast.
The Chinese company typically responds by saying it will never pay our client anything and it usually provides some sort of vague reason for this, like “your client is a liar” or “your client promised it would make another order from us” or “your client does not understand China.” We then reiterate the horrible things we previously described would happen to the Chinese company if it does not pay fast and then things move on (or not) from there.
What are you seeing out there?