I assume every lawyer has had a client who starts out emphatically stating exactly what the law is and exactly what you as the lawyer should do for them in light of that law. The biggest problem with this sort of client is they are usually wrong. They are wrong because they usually have read just one law and, without any context, they assume it applies 100% everywhere. A classic example in the United States is those who believe First Amendment free speech rights apply everywhere, when in fact they most certainly do not. A U.S. employment lawyer once told me it is commonly believed private sector employers cannot fire someone for what they say. This is dead wrong.
I thought of this the other day after seeing a very long email a foreign client wrote to one of our international litigators explaining exactly how this lawyer should defeat an argument made by the opposing party. The email was very thoughtful and very intelligently written but because the client did not realize that a particular word in a statute did not mean what he thought it did, it was entirely wrong from start to finish. This sort of thing is not at all unusual
A while back, I got an email from a U.S. company instructing us to force a particular Chinese company into a China bankruptcy and then use that bankruptcy to seize the Chinese company’s assets and then sell those assets at a judicial sale to generate funds to ensure payback on the debt.
This company (the email was from a non-lawyer) not only told us exactly what we needed to do to achieve all this, but they included a cursory English language write-up of a PRC Supreme Court judicial interpretation making “clear” how “easy” it would be to do what they were proposing we do. As a nice finishing touch, the U.S. company noted that because taking this action would be “so clear” and because they are just a “small company,” they would “expect” our fee for doing this to be “low.”
My response (which I no longer have so I am really just winging it here) stated as follows:
What you provided me is one judicial interpretation, standing alone. What matters in China (and in pretty much every other country of which I am aware) is not just what one law says, but how things are actually done. Here in the United States, when our firm has a large litigation matter in another state we bring in local counsel even though we are eminently capable of reading the court rules. But just reading the court rules is not enough because they will pretty much always be silent on many things and even sometimes flat out wrong in terms of how a particular court or even a particular judge handles thing. Without knowing the local flavor, you can be lost. This is even “more true” in China and this is certainly true of China bankruptcies, which are still rare in China.
And here is the thing about China bankruptcies. Whenever I talk with other China attorneys about their experience with China bankruptcies they look at me like I have two heads and mumble something about how there pretty much is no such thing. Sometimes they will jokingly lecture me about how one should not expect a Chinese judge to “break harmony” by putting a Chinese company into bankruptcy and throwing people out of work. But on one level they are not joking and I just do not see a Chinese court throwing a Chinese company into bankruptcy in favor of you getting paid on your $450,000 debt. That is just not how Chinese courts operate.
So though we would be happy to take on this matter for you, you should realize it is anything but the sure thing you seem to believe it will be and it will be anything but cheap either. In fact, in the end, I suspect that our advice will be something other than pursuing the bankruptcy route.
Way back in 2011, in The Basics on China Litigation, I listed out a number of “rules” for litigating in China and one of them was that you should “think about the equities of your case, not just the law. Ask what is fair and what would be good for China.” Putting a Chinese company into bankruptcy to pay a foreign company on a debt does not jibe with this rule. This Reuters article nicely sums up the realities of China bankruptcies: “Courts also have wide discretion on whether to accept bankruptcy filings and must work closely with local government officials, who are generally more concerned about jobs, local tax revenues and social stability than creditors.”
I never heard back from the US company that wanted us to push their Chinese debtor into bankruptcy, so I have no idea whether they decided to pursue the involuntary bankruptcy with another law firm or just sought out another lawyer who would tell them what they wanted to hear. But there is definitely a very simple lesson to be learned here: one translated law does not a legal system make.
China laws as written versus China laws in real life: there is a connection, but it sure as heck is not one to one.
You agree, right?
