Demand Letters to Chinese Companies: Facts are Optional

My law firm’s international dispute resolution lawyers often write demand letters to Chinese companies that owe money or have failed to abide by a contract. These letters are different from what we write to American and European companies.

Our demand letters to American and European companies are typically fairly long. They extensively describe the facts and the relevant law. Then they explicitly describe what we will get from a court or arbitration panel if the recipient fails to comply with our requests. They then set out what the recipient must do to resolve the case and mention how it is in “everyone’s best interest” to achieve resolution.

The recipient of these letters usually responds by pointing out holes in our client’s case. The response letter usually provides its own extensive factual and legal recitation, then explains why they will prevail. It is usually longer than the demand letter that precipitated it.

China tends to be different.

In When Your Supplier is not Arguing to Win, David Dayton (who actually has a Ph.D in Chinese Business Anthropology), explains some of this difference, and posits that Chinese companies simply do not care about arguing toward logical conclusions:

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).

But in 12 years in China, I can say that I’ve only had this progressing-to-a-logical-conclusion type of argument a couple of times. It seems to me that both the point of and the process of arguing is completely different in China.

Our lawyers have consistently found that one to two page letters that contain very little by way of facts or law are best for all but the largest Chinese companies. Our demand letters (always in Chinese) typically just state that the Chinese company owes our client X dollars from its failure to do Y. They then tell the Chinese company what we will do if it does not pay our client immediately.

The Chinese company usually responds by saying it will never pay our client anything. It usually also provides some vague reason for this, such as “your client is a liar” or “your client said it would make another order from us” or “your client does not understand China.” We then reiterate what will happen to the Chinese company if it does not pay fast and then the Chinese company either responds to indicate that it would prefer to settle. Or not.

For more on how to handle a dispute against a Chinese company check out How to Sue a Chinese Company: The Long Version.