Everyone wants to save a buck or two. I get that.
But to stick with the clichés (but throw in a new currency), there is also such a thing as being penny-wise and pound foolish. To put it bluntly, trying to save money on your China legal fees is usually not the right call.
One of the things I do at the end of each year is to check in on companies that chose not to retain my law firm for various reasons during the year. Sometimes it is because they went with a friend. Sometimes it is because they went with a local lawyer not steeped in China. Sometimes it is because they chose to do it themselves. Almost invariably it is because they chose not to spend the money and almost invariably I hear back from them that they wish they had.
I am right now dealing with a different issue. A really good friend of a really good friend who claims not to have the money to do things completely on the up and up in China keeps asking me for advice on how he can do things on the cheap there. I hear from my really good friend that his good friend is “really messing up” in China but doesn’t know it and yet the very last thing I want to do is to tell this person that. Really, the only thing I want to do is not to have to tell him anything.
A few weeks ago though I got an email from him that said the following (I’ve changed it quite a bit so that even he will not be able to recognize it):
Everything is going great with the WOFE and I’ve been following the advice on your blog throughout the whole process. We made sure to get the company scope right. I also bought Grace’s China Employment Law book which I LOVE. It has helped me immeasurably. What would you recommend to someone who needs to draft a good employee handbook (or as Grace calls it, Rules and Regulations) but can’t afford a top-tier law firm like Harris Bricken? I know from the blog that templates are a no-no, so what’s a cash-strapped start-up to do?
The below is the email I wanted to write, but didn’t:
I just hope you are right about your scope, but there is almost no way you are. Scope problems with WFOEs rarely show up quickly and that is what makes them so insidious. You go to a second-rate WFOE formation company whose goal is to get you a new WFOE as quickly and cheaply as possible and you think that should be your goal as well. One of the easiest ways to get a WFOE quickly and cheaply is to give it a narrow scope. This helps ensure a successful WFOE formation but it also usually helps ensure that your WFOE will get into trouble with the government for operating beyond its scope. You need a WFOE that is legal now and legal one year and three years from now as well. When our China lawyers work on a WFOE formation we always drill down to determine what our clients want to do now and 3-5 years from now and we draft accordingly, even though this can slow down the WFOE formation process. We are just not willing to hand our clients a WFOE with a one-year shelf life.
As for an employee handbook, you have read Grace’s book and so you know how critical it is these be well-crafted in both Chinese and in English. I know of no law firm with a specialized China employment lawyer who is truly bilingual Chinese and English who doesn’t charge what you would call “top-tier law firm” prices.
Instead, I mumbled a few platitudes and wished him well, knowing this person will likely fall off a cliff no matter what I say.
I also got an email from the son of a personal friend who is looking to buy a really high-risk product from Chinese manufacturers (think fireworks, but it’s not fireworks). His email (changed so as to make it so nobody can identify it), is as follows:
I have done more digging into sourcing fireworks from China and I am heeding your advice on the risks and I have recently talked with other lawyers and a couple insurance brokers regarding my situation. They are recommending I find a way to partner with the Chinese manufacturers and act as their North American distributor and that I seek protection under the Chinese company’s insurance. Do you have any recommendations regarding the type of paperwork I would need to hold the factory accountable for potentially defective products?
My response was to suggest this is probably not a good way to go, but below is the response I wanted to send:
Are you kidding me? Who the heck are these people giving you this advice because they obviously do not know insurance, China, or US product liability laws. Just because you are the distributor of a product made by someone else does not in any way let you off the hook if the products you are distributing are defective. This is especially true if you are getting your products from China. I am constantly consulting with such distributors and their insurance companies on this very issue after they have been sued.
Getting insurance from Chinese companies is almost always a waste of time and, honestly, whoever suggested otherwise to you almost certainly does not understand China. Here’s our explanation on this. I’d do the opposite and set myself up so that I’m as close to judgment-proof as possible.
In the old days, we used to refer people like these to Chinese law firms but now the good Chinese law firms charge pretty much the same as the good American and British law firms and we are not in the business of handing anyone over to someone in whom we ourselves do not believe.
Just not sure what to do with these sorts of requests beyond mouthing platitudes and then writing on here….