How to Sue a Chinese Company, Part 2: Discovery

This is part 2 of our series on how to sue a Chinese company. This series of posts addresses what to do should do to seek redress against a Chinese company that owes you money or has wronged you. It is based on an article I wrote for Bloomberg Law and on an article I wrote for the Wall Street Journal, Chinese Companies Court Disaster. Please note that instead of using footnotes, this post uses brackets, [], instead.

The first post in this series focused on how to effect service of process on a Chinese company pursuant to the Hague Convention and on the jurisdictional issues involved in suing a Chinese company. This post focuses on how to conduct discovery against a Chinese company.

Discovery

Once a U.S. company succeeds in serving a Chinese company in a U.S. lawsuit, discovery can begin. Because the Chinese company is now party to a U.S. lawsuit, it is technically bound by normal discovery rules. However, discovery in China can be difficult. Apart from the restrictions placed on discovery by the Chinese government, Chinese companies are not accustomed to U.S.‐style discovery, and they often consider compliance to be optional.

Deposition Discovery

China prohibits even voluntary depositions from being taken on its soil. In its declaration on accession to the Hague Convention on the Taking of Evidence Abroad in Civil and Commercial Matters, China stated it did not consider itself bound by Articles 16‐22 of the Convention, portions of which would grant consular officers the right to oversee depositions. In 1989, China permitted a limited deposition in the matter before the U.S. District Court for the Northern District of California. U.S. v. Leung Tak Lun, et al., 944 F.2d 642 (9th Cir. 1991). However, China advised the United States that the particular grant of authority for that deposition should not be regarded as a precedent. Indeed, there is no subsequent record of China permitting a deposition. At worst, conducting a deposition in China may lead to arrest, detention, or expulsion.

Instead, the best way to depose a China‐based witness is for the witness to come to the United States. However, if the witness is unable or unwilling to do so, there are several additional options available. One common method is to fly the potential deponent to Hong Kong or to a neighboring country and conduct the deposition there, either in person or telephonically from the United States. [telephonic depositions require court approval from the U.S. court under Federal Rule of Civil Procedure 30(b)(4)] Another possibility is to conduct a telephonic deposition of the witness in China. But because even a telephonic deposition technically occurs entirely within China, it almost certainly runs afoul of China’s prohibition.

Document Discovery

Under the Hague Convention on Evidence, China has agreed to allow some limited discovery of documents. Articles 1 and 2 of that Convention provide for document discovery by means of a Letter of Request issued by the court where the action is pending and transmitted to the “Central Authority” of the jurisdiction where the discovery is located. The Central Authority is then responsible for transmitting the request to the appropriate judicial body for a response. However, Article 23 permits a signatory country to “declare that it will not execute Letters of Request issued for the purpose of obtaining pre‐trial discovery of documents as known in Common Law countries.” China has executed such a declaration and, therefore, document discovery for trial purposes is permissible. The “fishing expedition” discovery for which the United States has become known, however, is not.

Yet even for the document discovery authorized in China, it is unlikely that the Chinese Central Authority will instruct a Chinese court to compel production. The U.S. State Department made the following accurate summary of how China tends to respond to U.S. court document discovery requests:

While it is possible to request compulsion of evidence in China pursuant to a letter rogatory or letter of request (Hague Evidence Convention), such requests have not been particularly successful in the past. Requests may take more than a year to execute. It is not unusual for no reply to be received or after considerable time has elapsed, for Chinese authorities to request clarification from the American court with no indication that the request will eventually be executed. See China Judicial Assistance by the U.S. Department of State.

Part 3 of this series will focus on litigation strategies when suing a Chinese company and enforcing U.S. judgments against such companies.

Part 4 will discuss arbitrating against Chinese companies and suing them in China.

3 responses to “How to Sue a Chinese Company, Part 2: Discovery”

  1. Being a legal junkie, it’s really interesting to google the case citations and read the stories behind them.
    In the case of “U.S. v. Leung Tak Lun, et al.”
    http://cases.justia.com/us-court-of-appeals/F2/944/642/34637/
    You have
    “This heroin importation and possession trial was the first time the People’s Republic of China and the United States joined to investigate and prosecute a criminal offense. It ended disastrously.”

  2. Re the statement: “But because even a telephonic deposition technically occurs entirely within China, it almost certainly runs afoul of China’s prohibition.” One would think there was no reason to treat telephonic depositions differently, yes. But I was an expert witness in a case where at least one of the other side’s expert witnesses, a Peking Univ. law professor, was deposed over the phone in China, and nobody thought there was a problem with it. The case is In the Matter of the Arbitration Between Trans Chemical Limited and China National Machinery Import and Export Corporation (US Dist. Ct. for Southern Dist. of Texas), S.D.Tex.1997, 978 F.Supp. 266, affirmed 161 F.3d 314.
    I know the State Department constantly repeats its warning about arrest, detention, and expulsion, but do we know of this ever actually happening? I’ve never been able to figure out (OK, I haven’t looked very hard because I haven’t needed to) which rule in the Chinese legal system prohibits depositions and prescribes detention and expulsion, or worse, as the punishment. After all, a deposition is really nothing but a conversation. What turns a conversation into a deposition is the effect an American court gives it – something that happens in the US, not in China. Law school exam question: Given that conversations in China are legal, what happens if a US attorney flies in and attempts to depose a Chinese witness in connection with US litigation, but because of various procedural flaws does not end up with a record that the US court will accept as a valid deposition. Has he violated any rule of Chinese law?

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