Suing Chinese Companies in US Courts

Yesterday, we did a post on Serving Complaints on Chinese Companies under the Hague Convention and I concluded that post with the following:

Tomorrow, I will discuss why it oftentimes makes no sense to sue Chinese companies in U.S. courts, but also set forth some situations where it makes all the sense in the world.

Tomorrow is now today (actually, because I just landed in the U.S. from Korea, yesterday is today) and so I am going to talk about when it makes sense to sue Chinese companies in U.S. courts and when it does not.

U.S. judgments have virtually no value in China. There is no treaty nor any reciprocal arrangement between China and the United States regarding recognizing or enforcing civil court judgments of the other country and Chinese courts simply disregard U.S. judgments.

SeeĀ Chinese Companies Can Say, “So Sue Me”

My law firm’s international litigators constantly get contacted by American lawyers who want to retain them to enforce their U.S. judgment in China against a Chinese company. We tell them that Chinese courts do not enforce U.S. court judgments and they invariably do not take it well, mostly because they now need to explain to their clients why they spent so much time and money securing a U.S. judgment that likely will have no value whatsoever. So if your only reason for suing a Chinese company in a U.S. court is so you can take that judgment to China and collect, you should probably not even bother.

But this does not mean suing a Chinese company in a U.S. court never makes sense, because there are many instances where it does, including the following:

1. The Chinese company has assets in the United States;

2. The Chinese company has assets in a country that enforces United States judgments (Canada, South Korea and England spring to mind);

3. The Chinese company does business with United States companies that do not pay the entire amount upfront for the goods or services they get from this Chinese company. In these circumstances it may be possible to use the U.S. court judgment to seize funds owed by the U.S. companies to the Chinese company;

4. The Chinese company has plans to come to the United States and your judgment against it will put a real crimp in that; or

5. You are the defendant in a case and there are legal benefits (like sharing the liability) or strategic or even psychological benefits to being able to tell the court or the jury that you served the Chinese company with the complaint in the case but it has chosen not to show up. This last reason should not be underestimated as my firm has handled Hague service of process on Chinese companies a number of times in these sort of situations.

There is some other reason — perhaps political or reputational — for why the Chinese company does not want a U.S. judgment against it.

What do you think?

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