I gave a talk last week before the Alaska Bar Association’s International Lawyers Section on “What Lawyers MUST Know About China”., but if I had given it a subtitle, it would have been “the biggest mistakes foreign lawyers make when dealing with China.”
Here’s the outline I used, with a few additions/clarifications in italics. This is very much a bare-bones outline, but it does highlight some of the most common and dangerous mistakes typically made by foreign lawyers who think “China’s laws just can’t be that different.” Trust me, they are.
1. China Company Formation
— Spend after formation. Companies too often spend money too soon for their expenditures to apply to China’s minimum capital requirement for new entities.
— Is it legal? On a number of of occasions, my firm has been called in to register a WFOE for a US company that has already spent substantial sums scoping out the Chinese market, without knowing that what they propose to do in China is illegal.
2. China Contracts
— Who’s your counter-party? Spend a little, save a lot. Be diligent with your Due Diligence.
— Arbitration is the only solution, except when it’s not and it’s usually not.
— Can you say litigation carve out?
— Arbitration clauses ain’t easy
— How to get your Christmas lights before Christmas. If you do not put it in your contract, you should pretty much assume it does not exist.
— You want your molds back? You better make clear in writing that they belong to you.
— Contract language/Arbitration language — If you are going to be in a Chinese court, your contract should be in Chinese. If you are going to be arbitrating before CEITAC and you want it to be in English, you need to state this in the contract.
3. Protecting Your Intellectual Property from China
— Register early and often, except patents
— Make your NDAs China-specific NNNs
— Why, why, why? The Peoria test.
— Control is always critical yet nearly always illusory.
5. Employment Law
— How does lifetime tenure for everyone sound?
6. Choosing Your Lawyer
— English and Guanxi. Both are overrated.
— Lawyer ethics and confidentiality. Be careful.
7. The law is everything and nothing
— Bankruptcy law. Try it.
— Antitrust law. You’ve got to be kidding.
— New Company law. Yes, but.
— Employment Law. Who stole my regs?
— Ex post facto. Sure, why not?
— Obsolescence at warp speed.