Why Suing Chinese Companies in the U.S. is Often a Waste of Time

How to sue a Chinese company

Just about every month, one of our international dispute resolution lawyers will get a call from a lawyer or company from somewhere in the United States, calling and expecting us to be interested in the great case they are offering us. Lately, we have been getting a bunch of these calls from companies that received massive amounts of defective PPE.

The following are three relatively recent examples (with information changed to hide any identifiers):

1. I have a $16.5 million judgment against this Chinese company on a U.S. tort case. We got the judgment from such and such US court and “all we have to do now” (I swear they nearly always say this, as though they just did 99.9% of the work and we are seven footers who merely need to dunk the perfectly passed ball into the hoop) is get the judgment enforced in China. Do you want to help us on this (again, usually asked as though we are going to jump at this alley-oop pass)? I like to come right back at them by answering, in my most blasé voice possible, “almost certainly not.”

We then will typically ask whether the Chinese company against which they have the U.S. judgment does business in the United States, even though the odds are great that if they did, this lawyer would not be calling us. Then when they say “no,” we ask whether the Chinese company does business in Canada, England, Taiwan, or South Korea (four of the best countries for enforcing U.S. judgments against Chinese companies). They almost invariably say they do not know. We then tell them that it will likely be impossible to get their judgment enforced in China and that the best way to collect on the judgment will likely be to try to seize the Chinese company’s assets in the US, Canada, England, Taiwan, or South Korea or in some other country in which it has assets.

2. I have a $2.4 million judgment against a Chinese company for breach of contract. These calls go exactly as per #1 above, but we also usually lecture them on how the next time they do business with a Chinese company, they should use a contract that calls for the litigation to be in China or use an appropriate international arbitration clause. See How to Write a Bad International Arbitration Clause.

3. I have an $11.2 million tort judgment that includes $8.7 million in punitive damages. These calls go exactly as per #1 above, except this time, we have to tell them that even England, Canada, Taiwan and South Korea courts generally will not enforce punitive damage awards.

In nearly all circumstances, we also usually discuss the strategy of trying to make the Chinese company’s life so miserable in all countries in which o(r with which) it does business — including the United States and Mainland China — that it will eventually decides it would be better off making a full or even a partial payment than to keep having you mess with them around the world.

The problem with any judgment collection matter against a Chinese company is that success invariably requires a substantial investment of time and money and that means smaller judgments are often not worth pursuing.

For more on the difficulties in suing Chinese companies and enforcing US judgments in China, check out China Enforces United States Judgment: This Changes Pretty Much Nothing and Enforcing US Judgments in China.