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What are key business litigation differences in China's system?

Cultural diversity is a reality of the business world today. Global trade is happening at a faster clip than ever before. With diversity in trade comes a variety in legal processes from country to country. Many in the United States have a concept of how the law works here based on personal experience. Still, many an entrepreneur has been caught short by subtle differences in laws from state to state.

Imagine what that looks like on an international scale and with the level of cultural difference that comes into play country to country. Operations in Europe might not pose too great a challenge, but go west to Asia – and specifically China – and the dynamics can vary dramatically. Not the least of which are those involved in navigating Chinese business litigation processes.

Key differences to note

Similarities do exist in how the Chinese and U.S. systems deal with business disputes. For example, in China, major commercial disputes tend to be resolved through:

  • Negotiation
  • Litigation
  • Arbitration
  • Legally administered mediation

Negotiation is common, but in recent years, use of the second two forms has increased substantially. There has also been a noticeable shift away from an inquisitorial system, in which the court is highly active in investigating claims, to an adversarial one. This is more like what we experience in the U.S. \

Court structure

Perhaps the point at which the Chinese and U.S. systems diverge the most is in court structures. Four levels of courts exist in China:

  • Basic people's courts
  • Intermediate people's courts
  • Provincial high people's courts
  • Supreme People's Court

In most instances, a case will enter the system at the basic people's court level and go up the appeals chain from there. However, if particular industries are involved or the amount of money in dispute is above a certain level, the court of first instance might be either the intermediate or provincial high people's court. If a case is thought to have significant political or social implications, the chance is higher that it will be heard initially in the intermediate or high people's courts.

If a case is brought in China, litigants have a right to be represented by a Chinese lawyer. Foreign lawyers cannot provide representation, but a skilled U.S. attorney with depth of experience in China can serve to bridge the cultural divide.

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