Arbitration Clauses – lessons for small and middle sized Chinese companies

As China is involved more and more in international transactions, litigations against Chinese companies have arisen tremendously. Data have show that about 11.5% of Hong Kong and Chinese companies listed in New York Stock Exchange were involved in class actions. And in NASDAQ, the percentage is even higher, which is 17.2%.

Most lawsuits against Chinese companies involve breaching of contracts, intellectual property infringements, violation of Securities Law and anti-dumping investigation. However, very few small and middle sized companies will defend themselves in the US court due to expensive attorney fees, language barrier and lack of knowledge about US laws. Moreover, Chinese believe that “harmony is a virtue” and usually will not resolve problems through legal channel. Although some Chinese companies have learned lessons from former experiences and started to protect themselves by legal methods, such as arbitration1, preventing those disputes from the beginning of a transaction is essential.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Diaz Jr. - Diaz Reus International Law Firm | Attorney Advertising

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