It’s going to be a bit of an uphill struggle for some from this part of the world who might not be keen on words like “transparency”
U.S. legal system can be a trial for Chinese firms
2015-03-31 11:25China DailyEditor: Si Huan
http://www.ecns.cn/business/2015/03-31/160064.shtml
As the Chinese increase investment in the United States, they are discovering the U.S. legal system, which in turn is being schooled about an ancient culture and people. The result is a steep learning curve for both sides, according to legal observers.
Attorneys examined how Chinese companies are adjusting to securities laws and the challenges facing lawyers in the U.S. who are involved in litigation with the Chinese at a recent seminar in New York with the theme “Chinese Companies and U.S. Class Actions: Securities Litigation and Product Liability”.
Panel members discussed how the tenets of U.S. law are foreign to the Chinese, the problems associated with conducting bilingual proceedings and how the traits of Asian culture can affect a legal strategy.
“The whole concept of a class-action lawsuit – most of the world doesn’t accept this,” said Geoffrey Sant of Dorsey &Whitney LLP and director of the Chinese Business Lawyers Association.
Sant’s colleague at Dorsey &Whitney, Richard Silberberg, who has been counseling Asian companies for more than 30 years, said U.S. legal professionals need to ignore some popular myths about Asian clients, including one that claims Chinese companies will quickly settle existing or potential litigation because they do not have the resources allocated or they are frightened by the American legal system.
“They are not prone to settle,” Silberberg said. “Asians in companies have elevated the importance of being right over the cost of litigation.”
Christopher Seeger of Seeger Weiss LLP was the only plaintiff (representing the suing party) attorney on the panel. He has been involved in litigation over defective drywall that was sold in the U.S. by Chinese companies (along with others) following Hurricane Katrina.
Seeger represents consumers who have had their homes ruined by drywall that may have had too much sulfur. A deposition involves lawyers from both sides questioning witnesses and it is a fairly standard procedure in U.S. courts, he said. That is not the case in China.
“First of all, I had to do my depositions (for the drywall case) in Hong Kong. Depositions aren’t allowed in the mainland,” Seeger said. “When you set up a deposition in Hong Kong you need interpreters because it must be recorded in English and Mandarin. We had huge arguments over testimony because of disagreements over language.”
Taishan Gypsum Co, a State-controlled company, agreed to pay the damages awarded to seven Virginia families. The judgment against Taishan dates back to 2010 when a U.S. federal judge ruled that the company was liable for $2.6 million to fix the homes of the seven families.
Stephen Radin of Weil, Gotshal &Manges LLP, talked about corporate governance issues and the challenges facing directors of Chinese companies. He pointed to a case involving Puda Coal in the Delaware Court of Chancery.
“Delaware law rules corporate governance in the U.S.,” he said. “The judge in the Puda case made it clear that rules and laws of the U.S. also apply to Chinese companies that access U.S. capital. Directors of those companies should better be in China a lot and know the assets of the company.”
Radin said that Chinese directors of companies should familiarize themselves with U.S. and Delaware law and understand the importance of having competent lawyers and accountants.
The panel also discussed the pending securities case against Alibaba Group Holding Ltd. A U.S. law firm has filed a class-action suit against Alibaba claiming that the company did not disclose meetings with a Chinese regulator prior to its $25 billion initial public offering on the New York Stock Exchange last summer.
Kayvan Sadeghi of Morrison &Foerster LLP said this dispute and others involving Chinese companies highlight transparency issues.
“It can be hard to get across to those who are not used to U.S. rules that public companies in the U.S., including those based overseas, have to disclose any information that could affect the company, including discussions with regulators, even if no action is taken against the company,” Sadeghi said.
“Chinese companies need to develop consistent disclosure policies in the U.S. and China that minimize discrepancies,” he said.
