Article: The Importance Of “Face” In China Legal

This short blog article with links post at China Law Blog..

Is well worth a quick read …

Here’s an introductory extract

On The Importance Of "Face" In China Legal.

China Daily did an article the other day on how China’s courts are now going to post its unpaid judgments online. It is entitled, "Court launches website showing who hasn’t paid." A bit of background is in order.

China’s court system (and I am talking about commercial disputes ONLY) is not as bad as is so widely believed in the West. Foreign companies can sue and win against Chinese companies and they can and do. All the time. But winning a lawsuit and getting paid on a lawsuit are two very different things, both in China and everywhere else in the world.

Many years ago, my firm brought a cross-border lawsuit against a foreign company on behalf of about 35 mostly foreign companies. The clients would often ask me if I thought we were going to win the lawsuit and my response to that was always, "yes, we are almost certainly going to win. Defendant took money that should have gone to you without your approval or authorization. This is about as blatant a breach of contract as one will ever find. But that is not really the right question here. We are almost certainly going to win, but the real question is whether our winning in court will lead to everyone getting paid. In other words, does defendant have the mult-millions necessary to pay everyone and will the court in X country really enforce the judgment. The problem with that is that we will not know the answer to that until months after we win." We eventually settled that case, compromising the various claims based in large measure on the uncertainty of collection.

China is notorious for being a country in which it is very difficult to collect on a judgment. Had someone asked me what percentage of Chinese court judgments actually get paid, I would have guessed around 50%. Turns out more like 75% of judgments get paid, at least according to the China Daily article.

Now, in an effort to improve that figure, China’s courts are going to put online the names of all judgment creditors who have not paid the judgments issued against them. This is big. Really big.