A Chinese company broke the deal, what are my options to resolve the dispute?

Will the embassy or police help me?

How do I sue a Chinese company?

Can I collect damages?

How can I avoid future disputes with my Chinese partners?

And if I have disputes in the future, what can I do to ensure I will win?

Getting help from the Chinese embassy

You can try to contact the Chinese embassy in your country, but usually they will give some excuse why they are too busy or why they aren’t the right people to help you. 

Basically, they are so overwhelmed with requests like yours that they can’t possible get involved unless the loss is massive, like in the millions of USD.

So you can cross that one off your list of options.

Consider engaging an English-speaking local lawyer

If the embassy cannot offer support, we advise you to engage an English-speaking lawyer, and find out if your case qualifies a criminal offense or other civil / economic dispute. If it is a criminal offense, contact a local police. Once the case has been placed on file, there is a great chance to redeem your loss. If it's a civial dispute, then you can only expect to solve on court, which is a long-term process. There is no need to find the police for a civil dispute. But before you sue the Chinese company, try to issue a demand letter.

Demand Letter

In China you can sue for lost revenue caused by the subject company’s poor performance. In most countries you can only sue for direct damages.   So you go in asking for a big number, and then negotiate down to something that is still acceptable.

KEY POINT: Unlike most other nations, in China you can sue for lost revenue. Let’s say you are buying from a Chinese factory and selling overseas. Since the price you sell to your buyers is certainly much higher than the price you pay to your suppliers, your demand letter can “swing big” and put the fear of God into a supplier.

But there is one potential road block. If the subject company is a scam, meaning not a real business…just some guys pretending to be a company, then a demand letter doesn’t have much impact. The subject company needs to be legit with assets to lose for a demand letter and fear of the law to have effect.  

If you are sure the seller is a real company, then you can skip the initial due diligence. But if you are not 100% sure, then I would recommend the initial due diligence first before spending money on the letter.

Will your embassy in China help solve your dispute with a Chinese company?

Depending on what county you are from, your Embassy in China may be a bit more helpful than the Chinese Embassy back home. I’m sure they also get lots of mail from companies in situations like yours. Most of the time they will suggest you contact the police and they may give you a list of lawyers and some English speaking Chinese government offices that are, in theory, supposed to help you.  So it can’t hurt to contact your Embassy. But unless your loss has political implications or is very large, I would not expect the Embassy staff to lead the charge to get your money back.

That is it for the first part of this two part series. Our next post will help you determine if you should walk away, conduct due diligence, issue a demand letter or go right to court.