8 Tips on How to Sue a Company in China - CTD101 Series

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You can sue a company in a Chinese court. Even if you are not in China, you can still do so with the help of Chinese lawyers. To get prepared, you need to know, to start with, whom you can sue and then identify its legal name in Chinese, as well as the address thereof.

This post is a selected collection of our previous articles. We hope these 8 tips will be helpful to you.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection.

1. Can I File a Lawsuit With Chinese Courts?

Certainly YES.

As long as the Chinese court has jurisdiction over the case in question, foreigners or foreign enterprises, like any other Chinese litigant, can file a lawsuit with Chinese courts.

For most cases, the Chinese court where the defendant is located has jurisdiction over the case in question.

In addition to the court where the defendant is located, other relevant Chinese courts may also have jurisdiction, depending on the type of case.

But anyway, as long as the defendant you are going to sue is in China, you can file a lawsuit with Chinese courts.

2. If I Am Not in China, Can I Still File a Lawsuit With Chinese Courts?

YES, but you need to hire a Chinese lawyer to file a lawsuit with Chinese courts on your behalf.

The lawyer can file a lawsuit and handle all relevant procedures on your behalf, even without requiring you to come to China at all.

In addition, according to Chinese law, you can only hire Chinese lawyers for representation in litigation. If needed, we may recommend Chinese lawyers for you.

It is worth noting that many local Chinese courts have allowed parties to participate in certain aspects of litigation, say the court trial, through the Internet.

Therefore, you can even participate in the trial of your case through your mobile phone or computer anywhere outside China.

Besides, China is now allowing parties outside China to file lawsuits online with Chinese courts. However, foreigners who have not been to China and have not registered their real names in China’s border entry-exit system are not able to use the online suing system for the time being.

In any case, your Chinese lawyer can do everything for you.

3. Whom Should I Sue When a China-Related Trade Dispute Arises?

You need to know whom you can sue and then identify its legal name in Chinese.

When you are preparing to file a lawsuit, you need to find out exactly who the defendant (the person or business you are suing) is, so you can name the same correctly on your claim.

In case of a breach of contract, you can sue the breaching party. In case of a product quality dispute, you can sue the seller or the manufacturer. In case of an intellectual property infringement, you can sue the one who pirated your works.

However, if you want to sue the other party, you need to know its legal name in Chinese.

You may see the name of a Chinese enterprise on the contract or the name of a Chinese manufacturer on the package. But these names are likely to be in English or other languages, rather than in Chinese.

All Chinese individuals and enterprises have their legal names in Chinese, and they have no legal or standard names in foreign languages.

In other words, their English names or names in other languages are named by themselves randomly. Usually, it’s hard to back-translate their weird foreign names to their legal Chinese names.

If you don’t know their legal names in Chinese, then you won’t be able to tell the Chinese court whom you are suing. Therefore, Chinese courts will not accept your case.

We can check relevant information or search online to find the legal Chinese name of the Chinese defendant as far as possible, and prove to the Chinese court that the Chinese name found and the foreign name provided point to the same subject. For more information about how to find the Chinese name, you can read our post Find China Supplier’s Legal Name in Chinese to Avoid Scams.

Moreover, if you purchase goods or services on a Chinese online trading platform that fails to provide the real name, address and valid contact information of the seller or service provider, you can also sue the platform directly.

For more information, you may read: Whom Should I Sue When a China-Related Trade Dispute Arises?

4. Where Should I Sue When a China-Related Trade Dispute Arises?

You need to identify the address of the person or business you want to sue when preparing and filing a complaint before Chinese courts.

Once you know the name of the person or business you want to sue, you need to find their address to fill out the paperwork.

The court needs the address to contact the defendant, serve a copy of the civil complaint and the court summons to the defendant.

In addition, according to Chinese law, you can file a lawsuit with the court where the defendant is located. Therefore, the court also needs to determine whether the defendant is in its jurisdiction and whether the court has jurisdiction over your case.

If the defendant’s address is available on the contract or the product package, we can try to confirm the validity of the address.

If the defendant is an enterprise and we find its legal Chinese name, then we can locate its registered address in the enterprise registration information database.

If none of the above is available, we can still try to locate their addresses in Chinese search engines and/or Chinese social networking sites.

For more information, you may read:

5. Do I Have the Legal Right (Standing) To Sue When a China-Related Trade Dispute Arises?

As long as you are ‘directly affected’ pursuant to Chinese law, you may file a lawsuit with the court.

First, you must be directly affected by the defendant.

You need to figure out whether you have the right to file a lawsuit against the person or business you have a dispute with. To file a lawsuit with the court, you have to be someone directly affected by the legal dispute you are suing about.

For example, you are directly affected if you signed a contract with the defendant who then breached the contract. The term “contract” mentioned here may include a formal contract, or an order placed on the e-commerce website, or just an agreement in email.

Or, you are directly affected if the products made or sold by the defendant injured your physical health or property due to non-conforming quality.

Or, you are directly affected if you found that the defendant infringed your intellectual property rights, such as pirating your works.

Second, you must be a natural person or a legal entity.

Only an “actual legal entity” may start a lawsuit in China.

For more information, you may read Do I Have the Legal Right (Standing) To Sue When a China-Related Trade Dispute Arises?

6. How Much Can I Claim When a China-Related Trade Dispute Arises?

You are entitled to claim compensation for loss and the agreed liquidated damages, and may under some circumstances receive a punitive damages award.

For contract disputes:

If the defendant is in breach of the contract, you may require the defendant to continue to fulfill their contractual obligations, take remedial measures, compensate for your losses, or even pay the agreed liquidated damages.

As far as the compensation is concerned, the amount of compensation should be equal to the loss (including the expectant benefits in case of no breach) caused by the breach of contract, provided that, it shall not exceed the potential losses caused by the breach of contract that the breaching party foresaw or should have foreseen when concluding the contract.

For product liability disputes:

If the products made or sold by the defendant injured your physical health or property due to non-conforming quality, then you can claim compensation against the defendant.

For your property loss, you can request the defendant to replace the damaged product with a new one or refund the purchasing price, or even compensate you for other property losses caused by the defective product.

For your personal injury, you can claim compensation for medical expenses, nursing expenses, mobility & daily living aids expenses, disability compensation, funeral expenses, death compensation and other expenses.

If the defendant commits fraud, you can also claim compensation equal to three times the above losses.

However, it should be noted that for personal injury compensation, Chinese courts may determine the amount of compensation according to local standards in China.

For the intellectual property infringement:

If the defendant infringes your intellectual property rights, you can request the defendant to compensate you for the actual loss.

If it is difficult to determine the actual loss, you can request the defendant to compensate you an amount equal to the benefit they obtain.

If it is difficult to determine both your loss and the benefit obtained by the defendant, you can request the amount of compensation to be determined ranging from one to five times your intellectual property license fees/royalties.

If none of the above can be determined, you can also request the court to award compensation within CNY 5 million according to the severity of the infringement.

For more information, you may read How Much Can I Claim When a China-Related Trade Dispute Arises?

7. How Much Does It Cost to Bring a Lawsuit in China? Court Costs and Attorney’s Fees.

The costs you need to pay mainly include three items: Chinese court costs, Chinese attorney’s fees and the cost of notarization and authentication of some documents in your country.

(1) Chinese court costs

If you bring a lawsuit to a Chinese court, you need to pay legal fees to the court at the time of filing.

The court costs depend on your claim. The rate is set on the scale of rates and denominated in RMB.

Roughly speaking, if you claim USD 10,000, the court cost is USD 200; if you claim USD 50,000, the court cost is USD 950; if you claim USD 100,000, the court cost is USD 1,600.

If you win as a plaintiff, the court costs will be borne by the losing party; and the court will refund the court cost you paid previously after receiving the same from the losing party.

(2) Chinese attorney’s fees

Litigation lawyers in China generally do not charge by the hour. Like the court, they charge attorney’s fees according to a certain proportion, usually 8-15%, of your claim.

However, even if you win the case, your attorney’s fees will not be borne by the losing party.

In other words, if you request the Chinese court to order the other party to bear your attorney’s fees, the court will generally not rule in your favor.

That being said, however, there exist some exceptional circumstances where the losing party shall cover legal fees.

If both parties have agreed in the contract that the breaching party should compensate the opposing party by covering his attorney’s fees in litigation or arbitration, and they have clearly stated the calculation standard and confines of attorney’s fees, the court is likely to support the payment request of the winning party. However, at this point, the court will require the prevailing parties to prove they have actually paid the fees.

(3) Costs of notarization and authentication of some documents in your country

When you sue, you need to submit relevant documents to the Chinese court, such as your identity certificate, power of attorney, and pleadings.

These documents need to be notarized in your country, and then authenticated by the Chinese embassy or consulate in your country.

The rate of this charge is up to your local notary and the Chinese embassy or consulate. Usually, it costs you hundreds to thousands of dollars.

For more information, you may read Sue a Company in China: How Much Does It Cost?

8. What Documents Do I Need to Prepare to File a Lawsuit in China?

Apart from pleadings and evidence, foreign companies in Chinese courts need to complete a series of formalities, which can sometimes be somewhat cumbersome. Therefore, it is necessary to spare sufficient time (and costs) to get ready.

Specifically, If you are a foreign company, then you need to prepare the following documents:

Business license of your company, to indicate who you are;
Bylaws or resolution of the board of directors of your company, to indicate who is your company’s legal representative or authorized representative in this lawsuit;
Certified documents, to indicate what is the name and position of your company’s legal representative or the authorized representative;
Passport or other identity documents of your company’s legal representative or the authorized representative;
Power of attorney, to mandate a Chinese lawyer and signed by your company’s legal representative or the authorized representative;
Notarization and authentication documents, to prove the authenticity of these materials as described above.

It will take you some time and cost to prepare the above documents.

(1) Certificates of Subject Qualification: ‘who am I’ and ‘who represents me’

To participate in China’s civil litigation, the certificates of subject qualification that foreign companies need to submit include:

Business License, or the certificate document on good standing issued by enterprise registration authority;
Documents certifying the status of the legal representative or the authorized representative (e.g. the company‘s bylaws, resolution of the board of directors, etc.);
Documents certifying the identity (“identity certificate”) of the legal representative or the authorized representative, including his/her name and position;
Passport or other identity documents of the legal representative or the authorized representative.

If a foreign company has a legal representative, like a Chinese company’s registered ‘legal representative’, he or she may also participate in the litigation on behalf of the company. In order to certify his or her status, the foreign company generally needs to submit its bylaws or other similar documents.

As for the foreign company without a legal representative, it is required to specifically empower an ‘authorized representative’ to participate in the lawsuit. In this respect, the foreign company needs to submit a related board resolution made pursuant to its bylaws.

(2) Power of attorney: ‘who is my lawyer’

The foreign companies often need to mandate Chinese lawyers, and hence need to submit the power of attorney to the courts. The power of attorney shall be signed by the legal representative or the authorized representative as described above.

(3) Notarization and authentication: ‘my instruments are authentic’

Most of the subject qualification documents and the authorization procedures of foreign companies are formed outside the territory of China. In order to confirm the authenticity of these materials, Chinese laws require that the content and the formation process of the materials be notarized by a local foreign notary (the step of “notarization”), and then be authenticated by the Chinese embassy or consulate in that country so as to certify that the signature or seal of the notary is true (the step of “authentication”).

The time and cost you will spend on notarization and authentication depend on the notary and the Chinese embassy or consulate where you are located. We suggest you consult your local lawyer or notary.

For more information, you may read Sue a Company in China: What Documents Do I Need to Prepare to File a Lawsuit in China?

The Cross-border Trade Dispute 101 Series (‘CTD 101 Series’) provides an introduction to China-related cross-border trade dispute, and covers the knowledge essential to cross-border trade dispute resolution and debt collection.

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