When conducting transactions with Chinese companies, it is quite common that no international trade sales contract is signed or there is no agreed - upon dispute resolution clause in the international trade sales contract. So, in such cases, once a dispute occurs, how should we resolve the issue of jurisdiction? Where should I sue a Chinese company?
When trading with a Chinese company, if there is no arbitration clause regarding disputes in the international trade contract, in cases of disputes over payment, product quality, delivery time, etc., the only way to resolve them is through legal proceedings.
Sue a Chinese Company in a Chinese Court
According to Article 272 of the "Civil Procedure Law of the People's Republic of China": "For a lawsuit filed against a defendant who has no domicile within the territory of the People's Republic of China due to a contract dispute or other property rights and interests dispute, if the contract is signed or performed within the territory of the People's Republic of China, or the subject matter of the action is within the territory of the People's Republic of China, or the defendant has property available for seizure within the territory of the People's Republic of China, or the defendant has a representative office established within the territory of the People's Republic of China, the lawsuit may be under the jurisdiction of the people's court at the place where the contract was signed, the place of contract performance, the place where the subject matter of the action is located, the place where the property available for seizure is located, the place of the tort, or the place where the representative office is domiciled."
Therefore, the following 5 points can be used to determine the jurisdiction of the court when suing in China:
Determine the jurisdiction of the court through the place where the contract was signed:
If the two parties to the contract have not agreed on the place where the contract was signed, or have not even concluded an international trade sales contract and only contracted via email, the place of the last signature of the contract or the place of contract acceptance shall be the jurisdiction.
Determine the jurisdiction of the court through the place of contract performance:
The place of contract performance depends on the contract or the agreement between the two parties regarding the trading method. In export trade, common trading methods include FOB Chinese port, CIF/CFR foreign destination port, etc. According to the "Incoterms 2020", under FOB terms, when the goods are loaded onto the ship at a Chinese port and pass the ship's rail, the seller has fulfilled the obligation of delivery. Therefore, the court at the location of the Chinese port is the place of contract performance. Under CIF terms, when the goods arrive at the foreign destination port and pass the ship's rail, the seller has fulfilled the obligation of delivery. So, the court at the location of the destination port is the place of contract performance.
Determine the jurisdiction of the court through the place where the subject matter of the action is located:
The subject matter of the action generally refers to the goods in the transaction. The place where the subject matter of the action is located is only applicable when a Chinese buyer has a quality objection to the goods imported from a foreign seller. A lawsuit can be filed in the court at the place where the goods are stored, and it is not applicable to disputes over arrears.
Determine the jurisdiction of the court through the place where the property available for seizure is located:
If a foreign company encounters a situation where a Chinese company owes money and discovers that the Chinese company has property in China, it can file a lawsuit in the court at the place where the property is located and take property preservation measures against it, which is very beneficial to foreign companies.
Determine the jurisdiction of the court through the place where the representative office is domiciled:
Generally, it is necessary to further confirm the nature of this representative office.
Sue a Chinese Company in a Foreign Court
The civil procedure laws of various countries stipulate that the court where the defendant is located has jurisdiction. Generally, when an export enterprise encounters a situation where a foreign customer owes money, filing a lawsuit in the court where the foreign enterprise is located is a relatively common approach. The reasons are as follows:
Enforceability of the court judgment:
If the country where the foreign enterprise is located has concluded an agreement with China or both countries have acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a lawsuit can be filed in the local court, and the judgment can be used to enforce in China. Conversely, if there is no judicial assistance agreement on mutual recognition and enforcement signed between the two countries, the judgment of the local court cannot directly enforce the property of the Chinese company and will not be recognized by the Chinese court. This is because the court is the judicial organ of a country and exercises judicial power on behalf of that country.
Level of litigation costs:
If the enforceability of the court judgment in the first point is no longer a concern, it is also necessary to compare the costs of filing a lawsuit in the local country and in China and choose the one that suits you.
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