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What to do when a commercial dispute arises?

What you can do in case of commercial disputes, such as late payments or defect products, depend on the governing law and dispute settlement clauses stipulated in your contract. At the same time, a lot will depend on the quantity and quality of evidence available to you: you should start collecting evidence as soon as possible, before it becomes unavailable.

In general, the following steps can be considered:

  • Keep following up with the Chinese business partner, showing that you are determined about solving the dispute. It is advisable to involve other departments such as finance, legal, etc.
  • Continue to collect as much evidence as possible.
  • Submit a Lawyer Letter from a Chinese law firm, which may cost around 2k EUR. This may put some pressure and show that you are duly assisted to act in China, aware of your rights and willing to defend your interests. However, in case of Chinese business partners intentionally scamming you, such letters hardly have any effect in practice.
  • If the above does not work and the dispute over the agreement cannot be solved in an amicable manner, the EU SME should then file a lawsuit against its Chinese business partner as a result of the breach of contractual obligations. Arbitration can be considered if a relevant valid clause was included in the business contract (see dedicated FAQs in this section).
  • Litigation is the last option which will probably lead to a termination of your business relationship with your client.