With China’s economy developing rapidly over the last two decades, many foreign enterprises have invested in the country and are now doing business with Chinese partners. But because the global economy is currently slowing down, which has also affected the Chinese market, the number of commercial disputes between foreign investors and their Chinese business partners has increased. This guideline tries to clarify some of the important points a foreign enterprise should know when settling a legal dispute in China.
When foreign elements are involved, the parties are basically free in their choice of applicable law and jurisdiction as well as in their choice of Arbitration Commission abroad. There are different ways for foreign companies to settle legal disputes with a Chinese business partner over commercial issues in China. The party bringing the dispute can either seek litigation or choose to arbitrate the dispute at one of the international Arbitration Commissions or local arbitration institutions in China in the case of having chosen such a method of dispute settlement or mediation to settle the dispute. There are different requirements for each procedure; the most appropriate option for the foreign party depends on the circumstances of the case and the interests of the foreign party. The prevention of any kind of litigation or arbitration procedure is of course the best way to avoid any unnecessary high costs and risks.