Unfair Chinese counterparty - how to behave?

Update date:
20 Mar 2024
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Date of publication:
20 Mar 2024
Reading time: 5 minutes

Table of contents:

The following article was prepared by Karol Czekałowski of the website prawochinskie.com.pl, through a collaboration between blogs on China and exports.

Introduction:

When buying or selling anything to China, it is worth bearing in mind that this is a country 7,000 kilometres away from us, which is as different as it can be. When doing business - even if it is a simple purchase on any of the well-known platforms - we need to know that a lot of the elements of the collaboration will look significantly different. However, we need to know what is simply a cultural difference and what is a dangerous situation that makes us an easy target to deceive.

However, if we have missed the danger and have been duped, what should we do? When sending your money abroad, you should always prepare yourself to a degree appropriate to the transaction. Often, what you can do after being scammed depends on what you have done beforehand. However, there are a few actions that can always help us in trying to recover our money.

Problems before the damage

Lack of shipping, perpetual indications of temporary problems, poor quality goods, no response from the seller - there are some very standard scam scenarios. Each of these can be effectively prevented with a good contract and by behaving sensibly. However, in order to decide on specific actions, one must be objectively aware of the situation in which one finds oneself. Unfortunately, very many entrepreneurs are often convinced of their strong position, despite very poor documentation, very problematic terms and conditions and a lack of good preparation.

It is a good idea to become accustomed to the fact that transactions that are poorly secured can go wrong. Statistically, meeting a counterparty from the other side of the world who is dishonest increases with every purchase. Just because a purchase was successful the first, fifth and tenth time doesn't mean it will be successful the eleventh. Unfortunately, though, opportunity makes a thief. Even a trusted person who realises that he or she can simply fail to fulfil his or her part of the commitment without consequences can often go down this path. 

After all, if we do not have, for example, the name of the entity in Chinese, how are we even going to contact them? If the goods we ordered were not described in terms of the certification they are supposed to meet - how are we going to indicate the standard we required? An oversight due to a lack of knowledge of basic, simple facts such as the Chinese language can cost us the entire transaction.

A badly vetted contractor may have financial problems that prevent him from acting just when he is about to ship our order. This is an issue that could be avoided by doing a good, legal verification of the entity in advance.

Absolutely central to any relationship is the contract. If this is not possible, it does not have to be particularly difficult - it can be ironed out in the form of a few sentences between the parties, just to establish exactly who the parties are, what they are buying, how much is being paid and when, and how to bring it about. Naturally, a badly drafted contract can also cause us a lot of problems, so I would always suggest having a specifically drafted contract for our particular case. 

After the damage

There will be a method of protection for almost every scam. Unfortunately, fraud must be prevented and not attempted to be fixed after the event. However, if you find yourself in such a situation, you also need to act in an informed manner. 

Scammers act in different ways. Sometimes they are very contactable, sometimes they will avoid us and sometimes they can be very aggressive. It doesn't matter, because all that really matters is how to put our situation right. It is always good to negotiate. Nevertheless, they must be substantive discussions consisting of pointing out the problem, the losses and describing the expected compensation. It is also worth taking into account that we will often lose a little - but will be able to recover some of the money. 

Unfortunately, it is often the practice between entrepreneurs to have vulgar conversations that have no effect. On the contrary, it can cause a lot of inconvenient problems, e.g. when presenting evidence later in court. Before writing anything to the counterparty, let us already think about possible litigation. 

For the same reason, start securing evidence. If quality is an issue, clearly point out the problems to the contractor. It will be a good idea to use the testing services of a specialised laboratory applicable to the goods in question. 

It is worth carefully reviewing all previous conversations with the counterparty, securing them (unfortunately, many entrepreneurs lose a significant amount of documents in the course of a protracted dispute). 

First and foremost, however, the primary objective should be to find the right law firm specialising in Chinese cases. This will enable you to agree on an action together and achieve the quickest and safest possible solution to the problem. Naturally, not every case is suitable for court. Nevertheless, even a lost case can end well if we have started to behave professionally in time. This will put us in a strong negotiating position.

Sometimes, however, going to court will be necessary. Litigation in China can be very rewarding, especially as Chinese courts are much faster than Polish courts. If the value of the subject matter of the dispute is significant, the terms of the transaction are well documented, the costs of the proceedings should not overwhelm the value of the dispute. 

Summary

A contract from someone experienced in PRC transactions is also useful before problems arise. Doing business in China is safe and very profitable, provided you approach your work responsibly and prudently.

In the event of a scam, we need to remain calm and not get drawn into emotional blunders. Consult a professional and prepare a strategy and then implement it gradually by securing materials and preparing a strategy. By doing so, we will prepare a good negotiating position and protect ourselves in the event of legal proceedings. 

If it cannot be negotiated, it will have to go to court or to arbitration. These institutions work well and can guarantee the recovery of our money. However, legal proceedings involve expenses. Some of them cannot be recovered. Regardless of the good or bad situation of our fraud case, it is definitely better to prevent it than to try to recover the money later. For such prevention, it is advisable to consult a law firm that will prepare model contracts for us, enabling us to conduct safe transactions for many years. 

If, as an entrepreneur, you want up-to-date information on your legal obligations, updates on developments in China and articles on the day-to-day experiences of Hanglung Law Biernat & Kossacki's lawyers dealing with Chinese and international law - you are cordially invited to visit the blog prawochinskie.com.pl . 

Article by Karol Czekałowski from the website prawochinskie.com.pl

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