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Disputes in China: Watch Your Step

As cross-border business in China has exploded, so has the frequency of business disputes there. With both Western and Chinese firms wary of conducting litigation on the other’s home turf, parties can often agree on arbitration. Arbitration may even be preferable to bringing a Chinese company to an American court, says Craig Celniker, a Morrison & Foerster partner in Tokyo. That’s because a Chinese judge may not recognize an American judge’s ruling, but Chinese courts are obliged by international convention to honor arbitral rulings.

The Chinese national arbitration forum, known as CIETAC, has become one of the world’s most popular, says Cedric Chao, a Morrison & Foerster partner who is an approved CIETAC arbitrator (and has also arbitrated for the International Chamber of Commerce and the Singapore International Arbitration Centre). Chinese companies often try to steer their Western partners to arbitrate by CIETAC’s rules in mainland China. But internal friction within CIETAC has yet to settle, Chao says. For the moment, “If you arbitrate in front of CIETAC, you want to do it in Beijing,” rather than other locales such as Shanghai or Guangzhou, Chao recommends.

Better yet, many Chinese partners will agree in the contract for arbitrations to occur at the Hong Kong International Arbitration Centre or the Singapore International Arbitration Centre. In both locations, the courts are friendly to arbitration, Celniker says. Hong Kong has long been open to international law firms, and Singapore recently opened up to them as well.

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