China Litigation and Arbitration

How We Evaluate China Litigation and Arbitration Matters

Before recommending litigation or arbitration involving a Chinese company, we address four questions. These questions shape the strategy from the outset and help us identify cases in which retaining lawyers to litigate would accomplish little beyond generating legal fees.

1. What happened, and what can you prove? We review the contracts, correspondence, payment records, product specifications, inspection reports, and other evidence needed to establish the claim or defense.
2. Who is legally responsible, and where are its assets? We investigate the Chinese companies involved, their ownership and relationships, and whether sufficient assets exist to justify pursuing the matter.
3. What remedies are available? We examine the governing law, jurisdiction, arbitration provisions, contractual damages clauses, and the availability of asset freezes or other interim relief. We also consider whether a settlement can accomplish what the client needs.
4. Does pursuing the matter make financial sense? We estimate the likely costs, time, risks, and recovery before recommending a course of action. A money dispute worth less than about $350,000 rarely justifies litigation or arbitration in China. There are exceptions, particularly when valuable intellectual property, tooling, or an ongoing business operation is at stake. For a more detailed discussion of these decisions, including filing deadlines, asset preservation, litigation costs, and collection, see our guide to How to Sue a Chinese Company.

Suing a Chinese Company in a Chinese Court

Foreign businesses can and do win commercial lawsuits in Chinese courts. We have represented foreign companies in China-related disputes for decades, and Chinese courts can provide meaningful remedies when the claim is sound and supported by strong evidence. Chinese courts hear disputes involving unpaid debts, manufacturing contract breaches, defective products, intellectual property infringement, and ownership of molds, tooling, and other property. But Chinese litigation differs from American litigation in ways businesses need to understand before filing.

Jurisdiction and Chinese Court Procedures

Chinese courts generally have jurisdiction over ordinary commercial claims against companies domiciled in mainland China. Jurisdiction can also arise from where a contract was performed, where relevant property is located, or other connections recognized under Chinese law. The analysis changes when the parties have agreed to arbitration or selected a particular court. A valid dispute-resolution clause can change where a claim must be brought, subject to China’s statutory limits, including its exclusive-jurisdiction rules. Chinese law generally gives a claimant three years to sue or arbitrate, running from when it knew or should have known of its claim (Civil Code Article 188), and four years for disputes over contracts for the international sale of goods (Article 594).

A foreign company that retains lawyers to represent it in a Chinese court must use lawyers licensed to practice in China. Proceedings are conducted in Chinese, and foreign-language evidence must be submitted with Chinese translations. Documents created outside China can require additional authentication. Since November 7, 2023, qualifying U.S. public documents requiring authentication for use in mainland China generally use an apostille rather than the former consular legalization process. We select and work closely with Chinese litigation counsel, overseeing the overall strategy, coordinating evidence and settlement negotiations, and handling related proceedings outside China.

We are careful about what we tell them. China has nothing like the attorney-client privilege American companies expect, and Chinese lawyers have told us that government officials regularly visit them and press them for information, so we give Chinese counsel what the case requires and keep the client’s broader strategy, finances, and settlement authority with us. A foreign company that hires a Chinese law firm directly is almost always making a mistake, because few foreign companies know China well enough to choose the right firm or manage one.

Evidence and Discovery in Chinese Courts

China has nothing comparable to broad American pretrial discovery. Each party generally needs to assemble the evidence supporting its case, and the opportunities to compel the other side to produce documents are much narrower than in American litigation. Chinese courts do have authority to obtain or preserve evidence and, in limited circumstances, to order a party to produce specific documents. For a manufacturing dispute, we want to see the contracts, purchase orders, product specifications, inspection reports, payment records, and relevant email and WeChat correspondence before filing.

Chinese courts accept electronic evidence. Depending on the circumstances, notarizing or otherwise preserving important electronic records can help establish their authenticity. Contemporaneous business records often carry substantial weight, while witness testimony and expert evidence can also be used. Chinese commercial litigation nevertheless places considerable emphasis on documentary proof. 

Damages and Contractual Remedies Under Chinese Law

Chinese law permits recovery of damages for breach of contract, including losses caused by the breach and benefits the injured party expected to receive from performance. Article 584 of China’s Civil Code limits those damages to losses the breaching party foresaw or should have foreseen when the contract was made. Chinese courts do award lost profits, but those losses must be supported by sufficient evidence. Speculative projections are unlikely to succeed.

Chinese law also recognizes contractual liquidated damages provisions. Article 585 of the Civil Code permits parties to agree in advance on the amount or method of calculating damages for a breach. At a party’s request, courts and arbitration tribunals can increase agreed damages that fall short of the actual loss and reduce agreed damages that are excessive, so a liquidated damages provision is useful but does not guarantee that the specified amount will be awarded.

Good contract drafting makes a substantial difference. A contract that identifies the parties by their registered Chinese names, states their obligations clearly, defines breaches, and sets out remedies, including liquidated damages, gives the court a stronger basis for resolving the dispute. What a client can prove and recover under Chinese law is not always what it first calculated as its losses.

Freezing Assets in China

One of the strongest tools available in Chinese commercial litigation is property preservation, which allows courts to freeze bank accounts and preserve other assets. Chinese courts can order measures intended to prevent a defendant from moving or disposing of property while a dispute is pending. They can also grant conduct preservation measures, similar to injunctions, when the legal requirements are met. These remedies can be particularly effective against a manufacturer that refuses to return tooling, misuses intellectual property, or threatens to move valuable assets.

Property preservation is available before a case is filed and while it is pending. Urgent pre-litigation applications require security, and the applicant generally must commence litigation or arbitration within 30 days after the preservation measure is imposed. A wrongful application can expose the applicant to liability for the losses it causes. These requirements need to be considered when deciding whether to seek preservation, but the availability of an asset freeze can substantially change the course of a dispute.

An American company's Chinese manufacturer refused to release molds the client owned under its manufacturing contract. Our Chinese litigation counsel filed suit at our direction and obtained a property-preservation order freezing the manufacturer's bank accounts within about five days. The factory released the molds the following day. Most cases do not move that quickly, and this result does not predict the outcome of another dispute. In this matter, though, a strong contract and a court-ordered asset freeze got the client its molds back without waiting for a final judgment. For more on protecting manufacturing tooling, see Who Owns Your Molds? How Overseas Factories Hold Tooling Hostage—and How to Stop Them.

Settlement and Mediation in Chinese Business Disputes

Chinese courts frequently encourage mediation, including after litigation has begun. Judges can facilitate settlement discussions, and parties also negotiate resolutions outside formal court proceedings. A credible demand supported by strong evidence sometimes resolves a dispute without a lawsuit. But sending a demand letter before understanding the supplier's position and likely response can make matters worse, particularly when the supplier controls the client's goods, tooling, or intellectual property. We also consider whether pursuing an asset freeze before notifying the other side would better protect the client's interests. In other cases, filing suit or obtaining asset-preservation measures creates the leverage needed to negotiate a settlement.

A settlement reached through Chinese court mediation can be recorded in a mediation statement that, once legally effective, is enforceable much like a judgment. Private settlements require additional attention. The agreement should identify the correct parties, specify payment or performance deadlines, address releases and security, and provide a workable enforcement mechanism. When enforcement will occur in China, a properly drafted Chinese-language version is often important. We regularly advise clients to accept settlements when the cost and risk of continuing litigation outweigh what more they are likely to recover. 

Enforcing Chinese Court Judgments

Chinese courts have substantial powers to enforce their judgments. They can investigate a debtor's assets, freeze bank accounts, seize property, and order assets sold to satisfy an enforceable judgment. Chinese courts can also impose restrictions on high-consumption activities and, where the statutory requirements are met, place dishonest judgment debtors on a public list. Certain enforcement restrictions can affect the representatives of corporate judgment debtors, though those measures have separate legal requirements and are not automatic.

These powers make Chinese judgments enforceable, but they do not eliminate collection problems. A judgment debtor may be insolvent, may have transferred assets, or may hold its business operations and property through affiliated companies that are not liable on the judgment. Collection is particularly difficult when the company has few assets in its own name or has effectively ceased operating. 

Arbitration with Chinese Companies

International arbitration can be an effective way to resolve commercial disputes with Chinese companies, particularly substantial monetary disputes. Arbitration allows parties to choose experienced arbitrators, establish the language of proceedings, and select a neutral seat. It is not necessarily cheap or quick. Substantial international arbitrations can involve significant legal fees, institutional expenses, arbitrator fees, and translation costs. Judicial review of the merits of an arbitration award is generally unavailable, and challenges are limited to specific legal grounds. The usefulness of arbitration depends on the dispute, the governing agreement, and where enforcement will take place.

Arbitration in China

China has established commercial arbitration institutions, including the China International Economic and Trade Arbitration Commission (CIETAC). Arbitration in mainland China makes sense when the defendant's principal assets are there and the parties want their dispute decided by commercial arbitrators rather than an ordinary court. We have represented clients in Chinese arbitrations, including obtaining a multimillion-dollar award in China for a large international education company.

Chinese arbitration differs from American arbitration. Document production is generally more limited, and written evidence often plays a central role. The arbitration rules still provide for hearings and witness testimony. Foreign parties can also negotiate important procedural provisions, including the language of arbitration and the method of selecting arbitrators.

China's revised Arbitration Law took effect on March 1, 2026. It expressly recognizes the seat of arbitration in foreign-related cases, expands access to court-ordered preservation measures, and permits ad hoc arbitration for specified foreign-related maritime and free-trade-zone disputes. The revised law also reduces the period for applying to set aside an arbitral award from six months to three months after receipt of the award.

Enforcing Foreign Arbitration Awards in China

China is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. China applies the Convention subject to commercial and reciprocity reservations. Qualifying commercial arbitration awards from other Convention jurisdictions, including the United States and Singapore, can be recognized and enforced in Chinese courts. This gives qualifying international arbitration awards a well-established route to enforcement that differs from the rules governing foreign court judgments.

An arbitration award still requires enforcement proceedings, and the Chinese court can refuse enforcement on grounds recognized under the Convention. These include an invalid arbitration agreement, inadequate notice, denial of an opportunity to present a case, certain procedural defects, and public policy. A default arbitration award is not automatically unenforceable in China. The record must establish that the nonparticipating party received adequate notice and had a meaningful opportunity to present its defense, while other grounds for refusing enforcement remain available. China also has a higher-court reporting system for certain decisions to refuse recognition or enforcement of foreign arbitration awards. Depending on the case, proposed refusals can require review by the Supreme People's Court.

Choosing the Right Forum

For our own China manufacturing contracts, we usually choose a Chinese court. We think highly of CIETAC, but it costs more than a Chinese court and lacks a court’s enforcement power, and enforcement against a Chinese manufacturer through a Chinese court is usually faster and cheaper. We also put a contract damages provision in most of our manufacturing contracts, because a Chinese court can use it to freeze the manufacturer’s bank account. Chinese manufacturers generally know that, and it is one of the best ways we have to get them to honor the contract. CIETAC makes more sense when a Chinese state-owned company insists on it, as many do, or when the factory is in a small, unsophisticated city.

The arbitration seat matters most when the Chinese counterparty holds assets in mainland China. Chinese courts can provide preservation measures in support of qualifying mainland arbitrations. Under a 2019 arrangement, mainland courts can also grant certain interim measures in support of Hong Kong-seated arbitrations administered by designated institutions. These measures include property, evidence, and conduct preservation. Arbitrations seated in Singapore or the United States have no comparable established access to mainland court preservation, and relief in support of them is far less certain. That distinction can determine whether a claimant can freeze assets before the defendant moves them. For more on choosing the right forum and drafting enforceable dispute-resolution provisions for China transactions, see China Dispute Resolution Clauses.

Defending Against Chinese Companies

We also defend businesses against claims brought by Chinese suppliers and other Chinese companies. These disputes may begin with a demand letter, a lawsuit, an arbitration notice, or an attempt to enforce a foreign judgment or arbitration award. A business that receives a legal claim should respond promptly. Default judgments and arbitration awards can be difficult and expensive to challenge, and ignoring a proceeding can eliminate defenses that would otherwise have been available. We assess the claim, the governing law, jurisdiction, and contractual defenses, and we look for a way to resolve the matter before it gets more expensive.

Defending Against Sinosure Claims

Often, the demand does not come directly from the Chinese supplier. When a foreign buyer withholds payment for defective goods, late shipments, or other disputed performance, the supplier's export credit insurer may become involved. China Export & Credit Insurance Corporation, commonly known as Sinosure, is China's state-owned export credit insurer. When it pays an insured Chinese supplier's claim, it can acquire recovery rights and pursue the foreign buyer through collection agencies, law firms, or litigation. We have handled more than 100 Sinosure disputes over the past two decades.

A Sinosure demand is not a court judgment, and the amount demanded is not necessarily the amount legally owed. The buyer's contract, the supplier's performance, the quality of the goods, and the parties' communications all matter. Our usual goal is to protect the client from Sinosure while keeping it able to buy from China. Of our 100-plus Sinosure matters, only two, possibly three, ended with the client paying Sinosure anything, and each of those clients chose to pay. That record reflects clients who retained us and generally followed our advice. It does not predict the outcome of any other matter.

While a serious China debt dispute is open, we tell clients not to send owners, officers, or key personnel to mainland China, and to bring home anyone already there. Chinese factories sometimes hold a buyer’s employee until the bill is paid, and a Chinese judgment can lead to an exit ban. We discuss these risks in Sinosure: The Complete Guide for Foreign Buyers.

Challenging Foreign Judgments and Arbitration Awards

We represent parties opposing recognition or enforcement of foreign judgments and arbitration awards when the law provides valid grounds for doing so. These cases require careful attention to jurisdiction, service, procedural fairness, and the requirements of the country where enforcement is sought. A party generally cannot defeat enforcement simply by arguing that the foreign court or arbitrators reached the wrong result. But a judgment or award obtained without proper notice, without jurisdiction, or through proceedings that broke the governing procedural rules can present legitimate defenses.

Our lawyers handle these issues in both U.S. and international proceedings. For a discussion of the U.S. side of this practice, see Enforcing or Challenging a Foreign Judgment in the United States. When disputes involve several countries, our International Dispute Resolution lawyers coordinate the related proceedings and enforcement strategies.