Negotiation is Most Common Form of Resolution Between Company Disputes
The most common form of dispute resolution in China involving foreign companies is negotiation and settlement between the conflicted parties. This is the easiest and most amenable to all parties. It can preserve a working relationship and can easily be the cheapest of all resolutions. It is very profitable to do business in China. It is even more profitable to do business, this means setting your business up to succeed from the beginning. But conflicts do happen regardless of the most thorough preventive steps. These conflicts can consist of a broken contract, fraudulent action or disagreement on the terms of the contract. The best approach is prevention, but when a deal goes sour, there are a number of options to resolve business disputes in China, all of with which your experienced and competent legal counsel can assist you.
Bringing in a third party for mediation is quite common in China however, like a successful negotiation, mediation requires willing parties and is non-binding. These parties comes to a mediated agreement will create a new contract involving new terms, but this is only treated as a new contract and lacks the force of law. Many contracts can be made to require mediation to resolve a possible conflict before ever getting to arbitration or litigation.
Also court litigation is difficult and expensive in China and it is not considered a viable option. Planning ahead and writing the correct contract can create a better option to get an enforceable judgment in the case of a dispute. This can primarily be accomplished through arbitration.
Arbitration is similar to mediation in that it brings in a third party to resolve the conflict. The primary difference is that arbitration is binding on the parties if executed properly. Normally, arbitration in China is governed by The China International Economic and Trade Arbitration Commission. Arbitration is the most common form of dispute resolution since it is shorter, cheaper and generally more efficient than litigation. It also carries with it the force of law. In order to get to arbitration, the original contract generally must include an arbitration clause.
The China International Economic and Trade Arbitration Commission arbitrate more international cases than any other arbitrating body in the world.