THE CHINA QUESTION

THE CHINA QUESTION

The domestic perspective

n todays fast-paced information society, public relations play a positive or negative role not only in commercial businesses, but also in legal practice involving litigious matters. When something unfortunate happens like the PR situation in this case, it is critical to handle the situation properly and mitigate negative publicity. This removes the uncertainty of people involved directly or indirectly, such as the judge and the public. The rst thing to consider when initiating litigation is local protectionism. Admittedly, local protectionism has not been completely eliminated in China. In some areas, governments still hold a very strong protective attitude toward local companies, especially

The international perspective

opportunity to minimise the PR inuence of the local company. If the PR inuence of the local company is overwhelming and the litigation cannot be conducted in a fair manner, we will need to turn to an excellent local lawyer for help. Because of the profession, expertise and experience of a local lawyer, the judge hearing the case may be more willing to consider and accept their opinions. On the other hand, we can focus our PR campaign in the local area on a different target from the local company. As a big taxpayer, a big employer and an inuential company in the local area, the PR inuence of the local company will be mostly focused on the local government. In response to that, our PR campaign would be aimed at justice. For example, the judicial system of the local area, which can offset negative publicity and enable the local court to balance the interests of both parties involved. Finally, we can use the trial system to the fullest extent. There is also the second instance if we lose the rst instance. Even if we lose the second instance, there is another instance in a retrial. With any change in the trial level, the PR inuence of the local company will decrease accordingly, making it more possible to have a fair trial.

against outside competitors or adversaries. This means local protectionism is always a big challenge when starting proceedings in China. In practice, the rst option available is to challenge the jurisdiction of the local court hearing the case at the beginning of the trial. As an old Chinese saying goes: Among the 36 choices, the best policy is to get away. Challenging the jurisdiction of the local court may lead to a change of the court hearing the case, allowing the company to get away from the PR inuence. However, in certain circumstances, some cases are subject to the exclusive jurisdiction of local courts. For the most part, the place of jurisdiction over cases is open to many possibilities, providing an

Xu Guojian Boss & Young, Shanghai

How can I win the PR battle in litigation?

I am suing a company in its home town. The company is a big employer. How can I avoid a situation where lots of negative publicity is created that could put pressure on the judge hearing the case?

THE CHINA QUESTION

egative publicity caused by litigation can be very damaging for a foreign investor in China. We have seen situations where foreign investors with good claims have been forced to abandon their claims because suing an inuential Chinese counterparty affected their existing business and ability to attract other business. We have also seen situations that resulted in Chinese employees walking out of the business or going on strike. Each of these situations can cause more damage than the damage initially caused by the counterparty that you were intending to sue. This is particularly the case when you are up against a company with a lot of local inuence over the public and the media. In such circumstances, the best defence is prevention rather than cure. You should structure your contractual relationship and your dispute resolution mechanism so that you do not end up in the local court of the company you may have to sue. The steps you can take to avoid being in such a situation are relatively straightforward: 1. Choose arbitration. Arbitration hearings are always private and often the very fact of the arbitration will usually also be condential (depending on the applicable arbitration laws and institutional rules). This will help keep information about the dispute outside the press. 2. Choose to arbitrate (or if necessary litigate) in a neutral and preferably large and sophisticated Chinese city. Judges of neutral cities will not be so inuenced by local politics. If your hearing is in one of the larger cities, the judges are usually also more experienced and sophisticated and less likely to be affected by the media. 3. Consider including strict condentiality provisions in your contractual arrangements. This would preclude your counterparty being able to air your dirty laundry before the media. The above options may not be available to you either because your dispute is not

The specialist perspective

hile you cannot prevent the other side from launching a negative campaign against your company, the following tips will help you elevate the tone of public discourse throughout the litigation process. First, work with your legal team to identify the most appropriate court in which to le your complaint, one that will at least be impartial, if not sympathetic, to your case. Most cases are initially led at the basic or intermediate peoples court level, while appeals can be escalated to higher courts. Track records vary not only province by province, but even district by district. Second, know which key stakeholders (supporters and detractors) may inuence the courts ruling. These include government agencies, industry associations, media, academics and other opinion leaders. Chinese social media, such as Weibo, can also fuel and propagate negative public opinion, placing pressure on the courts decision.

Third, inform key government contacts before ling suit. Ofcials often cannot speak with you once the legal process begins. Contacting these people in advance allows you to tell your story and explain not only your position, but also the steps that you took to avoid litigation. There is a common misperception that foreign companies are overly litigious, which builds additional sympathy for Chinese defendants. This is also a gesture of professional courtesy. Your legal team will need to carefully plan the timing and setting of this engagement and anticipate the risks of a potential leak to the opposing side. In addition, never request or accept offers to facilitate a favourable ruling. Fourth, identify opportunities to level the playing eld. This includes involving your home government and senior executives as appropriate and engaging credible third parties to move the dialogue beyond attacks against your company. In addition to emphasising the positive

commitments your company continues to make in China, discuss steps that are being taken by both industry and government to ensure sustainability, consumer and end user welfare, international cooperation, or other issues of mutual interest. Fifth, remember to rise above the fray. Many companies are attacked in the court of public opinion not on the merits of their cases, but on the perceived tone of their response, which can be portrayed as arrogant and antiChina. This means having a clear, consistent and compelling point of view around your legal position while taking steps to avoid becoming the story. Imagine the headlines that could be generated by your response and pause before communicating. Sixth, know your audiences and ensure that those who matter most to your business are hearing your messages. Many companies focus so much on media and overall public opinion www . chinalawandpractice . com

that they forget to engage their most important audiences. Communicate regularly with employees, customers and business partners. Focus on the positive messages you can share, rather than defending your company against the negative and thank them for their support. Finally, be prepared for any contingency. Conduct planning and prepare detailed responses in advance. Also, consider how you would handle common issues such as leaks, counter suits, unequally enforced gag orders, pressure to settle out of court, smear campaigns and delayed verdicts. Monitor developments and ensure that you have representatives in the courtroom to exchange name cards and begin building relationships with court reporters and other media.

contractual or you have an existing contract that does not include the elements listed above. In these circumstances, it is important to anticipate and assess the damage that might be created to your business and undertake damage control. Damage control can be achieved by using a combination of both experienced international disputes counsel and experienced local counsel. It is important to have both types of lawyers on board as local counsel can identify the local risks but may not be able to see past the local problems, whereas international disputes counsel will have various strategies that they are able to deploy, but may not fully understand the local risks involved. One of the ways in which negative publicity may be generated is through the media and members of public attending the court hearing. Therefore, you may be able to restrict the amount of publicity by restricting media and public access to the court hearing. According to Article 120 of the PRC Civil Procedure Law ( ), if your claim involves matters of state secrets or personal privacy, the court hearing the case will be closed to the public. If the dispute involves trade secrets, you may request a private hearing. The investment and employment opportunities brought by foreign investors are valued throughout China. The merits of foreign investment, however, may not always be at the forefront of peoples minds in contentious circumstances. The right team of legal and other advisors can help you structure your contractual relationships so that you can avoid, or at least mitigate, any negative publicity by participating in a private arbitration in a neutral venue. They can also assist with framing your claim and delivering your message to the public, which will help to remind the judge and the public of all of the good that you have done in the community.

Should you wish to contribute or comment on The China question please contact David Tring at: Tel: +852 2842 6964 Email: david.tring@euromoneyasia.com

Jennifer Hart APCO Worldwide, Beijing, Chicago and Washington DC www . chinalawandpractice . com

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