Welcome to the China business law podcast a show about the practice of law in China from real and house and Law Firm professionals on the ground. And today. The topic is litigation in the US for Chinese companies. We are thrilled to be joined by amiad Kushner partner at Seiden Law Group, which is a boutique law firm in New York that specializes in complex commercial litigation often on behalf of international clients, including Chinese clients in the US.
It's a pleasure to join you and thank you for inviting me. It's not another topic that I think too many people could really cover. So you are a unique guest on the show for sure and to get into a little bit more about your background and for the benefit of the audience. I thought we could take a couple minutes for you to just walk the audience through your story and your connection to China and Chinese clients and just
How you got to to this point of your career? Sure. So I've been practicing litigation in New York for 17 years. Now. I started out at Simpson Thacher and Bartlett which is one of the the major New York law firms was there for about seven years and then I was at Lowenstein Sandler for another seven years and for the past several years. I've been working at some boutique law firms and I'm currently with side and Law Group. I sort of got interested in China practice by accident. I spent I would say the first 10 years or so of my career without touching China at all.
And when I was at Lowenstein Sandler my second law firm.
I was looking to gain an edge. So to speak in the race to become partner, you know, I was I was an associate, you know or counsel trying to become partner. And in order to become a partner you needed to demonstrate that you could develop business and I had this idea of trying to develop business from Chinese clients.
Because I thought that this is something that no one else was doing and it seemed that this was sort of a niche that you know, if I if I developed some expertise and contacts in this area. I would have a unique space and perhaps an edge against other people who are trying to make partner the same time. I was lucky that one of my friends from from law school was a partner at a major Chinese law firm in the New York office of that firm, and he was able to introduce me to his contacts in China and kind of get me get me started and one day he referred to me, you know, my first first significant case for a Chinese client and that around I would say 2011 and since since that time I've been very fortunate because I've had a fairly steady stream of China related litigation and arbitration and I've learned a lot along the way and I would say become deeply fascinated by
Chinese culture and with the the contrasts between us culture and Chinese culture as well obviously experienced that myself as well and it's for guests of audience members who've heard the podcast before and it's so funny you mention that because that's quite a that's quite a common thread for folks who do business in China were spent time in China or or made? A lot of contacts and travel to China a lot is it's usually starts starts by accident, you know something the or trip that was supposed to be one trip and then turned into staying for a few years or developing whole business, right or practice area. Yeah. Absolutely. When I when I first came to China, I was just completely shocked it just how different everything was.
Um, I remember my first trip to China I was I was speaking at various conferences and I viewed these conferences as essentially opportunities to gain contacts and clients. And so I you know, as you would do in the US, you know, I would I would send emails to people who were registered to attend the conference. This is the typical exercise that you do in the US when you're trying to develop business when you go to a conference you get a list of the attendees and you try to figure out who it makes sense to meet you may know some people you don't know people you try to get an introduction and I had a list of cement and is this conference and I sent a bunch of emails introducing myself and receive no response at all. And then I remember when I spoke and the first city in China that I visited was Guangzhou and I spoke at a conference in Guangzhou and the topic I believe was bankruptcy litigation.
And I remember that there was an extremely active Chinese audience in the room that had a lot of questions about bankruptcy litigation, and we're very interested to know about my experience and about how Chinese companies could protect themselves in the bankruptcy process. Very engaged audience very very eager to know and I was really looking forward to meeting the attendees at the conference at the cocktail party which followed and I had a huge stack of business cards, and I eagerly went to the cocktail party and found that the only people the cocktail party were Americans and all of all of the Chinese audience members, you know hundreds of them had disappeared and I became very interested to understand why that was because you know in the u.s. Whenever people think about going to a conference, nobody thinks about the the value of the formal presentations for the agenda people just think of the value in terms of the side meetings and the ability to interact people in the hallways, you know in restaurants, you know going out for a drink with people that you otherwise wouldn't see and making that personal connection often, you know, sometimes people that you know, but often with with strangers or people you're meeting for the first time by contrast I think in China. As I came to learn the notion of a bunch of strangers getting together.
It is just not something that works in mainland, China.
And a mere exchange of business cards with strangers has has no meaning whatsoever. That's a fair assessment. I got I would I would I would agree with that. Yeah, I think you're Chinese level is is at the time was probably almost non-existent. I would think when you first started, right? Yeah. That's right. My my my Chinese by the way is still pretty basic. But even even if I was fluent in Chinese
It would probably have almost zero relevance to being retained on any particular matter. So how would you typically get retained by a client? That's I think would be fascinating for the audience to do that. Sure. So I think maybe I'll just start as a comparison, you know to the typical process in the US.
In the US if you have a company with litigation that there's typically an office of the general counsel that looks at different candidates different law firms. There's a term called beauty contest which all law firms are familiar with, you know, it means essentially a competition between various law firms that are pitching to be for a particular piece of work and and the size of the general counsel's office but involve comparing resumes backgrounds of lawyers getting recommendations from different people and what you're trying to do is you're trying to weigh information and data about different candidates and make an objective determination based on based on the experience that each candidate brings to the table and try to fit a particular person or particular firm to a matter.
And data is important experiences important track record is very important.
In China, I would say that experience has has relatively minimal relevance particularly. If you're getting outside of the largest state-owned Enterprises, you know private companies are most companies where what you're talking about is a recommendation from someone that the chairman of the Chinese company knows and trusts it's a personal relationship of trust somewhere that that matters and I'm not talking about the relationship between the Chinese company and the lawyer, you know, so if you have for example a a Chinese companies as a litigation in the US.
The Chinese company is not kind of any relationship with the u.s. Lawyer. The relationship is going to be between the Chinese company and a Chinese lawyer.
And that relationship would typically be very very long-standing could be many many years people know each other 10 years 20 years 30 years. And so if the chairman trusts this particular lawyer that he or she is known for 20 years and that lawyer recommends an American lawyer.
That's the end of the discussion. There's really no there's no wedding and most likely, you know based on my sense of how Chinese culture works. It's unlikely that there would even be any discussion so you have the conversation might be something like the chairman might say, you know, do you know any American lawyers?
The response might be oh I let me let me think about that. Oh and then two days later, there is someone I know and that's the end of the discussion right by the way the corollary of that is that
I think in mainland China if you ask if you're looking for a recommendation to hire someone you're trying to find out about someone.
And you ask let's say let's say let's say you're interested in finding out about a particular lawyer in a large law firm.
And you happen to know another lawyer in that firm?
And you're asking the lawyer at the firm that you know.
About this other lawyer in the same firm that you don't know. Okay it mainland China it would be normal just to say just to ask.
Oh, do you know this person?
And if the answer is oh, no, I I don't know that person.
That could be a way of saying don't trust that person and that would be the end of the day that would be the end of the conversation. So there's there's a whole class of arbitrations.
Where the governing law is United States law, but the arbitration may be physically located outside the United States and I've actually had a number of major arbitrations like that often in Hong Kong which is a traditionally of preferred venue for Chinese companies where the governing law is is New York law or some other US law, but in terms of issues that Chinese companies are most
I'm surprised by I think the biggest issue relates to disclosure. I think it has cultural elements and also has just enough familiarity with the legal process in the United States the philosophy.
In American litigation is that there should be very broad disclosure or Discovery. And there's a presumption that each side should get access to the other side's information and data to the extent that it's material and relevant to a case and in the United States that has a very sort of obvious meaning, you know, what it means is that if a company in litigation has files as emails as information, you know that it possesses that information is subject to actually being disclosed and given to the other side. And this is a very common sense notion in the United States in China this my experience. This is quite shocking the very idea that your secrets.
Would be disclosed to the other side and that there would be no limit on this is is quite shocking. In fact, I've been involved in disputes where the our adversary produced emails and my client was shocked that they would actually give this up. How could they how could they show us their emails?
You know, it's like it's just so shocking and the other aspect of this I think is really the kind of more of a cultural aspect is that in the US there is a there's just a natural process by which events are documented. So if you have you know, if you have for example an m&a transaction, you would have a series of emails going back and forth discussing, you know, the drafts of the ma contract you have.
All kinds of deal points being talked about over email and would be able to probably piece together the developments and the negotiation of a transaction just by looking at the email Trail it in mainland China.
You typically just wouldn't wouldn't put things in writing.
It's just it's just a culture that it's not it doesn't accept that that is a necessary part of the process and
The result is that Chinese clients often just don't have any emails. You know, they may have we chats.
But the we chats are often going to be of a very vague and general nature.
And because business is so often just based on trust and I'm verbal discussions or even on unspoken understandings.
It's just a lot less documentation.
Can I drill down on that point in because I think that's quite fascinating. I'm curious how I can totally see what you're saying. And I'm curious how that plays in either a court or in an arbitration panel and and even even within that where you know, if is that the panel or the court is in the u.s. Versus Hong Kong which might be a little more accustomed to Chinese culture as I said, not not naturally.
Commencing everything and is it any presumptions about that? The fact that stuff is not documented. I may be adversely.
Sure. Well, I think that from the US side and I've seen this I've seen this several times US litigants are routinely shocked and angry at what they perceived to be the refusal of the Chinese side to produce documents or the you know, the hiding of documents and they just do not believe that you could have significant transactions with no emails.
Notwithstanding the fact that United States and China have extensive commercial relationship, you know, it's the largest bilateral trading relationship in the world. Nevertheless. You have this Chasm and even even some of the most experienced US companies that deal with China regularly are shocked at what actually happens.
In Chinese companies and so this this causes a lot of friction.
In the cases that I've been involved in and there's often accusations by the American side that the Chinese must be hiding something and at the Chinese side is not plate is not playing by the rules.
But more often than not what what is happening is that the American side just doesn't understand the way business is done in China.
the way yeah, the way that I have tried to deal with that is to try to sensitize the tribunal to the realities of Chinese culture and in an international arbitrations where each party has the ability to select one of the arbitrator's I think it's critical you're representing a Chinese company to select an arbitrator that has some familiarity with Chinese culture and the way business is done in China because otherwise the arbitrator will simply not understand some of these issues around around
Closure and other issues that are unique to Chinese culture. Hmm. That's interesting. Yeah, you would I wants to be sort of a coach for for the other for the other arbitrator's right. Absolutely, you know, and I had one major arbitration in involving.
I represent a Chinese company against the major US company and I could tell you that we spent a very very long time searching for an arbitrator that had china experienced and we ultimately found one like that, but it was it was not easy most most of the big names in international arbitration are you know westerners who who just don't have a very close understanding of China. Obviously that's over time that will change and I think I think that you know, as time goes on perhaps. There's also maybe a little bit more of an internationalization to some extent of the police major Chinese companies
However, it still is a significant issue. And if you're representing Chinese companies, you really want to make sure you have someone with experience with China as one of the arbitrator's we actually had an arbitrator once who's fluent in Chinese and we had a surreal scene during our evidentiary hearing where Witnesses were testifying in Mandarin Chinese and occasionally crack cracking jokes and this one member of the tribunal would just start laughing uncontrollably.
And both of the legal teams were English-speaking. We're just like waiting for the translation eagerly.
Yeah, I would yeah, I could see that if I was on that panel, I guess I mean not to to to plug my own Chinese ability or whatever but I would be conversationally had those kind of situations where I might be understanding the Chinese faster than the translation gets through getting the joke faster, I guess and people looking at me wondering why I'm laughing. So understandable since you've set up there.
Is that will not necessarily be enough to change how they would go about their normal deal process their due diligence process their review process. In other words working backwards. There's nothing as these clients become bigger and more Global more sophisticated more accustomed to being sued that the and disputes if that's working back in time to change any of their behavior as they get bigger and more sophisticated.
Well, I think you have to draw a distinction between Chinese companies that have a are established, you know in the u.s. You know, they have offices in the u.s. They've been in the US for a number of years and Chinese companies that occasionally do business in the US or just have a transaction with a u.s. Counterparty that ends up in litigation. Of course Chinese companies that are in the US for a long time, you know thinking I'm just throwing a name out there like Bank of China have to adapt to US regulations have to comply with us law and they have substantial compliance departments and their highly regulated and and they have policies and procedures to reflect that but I think that is a very very small slice of the Chinese Universe if you will.
I think the vast majority of Chinese companies that do business in the US.
Are unaware of the way things are done in the US and have a hard time understandably and it's only when you encounter a dispute that you you start to realize some of these differences play out in litigation or arbitration. I also think that culturally the notion of doing business in a way that would protect you and litigation is just not.
That's not a Chinese approach that that sounds like in the u.s. No idea. Yeah. Yeah, I think yeah, I think you know exactly probably know exactly I mean because you know in the u.s. We just assume that litigation is part of the landscape of doing business. It's a cost of doing business. It's fairly normal and I think us companies understand that documenting things can can help protect you in litigation and litigation is just sort of expected there certain types of us companies like banks that are sued every day of the week. Now. I think Chinese companies are very very difficult targets to sue in the US mainly because us judgments are basically unenforceable in mainland China and apart from that there are a lot of practical difficulties of suing companies Chinese companies that are based in mainland China, but maybe they had a transaction of the US or office in the u.s. Very often. The documents are going to be in Chinese. So it's just, you know, it's burdensome to have things translated or you know, and and then if you're trying to get Discovery from mainland China, there's a special review process for state secrets.
It's an extra layer of cost and burden takes just takes a lot longer the physical distance between the US and China creates problems. If you have to take depositions of Chinese Witnesses and there and if they don't travel to the US.
dYou have to travel to Asia and you can't take depositions in mainland, China.
So you have to go outside of mainland China, you know, it's just one issue after another.
And then you add to that the fact that as we talked about Chinese companies tend not to really document things right? So I think I think that it's very difficult to sue Chinese companies in the US in general and most American lawyers.
Are unaware of just how difficult it is.
And they're in for a surprise. I've heard I've heard that that story as well and I'm and I guess but maybe you could probably make a distinction between like you said Chinese companies doing deals kind of cross-border deals with us companies and then you have maybe some of the companies like you mentioned Bank of China which are which have been in you know directly invest in the US and build an operations in the US and those of course then have
Assets that can be sued and judgment attached to in the US, but at the same time I take it then that they're if they're have that presence there already also more sophisticated about about litigation in general. So they're not just they're not just an easy target in that sense.
That's right. I think you know the bank of China's of the world have in many ways transformed, you know themselves to adapt to the u.s. Way of doing business and I wouldn't be surprised if most of the people working at Bank of China are Americans, you know in the glass offices.
As you would expect but again Bank of China is in the middle Rarity and most Chinese companies. Just do not have that kind of presence in u.s.
Can you do you have any recommendations for for let's say American companies or Chinese companies when they're drafting sort of their dispute resolution Clauses in their contracts things to watch out for things to get tripped up on you mentioned. For example, that might be an assumption that us Company by us lawyers that they can easily see what Chinese company there is their language or things that you see that are.
Going to be critical mistakes in drafting that dispute Claus. Yeah. So if you're a US company and you're trying to protect yourself in a potential dispute with the Chinese company, you probably want to go with International arbitration.
Rather than agreeing to a court proceeding if you if you agree to a dispute resolution and a Chinese Court.
You know, you're kind of at the mercy of a very unfamiliar court system where the way the game is played is just very very different, you know among many other things.
It's it's fairly common for Chinese litigants to have ex parte contact with the judge and there could be all kinds of unusual influences on the process that an American company would be shocked by on the other hand if you have your dispute resolved in a United States Court.
the US court judgment is unenforceable in China, and so it could be a very little used to so if you choose arbitration
The arbitration award is going to be enforceable in China and Chinese courts enforce overwhelmingly enforce International arbitration Awards, but what you need to be very careful about is the way that you craft the arbitration clause.
Because China Chinese law.
Is as is very strict on the way that these Clauses have to be drafted. And if you if you don't draft or Clause the arbitration Clause very carefully.
You could end up having problems enforcing an arbitration award in China. There are a number of cases where Chinese courts decline to enforce International arbitration Awards because there was a defect in the arbitration clause.
The fact that a US court judgment it is completely meaningless in China creates enormous Leverage.
And it's it really it drives the entire case. It creates a very powerful Dynamic where the American company that's suing. The Chinese company knows that no matter how successful it is in the case, whatever judgment it obtains is probably gonna be worthless. And so what you can do is extract very favorable settlements,
you know you can you can really limit exposure and this is this is you know, you know to be to be to be Frank this is this is unfair and I think you know, it's it's an imbalance which
Should be in all fairness corrected. It really is not a Level Playing Field in that in that sense. But at the moment that is the situation and if I'm on the US side five, I'm in the u.s. Representing a Chinese company, you know, I want to be in a US court now having said that.
Many Chinese companies prefer arbitration.
Because it's confidential and it's perceived to be.
Less costly and it may or may not be less costly arbitrations could be very expensive. But but it is it is confidential and many Chinese companies are secretive and you know, they find the confidentiality very very attractive. So that is another important important.
Consideration but as I said arbitration awards are enforceable just about anywhere in the world. And so the the pressure point of you know that you would enjoy in a US court is gone an international arbitration.
I'm at any other cultural differences. I kind of wanted to wrap up with an with an open-ended question of kind of some other points. We haven't covered or other kind of cultural differences or lessons. You've seen over the years handling these kinds of cases, which as I mentioned at the top of your kind of guessed that we haven't had on the show and and may not have again on the show for a long time. So handling these kinds of cases any lessons.
Or kind of cultural differences you want to emphasize again? Yeah, I think one thing that we haven't talked about is in my in my experience.
Chinese companies tend to be extremely hierarchical places where control of decision making is is typically vested in one person. It could be could be the chairman or could be perhaps some some powerful figure who is was behind German as it were and it's just it's just important to understand that dynamic because
You're often dealing with people who who have no real Authority including including the general counsel. So you may be dealing with someone who is as the title of the general counsel of the Chinese company and that person will have absolutely no authority over the litigation.
And that's really important to understand when you dealing the Chinese companies by contrast in the US the general Council does have real Authority and often in a situation in which there's a bet the company litigation the general Council has the final say over over the company's decision making in a litigation and one would not expect the business to interfere with litigation decisions in China, that would be unthinkable that the notion that amir functionary would sort of dictate to the chairman how particular decision should be made based on supposed expertise in one area. It's just not the way Chinese companies work.
So it's important to be understand that dynamic.
That's a very good observation right on the money. So well, thank you. I'm glad I mean this is really been quite a pleasant experience of an area. I'm less familiar with for sure. But also just it's been a thrill to have you on and and and I think our audience on both sides is the China and the Us and other places around the world will benefit a lot from listening.
This because it's not like I said a topic that we can easily find someone with the expertise to talk about every day. So it's a really thank you so much for joining us. My pleasure Art.