Suddenly hard. From China Law Blog:
File this one under “just when I thought I had seen/heard everything.”
A month ago (exactly) we wrote about how it is getting a lot tougher to get money out of China. See Getting Money Out of China: What The Heck is Happening? Two weeks later, our own Steve Dickinson was interviewed by Bloomberg for a video piece, entitled, The Problem of Getting Money out of China. In the meantime, our China lawyers are getting a whole host of phone calls and emails from mostly foreigners who want to know (1) whether what their China counter-parties are giving as an excuse for not being able to send funds to invest or buy is true and (2) what can be done to get the funds?
Some of those callers/emailers want to use us to test some idea/scheme/plan to get money out of China. With all due respect/disrespect, 99 times out of 100, their ideas are either severely flawed and/or likely to lead to jail time.
But my favorite out of all of them came in through from an “advisor” to a Chinese company and the scheme they wanted to run by me was a plan to have the Chinese company quicklylose an arbitration in the United States. This is what I quickly surmised anyway, but it took me a bit of probing to discern this. Here, very roughly and with changes made to improve blog flow and to camouflage any identifiers (including nationality), is how our conversation went.
Australian advisor: Can your firm defend a Chinese company in a U.S. arbitration involving a $3.5 million breach of contract.
Me: Sure. Not a problem, but that is not going to be inexpensive and we are going to require a large amount be paid upfront.
Australian advisor: This one is going to be different because both sides will want it to move forward as quickly and as cheaply as possible.
Me: Okay, that may be what they are saying now, but once these things get started that very well might change.
Australian advisor: It won’t in this case.
Me: Okay (while thinking, how many times have I heard someone insist that their matter is the one in a hundred that strays from the norm?)
Australian advisor: The parties would even be willing to agree on the award.
Me: Then why do they even need to arbitrate? The fastest, cheapest, easiest thing for them to do would be to enter into a settlement agreement that can be enforced in both China and the U.S. I’m just assuming that the other side is a U.S. company and that is why the arbitration is in the U.S.
Australian advisor: There are extenuating circumstances.
Me: Like what. And by the way, do you have the contract with the arbitration provision in front of you right now. What exactly does it say about arbitration? Where is it supposed to be and before what arbitral body? Does it provide for the winner to get its attorneys’ fees?
Australian advisor: Not exactly. We were kind of hoping to have you draft the arbitration agreement.
Me: What? What are you talking about? Now I’m really confused. You cannot have an arbitration unless both parties agree to arbitrate. Are you saying that the contract between these two parties does not provide for arbitration but now the parties have agreed to arbitrate? That’s possible.
Australian advisor: Yes.
Me: Okay, what is the name of the other party and who is its lawyer?
Australian advisor: We were going to ask you to form the American company and represent it too.
Me: What? I don’t get it. My firm can’t represent both your Chinese company and the opposing party. It just can’t.
Australian advisor: What if they were really the same party?
Me: But they’re not.
Australian advisor: Well, they really are.
Me: How is that?
Australian advisor: Because the whole point of this arbitration is to get an award that the Chinese company can show to the Chinese government.
Me: “Not interested. No way are we going to do this and I really don’t appreciate your having wasted my time. Good-bye.”
Get it? The Chinese company wanted us to represent it in a completely fake arbitration that it would lose so that it could then send $3.5 million to its own U.S. company so that — no doubt — in turn that US company could buy a house somewhere in the United States.
Other lawyers: you have been warned.
