Ties That Bind - Bay Area Council Economic Institute

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68 Ties That Bind judges through Berkeley’s Boalt Hall and the San Francisco-Shanghai Sister Committee, and he currently has an of counsel relationship with Chinese law firm AllBright Law Offices. Quan acknowledges that, while China has made considerable progress on legal reform in recent years, government enforcement mechanisms are weak and dispute resolution through the courts can be arbitrary. Even after contracts are signed, negotiations continue as to their meaning. Local officials, the central government and the Communist Party can all influence court and arbitration decisions and, at least until recently, they have tended to strongly favor the Chinese party in a dispute. The government tends to give “public good” considerations—protecting domestic industries and jobs, for example—priority over individual commercial rights. An extension of this principle can be said to apply to intellectual property cases, where China often sees a philosophical, developing country “right” to certain technology transfer free of prohibitive costs. Yet it should be stressed that China’s patent and trademark laws generally conform to those of most countries in the world other than the U.S., favoring the first party to file a patent or register a trademark versus the inventor or first user. And recently China upheld Pfizer’s patent on Viagra and toughened IP protection in cases affecting public health, in response to risks posed by counterfeit pharmaceuticals. Attorneys in China practice frequently refer to being “hometowned” by a legal system based on civil law tradition, with a three-judge panel instead of a jury, no attorney cross-examination of witnesses, and only a single appeal permitted. Most of China’s 200,000 judges are recruited from the military or the police and given on-the-job training, or increasingly are recent law school graduates with relatively little practical experience. Most judges are hired, paid, promoted and fired by local or provincial governments. Court “adjudication committees” made up of local administrative leaders may intervene in cases, usually behind closed doors. Use of local officials or police to harass outside parties to settle— either to dispose of a case quickly and quietly, or in a way favorably for local plaintiffs or defendants—is not uncommon. Behind the scenes influence from the Communist Party is also a frequent aspect of dispute resolution. Experienced attorneys, while praising China’s ongoing, rapid transition to the rule of law, privately acknowledge that use of connections and relationships— “guanxi”—is still an important asset that any foreign lawyer must bring to the table. Most commercial disputes are settled through an arbitration process rather than the court system. The favored arbitration venue specified in commercial contracts is the China International Economic and Trade Arbitration Commission (CIETAC), a panel of international lawyers established in China in 1989. Some 200 cities also have their own arbitration commissions as an alternative, and courts in some large cities have created special departments to deal with foreign trade and investment issues in lieu of arbitration. The system is still far from perfect: Even CIETAC has acquired a reputation for corruption, ex parte communications and other unethical practices. And some foreign companies receiving favorable decisions in arbitration have still had to sue in Chinese courts to enforce judgments
Bay Area-China Trade: Behind the Numbers when defendants refused to pay. As mentioned earlier, the arbitration venue is negotiated and specified in commercial contracts between parties, and is a function of bargaining leverage. Many attorneys advise clients to refuse any China arbitration or, failing that, to require that the arbitration panel chair be a third country national. Use of local arbitration panels requires due diligence and venue shopping. Cedric Chao, an attorney with Morrison & Foerster in San Francisco who is licensed to sit on CIETAC arbitration panels, says international arbitration is still the fairest dispute settlement option for foreign companies. Intellectual property cases are the exception, Chao says, and are typically heard in court for two reasons: IP cases can be highly technical and if the arbitration panel gets it wrong there is no appeal provision, whereas a court ruling can be appealed; and the absence of juries and punitive damages in Chinese courts moderates potential awards. Courts can also grant immediate injunctive relief to plaintiffs, halting the activities of counterfeiting operations. The downside is that a civil court case is a more public process than arbitration, and a case involving foreign and Chinese litigants—particularly one centering on intellectual property protection—may be more likely to attract press coverage. Courts may be gradually gaining in favor among attorneys. A compulsory national exam for judges, prosecutors and lawyers has helped professionalize the courts. In addition, commercial cases pitting foreign versus Chinese litigants often attract publicity and cause judges to exercise greater caution in hearing those cases—to the point that Chinese companies have complained at times that they cannot get a fair hearing. An estimated 100 foreign law firms operate in China. The licensing process is less than transparent, involving extensive documentation and approval delays. Attorneys are barred from identifying themselves as such and practicing in China while license applications are pending, but a number reportedly operate unofficially out of hotels without business cards. %D\ $UHD &RQQH�WLRQV Bay Area lawyers, judges and legal scholars have been active in China since the early 1980s, participating in exchanges and directly advising China’s government and its courts, including the Supreme People’s Court, on legal reform. Many of these exchanges were initiated through UC Berkeley’s Boalt Hall School of Law and through the San Francisco-Shanghai Sister City Committee, chaired by San Francisco attorney and city supervisor Gordon Lau. As already noted, for many years the Asia Foundation has played a major international role supporting legal development in China. Leading Bay Area Law Firms Active in China Allbright Law Offices Baker & McKenzie Cooley Godward DLA Piper Rudnick Gray Cary Heller Ehrman 69
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The Bay Area Economic Forum wishes
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Bay Area Economic Forum 201 Califor
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Table of Contents Introduction ....
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Introduction About This Report The
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Introduction dollar-denominated ass
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Introduction practices of their sup
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Executive Summary The San Francisco
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Executive Summary As Silicon Valley
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Executive Summary 8. Establish regi
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1 A Rich History of Work and Reward
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A Rich History of Work and Reward m
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Page 29 and 30: 2 New Networks Emerge The Bay Area
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Page 33 and 34: New Networks Emerge nomic Law; the
Page 35 and 36: New Networks Emerge and academics f
Page 37 and 38: New Networks Emerge schools on the
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Page 41 and 42: New Networks Emerge financing—ban
Page 43 and 44: New Networks Emerge Since the mid-1
Page 45 and 46: New Networks Emerge (R&D) innovatio
Page 47 and 48: Hong Kong Seeks Its Role New Networ
Page 49 and 50: New Networks Emerge In recent years
Page 51 and 52: New Networks Emerge savings rates a
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Page 57 and 58: 3 Bay Area-China Trade: Behind the
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Investment: Building Global Busines
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5 Building Bridges, Leveraging Asse
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Building Bridges, Leveraging Assets
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Building Bridges, Leveraging Assets
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Acknowledgments This report was co-
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Walter Reichert Hewlett-Packard Co.
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Sources Introduction American Chamb
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Sources Hicks, John D. “The Ameri
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Financial Services Sources “A Gre
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Sources Schmitt, Kellie, “Lost Ho
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Sources “China-Based Worksoft Cre
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Sources Guerin, Didier, “Human Ca
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Sources Cooper, Chris, Ken DeWoskin
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Sources Liou, Fu Tai, “How Taiwan
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Bay Area Economic Forum 201 Califor
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