Dan Harris at China Law Blog has another great post on this topic at China Law Blog. I know that both Dan and I have posted multiple times on this subject over the years, but it really does bear repeating that a foreign company that does business in China needs to be very careful about language. Let me first excerpt Dan’s post and then I’ll take another crack at this from a slightly different angle. Dan approached this as a hypothetical:

United States company contracts with Chinese company to have the Chinese company make product for the United States company. United States company tells Chinese company that it is absolutely critical that the product be delivered by August so as to be in the stores for the Christmas season. United States company calls me in September asking for my help in forcing the Chinese company “to live up to the contract.”

United States company sends me the contract, written in both English and in Chinese, and it says the following:

• Chinese language controls.
• English language version says product must be delivered by August 10.
• Chinese language version essentially says Chinese manufacturer will do its best to deliver the product by August 10, but that if circumstances prevent it from meeting that date, its only requirement is to try to get the product out as quickly as it can.

OK, so the takeaway from that is you have no one else to blame but yourself.

How does this sort of thing happen in the first place? Well, the obvious reason is that someone was too cheap to hire a good legal translator, so the foreign company takes the Chinese language contract it received from the Chinese company and gives it to its employee, Mr. Wang, who emigrated to [insert foreign country here] from [insert small town in Guangdong here] in 1955 and works in the mail room. Mr. Wang has never reviewed a legal contract before, of course, but how hard can it be?

Another possibility is that for some reason, some investors out there subconsciously believe that the foreign party is somehow responsible for the English version and that the Chinese party is responsible for the Chinese version. Makes sense in a weird, symmetrical sense, but it also guarantees that if there is a dispute somewhere down the road, the chances of a language disagreement, just based on lack of coordination, is that much higher. I’ve seen this kind of thing happen before (usually when I’m handling an arbitration).

So here’s the way I like to play this issue with clients: dealing with the Chinese language version of an agreement is not a burden, it’s a gift. Embrace the opportunity, take control, and handle the first draft yourself (and by “yourself,” I mean competent in-house/outside counsel or professional legal translators).

Why is this a good thing? Most foreign companies (and their in-house lawyers) will want to nail down the English-language version first. If the foreign company is responsible for the first draft of both versions, it has the luxury of drafting it in English first (and getting everyone in the company to sign off) and then turning it over to a competent translator to do the Chinese version.¹

At that point, the language is all yours, in both versions. You have a platform you can use for negotiations that you are 100% confident in and can work off of as discussions proceed. Moreover, since you are the “keeper of the original,” you can try to ensure that all formal changes to the document are made by the same folks who wrote it to begin with. I like to send one of my senior Chinese associates in to the negotiations and get that lawyer to make any changes (to both language versions), and only then will the new version be circulated to the other side.

Doing it this way keeps the foreign firm in control of the document throughout the process. All right, this ends my law proselytization for the evening.
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1. Yes, you could start with a Chinese version and translate it into English. However, my experience is that you almost never get an English version at that point that isn’t slightly weird, and it will sometimes be questioned on that basis alone by in-house counsel. This could slow up the in-house approval process.[↩]

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