Once again, Dan at CLB gives us some anecdotal stuff about some common problems with cross-border transactions. This is spot on commentary, folks.

Here’s the gist of this particular problem:

I have had it with US companies believing their Chinese-American Vice-President (or whatever) is somehow qualified to practice International law. Let me back up.

Many of our clients that do business in China have someone in their company driving their China business. This person is typically a Chinese-American who has been living in the United States for ten or more years. This person is oftentimes an engineer or some other technical person. This person typically is good at his or her job and has risen to a trusted position. This person is usually trusted by the company and the trust is usually justified.

In spite of this Chinese person’s lack of ANY legal training or business training, this person is typically chosen to be the lead person to start up operations in China.

I have been in this position many, many times. It sucks because as outside counsel, you are in a lose-lose position. For me, as an expat (i.e. white guy) practicing over here, I’m even worse off. No way that the Chinese expat is going to lose an argument with his bosses against a white guy. They will almost always think that he knows more than I do, even if he hasn’t lived in China since Deng was in charge. (Yes, having someone piss all over my ten years of China practice experience tends to annoy me.)

Moreover, a lot of these Chinese expats use guanxi (relationships) as a shortcut with transactions since they don’t know enough to do things the right/legal way. Therefore they are more likely to cut corners with setups, relying on local government officials to expedite and “fix” transactions, only to find out years later that the whole setup was completely FUBAR.

Since they also often have relationships with local law firms, they will often find any excuse to boot you off the case and hire their friends instead (sometimes kickbacks are involved, sometimes not). This usually means bad mouthing your performance to headquarters, the people who hired you to begin with. It’s like having a traitor in your midst — can’t be more blunt than that.

I don’t want to simply rehash Dan’s post, so I’ll just bring up an additional problem I’ve had with Chinese expats in these situations – translations.

I had a case about a year ago. Client was a UK engineering firm that was setting up a JV with an SOE in Shenyang. I was called in to do the technology licensing end of it, and I also had the opportunity to get involved with most of the setup docs, including the JV Contract and Articles of Association.

We handled the Chinese translation (from English), which was used in the negotiation with the Shenyang company. My colleagues and I were not part of the negotiations, which were spearheaded by a Chinese expat engineer who had been living in the UK for 20 years.

The Shenyang company had no lawyer in the negotiations either and (surprise!) had trouble with the language of the documents. Turns out they were unfamiliar with legal terminology.

We received back blistering criticism from the Chinese expat, who marked up the translation, noting many “errors” of diction. A big discussion ensued, and we spent a huge amount of time going back over all the docs and tracking down word choices, etc.

At the end of the day, there were virtually no errors at all, just a Chinese expat engineer who didn’t understand legal drafting, and a SOE that didn’t bring their lawyer into the process until too late (this is typical for SOEs).

We ate at least 20 hours of work time, plus when the bill went out for the initial translation work, the client refused to pay, claiming that we botched the job. We were forced to write off even more time as a result to keep the client happy.

This was completely avoidable and had a lot to do with the ego of the Chinese expat engineer (“I have a PhD!”), who had apparently read the legal docs just minutes before the negotiation and had a poor grasp of the details. He knew the industry and the technology — but that was it. His ego (and the responsibility placed on him by his employer) did not allow him to admit his shortcomings on Chinese-language legal docs.

In contrast, the UK company’s local PRC manager in Beijing was awesome to work with, knew exactly what she was doing, and had no problem with our translation.

To summarize: give me a PRC national living in China OR a foreign national expat to work with instead of a Chinese expat with no China experience. Worst of both worlds.