I would like to start by telling you a story. Once upon a time one of our clients entered into a contract with a company in Germany. They did business together for a number of years without any issues arising. They had agreed at the outset that if any issues were to arise they would be governed by English law and the courts of England and Wales would have exclusive jurisdiction to deal with things. Many years of successful trading later, our client decided to branch out and start doing business with a Chinese supplier. Our client took the view that since it had been trading for many years with the German company without any problems they would simply use the same contract with the Chinese as well. Unfortunately our client’s relationship with the Chinese company was not so successful. When problems arose our client needed help as they wanted to take legal action against the Chinese company.
Well gidy up gidy up and get away…
The Prime Minister David Cameron has told us that a strong relationship is in the interests of both Britain and China because it brings investment and jobs and higher living standards for our peoples. The more we trade together, the more we have a stake in each other’s success. Today Britain and China have strong diplomatic relations and our businesses are creating deeper ties. On 21 October 2015 Beijing and London secured deals worth about $62billion during President Xi Jinping’s first state visit to the UK. Xi said China will continue to encourage more Chinese companies to invest in the UK, while welcoming UK firms to come and do business in China. But did you know there is no reciprocal enforcement agreement between the People’s Republic of China and the UK in respect of UK court judgments?
So what this meant for our client is that even if they were successful in obtaining a court judgment against their Chinese supplier here, they would have no right to enforce any judgment obtained here over in China. The same problem would not have arisen if there had ever been any issues with our client’s German supplier because UK court judgments can be enforced in Germany, as indeed they can be in a number of other countries around the world under various agreements.
Getting a court judgment is only half the story. It is pointless obtaining a judgment against a company unless it can be enforced. The moral of the story: make sure your contracts are bespoke and that your contract terms are appropriate not only for the type of business you are doing but also for the place you are doing business in.
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