Can Foreign Companies Sue a Chinese Company in Chinese Courts?

Legal Foundation: National Treatment for Foreign Litigants

Article 5 of China’s Civil Procedure Law establishes the principle that foreign nationals, stateless persons, foreign enterprises, and foreign organizations have the same litigation rights and obligations as Chinese citizens and entities in Chinese courts. This principle of national treatment is further codified in the Special Provisions on Foreign-Related Civil Procedures (Chapter 24 of the Civil Procedure Law), which governs the procedural rules applicable to disputes involving a foreign element.

The national treatment principle means that a foreign company can file a lawsuit in China on the same legal basis as a Chinese company. There are no special barriers to access to justice for foreign entities — no requirement for a local business license, no requirement to post security for costs (except in limited circumstances discussed below), and no requirement for a minimum claim amount to establish jurisdiction. However, practical considerations, including document authentication, translation requirements, and the need for Chinese counsel, create a higher procedural burden for foreign litigants than for domestic parties.

Establishing Jurisdiction in Chinese Courts

For a Chinese court to hear a lawsuit brought by a foreign company against a Chinese company, the court must have both subject-matter jurisdiction (adjudicatory authority over the type of dispute) and territorial jurisdiction (geographic authority over the defendant or the dispute).

Subject-Matter Jurisdiction

Chinese courts are organized in a four-tier hierarchy, each with different subject-matter jurisdiction for foreign-related cases:

Under the 2022 amendments to the Civil Procedure Law, certain basic people’s courts in major cities (Beijing, Shanghai, Guangzhou, Shenzhen) have been authorized to hear foreign-related cases up to RMB 20 million in claim value. Foreign litigants should verify the jurisdictional thresholds in the province where they intend to file their lawsuit.

Territorial Jurisdiction

A foreign company may file a lawsuit in a Chinese court with territorial jurisdiction over the dispute. The general rules for determining the competent court are:

• Defendant’s domicile: The primary basis for jurisdiction. A lawsuit against a Chinese company should be filed in the court of the place where the defendant is registered (its domicile/registered address). For companies with branches or representative offices, service of process and jurisdiction may also be established at the branch’s location.
• Contractual place of performance: For contract disputes, the court of the place where the contract is performed (e.g., the place of delivery, the place of payment) also has jurisdiction. The plaintiff may choose between the defendant’s domicile court and the place of performance court.
• Tort location: For tort disputes (including IP infringement), the court of the place where the tortious act occurred or where the tort result occurred has jurisdiction. This allows foreign companies to file lawsuits against Chinese infringers in multiple potential venues.
• Contractual choice of court: If the parties have agreed in writing to a specific Chinese court for dispute resolution, that court has exclusive jurisdiction provided the agreement is valid and does not violate Chinese rules on exclusive jurisdiction.
• Property-based jurisdiction: Under Article 35 of the Civil Procedure Law, if the defendant has assets in China but is domiciled outside China (or the defendant’s domicile is unknown), jurisdiction may be established based on the location of the defendant’s property in China — including bank accounts, real estate, equipment, or intellectual property registrations.

Procedural Requirements for Foreign Company Plaintiffs

Documentation and Authentication

One of the most significant procedural hurdles for foreign companies suing in Chinese courts is the documentation and authentication requirement. Under Articles 264 and 265 of the Civil Procedure Law:

• Company registration documents: The foreign company must provide a certificate of incorporation or equivalent business registration document, authenticated through the apostille process (if the foreign company is from a Hague Apostille Convention country, which China acceded to in 2023) or through Chinese embassy/consulate legalization (for non-Convention countries).
• Power of attorney: If the lawsuit is filed through a Chinese lawyer (which is required for foreign litigants representing themselves in substantive proceedings), the power of attorney must be notarized in the foreign company’s home country and authenticated/apostilled for use in China.
• Corporate authorization: A board resolution or equivalent corporate authorization document authorizing the legal representative or a designated officer to initiate the litigation must also be authenticated.
• Translation: All foreign-language documents submitted to Chinese courts must be accompanied by a certified Chinese translation. The translation must be provided by a qualified translation service, and the translator’s certification must be notarized.

Legal Representation

Under Article 264 of the Civil Procedure Law, foreign litigants must retain a Chinese lawyer to represent them in Chinese court proceedings if they are not appearing in person. While foreign lawyers may be present as legal consultants, they cannot serve as counsel of record in Chinese litigation. Only lawyers who have passed the Chinese bar examination (司法考试) and are registered with the Ministry of Justice may represent clients in Chinese courts.

Practical considerations for selecting Chinese litigation counsel include:

• Language capability: While many Chinese litigators speak English, all court proceedings are conducted in Chinese. Foreign companies should engage counsel who can communicate effectively in both Chinese (for court) and English (for client communication) or work with a bilingual assistant.
• Specialization: Choose a law firm with specific experience in the relevant practice area — commercial litigation, IP litigation, construction disputes, or trade disputes — and with experience representing foreign clients.
• Court familiarity: Lawyers who regularly practice before the specific court where the lawsuit will be filed have advantages in understanding local judicial practices, procedural preferences, and relationships with court personnel.

The Litigation Process: What to Expect

Chinese civil litigation follows a structured process with several distinct stages:

Stage 1: Case Filing and Acceptance (立案)

The foreign company’s Chinese lawyer files the complaint (起诉状) and supporting evidence with the competent court’s case filing division. The court reviews the complaint for procedural completeness and jurisdictional validity. Under the case registration system established in 2015, courts must accept or reject a case within 7 days of filing. In practice, acceptance typically takes 7-15 days for foreign-related cases, as the court reviews the authentication of foreign documents.

Stage 2: Pre-Trial Procedures

Once the case is accepted, the court serves the complaint on the Chinese defendant. Service of process on a Chinese company by a Chinese court is typically efficient — the court sends the complaint to the defendant’s registered address via court bailiff or registered mail, and confirmation of service is usually received within 15-30 days. After service, the defendant has 15 calendar days to submit a written defense. The court then schedules an evidence exchange session where both parties present their documentary evidence.

Stage 3: Trial

Chinese court trials are generally less adversarial and more inquisitorial than common law trials. The presiding judge leads the examination of evidence and questions the parties. Witness examination is limited; most evidence is documentary. Trials typically last 1-3 days for commercial disputes, though complex cases may have multiple hearing sessions over several months. The parties present their arguments and evidence, respond to the judge’s questions, and submit closing statements. The trial is conducted in Chinese, with interpretation provided for foreign witnesses or representatives.

Stage 4: Judgment

After the trial, the court deliberates and issues a written judgment. The judgment must be issued within 6 months of the case being filed for first-instance cases, though this period may be extended by the court president if necessary. In practice, first-instance judgments in foreign-related cases are typically issued within 6-12 months of filing. The judgment includes findings of fact, legal analysis, and the court’s decision on remedies.

Stage 5: Appeal

Either party may appeal the first-instance judgment to the next higher court within 15 days of receipt of the judgment (30 days for foreign litigants domiciled outside China). The appeal is a de novo review — the appellate court re-examines both facts and law. The appellate court must issue its judgment within 3 months of accepting the appeal (extendable by the court president). In practice, appellate proceedings typically take 3-6 months.

Special Considerations and Potential Barriers

Security for Costs

While Chinese law generally does not require foreign plaintiffs to post security for costs, courts may order security for costs (诉讼费用担保) in specific circumstances — typically when the foreign plaintiff does not have assets in China that can satisfy a potential costs award against them. The amount of security is usually calculated based on the estimated legal costs of the defendant and is set at a percentage of the claim value. Security for costs is more commonly ordered in maritime and IP cases than in general commercial litigation.

Limitation Periods

Foreign companies must be aware of Chinese limitation periods for filing lawsuits:

• General civil claims: 3 years from the date the right holder knows or should have known that its rights were infringed (Article 188 of the Civil Code)
• Contractual claims: 3 years from the date of breach or the date the breach was discovered
• Tort claims: 3 years from the date of the tortious act or the date the tort was discovered
• Product liability: 2 years from the date of injury
• Environmental damage: 3 years from discovery
• Long-stop period: No claim may be brought more than 20 years after the infringement, regardless of when it was discovered

The limitation period may be suspended or interrupted by the debtor’s acknowledgment of the debt, partial payment, or the creditor’s initiation of negotiations or mediation. Foreign companies should calendar limitation dates carefully and initiate litigation before the period expires.

Enforcement of Judgments

If the foreign company wins the lawsuit, the judgment must be enforced against the Chinese defendant’s assets. If the defendant complies voluntarily, enforcement is straightforward. If the defendant does not comply, the foreign company must apply to the court for compulsory enforcement. The court has powers to:

• Freeze and seize bank accounts
• Seize and auction real estate, equipment, vehicles, and other assets
• Freeze equity interests in the defendant’s subsidiaries
• Impose enforcement fines for delayed compliance
• Place the defendant on the judgment debtor blacklist (失信被执行人名单), which restricts the defendant’s legal representative from travel, high-end consumption, and access to credit

Compulsory enforcement typically takes 6-18 months, though the court may close the enforcement proceedings if no assets are found. The judgment debtor blacklist is a powerful enforcement tool that often motivates Chinese companies to settle outstanding judgments.

Advantages of Suing in Chinese Courts vs. Other Forums

Practical Recommendations

1. Always include a dispute resolution clause in your contracts: Decide before a dispute arises whether you want to litigate in Chinese courts or arbitrate in a neutral forum. The choice significantly affects cost, speed, and enforceability. For most foreign companies, CIETAC arbitration with a sole arbitrator is the recommended default for contracts with Chinese counterparties.
2. Consider parallel enforcement strategies: If the Chinese defendant has assets in multiple jurisdictions, consider filing parallel lawsuits or arbitration in those jurisdictions to enhance recovery prospects.
3. Preserve limitation periods: If a dispute arises and settlement negotiations are ongoing, ensure that the limitation period is preserved through written acknowledgments of debt or by initiating litigation before the deadline.
4. Engage Chinese counsel early: Before taking any formal legal action, retain experienced Chinese litigation counsel to assess the merits of the case, identify the competent court, and prepare the necessary documentation package.
5. Consider mediation as an alternative: Chinese courts encourage mediation at every stage of litigation, and mediated settlement agreements can be confirmed by the court with binding effect. Mediation is often faster, cheaper, and preserves business relationships better than contested litigation.

Conclusion

Foreign companies can and do successfully sue Chinese companies in Chinese courts. The procedural framework provides equal standing for foreign litigants, and the quality of commercial adjudication in China’s major courts — particularly the specialized financial courts, IP courts, and commercial tribunals — has improved significantly over the past decade. However, the practical hurdles of document authentication, mandatory Chinese legal representation, and language barriers require careful planning and experienced local counsel. For most foreign companies, the recommended approach is to include a well-drafted arbitration clause in commercial contracts while keeping Chinese court litigation as a viable option for disputes that fall outside arbitration agreements or require the specific remedies — such as interim injunctions or third-party joinder — that only courts can provide.