Planning for Commercial Dispute Resolution In Mainland China – Vol. 16 No. 1

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Author: Joseph T. McLaughlin*, Kathleen M. Scanlon** and Catherine X. Pan***

Published: December 2006

Commercial Disputes
Investment Disputes
Dispute Resolution and Litigation



Assume that a U.S. company enters into a long-term construction and development contract with a Chinese energy company, partly owned by the Ministry of Coal, for the development and construction of a coal mining project in China. The contract is expected to be performed over approximately a 10-year period. The U.S. company has formed a Chinese subsidiary that is registered in China as a foreign-invested enterprise (“FIE”) to conduct the business. Assume further that in a separate distribution contract, the parties—along with multiple other parties involved on the U.S side and China side—agree that the end coal product will be transported via railway to Shanghai and exported on ships leased from yet another Chinese agency (not a party to this contract). The product will be sold in the world market by one of the U.S. parties to the distribution contract, with a profit-sharing arrangement for the Chinese parties. When a U.S. and a Chinese company enter into a business arrangement, particularly one that is expected to be performed over 10 years, planning for disputes that may arise is in the best interests of all parties. The parties realize that it is likely some form of dispute will arise over the course of the construction/development and distribution contracts ranging from misunderstandings that can be corrected during discussions between the parties to fundamental contract interpretation issues that will require some form of…

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*Joseph T. McLaughlin is a shareholder in Heller Ehrman LLP, and is the Managing Shareholder of the firm’s New York office. Mr. McLaughlin also is chairman of the Executive Committee and a member of the Board of Directors of the International Institute for Conflict Prevention and Resolution (“CPR Institute”).
**Kathleen M. Scanlon is Special Counsel at Heller Ehrman in New York. She is a former CPR Institute Senior Vice President and has authored numerous publications in the ADR field, including the Drafter’s Deskbook for Dispute Resolution Clauses (CPR Institute, 2002) and Mediator’s Deskbook (CPR Institute, 1999).
***Catherine X. Pan is an associate at Heller Ehrman and a graduate of Harvard Law School and Fudan University Law School (Shanghai, China), practicing corporate law and international arbitration in the firm’s New York office.