What Can Happen If You Lose On A Deal In China?

What Can You Expect To Pay For The China International Economic And Trade Arbitration Committee (CIETAC) To Arbitrate For You, Should You Lose On A Deal In China?

So, you lost out, and were skinned and scammed by a company in China, and now you want to go to arbitration to get back what you’ve lost, as well as getting some justice from the “evil doers“, as Mr. Bush might say. So, what's it going to cost you? Well, the following is the CIETAC fee schedule for their arbitration services, which I've converted, as near as possible, to the corresponding USD values. 

Now, remember, when you choose to go into arbitration you agree to abide by the arbitral outcome. That is to say, that should the judgement go against you then all of the following monies tabulated below, will be lost to you on-top of your actual current losses. And don't go confusing Western Jurisprudence with that of China; it may very well go against you. Remember, this is another risk. As clearly stated beyond the main table, there may be further "...arbitration fee(s) according to this Arbitration Fee Schedule, the CIETAC or its Sub-commission may collect other extra, reasonable and actual expenses pursuant to the relevant provisions of the Arbitration Rules." Meaning, that whatever you're charged in the initial schedule may also include further fees levied to your account to the value of 1,500 USD per additional charge, per additional "...reasonable and actual expenses pursuant to the relevant provisions of the Arbitration Rules." 

Of course, even should you win, the defendant may still hold you up by delaying payment for a variety of reasons, and causing you to resort to CIETAC again, at further expense, which you will then have to get CIETAC to levy back against the defendant. Or, of course, they may just shut up shop and disappear. This kind of tactic wouldn't necessarily be unusual. Now, let's just take a look at a bare-bones example, without the extra fees, and see what we're talking about here. We'll take the lowest level in the schedule as an example, and this is just waving the stick a little, to get an idea of how things could go. 

So, you lost $150,000 to a company somewhere in some province, in China. You go to CIETAC, and before anything happens (and at this point I think it only fitting to mention that there is about a 9 month backlog with CIETAC) you are charged a fee of $5,250, plus the $1,500 registration fee, which is charged at all levels. Therefore, you're current total is now $6,750, and you've just finished the registration process alone. Then there will be charges for phone calls, letters, and transport costs for an examiner to visit the defendant or their place of business, hotel costs, living cost etc. 

Now, let's just consider transport, living, interview, and visitation costs. Let's just call that another $3,000, and remain in the conservative area of things. That would bring you up to around the $9,750 mark. Then there'll be the weeks and months of back and forth, hither and thither, as nothing in this vein happens either quickly or directly in China. In the meantime, you may see your charges rise by another $3,000, before you even get close to an arbitral decision; and by which time you will have shelled out, on top of your $150,000 loss, another $12,750, and you'll be sweating and hoping it all goes your way, or else you've lost your initial loss of $150,000 plus another $12,750. So, are you shaking in your boots? Quivering with anger and frustration? You should be! 

Before I present you with the CIETAC arbitration fee schedule, allow me to tell you that there's another way around this, and that is - PREVENTION.

Very simply, you can contact us at Your China Trading Partner, and we'll make a factory visit, do your Due Diligence, and arrange for your goods to be checked before leaving port. For us to go visit the factory, and to have your goods checked at port before shipping, will cost you approximately another $850 to $1,000 on top of your costs; whilst of course, on our factory visit we'll get your supplier to agree to the insertion of the CIETAC Arbitration Clause in your joint contract, and which states: 

"Any dispute arising from or in connection with this Contract shall be submitted to China International Economic and Trade Arbitration Commission for arbitration which shall be conducted in accordance with the Commission's arbitration rules in effect at the time of applying for arbitration. The arbitral award is final and binding upon both parties." 

And thereby, offer you a little extra protection; additionally, of course, you can include in the terms of your L/C, that monies will not be released until goods have passed random quality checking, at their exit port prior to shipping. 

Now, here's a final question for you, before I introduce you to that fee schedule.  

Doesn't it make a lot more sense to spend another $850 to $1,000 on top of your costs, as insurance against the nightmare of losing your investment, and then having to go to arbitration with CIETAC? 

I'm a little tired of hearing about all these losses, when I know that even if they can't be completely dissolved, they can, at the very least, be seriously mitigated. But, we live in a cost-cutting global mentality, and have done since the Thatcher and Reagan years; and people are silly enough to even cut costs on their insurance and investment security. This is precisely the kind of mentality that makes dollars for the scammers, and no cents to me? Does it make cents to you? Get the pun?  

Now Here's That Fee Schedule for you.

China International Economic and Trade Arbitration Commission 

Arbitration Fee Schedule 

((This fee schedule applies to the arbitration cases accepted under Item (a) and (b), paragraph 2 of 3 of the Arbitration Rules, and effective on May 1, 2012.)

Each case, when being accepted, shall be charged an additional amount of RMB 10,000 Yuan as a Registration Fee which  includes the expenses for examining the application for arbitration, initiating the arbitration proceedings, computerizing management and filing the documents.

Where the amount of the claim is not ascertained at the time when application for arbitration is handed in, or there exists  special circumstances, the amount of arbitration fee shall be determined by the secretariat of the CIETAC  or its Sub-Commission.

If the arbitration fee is charged in foreign currency, an amount of foreign currency equivalent to the corresponding RMB value specified in this schedule shall be paid.

Apart from charging arbitration fee according to this Arbitration Fee Schedule, the CIETAC or its Sub-Commission may collect other extra, reasonable and actual expenses pursuant to the relevant provisions of the Arbitration Rules. 

Arbitration Fee Schedule 

((This fee schedule applies to the arbitration cases accepted under Item (c), paragraph 2 of Article 3 of the Arbitration Rules,effective on May 1, 2012.)

In   accordance   with   the   Notice   of   the   Measures   for   the Charging    of Arbitration    Fees    by    the    Arbitration Commissions with the reference number of Guo Ban Fa No. 44/1995  issued  by  the  General  Office  of  the  State  Council, the arbitration fee for cases taken by the China International Economic   and   Trade   Arbitration   Commission   under   Item (c), paragraph 2  of Article 3 of  the Arbitration Rules are charged in the following way: 

  I. Registration Fee

 

   

 II. Handling Fee

The amount of Claim referred to in this schedule shall  be  based  on  the  sum  of  money  claimed  by  the  Claimant.  If  the amount claimed is different from the actual amount in dispute, the actual amount in dispute shall be the basis for calculation.

Where  the  amount  of  claim  is  not  ascertained  at  the time when application for arbitration is handed in, or there exists  special  circumstances,  the  amount  of  arbitration  fee deposit   shall   be   determined  by  the  CIETAC in consideration of the specific rights and interests involved in the disputes.

Apart from charging arbitration fee according to this Arbitration Fee Schedule, the CIETAC may collect  other  extra,  reasonable  and  actual expenses pursuant to the relevant provisions of the Arbitration Rules.

SOURCE: www.cietac.org

Safe Trading!