On resolving disputes in China

When people ask me advice about doing business in China, one of the first things I tell them is don’t assume that the way disagreements are resolved in your country is how they’ll be resolved in China. This is especially true for disputes involving insurance claims.

In the U.S., the contract or policy is the ultimate source of a dispute resolution. Insurers and co-competing parties may have differing interpretations of what the language means in a given situation, but the document is paramount.

The relationship is paramount

In China, the most typical process for resolving disputes centers achieving consensus between the parties involved. The relationship therefore is paramount, and the trust that underpins that relationship will be key to finding a common understanding. In the U.S., we tend to see disputes settled by lawyers in court or via the exchange of legal positions. In China, we expect to see disputes settled by partners getting together in a room and talking through the issues and differences.

This does not mean that resolving disagreements is always easy and simple. One of the things I tell people after explaining the importance of consensus resolution in China is the importance of finding local advisers and supporters who are experienced in achieving consensus and can add to your local relationships. Businesses need to be aware of local practices and expectations and they are likely to need some local expertise.

Consensus resolution

The current approach to disputes in China can help avoid costly legal bills and an extended dispute process. Furthermore, failing to follow the path of consensus resolution can potentially do harm to business relationships that are dependent on trust.

One more note: In the international arena we see the beginnings of a different story. In my previous posting, I pointed out that in settling disputes with international companies. Chinese individuals are increasingly likely to pursue class action suits in international dispute centers. In this way, China is becoming more litigious along the lines of the American model. In settling disputes at home, however, traditional practices hold sway.

About Lincoln Pan

Lincoln Pan is Head of Greater China for Willis Towers Watson, based in Shanghai.…
Categories: Asia, Claim & Risk Control | Tags: ,

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