A wholly foreign-owned enterprise operating in China discovers that its local distributor has diverted shipments, withheld payment, and transferred assets to a connected party. The foreign shareholder wants to act immediately. Yet the procedural system, the language of pleadings, the competent courts, and the enforcement rules all differ sharply from anything familiar in a common law or continental European setting. Every week of delay allows further asset dissipation – and the window for interim protective measures is measured in days, not months.
Commercial litigation in China is conducted before the People's Courts under civil procedure rules that require a written statement of claim, jurisdiction assessment, and court-directed mediation before trial. Foreign parties may sue and be sued, but must comply with specific documentary authentication requirements and local filing formalities. Cases at first instance typically conclude within six to twelve months, though complex commercial disputes and appeals can extend that timeline considerably.
This page sets out the key legal instruments, procedural steps, common pitfalls, cross-border enforcement considerations – including links to UAE and EU dimensions – and a self-assessment checklist for international businesses evaluating litigation in China.
The regulatory setting for commercial disputes in China
China's civil procedure rules govern how commercial disputes are filed, heard, and resolved before the People's Courts. The system is hierarchical. Basic-level courts handle smaller-value matters. Intermediate courts take first-instance jurisdiction over foreign-related commercial cases above the applicable threshold. Higher people's courts hear appeals. The Zuigao Renmin Fayuan (Supreme People's Court of China) issues binding judicial interpretations that shape how lower courts apply commercial legislation.
Corporate legislation, contract legislation, and civil legislation all intersect in commercial disputes. Disputes involving a Wholly Foreign-Owned Enterprise (WFOE) – the most common vehicle for foreign market entry – frequently engage company law, foreign investment legislation, and, where intellectual property is in issue, IP legislation. The State Administration for Market Regulation (SAMR) exercises parallel regulatory authority over competition and market conduct matters, which can run alongside civil proceedings.
The State Council has also issued regulations governing foreign-related civil proceedings, including authentication of foreign documentary evidence. This authentication requirement – typically involving notarisation and apostille or legalisation through a Chinese embassy – is one of the most underestimated procedural burdens for international claimants. Missing or defective authentication causes courts to reject evidence outright, which can be fatal at trial.
A non-obvious feature of Chinese civil procedure is the role of mandatory pre-trial mediation. Courts actively promote settlement before and during proceedings. Participation is expected. Refusing to engage with court-directed mediation can create an adverse impression, even though a party is not legally compelled to settle. Experienced practitioners treat mediation as a tactical tool, not an obstacle.
Key instruments: from court filing to judgment
The primary mechanism for commercial dispute resolution in China is litigation before the People's Courts. For foreign-related commercial disputes, parties also have access to arbitration – most commonly before the China International Economic and Trade Arbitration Commission (CIETAC) – provided a valid arbitration clause exists. Where no such clause is present, court proceedings are the default path.
The process begins with a qisu zhuang (statement of claim), filed with the competent court. The statement of claim must identify the parties, the factual basis of the claim, the legal grounds, and the specific relief sought. Chinese courts apply formal sufficiency requirements at the filing stage. Deficient filings are returned for amendment, consuming time that may prove critical if asset dissipation is already underway.
Once the court accepts jurisdiction, it serves the defendant and sets a response deadline. The defendant files a defence. Both parties then exchange evidence. The evidence exchange phase is time-bounded – courts set a fixed period, typically measured in weeks, within which all evidence must be submitted. Evidence produced late without good cause may be excluded. This differs markedly from common law-style disclosure, where document production is iterative and court-supervised.
Interim protective measures – the functional equivalent of an interim injunction in common law systems – are available in China. A party may apply for property preservation before or immediately after filing the statement of claim. The court may freeze bank accounts, seize assets, or prohibit asset transfers pending a final judgment. Speed is essential: applications must be supported by documentary evidence and, in most cases, a security deposit or guarantee. Courts act within 24 to 48 hours on urgently filed preservation applications. Missing this window means assets may already be beyond reach by the time judgment is obtained.
A common mistake by international claimants is treating property preservation as an afterthought. They focus first on the merits of their case and apply for preservation weeks after filing the main claim. By then, a sophisticated defendant will often have restructured its asset position. Preservation and the main filing should be prepared simultaneously.
Trial hearings in first-instance commercial cases typically occur within three to six months of case acceptance. The hearing is inquisitorial in character: judges lead questioning, and counsel's role differs from adversarial cross-examination familiar in English or American courts. Written submissions carry significant weight. Oral advocacy, while important, operates in a different register than a common law trial.
Judgment is issued in writing. A party dissatisfied with the first-instance outcome may appeal within fifteen days to the next level of the People's Court system. The appeal court reviews both law and fact. A second-instance judgment is final and enforceable.
For litigation matters involving related arbitration strategy, our practice in litigation and arbitration in China provides a detailed comparison of the procedural and strategic considerations for each route.
To receive an expert assessment of your commercial dispute in China and the most effective route to resolution, contact us at info@ferrazwhitmore.com.
Practical pitfalls and what international clients overlook
Jurisdiction is one of the most frequently misjudged aspects of commercial litigation in China. Foreign parties often assume they can choose a neutral forum by contract. Chinese civil procedure rules contain mandatory provisions on jurisdiction over foreign-related cases. A foreign jurisdiction clause that conflicts with those mandatory provisions may be disregarded. Parties who rely on a contractual choice of a foreign court – without a fallback arbitration clause – may find themselves in Chinese proceedings they never anticipated.
Language is a practical obstacle that underestimates itself. All filings, evidence, and submissions before the People's Courts must be in Mandarin Chinese. Foreign-language documents require certified translation. Translation quality is itself a source of dispute: a poorly translated contract provision can produce an adverse court finding that has nothing to do with the parties' original intent. Selecting qualified legal translators with commercial litigation experience is not optional.
Service of process on foreign parties presents a parallel challenge in the reverse direction. Serving a foreign defendant through the People's Republic of China court system requires compliance with bilateral treaty arrangements or, where none exists, service through diplomatic channels. This can add months to the timeline before proceedings even begin. In practice, including a Chinese law-governed subsidiary or a local agent for service of process in contract structures significantly reduces this friction.
The treatment of foreign documentary evidence illustrates the authentication burden described above. A contract signed abroad, board resolutions, or financial records from a foreign entity must be notarised in the country of origin and legalised by the Chinese embassy or consulate. Where China has bilateral arrangements with the other state, apostille may suffice. Many international clients discover this requirement only after proceedings have started – by which point the court's evidence submission deadline may already have passed.
Enforcement of a first-instance judgment during appeal is not automatic. A judgment debtor who files an appeal can apply to suspend enforcement. The court may grant the suspension if the debtor provides security. International clients expecting immediate enforcement after a favourable judgment are sometimes unprepared for this intermediate period.
WFOE shareholders involved in disputes with local joint venture partners or distributors frequently encounter a structural difficulty. The WFOE itself is the contracting party, but the actual commercial leverage – client relationships, regulatory licences, operational knowledge – may reside with individuals rather than with the entity. Effective litigation strategy in these cases requires securing evidence of those relationships quickly, before they are obscured or transferred.
Cross-border enforcement and strategic considerations for international clients
Enforcing a Chinese court judgment outside China – or enforcing a foreign judgment in China – involves a distinct legal layer that many clients do not address until after a judgment has been obtained. At that point, options may be constrained.
China does not have reciprocal enforcement treaties with the majority of Western jurisdictions. Enforcement of a Chinese judgment in the European Union requires recognition proceedings in the relevant EU member state court. Those courts apply their own private international law rules, which typically require reciprocity or a bilateral treaty. In the absence of a treaty, recognition of a Chinese judgment before an EU court is possible but uncertain and jurisdiction-specific. Parties whose anticipated enforcement jurisdiction is the EU should assess this risk at the contract drafting stage, not at the point of dispute.
The UAE presents a contrasting picture. The UAE does not maintain a general bilateral enforcement treaty with China either, but the DIFC Courts in Dubai operate a reciprocal enforcement framework with certain foreign courts and arbitral bodies. For disputes where assets are located in the UAE, structuring the dispute resolution mechanism to produce an arbitral award – rather than a court judgment – significantly improves enforceability. CIETAC awards are recognised as arbitral awards under the New York Convention, to which both China and the UAE are parties. A CIETAC arbitration clause in commercial contracts between Chinese and Gulf-based parties is therefore a materially stronger enforcement foundation than a court judgment from either jurisdiction.
Our analysis of commercial disputes in the UAE covers how assets held in Dubai and Abu Dhabi can be reached through parallel or coordinated proceedings when the primary dispute arises in a different jurisdiction.
For clients with assets in multiple jurisdictions, parallel preservation strategies deserve early attention. Freezing assets in China through property preservation while simultaneously applying for a Mareva injunction or equivalent measure in another jurisdiction requires coordinated timing. The application in China must be supported by the same urgency evidence as the foreign application. Courts in both jurisdictions will look critically at any delay between the claimant's discovery of the risk and the filing of the preservation application.
A further strategic consideration involves the China International Commercial Court (CICC), established under the Supreme People's Court. The CICC was created to hear significant foreign-related commercial cases, particularly those arising under Belt and Road Initiative investment structures. Its procedural rules allow for foreign law experts to give evidence and for rulings to be issued in English alongside Chinese. For large-scale disputes involving state-linked entities or infrastructure projects, the CICC represents a different forum calculus than standard People's Court proceedings.
For a tailored strategy on commercial dispute resolution in China – including coordination with enforcement proceedings in the EU or UAE – reach out to info@ferrazwhitmore.com.
Self-assessment checklist before initiating proceedings in China
Commercial litigation in China is appropriate in the following circumstances:
- The counterparty is a Chinese-registered entity or individual with assets located in China
- The dispute arises under a contract governed by Chinese law or performed in China
- No valid arbitration clause covers the dispute, or the parties have agreed to court proceedings
- The value of the claim justifies the time and cost of first-instance and potential appellate proceedings
- Evidence of the claim is available in admissible form, or can be authenticated within the court's filing deadlines
Before filing, verify the following:
- The competent court at the correct level has been identified and its jurisdictional threshold confirmed
- All foreign documentary evidence has been notarised and legalised or apostilled as required
- A property preservation application has been prepared simultaneously with the statement of claim
- The security deposit or guarantee required for preservation has been arranged
- Certified Mandarin translations of all key documents are ready for submission
- The enforcement destination for any judgment has been assessed for recognition risk
- If the counterparty has assets outside China, the appropriate parallel forum has been identified
If any of the above conditions cannot be confirmed before filing, the litigation strategy should be reviewed before the statement of claim is submitted. Proceeding without this groundwork significantly increases the risk of procedural failure, asset dissipation, or unenforceable judgments.
For guidance on company formation structures that reduce litigation risk at the contracting stage, our guide to company formation in China addresses the structural choices that affect dispute resolution options.
Frequently asked questions
- How long does commercial litigation in China typically take from filing to final judgment?
- A first-instance case before an Intermediate People's Court typically concludes within six to twelve months of case acceptance, depending on complexity and the court's docket. Where an appeal is filed, the second-instance review adds a further three to six months. Cases involving foreign parties or complex evidentiary issues tend toward the longer end of these ranges. Including property preservation applications in the timeline does not extend the main proceedings but must be filed at the outset to be effective.
- Can a foreign company sue a Chinese entity in Chinese courts without a local lawyer?
- A foreign company may appear in Chinese proceedings but must file all documents in Mandarin and comply with local procedural formalities. Engaging a lawyer in China with commercial litigation experience is not a legal requirement in all cases. However. In practice self-representation by foreign parties almost always results in procedural errors. rejected filings, missed deadlines. Alternatively, inadmissible evidence. that are difficult or impossible to correct later. Practitioners consistently advise retaining qualified Chinese counsel from the outset. A law firm in China with international client experience can also coordinate with foreign counsel on cross-border strategy.
- Is it a misconception that arbitration is always faster than litigation in China?
- Yes – this is a widespread misconception. CIETAC arbitration offers procedural flexibility and a final award that is enforceable under the New York Convention, which is a significant advantage for cross-border enforcement. However, CIETAC proceedings typically take twelve to eighteen months for complex commercial cases. They are not inherently faster than court proceedings. The more decisive advantage of arbitration over litigation in China is enforceability abroad, not speed. Litigation before the People's Courts can be equally efficient for purely domestic disputes where the judgment debtor's assets are in China.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our commercial disputes practice covers China, the UAE, the EU, and related markets, combining Portuguese civil law expertise with English common law tradition. We advise WFOEs, joint venture partners, international investors, and in-house legal teams on commercial litigation strategy in China – including property preservation, cross-border enforcement, and coordination with proceedings in the UAE and European Union. Our attorneys have advised on commercial litigation and arbitration matters across both civil law and common law systems, with experience before CIETAC and in coordinated multi-jurisdictional disputes. The firm's Lisbon base provides direct access to EU regulatory and judicial networks, while our common law expertise supports enforcement and arbitration strategies in English-speaking and Gulf jurisdictions. As an international law firm with established presence across Asia, the Middle East, and Europe, Ferraz & Whitmore is positioned to support the full lifecycle of a commercial dispute in China. To discuss your situation and explore litigation options for your business in China, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.