Expats warned about dual language Chinese contracts

It’s been the norm for some time that Chinese contracts for expat/Chinese business cooperation come in dual language form, but expats are now being warned to get their own translations and clarifications.

Foreign companies and their expats alike have been signing dual language contracts without being absolutely sure of the meaning of the Chinese text, but are now being urged to ensure an exact translation is obtained. The problem seems to have arisen due to foreign companies’ assumptions that English is the dominant language and the meaning of both the Chinese and English texts is the same. It’s now being realised that both assumptions are incorrect.

As regards the controlling language, this is fairly straightforward in dual language contracts, as whichever lingo is stated by both portions to be controlling, is accepted as such. However, serious problems can occur for Western companies as the devil’s in the linguistic detail. For example, in a joint venture, should the English portion state you will receive 10 per cent of revenue and the Chinese portion says you’ll get 10 per cent of profits, you’ll be well out of pocket as revenue is invariably far higher than profits. In general, it’s no surprise that language can be used to get favour for one side against the other, but lawyers are now warning they’re seeing more contracts where the true meaning of the Chinese text favours the Chinese company against the foreign investor whilst the English language text is fair.

Of course, the Chinese partners are relying on the fact their foreign equivalents assume the English text is an accurate translation from the Chinese and controls the fine points of the deal. Of course, in China it isn’t and it doesn’t. It all comes down to this issue of control, as in when both texts say their side has control. Unfortunately, in any dispute, the Chinese language portion will win out as it’s supported by Chinese contractual laws regulating international/Chinese companies. The only ways out are to insist the Chinese language text either doesn’t mention control or states the English version has it, or for the English text to state it has full control.