In cross-border litigation, particularly in cases involving international trade and contract disputes, companies often face the dilemma of where to initiate proceedings: should the lawsuit be filed domestically, or should the company proceed with litigation in the defendant’s home country? This decision not only affects the likelihood of winning the case but also directly influences the efficiency and enforceability of the judgment.
Cross-Border Litigation

In cross-border engineering projects, companies typically make investments in U.S. dollars or other major international currencies, while revenues or payments in the host country are often settled in the local currency. This currency mismatch is highly susceptible to exchange rate fluctuations. For example, when Chinese companies invest in engineering projects in Indonesia, the investments are usually made in U.S. dollars, but the project revenues and operating costs are primarily settled in Indonesian Rupiah (IDR). Due to the IDR depreciating by nearly 80% against the dollar from 2011 to 2020, companies suffered significant losses when converting the IDR back to U.S. dollars. Similarly, the Sri Lankan Rupee (LKR) depreciated sharply against the dollar in 2022 due to the country’s economic crisis, and the Myanmar Kyat (MMK) lost nearly 50% of its value against the dollar since the political turmoil began in 2021. These cases demonstrate that effective exchange rate risk management is crucial for the financial stability of cross-border projects.

Managing Exchange Rate Risk

Implementing the “Belt and Road Initiative”, an increasing number of Chinese companies are participating in cross-border EPC (Engineering, Procurement, and Construction) projects. Such projects typically involve complex international legal systems, and diverse cultures, which can lead to numerous legal risks during the project.

Key Legal Risks in Cross-Border EPC Projects

In recent years, with the acceleration of globalization, an increasing number of Chinese enterprises have established overseas branches, employing local staff or dispatching Chinese employees to work abroad. However, the significant differences in labor laws, tax systems, and compliance requirements across countries have introduced complex legal risks for cross-border employee management.

Managing Cross-Border Employees

In recent years, Amazon has faced increasing lawsuits and regulatory pressure due to allegations of unfair competition and monopolistic practices. In 2021, many sellers were confronted with unreasonable account closures, and in 2024, the U.S. Federal Trade Commission (FTC) filed an antitrust complaint against Amazon, inspiring SMEs to defend their rights.

How SMEs Can use Antitrust Laws

On July 4, 2024, the European Commission announced provisional anti-subsidy measures of up to 38% on Chinese electric vehicles. In response, on August 9, China submitted the EU’s provisional anti-subsidy measures to the WTO dispute settlement mechanism. This all stems from the European Commission’s self-initiated anti-subsidy investigation on October 4, 2023. Therefore, when your industry encounters foreign anti-dumping and anti-subsidy investigations, should you cooperate with the investigation, and how should you respond?

Strategies for Anti-Dumping and Anti-Subsidy Investigations

As cross-border M&A activities become increasingly frequent, companies that engage in mergers and acquisitions to expand markets and acquire resources also face various challenges and risks.

Key Considerations in M&A

A US technology company set up a new company in India and used local entrepreneurs as nominal shareholders to hold shares in order to bypass foreign investment restrictions. Although the actual control was held by the US company, the Indian government found anomalies in the shareholder structure during the registration and operation process and pointed out that the arrangement violated the company law and foreign investment regulations.

A global view on nominee shareholder

A Chinese electronics manufacturing company invested in building a factory in Abu Dhabi, aiming to produce and export high-end electronic components. The company planned to use the UAE as an export hub to distribute its products to European and Asian markets. To achieve this, the company needed to obtain a Certificate of Origin to ensure that its products could benefit from tariff reductions and market access in the destination countries. However, despite the company’s investment of tens of millions and production of finished products, it has never been able to obtain a certificate of origin due to failure to meet the requirements for substantial transformation and the specified ratio of local materials.

Tens of millions of investment frustrated

A Chinese electronics manufacturer exported a batch of smart home devices to a US company. Initially, the devices performed well, but after a year, several devices failed to function properly due to design defects. The customer, based on the contract terms, demanded repairs or replacements from the Chinese manufacturer and filed a quality claim.

The Quality Battle in the Global Market 

Company A is a Chinese electronics manufacturer, primarily exporting smartphones and accessories to the Russian market. What should Company A do when a batch of its smartphones is seized by Russian customs?

Customs Regulations and Import/Export Restrictions

A Chinese software development company used an open-source encryption library to develop software products and sold these products to customers in Europe and USA. This library was licensed under the GPL (GNU General Public License), which requires that all derivative works also be released under the same license with their source code published.

Cross-Border Code War 

An American technology company has developed an AI-based speech recognition API primarily for use in smart home devices. This company has made the API available to global users, including several smart home device manufacturers in China. To enhance the intelligence of their products, Chinese manufacturers transmit user voice data to the American company’s servers for processing and analysis.

The Clash of Technology and Law 

When engaging in cross-border trade involving restricted or sensitive markets, businesses must be aware of and comply with various international export control regulations and trade compliance requirements. Depending on the jurisdictions involved, these regulatory measures may address areas such as sensitive goods and technologies, financial transactions, transportation logistics, and interactions with designated individuals or entities.

Export Controls and Regulatory Considerations 

A Chinese manufacturing company purchased a batch of high-precision equipment from Germany and shipped it to China by sea. When the equipment arrived, it was found that some of the equipment was severely damaged due to bad weather and improper loading and unloading operations, and the company faced huge financial losses. In order to recover the losses, the company decided to file a claim.

International cargo transportation disputes  

Cross-border payments involving India are subject to a comprehensive set of foreign exchange regulations governed by the Foreign Exchange Management Act (FEMA) and guidelines issued by the Reserve Bank of India (RBI). These policies are designed to promote orderly development and maintenance of India’s foreign exchange market, while ensuring financial stability and legal compliance.

Cross-border Payments and Foreign Exchange Controls