New Lawyers
Cross-Border Discovery: Seeking Documents from China-Based Companies
by Katherine Tong
Chinese companies often face questions regarding their legal obligations when actions arise in the U.S. involving products they manufactured. Attorneys advising Chinese companies on their legal obligations with respect to lawsuits in the U.S. must advise their clients on both the U.S. discovery process, which can be alien to Chinese companies, and the requirements under the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (Hague Convention). Similarly, U.S. attorneys seeking discovery from Chinese individuals or corporations must understand the procedures and limitations of conducting discovery in China, which can be quite unfamiliar even to experienced attorneys.
DISCOVERY OF DOCUMENTS LOCATED IN CHINA
While U.S. discovery rules provide litigants liberal access to the opposing side’s documents, the scope of discovery in China is much more restricted. Under the People’s Republic of China (PRC) procedural rules, a party must only present sufficient evidence to support its own claims or defenses.1 In contrast, in the U.S., discovery is intended to uncover both supporting and damaging evidence from parties and third parties.
Thus, PRC companies are often surprised to learn that despite not being a party to a lawsuit, they may be compelled to produce evidence in connection with litigation. The PRC Civil Procedure Law does not obligate third parties to provide evidence for a proceeding in which they have no interest. In the U.S., however, if a party is within a court’s jurisdiction, a court may order a non-party to a proceeding, through a subpoena, to produce documents or submit to a deposition which require responses under penalty of perjury.
However, if a class=”anchor” named party or a non-party is located in China, parties to the proceeding in the U.S. may face extra hurdles to obtain discovery. Under U.S. law, documents located abroad may be obtained pursuant to the Federal Rules of Civil Procedure (FRCP)2 or the Hague Convention.3 When a U. S. court has personal jurisdiction over a foreign company, the FRCP is the primary means by which parties obtain discovery. FRCP Rule 45 permits courts to command third parties to produce documents based on a foreign third party’s relationship to a class=”anchor” named party through the subpoena power of the court. However, the court’s ability to exercise personal jurisdiction over the foreign company must be established. A PRC company may be within the court’s jurisdiction if it has assets, a branch office, or affiliate company in the U.S. or if it conducts business in or travels to the U.S. enough to establish sufficient contacts for personal jurisdiction.4
Where the foreign entity is not subject to the personal jurisdiction of U.S. courts, parties must resort to the Hague Convention to obtain discovery. China became a signatory to the Hague Convention in 1998. The Hague Convention provides procedures for the compulsory production of evidence using a form “Letter of Request,” which can be sent directly by the court in the U.S. to a foreign central authority. Upon application by a party to the litigation, the U.S. court transmits the Letter of Request for discovery to the designated Central Authority in China, who then transmits the request to the appropriate Chinese judicial body where the discovery is located for a response.5
Although China has declared it will accept Letters of Request issued for the purpose of obtaining pre-trial discovery of documents, it will only do so if the Letters of Request clearly enumerate the document requests and the requests establish a direct and close connection with the subject matter of the litigation.6 Once a Letter of Request has been reviewed and issued with a seal of approval from the Chinese Ministry of Justice, it is sent to the local court and, in turn, the Chinese company which must comply pursuant to Chinese law and China’s commitment under the Hague Convention. This may entail placing a “litigation hold”7 on documents relevant to the litigation, or producing information or physical or electronic documents in accordance with U.S. rules and methods of discovery as discussed above. Although the Hague Convention process can help to obtain necessary discovery, it is important to keep in mind that it takes the Chinese judiciary approximately six to twelve months to process Hague Convention requests. 8
In sum, even if a Chinese company is not subject to jurisdiction in the U.S., the Hague Convention enables parties in a U.S. proceeding to seek physical and electronic evidence from a Chinese company if the litigation calendar allows for a six to twelve month waiting period to complete discovery. Despite the complexity and time-consuming nature of this process, the Chinese Ministry of Justice has emphasized its intent to strengthen “cooperation with other countries in the judicial field.” 9
IMPLICATIONS
Chinese manufacturers whose products make their way into the U.S. may become embroiled in U.S. litigation, either as a party to the suit or as a non-party subject to document requests during the discovery phase of litigation. It is important for these companies to understand that even if they are not subject to personal jurisdiction in the U.S., they may be sent “Letters of Request” under the Hague Convention requiring them to cooperate and provide evidence with a close connection to the subject matter of any lawsuits. Therefore, Chinese companies would be wise to seek the advice and potential protection of counsel in navigating the maze of U.S. discovery obligations and the challenges it presents.
NOTES
1 PRC Civil Procedure Law, Chapter VI, Article 64.
2 Assuming the case is pending in federal court. The US court system is divided into federal and state courts. Because most litigation involving foreign parties takes place in federal courts under diversity jurisdiction, this article is based on the Federal Rules. Procedural rules in state courts vary by state.
3 Both the US and the PRC have signed the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, which is applicable to service of documents from a member country to another member country.
4 The U.S. Supreme Court has decided a number of cases that have established and refined the principle that it is unfair for a court to assert jurisdiction over a party unless that party’s “minimum contacts” with the state in which that court sits are such that the party “could reasonably expect to be hauled into court” in that state.
5 Convention on the Taking of Evidence Abroad in Civil or Commercial Matters, Article 2.
6 Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters, Article 33 and Status Table (“Hague Convention“), available at http://www.hcch.net/index_en.php?act=conventions.status&cid=82
7 Written directive advising custodians of certain documents and electronically-stored information (“ESI”) to preserve and not destroy or alter potentially relevant evidence in anticipation of future or pending litigation.
8 See “time for execution” under Chapter 1 (Letters of Request), available at http://www.hcch.net/index_en.php?act=authorities.details&aid=490
9 http://www.legalinfo.gov.cn/english/Judicial-Assistance/node_7627.htm