Tuesday, October 27, 2009

The Magic Tool of Swift and Successful Debt Collection
by Robert J. Allan and Edythe Huang

In our blog on September 25, Don't Chi Ku If You Don't Have To, we discussed the reoccurrence of Chinese sellers unable to collect accounts receivable from American buyers based on excuses of timeliness or non-conforming goods. In our story there is usually an American businessperson or entity taking advantage of the poor Chinese seller because of the seller’s cultural inclinations. The American buyer knows the Chinese seller is unfamiliar with the United States legal system and is culturally resistant to seeking the advice of legal counsel (although this is changing). The American buyer takes advantage of the Chinese seller by accepting goods but never paying on the premise the Chinese seller will not do anything about it.

We have already suggested seeking the advice of legal counsel; but there's more.

What can Counsel for the Chinese seller of goods do about the American buyer’s failure to pay for the goods?

The most powerful tool in our collections arsenal is the Prejudgment Writ of Attachment. In our experience, once a Right to Attach Order has been issued based on a Prejudgment Writ of Attachment, the debtor always wants to settle and is willing, if able, to pay at least a substantial portion of the outstanding debt.

In California, where Allan Law Group, our United States founding member is based, a Prejudgment Writ of Attachment allows commercial creditors with debts owed greater than US$500 to create commercial liens on the debtors' property before a Court issues a judgment. Typically, a Prejudgment Writ of Attachment is proper when the defendant may attempt to hide assets from the Court to prevent a debtor from transferring, encumbering, dissipating, or concealing assets available to satisfy the judgment. In order to obtain a Prejudgment Writ of Attachment, there must be an express or implied contract and a fixed or readily ascertainable amount which the creditor can and must show with "probable validity" the corporate debtor owes the creditor.

Ascertaining with certainty the amount owing is the most important fact and the most time consuming feature of the process. Although the statute seems somewhat vague when referring to a "fixed or readily ascertainable" amount it is not. The Court will only issue a Prejudgment Writ of Attachment if the amount claimed to be owing can be ascertained with certainty. Being off by a “penny” can prevent the Right to Attach Order from being issued. Remember, the Court is placing a lien on another "person's" property based on a claim, not a judgment and will not do so unless it is established to the Court’s satisfaction that a “sum certain” is probably due to the creditor by the debtor.

In order to obtain a Right to Attach Order, the creditor must first file a complaint, which is served by the usual means, on the debtor. Notice of the hearing on the Application for the Pre-judgment Writ of Attachment must be served with supporting declarations and supporting documents. At the hearing on the Application the creditor has the burden of proving the creditor’s right to attach general or specific property, that the creditor will likely prevail in the action with probable validity, and that the attachment is not sought for any other purpose but to secure the claim.

Before the Court orders a Right to Attach, the creditor must file a Bond or Undertaking, typically through an admitted surety insurer. This is done to protect the debtor in case the creditor does not win the suit.

The Court will issue a Right to Attach Order if the creditor has met its burden of proof. Once issued by the clerk of the Court, the order will allow the County Sheriffs or the United States Marshals Service to seize property of the debtor which is located in the jurisdiction of the Court. The property will be held until the trial is completed.

The Problem -- Most businesses cannot wait a year or longer to collect accounts receivable and survive.

The Solution -- Once a Right to Attach is ordered by the Court, the creditor's attorney should expect a call from the debtor's attorney. It is now time to settle.

Thursday, October 1, 2009

Following the Food
by Edythe Huang

It's not that my father does not like to travel, because he does. But he has a great fear of going to places that don't have Chinese food. This fear has kept him from joining many trips abroad- so much so that I take pictures of Chinese restaurants wherever I go to show him that, next time I return to the same destination, he can come too, without the fear of being forced to eat the native food.

During one of my last vacations, I took more pictures of Chinese restaurants than I ever have before… and no, I was not in Asia. There were Chinese restaurants in the countryside of the Czech Republic and Austria, in the city of Ljubliana, Slovenia, in the small countryside towns of Postojnska, Slovenia, and even in northern Croatia. Chinese restaurants were everywhere in the Eastern European countries I visited.

Imagine my (non-existent) surprise when I got back to the office and the article "Chinese Investment in Europe: a Shift to Services" in the Chinese Business Review was waiting for me. According to Vanessa Rossi and Nora Burghart, the newer EU members from Eastern Europe are one of the new targets of Chinese Outbound Direct Investment (ODI). Although the UK and Russia receive most of Chinese ODI directed at Europe, the Eastern European countries of the EU are the latest place where Chinese hope to see a growth in exports.

Eastern Europe is not the only place that is seeing a rise in Chinese ODI. The Chinese Business Review issue dedicated to the topic cites Latin America as the next biggest new hotspot. Yet, Chinese restaurants have been in Latin America for years. Chinatowns in Mexico City, Havana, Buenos Aires, Lima, in San Jose and the Puntarenas area of Costa Rica that have been around for decades, some even over a century.

If you want to stay ahead of the curve and know where China is going next, look to the unlikely economic indicator: the number of Chinese restaurants in the area. In my experience, and without passing any judgment, Chinese business people tend to believe that Chinese food is far superior to any other food in the world. The statement is based on the many hours that I have spent listening to various "Uncles" and "Aunts" talk about how great Chinese food is and how much better it is than anybody else's food (when cheekily asked when was the last time they had non-Chinese food, many have been happy to tell me that they deemed to have Japanese food this past week. When asked the last time they had "Western food," the typical response was a cringe accompanied by some reference to the fact that he or she just can't manage to eat a potato). To many Chinese, the idea of going without Chinese food for even a week is a harrowing prospect. But, if they know they can get Chinese food while on a business trip, no matter how awful it is, they are happier to make the trip.

This information can benefit any wei go zen (non-Chinese), especially business people. If you are working with or entertaining Chinese people, make sure Chinese food, preferably "the good stuff," is available for native contacts or visitors. Don't be afraid to make recommendations of good Chinese restaurants, after all, most conversations in China revolve around what restaurants are the best restaurants in town or for a particular dish. And if you want to know where Chinese business is going to go next, remember, in many cases, Chinese business follows Chinese food.

Chi li ma?