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Tips on legal risk points of foreign-related enterprises

  1. Enterprises do not pay enough attention to international commercial arbitration, and often suffer adverse consequences due to their absence from international commercial arbitration procedures. When signing Foreign-related Contracts, enterprises did not pay enough attention to the dispute resolution methods agreed in the contract, and arbitrarily agreed to arbitrate with foreign arbitration institutions, and the service address left was inaccurate. When a dispute occurs, the foreign arbitration institution delivers according to its arbitration rules, and the domestic enterprise cannot receive the notice of service due to the problem of retaining the address for service, or simply does not participate in the foreign arbitration in consideration of the time, financial resources and human costs after receiving the notice. In the above two cases, the domestic enterprise loses the right to conduct substantive defense in the arbitration proceedings. Once the opposite party of the arbitration wins the award, it can apply to the court of our country for recognition and enforcement in accordance with the provisions of the Convention on the recognition and enforcement of Foreign Arbitral Awards (i.e. the New York Convention). While the recognition and enforcement of foreign arbitral awards are procedural reviews, the substantive defenses raised by domestic enterprises in this procedure cannot change the allocation of responsibilities identified in the arbitration proceedings, unless domestic enterprises have evidence to prove that there are several cases of non recognition and enforcement of arbitral awards as stipulated in the New York Convention. Due to the wide range of signatory member states of the New York Convention, commercial arbitration awards made abroad can be recognized and enforced among Member States.
  2. Enterprises engaged in foreign-related business are not familiar with the application rules of letters of credit and independent guarantees. When applying for suspension of payment on the grounds of letter of credit fraud or letter of guarantee fraud, they are often rejected by the court due to insufficient evidence. In international commercial activities, it is common practice to issue letters of credit and independent guarantees as performance guarantees, but many domestic applicants do not understand the corresponding rules of letters of credit and independent guarantees. In order to facilitate transactions, they blindly apply for the issuance of letters of credit or independent guarantees under the condition that the contract terms are not clear and detailed. Once the payment terms agreed in the contract appear, the bank will have the obligation to pay when the documents and documents are only checked to be consistent. At this time, it is very difficult for the applicant or the bank to stop paying the money under the letter of credit or letter of guarantee on the grounds of fraud, unless there is practical evidence to prove that there is fraud such as the beneficiary colludes with others, fabricates the basic transaction or forges documents. It is not uncommon for domestic enterprises to suffer losses due to the above reasons in the process of “going global”. In the case being tried, a well-known state-owned enterprise has also encountered such a situation, which should be paid enough attention to.
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