When an everyday civil business dispute arises in China between a U.S. company and a Chinese company, such as an alleged contract breach, employees of the U.S. company may find themselves subject to an exit ban and unable to leave the country or locked in a guarded hotel and unable to leave their room.
When U.S. business leaders or their employees are subject to exit bans or become commercial hostages in China, they confront a problem unlike almost any other that they face in the ordinary course of business in the United States. Yet the ordinary course of business is culturally defined and is different in China than in the United States. In China, business exit bans in the context of civil litigation are expressly legal, and commercial hostage-taking is illegal but culturally accepted.
Relying in part on previously confidential exit ban data on U.S. citizens, obtained from the U.S. Embassy in Beijing under a FOIA request, this article explains how U.S. and other nations’ business leaders can use legal strategy to prepare for and handle commercial hostage and business exit ban situations. The article also explains the Chinese legal and cultural influences that give rise to both practices. The article sets forth a range of potential strategies that companies may choose to implement, beginning with straightforward precautionary measures such as maintaining insurance coverage and having crisis management and legal advisors on retainer. More involved strategies include actions such as seeking to deepen relationships with Chinese counterparts and government officials and improve internal company communications surrounding all travel to China and any potential disputes or unpaid invoices involving China. Ultimately, some companies may even opt to pursue transformational strategies such as launching new lines of business within or related to China or relocating operations outside of China.