Most US lawsuits involving Chinese companies are initiated by or against their customers, employees, or business counterparts. However, on occasion, Chinese investors may go to court against a US government entity to resolve a dispute. As US–China relations continue to deteriorate, Chinese companies are increasingly caught in the crossfire of the geopolitical rivalry. Being suspected as agents for the Chinese state, China-headquartered multinational companies, especially those with ties to the Chinese government, have expressed growing frustration over what they perceive as unfair treatment by the US government. This chapter examines the legal reactions of Chinese companies to perceived official bias in the United States in the context of intensifying geopolitical tensions.

The US legal system is notoriously complex. Navigating this labyrinthine structure requires knowledge of legal precedents, procedures, and rules, along with the ability to anticipate and adapt to shifts in the legal landscape. Businesses, therefore, require the guidance of seasoned lawyers. Over the past few decades, US corporations have increasingly turned to in-house lawyers for legal services, leading to their rising prominence in the corporate hierarchy and profound changes in the US legal profession and corporate governance. This could also be true for Chinese companies operating in the United States. Hence, this chapter investigates the Chinese companies’ utilization of full-time internal legal managers within the dual institutional context. For those employing such managers, this chapter scrutinizes two key aspects: (1) whether these legal managers are locally hired or are expatriates and (2) whether they hold licenses to practice law in the United States, which approximates their ability to handle US legal risks and opportunities. Analysis under the dual institutional framework reveals not only effects of both home- and host-state institutions but also substantial intercompany variations associated with other institutional and firm-specific variables of theoretical and policy importance.

After decades of exponential growth, China has transformed from a stagnant, impoverished autarky to the world’s second-largest economy highly integrated into global supply chains, and numerous Chinese firms have embarked on overseas business expansion on an unprecedented scale. Against that backdrop, many Chinese investors have ventured into the highly competitive, strategically important US market. Though the recent geopolitical confrontation between the two countries has hampered the investment flow, many large Chinese investors have been hesitant to withdraw from the US market. How do Chinese investors negotiate the omnipresent and consequential legal risks and opportunities in the United States? This question, which holds great practical, policy, and theoretical importance, has received scant scholarly attention. This chapter lays out the road map of the book that attempts to provide the answers.

With or without professional in-house counsel, Chinese companies must rely heavily on outside lawyers to effectively manage legal risks in the United States. Companies operating in the United States must navigate through an intricate web of legal rights and obligations, which cannot be done without adequate legal assistance. While a vast literature has accumulated on the US legal profession and the legal service market, few scholars have studied the interactions between multinational companies and their US lawyers, leaving important questions open. For instance, do Chinese companies bring their lack of appreciation or even contempt for lawyers and legal services to the United States, or do they adapt to the host-state environment and take legal advice seriously? Moreover, how do Chinese companies choose from the 1.3 million US lawyers? Are Chinese companies becoming a significant revenue source for US law firms, which will give them pricing power in the market and the ability to dictate how legal services are provided? Do their lawyer selection preferences and legal expenditures vary across different Chinese companies, and if so, what institutional and firm-specific factors may explain the variations? This chapter answers these crucial yet unexplored questions within the dual institutional framework.

To litigate or not to litigate, that is the question any Chinese companies operating in the United States long enough must contemplate. For American companies, litigation is nothing but an unavoidable business risk and often a vital competition strategy, routinely dealt with by legal and managerial professionals applying monetarized cost–benefit analysis. Such analysis typically incorporates attorney fees and other litigation expenses, potential reputational damage, time and human resource consumption, and the present value of expected litigation gains or losses. By contrast, litigation in China carries complex social meanings and is often avoided to preserve long-term cooperative relationships or to signal desirable attributes to uninformed third parties. When lawsuits do occur, they are often handled by stakeholders without professional legal assistance. Disputants consider a wide range of material and nonmaterial interests that are shaped by both formal institutions undergoing significant transformation and complex, entrenched social norms governing dispute resolution. Chinese companies immersed in these two disparate institutional environments approach legal disputes in the United States.

In China, corporate management and business transactions often relegate the legal system to a more peripheral role. Chinese companies then encounter formidable institutional obstacles when operating in developed countries with robust, strict, and complex legal systems. Obviously, nowhere else are the hurdles as high as in the United States. How then do Chinese investors negotiate the omnipresent legal risks? This chapter begins with an overview of China’s outbound direct investment in the United States. It then introduces research questions ranging from the role of in-house legal counsel in Chinese companies to their legal responses to unfair treatment by the US government. Next, this chapter selectively summarizes and critically reviews the existing literature pertinent to the interactions between multinational companies and the complex US legal system. From this, I formulate a comprehensive theoretical framework predicated on dual institutional influence, which will be applied consistently throughout the book. The chapter concludes with a description of the research methodology.

Litigation is a complex matter, calling for more sophisticated inquiries than what can be measured by a binary variable, namely, whether or not a Chinese company had experienced US lawsuits. This dichotomy glosses over crucial aspects of Chinese companies’ interactions with the US adjudicatory system. For instance, while prominent Chinese companies such as Huawei have litigated hundreds of lawsuits in the United States, most others were involved in no more than a few cases. However, the coding in Chapter 4 grouped them together in terms of US litigation experience. In fact, those that litigate infrequently may have more in common with Chinese companies that have managed to avoid US lawsuits altogether than prominent repeat players. To unveil important information lost from collecting and coding the data as a binary variable and to ameliorate possible biases in survey data concerning sensitive topics, this chapter explores a hand-collected objective dataset: federal lawsuits involving Chinese companies. It also presents three detailed case studies to demonstrate how Chinese companies with direct investments in the United States navigate the complex host-state legal system. These case studies (i.e., Lenovo, Huawei, and Fuyao Glass) will revisit the hypotheses and findings of prior chapters.

This chapter recapitulates the dual institutional framework and the empirical findings of this book. It then discusses how the findings contribute to ongoing policy and theoretical debates.

The rule of law (ROL) is invoked by multinational institutions, Western governments and in China as a political expectation of what legitimate governance looks like. Chinese leaders regularly make claims that are translated into commitments to uphold the ROL, and they generalize this rhetoric to the international level. Constrained by top-down conceptions, China’s idea of an international ROL becomes a hypothetical yet coherent and attractive possibility. Western legal scholars and political scientists are significantly more diverse and sceptical; most do not speak about an international rule of law, for a variety of reasons. This does not mean that there is no role for international law, but it does mean that for many Western scholars and practitioners, domestic conversations about an ROL ideal do not travel to the international level. Ideals can be useful even if they remain elusive. Yet the very different Western and Chinese understandings of the ROL ideal and its international implications may limit China’s international efforts to build international support for the vision that Chinese leaders are intentionally and assiduously creating.