When someone talks about a hostage situation, most people immediately think of criminal groups holding important people against their will for money. Hardly anyone thinks about a normal businessperson being held against their will due to normal business dealings. But this still happens in SE Asia, especially in China. There have been numerous reports about a dispute between a US company and a Chinese company resulting in the unlawful imprisonment of the US company’s representative.
Why is it done? In Chinese culture, it seems as though it is socially acceptable to hold someone hostage in order to try to illicit payment from whoever that person represents or is represented by. One example is a story of a state-run hospital holding a baby hostage because the parents could not pay the hospital fee. Hardly anyone critiqued the hospital and some of the harshest words given were from one attorney in the area who called the hospital’s actions as “inappropriate”. This cultural acceptance is counter to what the letter of the law says in China, but don’t rely on the written laws to protect you. If the local government, courts, and police all think that taking someone hostage is a good way to collect on a debt, then the letter of the law is not going to help you much.
How can you prevent a hostage situation? The easiest way to avoid a hostage situation from developing is to have no debt with a Chinese company and to always keep using the same suppliers. One way these situations develop is when a US company either has to declare bankruptcy or is otherwise deciding to not pay the debt owed. The other way these situations tend to develop is when a US company decides to use a different supplier. If these situations cannot be avoided, then the second most effective way to avoid a hostage situation is to pull all of your US workers out of China and headed back to the US before you deliver the bad news to your Chinese contacts. If your people are safely back in the US, your Chinese counterpart has no leverage and negotiations tend to be much easier. However, if you leave your people there, then there is the chance that they will be taken hostage.
If you don’t have people there, but you still have to tell your Chinese counterpart that you can’t pay them and/or are deciding to use a different supplier, do not send anyone over to China. The best thing to do is to do all of your communications from the US. If you cannot avoid having to send a representative, the best thing to do is bring a bodyguard or two and be very careful who you meet with and where. The best places would be lobbies of very nice, western hotels during the day. However, this is not a guarantee that nothing bad will happen. Frequently, the local police will actually assist the Chinese companies in detaining your representative or workers in order to try to collect on unpaid debt. It doesn’t matter where you meet or if you have a bodyguard or not if the local police are the ones who are going to be detaining you.
To avoid this from happening, the best thing to do would be to countersue the Chinese company before you send anyone over to China. Once the lawsuit is underway, keep copies of the lawsuit on your representative’s person at all times. This is important because then your representative can claim that they are not being detained in order to collect a debt, but instead out of revenge for the lawsuit going on in the US. In these kinds of cases, the police are unlikely to help the Chinese company and the Chinese company will likely be deterred from trying anything in the first place.
If you follow all of the above advice, then it is unlikely that any hostage situations will develop. But do not limit your research to this one blog post. This is a very serious danger for both yourself and your company, so try to learn as much as you can about this issue and seek out legal advice from both local attorneys and also law firms who have had experience with these kinds of issues. Best of luck!