The China Predicament

By Boettcher, Jacques G. | Multinational Business Review, Spring 2001 | Go to article overview

The China Predicament

Boettcher, Jacques G., Multinational Business Review

American businessmen, drawn by the lucrative markets and investment potential of the international scene, are flirting with disaster because they tend to ignore the laws of foreign countries. The bait is foreign countries need for \new products, modern technology and hard dollars. The trap is the legal ramification of their ignorance.

In November of 1999, the American business community was shocked by the announcement that a Class Action lawsuit had been filed in Manhattan naming Union Carbide as defendant in a case arising from the 1984 disaster in Bhopal, India, when thousands of people died when a poisonous gas was released into the air from a pesticide plant. The initial civil case against Union Carbide was settled in 1989 for $470,000,000.00. Union Carbide had considered the case closed but had ignored the fact that the case, originally filed in New York had been transferred to India and that the Indian Supreme Court had ordered Union Carbide to stand trial under criminal charges. The suit claims that Union Carbide and its former chief executive officer, Warren Anderson were totally liable for "fraud and civil contempt for their total failure to comply with the lawful orders of the Courts of India. The suit also claims that Union Carbide operated with a "depraved indifference to human life." For the Supreme Court of India it made no difference that the plant in Bhopal was located in India, that it was built by Indian companies, that it conformed to Indian Building Codes, that it was inspected by Indians, and that it is was operated by Indians.

Union Carbide had taken attractive bait and fifty-one percent of the plant was owned by Union Carbide India. This was a concession to Union Carbide since this amount of ownership violated India's limited foreign ownership to forty percent. The trap lies in the fact that the Indian government cared little about anything but the fact that Union Carbide was involved, and while, normally, this would be case in "Negligence," the Indian government was apparently moving into an area of "Strict Liability" for damages. Under "Strict Liability," which is generally imposed by Statute, motive or intent is immaterial, and if a company is responsible for an act it is liable. This responsibility could be by way of manufacture, sale, use or negligence. In more simplistic terms, if you make it or sell it you are liable. Union Carbide simply failed to understand that when it had the case transferred back to India, Indian interpretation of Indian law prevailed.

This is not a new situation. All too often American companies seeking to do business in foreign countries fail to examine the laws of those countries, and they fail to understand the consequences of their acts. An American company, for example, realizing the lucrative potential of fast-food restaurants in Beijing, China, ignores that fact that Chinese law is not American law, that Chinese interpretations of contract are not the same as American interpretation of contracts, that the Chinese do not have the same Housing Codes, Building Codes, Health Codes, Food and Drug laws, etc. as they are accustomed to in the United States. They do not understand that Chinese law permits the application of "Strict Liability" for damage recovery. Thus, under Chinese law, if you make it or sell it you can be held liable for any and all damages.

The past decade has produced a history of consequences for this ignorance, and virtually every company seeking to enter the international manufacturing or marketing ring has a repertoire of horror stories.

An American manufacturer left China thinking it had a contract for the manufacture of mini-vans only to find that no contract existed. On a far lesser scale an American university negotiated a contract with the People's Republic of China for the presentation of a number of seminars for Chinese government officials and Chinese industrial managers. A part of the contract dealt with food services, and it specifically covered the types of food to be served, the quantity, preparations, etc. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The China Predicament


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.