Thursday, June 5, 2014

Foreign Exchange: When Eastern Yuan meet Western Dollars

This week I mediated an interesting dispute between a Chinese employer and it's former employee, who was an American citizen working in America for the Company at the time of the termination of his contract.  It was interesting to learn that apparently the remedy in China for the wrongful termination of an employment agreement is a maximum of eight weeks of earnings.  Here, the remedy may include actual lost earnings (back pay), front pay for some reasonable period of time (the reasonable amount of time estimated it will take to find alternative equivalent employment), emotional distress and attorneys fees.  In California, this often results in even higher settlements when issues surrounding wage and hours are factored in.  In this case, it amounted to a (confidential) six figure settlement.  But that is where the real cross-cultural challenge began, not ended.
As a student of International Relations in the 1970's, there simply was no discussion about concepts like "money laundering" and business ventures with the New Republic of China.  At that time, China was a Communist country which was not open to conducting business with U.S. citizens.  As I recall, it was not yet open to American tourists either.  So it was some surprise to learn that the Chinese employer here considered the problem of transferring hundreds of thousands of Chinese Yuan to America in a lump sum completely daunting.  In all likelihood, he believed it would be held up by the Chinese government and may take many months and great efforts to get the money out of the Country.  On the other hand, there was so much distrust between the parties that neither one were comfortable with a protracted payment plan which could be in the maximum of $10,000.00 USD increments. That seemed to be the magic number which could fly under the radar of the government and not be flagged for scrutiny or held up upon transfer.
Ultimately, the creative and cooperative lawyers, once they arrived at a deal on the settlement of the case, agreed to using a Chinese escrow.  Defendant will put all of the money into an account, and the escrow will be charged with sending the funds over a period of months until fully paid directly to the Plaintiff's lawyer.   The use of a trustworthy neutral third party is, of course in my view, brilliant!
I offer this as a lesson in cross-cultural negotiation in an arena that I have never had to delve into before.  What creative ways have you developed to move money from one currency and country to another safely and legally?