Unpaid Commissions in China: The Strategy of “Litigate First, Negotiate Later”

When foreign trade agents struggle to recover commissions from Chinese companies, negotiation is often the first step. However, when companies refuse to pay or delay indefinitely, initiating a lawsuit can be a powerful strategy to force a resolution. In China, many commission disputes are settled not through prolonged trials but through court-facilitated mediation—often after litigation has begun. This “litigate first, negotiate later” approach can create leverage and significantly improve an agent’s chances of recovering unpaid commissions.

How Initiating a Lawsuit Can Pressure the Debtor to Settle

Filing a lawsuit is not just about winning in court—it is also a strategic move to push the Chinese company toward a settlement. Many companies assume foreign agents will not take legal action, relying on the belief that cross-border disputes are too costly or complicated. However, once a lawsuit is filed, several factors increase the pressure on the debtor:

Legal and Financial Pressure

• Legal Costs & Uncertainty – A formal lawsuit forces the company to spend time and money on legal defense. If the case is strong, they may prefer settlement over an unfavorable court ruling.

• Reputational Risk – Many Chinese companies, particularly exporters, are concerned about their business reputation. A public legal dispute may affect their relationships with buyers and suppliers.

• Risk of Asset Freezes – If the agent has a well-documented claim, the court may allow pre-judgment asset preservation, restricting the company’s financial operations.

Changing the Power Dynamics

• Before litigation, the company holds the power, deciding whether or not to pay.

• Once sued, they are forced into a defensive position, making settlement a more attractive option.

The Benefits of Court-Facilitated Mediation

Unlike in many Western legal systems, courts in China actively encourage mediation during litigation. In commission disputes, this can be highly advantageous for foreign agents.

Why Court Mediation Works

• Judicial Influence – Judges in China frequently act as mediators, persuading companies to settle based on the likely court outcome.

• Time & Cost Efficiency – A mediated settlement can be reached in weeks or months, whereas full litigation may take a year.

• Binding Agreements – Mediation settlements facilitated by the court are legally enforceable, ensuring the company follows through on payment.

When Does Mediation Happen?

Mediation can take place at any stage of litigation but is most effective after the company realizes that ignoring the claim is no longer an option.

Real-Life Examples of Successful Settlements During Litigation

Through our extensive experience, we have successfully helped foreign trade agents recover commissions using the “litigate first, negotiate later” approach. The most common situation is the company decide to settle after receiving the court notice for the first hearing: A foreign trade agent had a written agreement for a 5% commission on a significant deal. The Chinese supplier refused to pay and claimed financial difficulties. After we filed the lawsuit, froze their account and obtained a court notice, the supplier agreed to settle for the full claimed amount within three days.

Conclusion

For foreign trade agents struggling with unpaid commissions, filing a lawsuit is not just a last resort—it is a strategic tool to force negotiations. Many Chinese companies prefer settlement once they realize the legal risks and costs of prolonged litigation. Court-facilitated mediation further increases the likelihood of a favorable outcome without the need for a full trial.

If you are facing a commission dispute, taking legal action early can significantly improve your chances of recovery. We have successfully helped numerous foreign agents recover their commissions through strategic litigation, negotiation, and mediation. Contact us to explore the best approach for your case.

Catalogue of articles in the series

1.Unpaid Commissions in China: Avoiding Pitfalls for Foreign Trade Agents

2.Unpaid Commissions in China: Contract Tips for Foreign Trade Agents

3.Unpaid Commissions in China: Legal Remedies for Foreign Trade Agents 

4.Unpaid Commissions in China: The Strategy of “Litigate First, Negotiate Later”  

5.Unpaid Commissions in China: Key Takeaways and Proactive Strategies for Foreign Trade Agents

---

Hongyu Huo

License No.: 13201202311712527

About the Author:

Hongyu is a highly skilled attorney specializing in both criminal and civil law matters.

She has successfully assisted numerous clients, earning a reputation for her exceptional legal acumen and dedication.

Hongyu is known for her approachable and friendly demeanor, making her easy to communicate with and well-liked by her clients. She always prioritizes her clients’ best interests, ensuring they receive the best possible legal advice and representation.

Whether dealing with complex criminal cases or intricate civil disputes, Hongyu’s commitment to excellence and her compassionate approach have made her a trusted and respected figure in the legal community.

(Contact: zlxlawyer@bjcelue.com or WhatsApp +86 18362959702)