In China, settlement negotiations may not arise until the parties have filed their case in court or arbitration and each side has presented evidence and argument.  At that point, the judge or arbitrator may offer the parties an opportunity to discuss settlement.  Sometimes the introduction of settlement talks is the product of one party or the other suggesting to the arbitration institution secretary or the judge that settlement is a good option for the case.  In most cases, Chinese parties seem to be reluctant to settle early lest it show a fear that the party lacks confidence in the strength of its case.

American counterparties are different.  US arbitration and litigation proceedings are expensive propositions and many companies seek to dispense with litigation early if at all possible.  Settlement is considered even where one may have a relatively strong case if the cost of settlement may be less than the costs of litigation time and fees.  Also, parties recognize the uncertainty of dispute resolution in any forum and so settlement allows certainty.  Thus, we hear the expression, “A bad settlement is better than a good trial.”

As a result, a Chinese party may end up i
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