A clean break up: China Unicom and Google
April 16, 2010 | BY
clpstaff &clp articles &Although China Unicom ended its partnership with Google last week, there was no contractual breach, said counsel. On March 24 2010 China Unicom announced…
Although China Unicom ended its partnership with Google last week, there was no contractual breach, said counsel. On March 24 2010 China Unicom announced it was removing the Google search function from all its mobile phones.
Despite media headlines blaring sensational words such as “ditches”, “drops”, “divorces” and “bailing” to describe the state-owned enterprise (SOE)'s break up with Google, in reality there wasn't a messy aftermath.
Most foreign companies don't have bargaining power when entering into a business contract with SOEs, especially those in sensitive or highly-regulated sectors.
“Given the nature of the business arrangement and the bargaining power of the parties, it is unlikely that a company like Google would have had sufficient leverage to gain the upper hand when it was negotiating its mobile search agreement with China Unicom,” said Grace Chen, a TMT specialist and corporate partner at the Beijing office of Bird & Bird.
“An important question is whether Google's China affiliate will be able to renew the licenses necessary for it to continue representing itself as an internet content provider (ICP) with the requisite qualifications to operate its businesses in China.”
Contracts drafted in China that are governed by Chinese law are standard. Provisions are drafted broadly for leeway, but lawyers for foreign players are careful to include detailed examples to provide clarity on how to address certain scenarios and provide remedies.
“There is not a lot of room to negotiate in such instances,” said Chen of entering into commercial agreements with SOEs, especially those in a monopolised market such as the telecoms sector. “You will want to set reasonable expectations and negotiate hard on important commercial issues.”
“In practice the Chinese counterparts are very reasonable and willing to concede to reasonable and realistic requests,” Chen assured. “There's nothing to be afraid of.”
An optimist, Chen added that she's seen many companies do business with the large PRC telecoms companies and been successful. “You do have to step carefully, stay focused on the important issues, and go in with fair and reasonable expectations. CM
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