Doing Business in China For Dummies®

Indemnity

Indemnity is an agreement that the other party will cover all expenses and liabilities in certain situations. In the West, parties are often adequately insured, so indemnities can be quite broad. Many Chinese parties don’t have good insurance, so you’re likely to get more resistance on the indemnity provisions from them.

You have to balance the need to protect your company against the risk of breaking the deal. Keep in mind that because of the lack of insurance, you can reasonably expect only so much indemnity out of most Chinese parties. The agreement does neither of you any good if the Chinese side goes bankrupt because of its indemnity obligation to your company. Nevertheless, protect your company through indemnity as much as you can under the circumstances. We discuss indemnity in Chapter 12.