Negotiate

It is said that if you know others and know yourself, you will not be imperilled in a hundred battles; if you do not know others but know yourself, you will win one and lose one; if you do not know others and do not know yourself, you will be imperilled in every single battle.

– Sun Tzu, The Art of War

Often encapsulated in the catchphrase “know your enemy”, the above quote was cited by Chairman Mao in China as part of his revolutionary manifesto. This and other quotes from The Art of War, an ancient book on military strategy written in the 6th century BC, continue to have a profound influence on China today, particularly in the area of business strategy and negotiation.

As the negotiation experts emphasise, the key to a successful negotiation turns on the ability of each party to meet the interests of the other party and agree on an outcome that is more beneficial than each party’s BATNA (best alternative to a negotiated agreement). Understanding the other party and how it might negotiate is of critical importance in this regard.

In this article, I will examine the origin of the word “negotiate” in English and Chinese, and reflect on the differences between the ways in which Chinese and Western parties negotiate.

Origin of the word

The English word “negotiate” derives from the Latin word negotiari, meaning “to do business”. The Latin word for business, negotium, can be broken into two components: nec, meaning “not” and otium, meaning “leisure”. Originally, the verb “negotiate” referred to the transfer or assignment of title or ownership, as reflected in the noun “negotiable instruments”. It subsequently came to be used to refer to something that can be discussed between two or more parties.

It is interesting to reflect on the connection between negotiation and business and the implication that the focus of negotiation, at least in a Western context, is on the deal (or the content of the deal) rather than the relationship between the negotiating parties.

By contrast, the modern Chinese term for negotiation, tanpan [谈判], consists of the character meaning “discuss” [谈] and the character meaning “decide” [判], highlighting the extent to which negotiation is a process by which two or more people discuss and agree on a certain outcome. In this respect, the focus is more on the relationship and process aspects than on the content.

There are certain other Chinese words that are sometimes used in this context, including yiding [议定] and xieshang [协商]. Interestingly, these words follow the same pattern as tanpan; namely, they focus on the process by which an agreement is reached rather than the content of the agreement.

Chinese and Western approaches to negotiations

Comparisons can be misleading. In addition, there is a risk of generalisation and over-simplification when we talk about the different ways in which parties from different cultures negotiate because everyone is different, no culture is homogenous and a lot depends on the specific circumstances. However, there are some general differences that can be identified between the Chinese and Western approaches to negotiations. To a large extent, these differences are due to different attitudes towards law, contracts and the rules that are embodied within contracts. Significantly, they also highlight differences of emphasis between the process of the negotiations – in particular, the relationship aspects – and the content of the negotiations, or the “deal” itself.

I think it would be fair to say that the West has traditionally been much more comfortable than the Chinese about subscribing to impersonal rules, as embodied in contracts, for the purpose of regulating their private affairs and resolving disputes. This is reflected in the traditional Western notion of law as “absolute truth”, or the embodiment of reason, or universal principles.

By contrast, law in traditional China was viewed more as a tool for regulating society. Its primary purpose was to prevent people from doing the wrong thing, rather than to ensure that people did the right thing. As a result, law was more relevant to “public ordering” – regulating the relationship between a state and its subjects – than “private ordering” – regulating the relationship between private individuals.

In relation to private ordering, customary rules of etiquette that were able to adapt to specific circumstances were traditionally more relevant than impersonal rules of law that were applied in an indiscriminate manner. In other words, the Chinese have traditionally relied more on relationships to regulate their private affairs and resolve disputes than impersonal rules as embodied in contracts.

In many Western jurisdictions, particularly common law jurisdictions, the primacy of contract over relationship is reflected in the following entire agreement clause, which makes it clear that the relationship between the parties is limited to the contract: This agreement is the entire agreement of the parties on the subject matter and replaces all representations, communications and prior agreements in relation to the subject matter. The only enforceable obligations and liabilities of the parties in relation to the subject matter are those that arise out of the provisions contained in this agreement. All representations, communications and prior agreements in relation to the subject matter are merged in and superseded by this agreement.

To the Chinese, however, the relationship is bigger than the contract and there is some unease about attempting to squeeze the relationship into the four corners of the contract. This is why you often find the following provision in Chinese contracts: Any matters arising in the future that have not been specified by this agreement will be agreed separately by the parties.

The emphasis that the Chinese place on relationships in contractual language is also seen in the following preamble that usually appears in joint venture contracts: The parties, adhering to the principles of equality and mutual benefit and after friendly consultations, have agreed to enter into a joint venture and for such purpose have agreed to enter into this agreement.

This suggests that, at least in a formal sense, the Chinese find it difficult to accept that a business relationship could survive other than in the context of equality, mutual benefit and friendly consultation.

The same approach extends to dispute resolution clauses, where the starting assumption is that disputes should first be resolved through friendly consultation and should only be submitted to court litigation or arbitration after that has failed. Another way of describing the distinction is that in the West, the parties focus on negotiating deals; the Chinese, on the other hand, focus on negotiating relationships. In the West, the parties talk about “doing a deal”; in China, the parties talk about “building a relationship”.

Of course, some of these traditional distinctions are less relevant in today’s global marketplace, as international practice converges and legal systems are harmonised. However, I would suggest that these distinctions are still relevant, particularly in terms of the ways in which people negotiate contracts.

A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia.