Navigating UK Legal Risks: Dispute Resolution and Fraud Prevention for Chinese Corporates

At Howard Kennedy’s recent UK-China Legal Exchange event, our dispute resolution and business crime specialists shared practical insights into navigating legal risks and resolving disputes in the UK. Here are the key takeaways for Chinese corporates operating or investing in the UK or choosing English law as the governing law in international contracts:

1. Why English Law?

England remains a leading global -legal jurisdiction for international dispute resolutions. Its common law system influences jurisdictions worldwide, including China’s key trading partners. 

London is the most attractive centre for commercial litigation and international arbitration and - offers:

• A robust legal ecosystem with well-tested and international respected legal procedural framework, top-tier judges, lawyers, and expert services.
• Legal stability and minimal political interference.

Strategic geographic positioning for international business.

2. Dispute Resolution Options

For Chinese corporates engaging in UK business or choosing a legal jurisdiction for international commerce, understanding how disputes can be prevented and resolved under English law is essential. Our advice is always to plan, prevent and mitigate disruptions. 

In the event of a dispute, English law offers a range of mechanisms tailored to different types of conflicts, each with its own procedures, advantages, and strategic considerations, such as:

Litigation: Formal, public, and binding. Offers a range of remedies but can be costly and unpredictable.

Arbitration: Confidential and flexible. Parties appoint their tribunal and benefit from enforceable awards.

Mediation: A non-binding, consensual process with high success rates, often used alongside litigation or arbitration.

3. Recent Legal Reforms: The UK's Arbitration Act 2025

The UK’s Arbitration Act 2025 marks a significant update to the legal framework governing arbitration, reinforcing England’s position as a leading global seat for international commercial dispute resolution. While the changes are evolutionary rather than revolutionary, they reflect a modernisation of the law to meet the needs of international businesses and enhance procedural efficiency.

For Chinese corporates engaging in cross-border transactions or joint ventures, these reforms offer greater clarity, flexibility, and confidence in the arbitration process. The Arbitration Act 2025 introduces:

• Clarification on governing law.
• Summary dismissal powers for arbitrators.
• A statutory duty to disclose potential impartiality concerns.
• Enhanced immunity for arbitrators.

4. Preventing Disputes

While understanding how to resolve disputes is important, preventing them from arising in the first place is even more valuable, particularly for Chinese corporates navigating unfamiliar legal and commercial environments on the international market. Many disputes stem from avoidable missteps including unclear contracts, rushed transactions, or insufficient due diligence. Here are some proactive steps you can take to reduce risk:

• Seek legal advice early.
• Conduct thorough due diligence.
• Draft clear contracts with enforceable terms.
• Maintain proper records and consider enforcement risks upfront.

5. Corporate Liability: Failure to Prevent Fraud 

The UK’s Economic Crime and Corporate Transparency Act 2023 introduced a new Failure to Prevent Fraud offence, effective from 1 September 2025. It applies to large organisations and group companies including Chinese corporates with UK operations and imposes strict liability for fraud committed by employees or agents, even without senior management's knowledge.

This reform reflects the UK’s drive to strengthen corporate accountability and tackle economic crime. Businesses must now show they have reasonable procedures in place to prevent fraud, or risk prosecution. The offence also has extra-territorial reach, meaning overseas entities may be caught if they operate in or serve UK markets. Key aspects of the new offence include:

• Applies to companies with >250 staff, >£36m turnover, or >£18m assets.
• Covers a wide range of UK fraud offences committed by associated persons (as long part of the fraud offence takes place in the UK, or the effect of the fraud is felt in the UK, that will be enough to form the required connection to the UK).
• Requires “reasonable procedures” to prevent fraud, including:
• Top-level commitment
• Risk assessments
• Due diligence
• Tailored anti-fraud controls
• Clear policies and training

For group organisations, the criteria apply to the whole organisation regardless of where the organisation is headquartered or where its subsidiaries are located. A subsidiary that does not meet the criteria for being a large organisation can be prosecuted where the parent company is a large organisation. 

As Chinese corporates continue to invest in the UK and expand their UK presence, understanding the legal landscape, from dispute resolution to fraud prevention, is key to protecting commercial interests. With recent reforms enhancing both arbitration and corporate liability frameworks, staying informed and proactive is essential for long-term success.