Building contractual trust in Asia different from West?

Summary:Is building trust in Asia different from the West? If it is, how does it impact the way we sign contracts and make regulations?

A few nights ago, a friend from a consulting firm remarked that building trust in Asia is very different from the West. In the West, trust is built by setting up the structure (i.e., contract) and then fitting the people (i.e., organizations) into that structure. In Asia, trust is built by getting to know the people and then building the structure around that.

So, when Asians seek to establish a business relationship, they take time to get to know each other and build trust. As is well-recorded now, the "guanxi" (translated as "relationship" in Chinese) aspect is part of that extensive trust-building exercise. Only when this is done will a contract be signed--and as many Asians say, the contract is then locked away and brought up only when required.

I am sure many will be familiar with the "memorandum of understanding/letter of intent" (MOU/LOI) way of doing business in Asia. Should there be a falling out, court action is a possibility and the relationship will need to be rebuilt.

On the other hand, Western companies will seek to sign binding agreements right from the outset, beginning with the non-disclosure agreement (NDA). Once definitive contracts are signed, they are kept close by. Going to court is a real option but once that decision is sorted out, the relationship may be resumed.

So the clash of cultures means that navigating these differences becomes tricky. Cross-border lawyers, especially those dealing with east-west deals, may need to be aware of such nuances.

I wonder whether the same exists in making regulations and laws. For instance, when we regulate personal data protection by adopting provisions from the West, are we saying that once we establish the processes and structures around the organization, then the trust has been built? And because the government has already been established as a trusted entity, it does not need to demonstrate the processes required to build that trust?

In the past, because an entity is trustworthy, for example a bank or government, trust has been built and we can afford to be more lax in having to see the processes that protect our personal data. But now, is all this trust building ignored and everyone treated the same?

I would love to hear your experiences and theories.

Topics: Legal, Asean

About

Bryan is Pinsent Masons's technology media and telecommunications partner in Singapore and has practised since 1997. He advises on contracting and risk management in the areas of information systems and telecommunications, including intellectual property, data data privacy, e-commerce, cloud computing, and sourcing. Bryan also has adv... Full Bio

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