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Partly because of culture, and partly because of a weak legal system, China’s economy runs on guanxi. Before inking deals, executives and officials are expected to socialize in order to build trust. While economists might view this behavior as inefficient, or corrupt, it can also carry certain benefits. Businesses that exchange gifts or favors can expedite agreements, shorten negotiations, reduce arbitration and mediation costs, and avoid lawsuits.
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The prince's defence was that there was no agreement to paya $10-million commission but rather that Sharab would be paid"at his discretion". He told the court he paid her nothingbecause during the protracted sale she had "moved to the Libyancamp".
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