Legal Briefing

Recognition and enforcement of foreign judgments in China

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Global Outlook: Disputes | 02 October 2018

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After the landmark decision by a Chinese court finding reciprocity between China and the US, and recognising and enforcing a US judgment for the first time, there have been heated discussions on whether this case signals a genuine broader trend towards recognition and enforcement of foreign judgments in China. The term ‘foreign judgments’ does not include foreign divorce judgments, which are generally enforceable subject to certain limited exceptions. Also for the purpose of this article, the term ‘China’ does not include the Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan.

We analyse the status quo of foreign judgments recognition and enforcement in China, with a focus on recognition and enforcement based on reciprocity.

Legal basis for enforcement of foreign judgments

Under PRC law, a foreign court judgment may only be recognised on the following grounds.

International convention

China signed the Hague Convention on Choice of Court Agreements (the Convention). Under the Convention, courts of member states must, subject to limited exceptions, recognise and enforce judgments with exclusive choice of court agreements in civil and commercial matters of the courts of other member states. The European Union (all member states except Denmark), Mexico and Singapore are parties to the Convention. China, along with the US, Ukraine and Montenegro, has signed but not yet ratified the Convention. It is expected that China will ratify the Convention in the future and given China’s commitment to promoting and safeguarding the ‘Belt and Road Initiative.’

Bilateral treaty

Up to February 2018, China has entered into bilateral treaties with 39 countries in respect of judicial assistance in civil matters, among which 34 include judicial assistance in the enforcement of civil judgments and are currently in force.

Reciprocity

A foreign judgment can be recognised and enforced by a people’s court in China in accordance with the principle of reciprocity. However, there is no legislative or judicial interpretation on what constitutes reciprocity. To this date, there are only two published cases where a court has recognised a foreign judgment based on reciprocity, ie Kolmar Group AG v Jiangsu Textile Industry (Group) Import & Export Co, Ltd (2016) (the Nanjing decision) and Liu Li v Tao Li and Tong Wu (2015) (the Wuhan decision). Both courts in those two cases interpreted the principle of reciprocity in its more conservative sense as de facto reciprocity, meaning that there is reciprocity if a foreign court has recognised a Chinese court judgment before.

Unresolved issues under de facto reciprocity

It sounds simple and direct to apply de facto reciprocity. However, the apparently simple test conceals some uncertainties that reflect the need for a more comprehensive standard in finding reciprocity.

Chinese courts seem to have been adopting the position that if a foreign court has never recognised a Chinese judgment before, there will be no reciprocity found.

Whether application of de facto reciprocity is subject to geographic limitations remains to be tested

In the Nanjing decision, the Nanjing Court recognised a judgment by the High Court of Singapore, the same court that had previously recognised a judgment by the Suzhou Intermediate People’s Court. Both the Nanjing Court and the Suzhou Intermediate People’s Court are located in Jiangsu Province. On the other hand, in the Wuhan decision, the Wuhan Court recognised a judgment by the Los Angeles Superior Court in California, based on the reciprocity evidenced by the recognition of a judgment by the Higher People’s Court of Hubei Province by the US District Court Central District of California. The Higher People’s Court of Hubei Province is the appellate court of the Wuhan Court and both courts are located in Hubei Province.

De facto reciprocity may lead to refusal in the absence of precedent, or even retaliatory treatment

Although not explicitly stated, Chinese courts seem to have been adopting the position that if a foreign court has never recognised a Chinese judgment before, there will be no reciprocity found. This mechanical application of de facto reciprocity may lead to refusal in the absence of precedent, or even retaliatory treatment by foreign courts.

Judicial willingness to take one further step in reciprocity
Chinese court overturned previous position and found reciprocity with the US

In fact, before the Wuhan decision, from our research on published cases, Chinese courts previously, in two other cases, refused to find reciprocity between China and the US, where one in particular concerned a judgment by the Superior Court of California.

Signals from the Supreme People’s Court to move towards clearer standards in reciprocity

On 16 June 2015, the Supreme People’s Court issued ‘Several Opinions on Providing Judicial Services and Safeguards by the People’s Court for the Construction of the “Belt and Road”’. In particular, Article 6 points out that in the absence of bilateral treaties on judicial assistance with some countries along the Belt and Road, depending on the intention for judicial communication and cooperation or commitment to provide reciprocity to Chinese courts in the future, Chinese courts may consider providing judicial assistance first and actively facilitate the formation of reciprocity.

In a recent journal article, a judge from the Supreme People’s Court advocates for the establishment of a new reciprocity standard by legislation or judicial interpretation. It is suggested that such a standard should either adopt a ‘substantive equal term’ theory, where reciprocity should be found if the substantive requirements for enforcement of foreign judgments are the same between two countries, or a ‘reverse presumption theory,’ where reciprocity should be found if there are no substantive impediments for the successful enforcement of a Chinese judgment in the courts of a particular foreign country.

That article evidences high-level discussions on the reciprocity issue at the Supreme People’s Court. In our view, this may signal the judicial willingness to a more feasible and reasonable standard of reciprocity in China, which we may expect to be released in the form of a judicial interpretation in the near future.