China's reemergence as an economic power has been one of the defining economic trends of the last two decades. Chinese entrepreneurs and corporations have integrated into the global market at a seemingly breakneck pace, both adapting to and shaping that global market. The Chinese judicial system, by contrast, has been slow to integrate into the broader global legal framework. Goods and services readily flow in and out of China, but the cross-border movement of legal judgments is another matter.
Companies doing business in China or with Chinese companies are free to seek legal redress in any country with competent jurisdiction, and often choose their home country for reasons of convenience or familiarity. Enforcing those judgments in China, however, can pose a challenge. This article provides a brief overview of the recognition and enforcement of foreign judgments in China and a discussion of recent developments on this subject.1
The recognition and enforcement of foreign judgments in China is governed by Articles 281 and 282 of the Civil Procedure Law of China (CPL). The CPL provides for enforcement based on applicable treaties/international conventions or on the principle of reciprocity, provided that recognition of the judgment would not conflict with fundamental principles of Chines law or be against the public interest. China has bilateral treaties in place with several countries, but has yet to enter into such agreements with most of its major trading partners. 2
In most instances, enforcement of foreign judgments in China hinges on the principle of reciprocity. On its face, the CPL provides only a general requirement of reciprocity and a defense in cases where enforcement would be against public policy. In practice, the Supreme People's Court established a strict requirement of de facto reciprocity. In Gomi Akira v. Dalian Fari Seafood Ltd. (the “Gomi case”), the Supreme People's Court issued an opinion that effectively set a precedent of reciprocity only being invoked negatively as grounds to refuse foreign judgments.3 Following the Gomi case, Chinese courts refused recognition of judgments from Japan, Germany, UK, Australia, and South Korea.4 Under this restrictive application of the reciprocity standard, a foreign judgment could only be enforced where a precedent of mutual recognition and enforcement of civil rulings existed between the country and China.” In practice, it was not possible to apply to a people's court for recognition and enforcement of commercial judgments from countries with which the PRC had no relevant treaty.”5
The requirement of reciprocity presents a particular issue where both countries demand de facto reciprocity and neither is willing to take the first step, becoming locked in a stalemate. To avoid this, courts have been willing to lead in the hope that Chinese courts will follow suit. In Germany, for example, a court specifically cited the importance of establishing reciprocity in deciding to enforce a Chinese judgment. Germany, a Civil Law country like China, also requires reciprocity as a precondition to enforcement of foreign judgments. In German Zublin International Co. Ltd. v. Wuxi Walker General Engineering Co. Ltd., the Court of Appeal of Berlin ruled that the principle of reciprocity did not per se prevent enforcement of a Chinese court's judgment, and that it was prudent for German courts to take the first step in establishing reciprocity in the hope that Chinese courts would follow. 6
On the Chinese side, there is indication that prior reluctance to enforce foreign judgments is giving way to a more flexible approach to judicial assistance. In 2017, the Wuhan Intermediate People's Court recognized a judgment of the Los Angeles Superior Court in California.7 The case, Liu Li v. Tao Li & Tong Wu, marks the first time a Chinese court has recognized a US court judgment. The Chinese court based its finding of reciprocity on a US case decided in 2011, where both a federal district court and the United States Court of Appeals for the Ninth Circuit ruled in favor of recognition of a Chinese judgment.8 Without considering the unique circumstances of the case purportedly giving rise to reciprocity, as Chinese courts had done in the past, the Wuhan Intermediate People's Court surprised many legal observers with its relatively quick determination that reciprocity existed. The Wuhan Intermediate Court concluded “after scrutiny, it is found that the materials submitted by the Applicant proves there is precedence as to recognition and enforcement of civil rulings of Chinese courts in US, so reciprocity for mutual recognition and enforcement of civil rulings is determined existing between the two countries.”9
Chinese courts' shift towards a more proactive application of reciprocity is especially apparent in the larger context of its Belt and Road Initiative. The Belt and Road Initiative is a Chinese-led development strategy designed to enhance connectivity between China and the rest of Eurasia, largely focused on developing infrastructural connections.10 In 2015, the Supreme People's Court issued an opinion to the effect that Chines courts could provide judicial assistance to countries included in the Belt and Road initiative, even in the absence of treaties/conventions or existing reciprocity, in order to facilitate the formation of reciprocity.11 This forward-looking view of reciprocity, with China taking the first step, represents a new and more integrative view of the Chinese judicial system's role in the global legal framework.
While reciprocity is the first (and generally most difficult) hurdle an applicant must clear for recognition and enforcement of a foreign judgment, it is not the only factor a Chinese court will consider.12 The foreign judgment must be final and effective. A Chinese court will not enforce a foreign judgment with a pending appeal, or a preliminary/provisional judgment. The foreign court rendering the judgment must have valid jurisdiction over the case, and the case must have been fairly litigated under the laws of that country, including with regard to service of process and other procedural requirements. There must also be no conflicting judgments from a third country or different jurisdictions within the same country (i.e. competing decisions from different states).
Chinese courts can refuse to enforce a foreign judgment on the grounds that enforcement would contradict basic principles of Chinese law or violate Chinese sovereignty, security or public interest. While it has not been tested, excessive punitive damages, common in US judgments, may be an example of a type of judgment that violates basic principles of Chinese law.13 To date, no reported cases provide examples of enforcement rejected based on public interest grounds. 14
In the past, Chinese courts have been reluctant to recognize and enforce foreign judgments, relying on a strict interpretation of the CPL's reciprocity requirement. Recent cases indicate, however, that the courts are taking a more liberal view towards reciprocity and applying it in a forward-thinking manner. This is a positive development for China's integration into the framework of international law which should increase the willingness of foreign entities to do business in China.
1. There are detailed reciprocal enforcement arrangements in place between Mainland China and Hong Kong, Macau, and Taiwan. For the purpose of this article, judgments issued in these jurisdictions are not considered foreign to China.
2. Nuo Ji et al., Enforcement of Judgments and Arbitral Awards in China: Overview, Law stated as at 01-Apr-2018, available at https://uk.practicallaw.thomsonreuters.com/8-619-0132?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1
3. Reply of the Supreme People’s Court on Whether People’s Courts of Our Country Should Recognize and Enforce Japanese Courts’ Judgments and Rulings with Contents About Claims and Debts), issued on and effective as of June 26, 1995, http://www.people.com.cn/zixun/flfgk/item/dwjjf/falv/9/9-1-7-2.html.
4. Dai Yue and Li Tianren, Recognition and Enforcement of Foreign Judgments in China: Progress and Challenges Go Hand-in-hand, September 6, 2017, available at https://www.kwm.com/en/knowledge/insights/china-recognizes-and-execute-foreign-judgement-20170906#id-here
5. Alison Lu Xu, Belt & Road Typical Case 13: Towards a Liberal Interpretation of the Reciprocity Principle for Recognition and Enforcement of Foreign Judgments, 1 China Law Connect 26 (June 2018), also available at Stanford Law School China Guiding Cases Project, China Cases InsightsTM, June 2018, http://cgc.law.stanford.edu/commentaries/clc-1-201806-insights-3-alison-xu.
6. German Züblin International Co. Ltd v. Wuxi Walker General Engineering Rubber Co., Ltd, Judgment of the Court of Appeal of Berlin 18 May 2006
7. Application to Recognize and Enforce a Foreign Civil Judgment by Liu Li v. Tao Li and Tong Wu” (2015 E Wuhan Zhong Min Shang Wai Chu Zi No. 00026)
8. Hubei Gezhouba Sanlian Indus. Co. v. Robinson Helicopter Co., 425 Fed. Appx. 580 (9th Cir. 2011).
9. Application to Recognize and Enforce a Foreign Civil Judgment by Liu Li v. Tao Li and Tong Wu” (2015 E Wuhan Zhong Min Shang Wai Chu Zi No. 00026)
10. See e.g. The World Bank, Belt and Road Initiative: Overview (March 29, 2018), available at https://www.worldbank.org/en/topic/regional-integration/brief/belt-and-road-initiative.
11. “Several Opinions of the Supreme People's Court on the Provision of Judicial Service and Guarantee by People's Courts for the "One Belt and One Road" Construction” issued on and effective as of June 16, 2015.
12. See Suni Gong, The Chinese Court’s Enforcement of a U.S. Civil Judgement, Transnational Notes (April 17, 2018), available at https://blogs.law.nyu.edu/transnational/2018/04/the-chinese-courts-enforcement-of-a-u-s-civil-judgement/#_ftn4.
13. Nuo Ji et al.