China Clears Final Hurdle for Recognition and Enforcement of Foreign Judgments in 2022

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Key takeaways:

As a landmark judicial policy issued by China’s Supreme People’s Court, the 2021 Conference Summary enables an ever greater number of foreign judgments to be enforced in China, by making substantial improvements from both the “threshold” and “criteria”.
The threshold addresses whether foreign judgments from certain jurisdictions are enforceable, whereas the criteria deal with whether the specific judgment in an application before Chinese courts can be enforced.
The 2021 Conference Summary significantly lowers the threshold by liberalizing the reciprocity test, while providing a much clearer standard for Chinese judges to examine applications for recognition and enforcement of foreign judgments.

Theoretically, from January 2022, the judgments rendered in most of China’s major trading partners, including almost all common law countries and a large number of civil law countries, can be enforceable in China.

The “Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” (hereinafter the “2021 Conference Summary”, 全国法院涉外商事海事审判工作座谈会会议纪要), a landmark judicial policy issued by China’s Supreme People’s Court (SPC), has been implemented since January 2022. The 2021 Conference Summary makes it clear for the first time that applications for enforcing foreign judgments will be examined subject to a much more lenient standard.

Since 2015, the SPC has consistently disclosed in its policy that it wishes to be more open to the application for recognition and enforcement of foreign judgments, and encourages local courts to take a more amicable approach to foreign judgments within the scope of established judicial practice.

We have noticed the SPC’s changing attitude and have been tracking the latest cases in this field since 2018 so as to make systematic observations, analyses and predictions.

Admittedly, the threshold for enforcing foreign judgments was set too high in the judicial practice, and Chinese courts have never elaborated on how to enforce foreign judgments in a systematic manner.

As a result, despite the SPC’s enthusiasm, it is still not attractive enough for more applicants to file an application for recognition and enforcement of foreign judgments with Chinese courts.

However, such situation is now changed.

In January 2022, the SPC published the 2021 Conference Summary with regard to cross-border civil and commercial litigation, which addresses a number of core issues concerning the recognition and enforcement of foreign judgments in China. The 2021 Conference Summary manifests the consensus reached by representatives of Chinese judges nationwide at the symposium on how to adjudicate cases, which will be followed by all judges.

The 2021 Conference Summary makes substantial improvements from two aspects, the “threshold” and “criteria”.

The “threshold” refers to the first obstacle you will face when applying for recognition and enforcement of a foreign judgment in China, that is, whether foreign judgments from certain jurisdictions are enforceable.

The countries reaching the threshold now include most of China’s major trading partners, which is huge progress compared with the prior 40 countries or so.

If your country reaches the threshold, a criterion will then be met, with which the Chinese judges will measure whether the specific judgment in your application can be enforced in China.

Now a clearer threshold and criteria enable you to make more reasonable expectations about the likelihood of your judgment to be enforced in China.

1. Threshold: the threshold for enforcing judgments of most foreign countries in China has been significantly lowered.

The 2021 Conference Summary significantly lowers the threshold for the recognition and enforcement of foreign judgments in China, making a breakthrough in existing practice.

According to the 2021 Conference Summary, the judgments of most of China’s major trading partners, including almost all common law countries as well as most civil law countries, can be enforceable in China.

Specifically, the 2021 Conference Summary states that the judgment can be enforced in China if the country where the judgment is rendered satisfies the following circumstances:

(1) The foreign country has concluded an international or bilateral treaty with China in respect of recognition and enforcement of foreign judgments.

Currently, 35 countries meet this requirement, including France, Italy, Spain, Belgium, Brazil, and Russia.

For the List of China’s Bilateral Treaties on Judicial Assistance in Civil and Commercial Matters (Enforcement of Foreign Judgments Included), please click HERE. Authoritative texts in Chinese and other languages are now available.

(2) The foreign country has a de jure reciprocal relationship with China.

It means that where a civil or commercial judgment rendered by a Chinese court can be recognized and enforced by the court of the foreign country according to the law of the said country, a judgment of the said country may, under the same circumstances, be recognized and enforced by the Chinese court.

In accordance with the criteria of de jure reciprocity, the judgments of many countries can be included in the scope of enforceable foreign judgments in China.

For common law countries, such as the United States, the United Kingdom, Canada, Australia, and New Zealand, their attitude towards applications for recognition and enforcement of foreign judgments is open, and in general, such applications meet this criterion.

For civil law countries, such as Germany, Japan, and South Korea, many of them also adopt a similar attitude to the above-mentioned de jure reciprocity, so such applications also meet this criterion to a great extent.

(3) The foreign country and China have promised each other reciprocity in diplomacy or reached a consensus at the judicial level.

The SPC has been exploring the cooperation in mutual recognition and enforcement of judgments with other countries in a lower-cost way in addition to signing treaties, such as a diplomatic commitment or a consensus reached by the judiciaries.

It can achieve functions similar to that of treaties but without being involved in the lengthy process of treaty negotiation, signing, and ratification.

China has started similar cooperation with Singapore. A good example is the Memorandum of Guidance Between the Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore on Recognition and Enforcement of Money Judgments In Commercial Cases.

It is thus fair to say that the 2021 Conference Summary has substantially lowered the threshold by liberalizing the reciprocity test.

2. Criterion: Clearer standard for Chinese judges to examine each application for recognition and enforcement of foreign judgments

The 2021 Conference Summary makes it clear under what circumstances Chinese courts may refuse to recognize and enforce a foreign judgment and how the applicants may submit the applications, which undoubtedly enhances the feasibility and predictability.

Pursuant to the 2021 Conference Summary, a foreign judgment can be recognized and enforced in China if there are no following circumstances where:

(1) the foreign judgment violates China’s public policy;

(2) the court rendering the judgment has no jurisdiction under Chinese law;

(3) the procedural rights of the Respondent are not fully guaranteed;

(4) the judgment is obtained by fraud;

(5) parallel proceedings exist, and

(6) punitive damages are involved.

Compared with most countries with liberal rules in recognition and enforcement of foreign judgments, the above requirements of Chinese courts are not unusual. For example:

The above items (1) (2) (3) and (5), are also requirements under the German Code of Civil Procedure (Zivilprozessordnung).
Item (4) is consistent with the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.
Item (6) reflects the legal cultural tradition on the issue of compensation in China.

In addition, the 2021 Conference Summary also specifies what kind of application documents should be submitted to the court, what the application should contain, and how parties can apply to the Chinese court for interim measures when applying for enforcing foreign judgments.

In short, we have observed a gradual relaxation of Chinese courts’ attitude towards application for recognition and enforcement of foreign judgments since 2018. Recently the 2021 Conference Summary has finally made a substantial leap forward.

We hope to see such breakthroughs in rules to be witnessed and developed by case after case in the near future.

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌

Recognizing and Enforcing Foreign Judgments in China

Enforcement

Litigation in China

CJO GLOBAL