You need to understand the threshold and criterion for the enforcement of foreign judgments in China. If your judgment can pass the threshold and meet the criterion, you may consider enforcing your judgments in China to collect your debts.

This post was first published in CJO GLOBAL, which is committed to providing consulting services in China-related cross-border trade risk management and debt collection. We will explain how debt collection works in China below. 

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 need to be met, with which the Chinese judges will measure whether the specific judgment in your application can be enforced in China.

In January 2022, the SPC published the landmark 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. This 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. This will help you determine in advance the likelihood that your judgment will be enforced in China, so that you can make more reasonable expectations.

I. Threshold: Can judgments of this country be enforced in China?

In general:

There are 35 countries whose judgments can be recognized by Chinese courts based on treaty obligations;

There are 4 countries whose judgments have been recognized by Chinese courts despite no treaty obligations;

There are 4 countries whose judgments are likely to be recognized by Chinese courts despite no treaty obligations; and

Judgments of other countries that are friendly to foreign judgments will be recognized by Chinese courts theoretically.

1. Treaty countries: 35 countries

If the country where the judgment is rendered has concluded an international or bilateral treaty on the recognition and enforcement of judgments with China, the Chinese court shall examine the application for recognition and enforcement of foreign judgments in accordance with such international or bilateral treaty.

If the foreign judgment is rendered in a country that has not signed relevant international or bilateral treaties with China, also known as ‘non-treaty jurisdictions’, the Chinese court must first determine the existence of reciprocity between that country and China. If reciprocity exists, the Chinese court will then further examine the application for recognition and enforcement of the judgment.

China has signed, but has not yet ratified, the Convention on Choice of Court Agreements (2005 Choice of Court Convention). China has not yet acceded to the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “Hague Judgments Convention”). Therefore, these two treaties cannot, at least at the current stage, be applied as the basis for the Chinese court to examine applications for recognition and enforcement of judgments of relevant contracting states.

To date, China and 39 States have concluded bilateral judicial assistance treaties, among which 35 bilateral treaties, include the judgment enforcement clauses. For the judgments of these countries, China will examine their applications for recognition and enforcement in accordance with these bilateral treaties.

France, Spain, Italy, Belgium, Brazil and Russia are among these 35 countries.

For more about bilateral judicial assistance treaties that China and 39 States have concluded, please read ‘List of China’s Bilateral Treaties on Judicial Assistance in Civil and Commercial Matters (Enforcement of Foreign Judgments Included) ’.

2. Reciprocity: 4 validated countries + 4 potential countries + other major trading partners

In theory, after January 2022, the judgments from most of China’s major trading partners can be enforced in China. Among others, four of these countries have already been validated, and four more are highly likely to be validated.

From 2022, the Chinese courts will adopt the following three ways to recognize reciprocal relationships.

(1) De jure reciprocity: 5 validated countries + 3 potential countries + other major trading partners

If, according to the law of the country where the judgment is rendered, the Chinese civil and commercial judgments can be recognized and enforced by the court of that country, then the Chinese court will also recognize its judgments.

This is the first time that Chinese courts have accepted de jure reciprocity, which is similar to the existing practice in many other countries, such as Germany, Japan, and South Korea.

It is noteworthy that in March 2022, Shanghai Maritime Court ruled to recognize and enforce an English judgment in Spar Shipping v Grand China Logistics (2018) Hu 72 Xie Wai Ren No.1, marking the first time that an English monetary judgment has been enforced in China based on reciprocity. One key to ensuring the enforcement of English judgments is the reciprocal relationship between China and England (or the UK, if in a wider context), which, under the de jure reciprocity test, was confirmed in this case.

Before the 2021 Conference Summary, Chinese courts adopted the de facto reciprocity, that is, only when a foreign court has previously recognized and enforced a Chinese judgment, will Chinese courts recognize the existence of reciprocity between the two countries, and further recognize and enforce the judgments of that foreign country.

Under what circumstances do Chinese courts deny the de facto reciprocity? In some cases, Chinese courts hold that there is no reciprocity between the two countries under the following two circumstances:

A. Where the foreign court refuses to recognize and enforce Chinese judgments on the ground of lack of reciprocity;

B. Where the foreign court has no opportunity to recognize and enforce Chinese judgments because it has not accepted such applications.

Up to 2022, Chinese courts have recognized foreign judgments all on the ground of de facto reciprocity.

We can consider de facto reciprocity as the stricter de jure reciprocity. If a country has recognized a Chinese judgment, it means that its legal operation recognizes and enforces civil and commercial judgments rendered by Chinese courts, i.e., de jure reciprocity has been established.

So, apart from the United Kingdom (based on de jure reciprocity), there are seven more countries having passed the threshold (based on de facto reciprocity), including:

i. Four countries that have been validated

Four countries have recognized Chinese judgments, and the Chinese courts have also recognized their judgments on this ground. They are the United States, South Korea, Singapore and Germany.

ii. Three countries that are highly likely to be validated

Three countries have recognized Chinese judgments, but the Chinese courts have not yet had a chance to recognize their judgments. They are Canada, Australia, and New Zealand.

(2) Reciprocal understanding or consensus: 1 country

If there is a reciprocal understanding or consensus between China and the country where the judgment is rendered, then China can recognize and enforce the judgment of that country.

The SPC and the Supreme Court of Singapore signed a Memorandum of Guidance on Recognition and Enforcement of Money Judgments in Commercial Cases (the MOG) in 2018, confirming that Chinese courts can recognize and enforce Singapore judgments on the basis of reciprocity. The MOG is probably the first (and only so far) attempt by Chinese courts on “reciprocal understanding or consensus”.

The MOG was first invoked by a Chinese court in Power Solar System Co., Ltd. v. Suntech Power Investment Pte. Ltd. (2019), a case where a Singapore judgment was recognized and enforced in China.

Under this mode, only by signing similar memoranda between the SPC and the supreme courts of other countries, the two sides can open the door to mutual recognition of judgments, saving the trouble of signing bilateral treaties. This has greatly lowered the threshold for Chinese courts to facilitate cross-border ‘movement’ of judgments.

(3) Reciprocal commitment without exception: Not found yet

If either China or the country where the judgment is rendered has made a reciprocal commitment through diplomatic channels, and the country where the judgment is rendered has not refused to recognize the Chinese judgment on the ground of lack of reciprocity, then the Chinese court can recognize and enforce the judgment of that country.

“Reciprocal commitment” is the cooperation between two countries through diplomatic channels. In contrast, “reciprocal understanding or consensus” is the cooperation between the judicial branches of the two countries. This allows the diplomatic service to contribute to promoting the portability of judgments.

The SPC has made reciprocal commitments in its judicial policy, i.e., the Several Opinions on the People’s Court Providing Judicial Services and Guarantee to the Belt and Road Initiative Construction (Fa Fa (2015) No. 9) (关于人民法院为“一带一路”建设提供司法服务和保障的若干意见). But so far, we haven’t found any country that has such a commitment with China.

II. Criterion: Can the judgment concerned be enforced in China?

If Chinese courts can recognize and enforce your judgments, how will the Chinese court review the judgment concerned?

Chinese courts usually do not conduct a substantive review of foreign judgments. In other words, Chinese courts would not examine whether foreign judgments make mistakes in fact-finding and application of law.

1. Refusal of recognition and enforcement

Chinese courts will refuse to recognize the applicant’s foreign judgment under the following circumstances, specifically as follows:

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

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

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

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

(d) the judgment is obtained by fraud;

(e) parallel proceedings exist, and

(f) punitive damages are involved (specifically, where the amount of damages awarded significantly exceeds the actual loss, a Chinese court may refuse to recognize and enforce the excess).

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 (a) (b) (c) and (e), are also requirements under the German Code of Civil Procedure (Zivilprozessordnung).
• Item (d) is consistent with the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.
• Item (f) reflects the legal cultural tradition on the issue of compensation in China.

If a Chinese court refuses to recognize a foreign judgment on the grounds of the above, it will make a ruling refusing to recognize and enforce the foreign judgment. The ruling so made shall not be appealed.

2. Dismissal of the application

If the foreign judgment temporarily does not meet the following requirements for recognition and enforcement, the Chinese court will render a ruling to dismiss the application. For example:

(i) China has not entered into relevant international or bilateral treaties with the country where the judgment is rendered, and there is no reciprocal relationship between them;

(ii) the foreign judgment has not yet entered into force;

(iii) the application documents submitted by the applicant have not yet met the requirements of Chinese courts.

After the dismissal, the applicant may choose to re-apply when the application satisfies the requirements for acceptance later on.

If your judgment passes the aforementioned threshold and meets the criterion, you may consider enforcing your judgments to collect your debts in China.

Photo by Joshua J. Cotten on Unsplash

Contributors: Meng Yu 余萌

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