In March 2022, with the approval of China’s Supreme People’s Court (SPC), a local court in Shanghai ruled to recognize an English monetary judgment.
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In this case, the Chinese court, for the very first time, applied the new foreign judgment-friendly judicial policy that was launched by the SPC and has been implemented since 2022.
Apart from being the first of its kind where an English monetary judgment has been enforced in China based on reciprocity, this case also shows how Chinese courts ensure impartiality, through the mechanism of ex ante internal approval and ex post filings, in foreign judgments enforcement cases.
I. The 2022 Shanghai Case
On 17 Mar. 2022, with the approval of the SPC, the Shanghai Maritime Court ruled to recognize a judgment rendered by the English Court of Appeal (hereinafter “the English Judgment”), in the case Spar Shipping AS v Grand China Logistics Holding (Group) Co., Ltd. (2018) Hu 72 Xie Wai Ren No.1 ((2018)沪72协外认1号), (hereinafter “the 2022 Shanghai Case”).
Under the PRC Civil Procedure Law, the precondition (threshold) for Chinese courts to recognize and enforce a foreign judgment is ‘either treaty or reciprocity. In other words, applicants need to prove that:
(1) China has concluded a relevant international treaty or bilateral agreement with the country where the judgment was rendered; or
(2) a reciprocal relationship exists between China and the country where the judgment was rendered in the absence of the aforesaid treaty or bilateral agreement.
Given the fact that the UK has not concluded any pertinent international treaty or bilateral agreement with China, the core issue leaves to be whether there is a reciprocal relationship exists between UK and China.
So, has any reciprocal relationship been established between China and England (or the UK in a wider context), in the area of recognition and enforcement of foreign judgments?
Upon approval from the SPC, the Shanghai Maritime Court held that reciprocity would be deemed to exist if a Chinese judgment in civil or commercial matters could be recognized and enforced by the foreign court (also known as the ‘de jure reciprocity test’).
It is on this reciprocity test that Shanghai Maritime Court concluded that a reciprocal relationship exists between China and England, and thus recognized the English judgment.
II. The key to ensuring impartiality: ex ante internal approval & ex post filings
The key to ensuring impartiality lies in a mechanism called ‘ex ante internal approval and ex post filings’ designed by the SPC.
This mechanism came from the Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” launched at the end of 2021 (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)). The 2021 Conference Summary is a landmark judicial policy on the enforcement of foreign judgments, embarking on a new era for judgment collection in China.
For a detailed discussion on the 2021 Conference Summary, please read the ‘Breakthrough for Collecting Judgments in China Series ’. For its PDF version, please click HERE.
In terms of ex ante approval, it depends on whether the court examines the application based on treaty or reciprocity. Ex ante approval is a must for those based on reciprocity. By contrast, such approval is not required for those based on a pertinent treaty. In ex ante approval mechanism, the local court shall, before making a ruling, report its handling opinions level by level for approval, and the SPC shall have a final say on the handling opinions.
As for the ex post filing, for any case of recognition and enforcement of foreign judgments, whether it is examined in accordance with international and bilateral treaties or based on reciprocity, the local court shall, after making a ruling on recognition or non-recognition, report to the SPC for filing.
The mechanism is believed to improve the success rate in the recognition and enforcement of foreign judgments. In fact, the SPC has also designed an internal report and review mechanism to ensure that foreign arbitral awards are treated reasonably by local Chinese courts. Although the said mechanism is slightly different from the ex ante approval, their purposes are basically the same.
III. The landmark policy: 2021 Conference Summary
The 2021 Conference Summary, 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.
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.
For a detailed discussion on the 2021 Conference Summary, please read the ‘Breakthrough for Collecting Judgments in China Series ’. For its PDF version, please click HERE.
Photo by David Monaghan on Unsplash
Contributors: Meng Yu 余萌
