What’s New for China’s Rules on Foreign Judgments Recognition and Enforcement? - Pocket Guide to 2023 China’s Civil Procedure Law (1)

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Key takeaways:

In the Fifth Amendment (2023) to the PRC Civil Procedure Law, a total of four new articles (Arts. 300-303) provide the missing piece of the framework for the recognition and enforcement of foreign judgments in China.
The Amendment introduced the long-awaited rule (Art. 300) on refusal grounds of recognition and enforcement.
Art. 301 marks the first time that China has established indirect jurisdiction rules in its domestic law.
Art. 302 applies in cases where parallel proceedings are still pending in a Chinese court when recognition and/or enforcement of a foreign judgment in China is sought.
Art. 303 addresses the legal remedy after a Chinese court ruling for or against recognition and enforcement of a foreign judgment is made.

On 1 Sept. 2023, the Fifth Amendment to the PRC Civil Procedure Law (the ‘2023 CPL’) was adopted by China’s top legislature, the National People’s Congress’s Standing Committee. The 2023 CPL has made significant modifications to international civil procedures. Among others, major changes can be found in rules on international civil jurisdiction, recognition and enforcement of foreign judgments, and cross-border service of process.

The purpose of this Pocket Guide is to acquaint CJO readers with these salient developments in the 2023 CPL. As the first article in the Pocket Guide, this post focuses on the rules of recognition and enforcement of foreign judgments in China.

For a long time, there was only a broad framework for the recognition and enforcement of foreign judgments in China, with very few rules scattered throughout China’s Civil Procedure Law, judicial interpretations, and over thirty Sino-foreign bilateral treaties.

This time, Art. 300 of the 2023 CPL, together with three other articles -Arts. 301-303, provide the missing piece of the framework for the recognition and enforcement of foreign judgments in China.

I. Refusal of recognition and enforcement (Art. 300)

The 2023 CPL introduced the long-awaited rule on refusal grounds of recognition and enforcement. This is perhaps the biggest -and happiest- news for Chinese legal practitioners and private international law scholars this year.

It was not until December 2021 that the grounds for the refusal of recognition and enforcement took shape in Chinese domestic laws, in the form of a judicial conference summary. This landmark judicial document was issued by China’s Supreme People’s Court (SPC), known as 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).

This time, the 2023 CPL incorporates almost verbatim Art. 46 of the Conference Summary. Art. 300 of the 2023 CPL reads as follows:

“For a legally effective judgment or order made by a foreign court and sought for recognition and enforcement, a people's court shall rule to refuse to recognize and enforce if, upon examination, it finds that any of the following circumstances exists:

(1) In accordance with Art. 301 of this Law, the foreign court has no jurisdiction over the case;

(2) The Respondent has not been lawfully summoned, or has not been given a reasonable opportunity to be heard and to defend despite having been lawfully summoned, or the party without legal capacity has not been properly represented;

(3) The judgment was obtained by fraud;

(4) The people’s court has rendered a judgment on the same dispute, or has recognized and enforced a judgment or an order made by a third country on the same dispute; or

(5) Where a legally effective judgment or ruling made by a foreign court violates the basic principles of the Chinese law or is detrimental to the state sovereignty, security and public interest.”

This is an exclusive list. In short, only when one of the above five circumstances – indirect jurisdiction, due process, judgment obtained by fraud, conflicting judgments, and public policy -occurs, will the Chinese courts refuse recognition and enforcement.

For more analysis on the five refusal grounds, please read ‘Conditions for Enforcement of Foreign Judgments in China - Breakthrough for Collecting Judgments in China Series (VII)’.

It is interesting to note two changes in this Article compared to that in the Conference Summary. One lies in Art. 300 (1), which does not specify which law (the law of the requested State or the law of the State of origin) determines direct jurisdiction, but instead further refers to Art. 301-the very rule on indirect jurisdiction. The other is Art. 300 (4), which allows a refusal when there is a conflicting judgment on the same dispute from the requested State or a third State, without mentioning conflicting arbitral awards from a third State (which was once included in the Conference Summary).

II. Indirect Jurisdiction (Art. 301)

A people’s court shall determine that a foreign court has no jurisdiction over a case under any of the following circumstances:

(1) The foreign court has no jurisdiction over the case according to its law, or it has jurisdiction over the case according to its law but has no proper connection with the dispute involved in the case;

(2) The provisions of this Law on exclusive jurisdiction are violated; or

(3) The agreement by which the parties exclusively choose the court to exercise jurisdiction is violated.

This article marks the first time China has established indirect jurisdiction rules in its domestic law. Prior to this, neither the Civil Procedure Law nor relevant judicial interpretations had clarified how to determine whether a foreign court has jurisdiction. Although there are provisions on indirect jurisdiction in 35 Sino-foreign bilateral treaties containing foreign judgment enforcement clauses, their contents varied widely and there was no uniform standard.

This article sets out the indirect jurisdiction rules, which apply to all judgments from non-treaty jurisdiction. For judgments from treaty jurisdiction, the corresponding indirect jurisdiction rules under the relevant treaties continue to apply.

According to this article, a foreign court first needs to have jurisdiction over the case in accordance with its own laws. Otherwise, the Chinese court will find it lacking jurisdiction over the case.

Furthermore, as an added condition on the basis of the Draft Fifth Amendment, even if a foreign court has jurisdiction over a case in accordance with its own national laws, it needs to have a proper connection with the dispute involved in the case. If there is no such proper connection, the Chinese court will also deem it an incompetent court.

Finally, if a foreign court’s jurisdiction over the case either a) violates the exclusive jurisdiction provisions of this Law (e.g., Art. 279 of the 2023 CPL),- for example, the case arises from disputes over the establishment, dissolution, or liquidation of legal entities established in China, or b) contradicts agreements between the parties to exclusively choose a court’s to exercise jurisdiction - for instance, if the parties had agreed to submit a claim to the exclusive jurisdiction of the Chinese courts or courts of a third State, such foreign courts of the State of origin shall also be deemed as incompetent.

III. Parallel Proceedings (Art. 302)

Art. 302 of the 2023 CPL, which addresses the issue of parallel proceedings when a foreign judgment is sought for recognition and enforcement in China, reads as follows:

Art. 302 Where a party applies to a people’s court for the recognition and enforcement of an effective judgment or ruling rendered by a foreign court, and the dispute involved in the judgment or ruling is the same as that under trial by a people's court, the people’s court may render a ruling to suspend proceedings.

If an effective judgment or ruling rendered by a foreign court does not meet the conditions for recognition specified in this Law, the people’s court shall render a ruling against recognition and enforcement of the judgment or ruling, and resume the proceedings that have been suspended. If the conditions for recognition specified in this Law are met, the people’s court shall render a ruling for recognition of the judgment or ruling, and issue an order for enforcement as needed to enforce the judgment or ruling according to the relevant provisions of this Law; and shall render a ruling to dismiss the action in respect of which the proceedings have been suspended.

This article deals with the very situation of international lis pends. A similar counterpart can be found in Art. 7, para. 2 of the Hague Judgments Convention.

Prior to this, Art. 535 of the SPC’s 2015 Interpretation to the PRC Civil Procedure Law ( the “2015 CPL Interpretation”) only addresses the situation where parallel proceedings between the same parties on the same subject matter take place in China and another State, and the parallel proceedings in China have concluded. But if such proceedings in China are still pending, there were no applicable rules, which was exactly the situation for Americhip, Inc. v. Dean et al. (2018) Yue 03 Min Chu No. 420. In this case, due to parallel proceedings, the Shenzhen Intermediate People’s Court of China ruled to dismiss the application for enforcing a New Zealand judgment.

Thanks to Art. 302 of the 2023 CPL, the result would have been different in Americhip, Inc. v. Dean et al.

Art. 302 applies in cases where parallel proceedings are still pending in a Chinese court when recognition and/or enforcement of a foreign judgment in China is sought. Under this circumstance, the Chinese court ‘may’ rule to stay the ongoing proceedings, waiting for the result of examination for foreign judgments sought to be recognized or enforced in China. If all requirements for recognition/enforcement are met, the Chinese courts would rule to recognize/enforce the foreign judgment and rule to dismiss with regard to the stayed Chinese proceedings. Otherwise, the Chinese courts would rule to refuse recognition/enforcement of that foreign judgment, and resume the stayed Chinese proceedings.

IV. Legal Remedy (Art. 303)

Art. 303 of the 2023 CPL, which addresses the legal remedy after a Chinese court ruling for or against recognition and enforcement of a foreign judgment is made, reads as follows:

Art. 303 A party may apply for reconsideration against a ruling on recognition and enforcement or non-recognition and non-enforcement to the people’s court at the next higher level within ten days after the ruling is served.

This article clarifies for the first time that a Chinese court’s ruling for or against the recognition and enforcement of a foreign judgment is subject to reconsideration. The court accepting the reconsideration application is the higher-level court above the court accepting the case. Please note that it is not subject to appeal, but subject to reconsideration, and the review procedures for the two are slightly different.

In this context, there is a relevant reference point: the recognition and enforcement of foreign arbitration awards. Decisions made by Chinese courts on the recognition and enforcement or non-recognition and non-enforcement of foreign arbitration awards are not subject to appeal or reconsideration, unless otherwise specified by law (See Art. 110 of the Conference Summary).

In addition, it should be noted that the Conference Summary has a reporting and notification mechanism for the recognition and enforcement of foreign judgments (the ex ante internal approval and ex post filings) - a mechanism designed by China’s Supreme Court to ensure impartiality in enforcing foreign judgments. The ex-ante approval procedure would apply for foreign judgments from non-treaty jurisdictions. Under this procedure, 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.

Presumably, it can be therefore very hard, if not impossible, for its next higher-level court to change the ruling.