Recognition and Enforcement of Foreign Judgments in Asia
Recognition and Enforcement of Foreign Judgments in China
Last updated: 1 December 2017
Reporter: Dr Yujun Guo, Professor, China Wuhan University Institute of International Law
There are three regimes applicable to recognising and enforcing judgments in civil and commercial matters in China: the regime applicable to countries which have concluded bilateral treaties or conventions with China, the regime applicable to countries under the Civil Procedure Law of the People's Republic of China1 (CPL) and the Interpretations of the Supreme People's Court on Applicability of the Civil Procedure Law (SPC Judicial Interpretation),2 and the special regimes for Hong Kong SAR,3 Macau SAR4 and Taiwan Region.5 The rules for recognition and enforcement under the bilateral treaties and the special arrangements between Chinese Mainland and Hong Kong SAR and Macau SAR and the special provisions for Taiwan Region are largely similar to each other. This report will address the rules for recognition and enforcement of foreign judgments under treaty and under the principle of reciprocity in civil and commercial matters.
B. RECOGNITION AND ENFORCEMENT UNDER TREATY
As of July 2017, China had concluded bilateral judicial assistance agreements with approximately 37 countries, among which 33 treaties have special provisions governing the recognition and enforcement of foreign judgments in civil and commercial matters.
China has entered into such bilateral treaties with Laos, Singapore, South Korea, Thailand and Vietnam.6 However, only the agreements with Laos and Vietnam have special provisions on the recognition and enforcement of a foreign judgment.
China is currently not a party to any conventions governing the recognition and enforcement of foreign judgments, except the ratification of articles in the International Convention on Civil Liability for Oil Pollution Damage 1969 (1969 Convention). In 1980, China ratified the 1969 Convention, which includes an article on the recognition and enforcement of judgments from courts of contracting states.7 China, Australia, Brunei Darussalam, Cambodia, India, Indonesia, Japan, Malaysia and Singapore are member states of this Convention. Accordingly, China would recognise and enforce judgments from these countries regarding oil pollution damage in accordance with the 1969 Convention.
In determining whether to recognise and enforce a foreign judgment under treaty, the factors considered are set out below. The bilateral treaties deal with the nature of the defences that may be raised against the foreign judgment (ie, whether mandatory or non-mandatory) in different ways. In respect of the Sino–Laos Agreement all the defences set out in the treaty are mandatory,8 whilst under the Sino–Vietnam Agreement they are all non-mandatory.9
The finality of the judgment. According to the law of the rendering state, the judgment must be final, conclusive and enforceable. That the judgment must be enforceable under the law of the enforcing state is sometimes also required, such as under the Sino–Laos Agreement.10
The competent jurisdiction of the rendering court. The bilateral treaties dealing with foreign judgments have unanimously and explicitly provided for this jurisdictional requirement. There are three different approaches adopted by the various treaties. First, the treaties expressly provide the jurisdictional grounds which the rendering court must satisfy. In addition, there is no infringement of the exclusive jurisdiction of the court of enforcement. That is to say, the rendering court must meet both the requirement for jurisdiction as laid down in the treaties and the requirement that there is no infringement of the exclusive jurisdiction of the court of enforcement.11 Second, the treaties expressly require that the exclusive jurisdiction of the court of enforcement should not be infringed.12 Third, the rendering court must have jurisdiction in accordance with the law of the enforcing state.13 Both the Sino–Vietnam Agreement14 and the Sino–Laos Agreement15 adopt the first approach.
Due process. Denial of
due process is one of the most prominent grounds for refusal of recognition and enforcement of foreign judgments; the fact that the absent losing party was not duly served16 or the incapable party was not properly represented in the foreign proceedings offers a good defence to the recognition and enforcement of the judgment.17 Most of the Sino-foreign bilateral judicial assistance agreements, including the Sino–Laos and Sino–Vietnam Agreements, stipulate that the law of the rendering court applies to determine whether there has been sufficient due process.18 Some do not touch on this issue.19 A few other agreements make the following distinction: the issue of proper representation is governed by the law of the recognising state, while sufficient notice is governed by the law of the rendering state.20
No irreconcilable judgments. Some bilateral treaties, including the Sino–Laos Agreement, provide that if a court of the recognising state has rendered a judgment or a third country's judgment on the same cause of action between the same parties has been recognised and enforced in China prior to the addressed judgment, the court must refuse to recognise and enforce the judgment.21 Other bilateral treaties, including the Sino–Vietnam Agreement, provide that the recognising court may refuse to recognise and enforce the foreign judgment on the ground that a court of the recognising state has been seised with a case concerning the same cause of action between the same parties.22 While some other treaties provide that the court of the recognising state may not refuse to recognise and enforce a judgment just because it has been seised with the underlying case, it may refuse to recognise the foreign judgment only when it has been seised first.23
Public policy.24 The recognition and enforcement of the foreign judgment must not be contrary to the basic principles of law, public order or public interests, or infringement of the sovereignty or security of the countries addressed.
Fraud. Whether a judgment obtained by fraud is entitled to recognition and enforcement has not been touched on in any of the bilateral treaties. However, the 1969 Convention25 and the Chinese Mainland–Hong Kong SAR Arrangement 200826 embraced the non-recognition ground of a judgment obtained by fraud.
C. RECOGNITION AND ENFORCEMENT UNDER THE PRINCIPLE OF RECIPROCITY
To recognise and enforce foreign judgments from a country with which China has no agreement is to meet the needs of international civil and commercial communications or transactions and to benefit cross-border stakeholders.27
Where there are no bilateral or multilateral agreements, judgments from foreign countries can be recognised and enforced in accordance with the CPL28 under the principle of reciprocity.29 Having reciprocal relations is a fundamental prerequisite to the recognition and enforcement of foreign judgments. Furthermore, under the SPC Judicial Interpretation, where neither special treaties nor reciprocal relations exist, the people's courts must refuse to recognise and enforce the addressed judgment. Once the claim for recognition and enforcement is dismissed, the party may bring a fresh action in the Chinese courts.30
Compared to under the treaties and agreements with other countries, there are less preconditions or defences in the CPL. While the SPC Judicial Interpretation makes further clarification, this reporter considers that it would be desirable to enact more detailed rules to fill in the gaps in legislation and practice in order to reduce the uncertainty of recognition and enforcement of foreign judgments.
In addition to reciprocity, in general, a foreign judgment will be recognised and enforced if:
- it is legally effective;
- the rendering court has competent jurisdiction;
- it is not in breach of due process;
- it is not in conflict with an earlier judgment;
- it is not contrary to public policy.
With regard to these requirements, the lack of reciprocal relations and breach of due process are the grounds most frequently invoked for non-recognition in judicial practice.
Note that there are special rules for the recognition of foreign divorce judgments and bankruptcy judgments in Chinese Mainland.31
Under Chinese law,32 reciprocity is a fundamental prerequisite to recognising and enforcing a foreign judgment (except a divorce judgment). In practice, the most influential case regarding the reciprocity requirement is the Gomi Akira case in 1995.33 In the many years following the Supreme People's Court's opinion in Gomi Akira, the local Chinese courts have adhered to and echoed the Supreme People's Court's basic holding, which is to the effect that the reciprocity requirement is proved by reference to earlier judgments from the recognising state that have been recognised in the courts of the rendering state. That is to say, the Chinese courts require that de facto reciprocity be established; it should be shown that the foreign rendering court had once recognised a Chinese judgment. If there had been no previous attempt to enforce a Chinese judgment in the foreign country, the existence of reciprocity would be denied. South Korean,34 Australian,35 English,36 Chadian,37 Malaysian38 and US39 judgments have been denied recognition and enforcement on the ground of lack of reciprocal relations between China and those countries. However, German,40 Singapore41 and US42 judgments were recognised and enforced as the Chinese court held that reciprocal relations had been established.
The attitude to the factual existence of reciprocity is loosening. In the Nanning Declaration, which was approved at the 2nd China–ASEAN Justice Forum on 8 June 2017 in Nanning, Guangxi Province, China, the seventh consensus is to promote the mutual recognition of civil and commercial judgments. It shows that, even if there is no treaty relation, the existence of reciprocity may be presumed to have been established where there is no precedent of non-recognition and enforcement based on lack of reciprocity.43 The situation is expected to change in the near future.44
ii. Finality of the foreign proceedings
Under the CPL, the foreign judgment must be final and conclusive.45 However, there is no express legislation or reported cases dealing with the issue of the law applicable to the finality of a foreign judgment. It has been suggested that the law of the rendering state shall apply to determine the finality of a foreign judgment.46
In most of the bilateral treaties, including the Sino–Vietnam Agreement, which China has concluded, the law of the rendering court applies to determine the finality and conclusiveness of its judgment. Only occasionally, such as in the Sino–Laos Agreement, does the law of the recognising court also apply to determine the enforceability of the foreign judgment.47 It may be reasonable to presume that the Chinese court may mirror the majority practice of the bilateral treaties such that a judgment which is enforceable according to the law of the rendering state is enforceable in China.48
In the Chinese domestic law context, a judgment with legal effect mainly implies the non-existence or the exhaustion of the remedy of appeals, that is to say, in general, finality means that the judgment is not subject to any ordinary form of review. According to Chinese domestic law, a judgment which is being challenged in a higher court may be enforced once preconditions are met.49 The enforceability will not be affected if a party applies for a judicial supervision proceeding (Zai Shen).50 However, the courts of China must stay enforcement proceedings once the case is pending for appeal or is reopened for judicial supervision. Once the court decides to reopen the case, the enforcement proceedings must be stayed, except for judgments involving maintenance expense, survivor's pension, medical expense, and payment of labour, etc.51
A default judgment may be recognised and enforced only if the applicant (judgment creditor) can submit documents proving that the judgment debtor was duly served or the judgment expressly stated the fact of proper service.52 In judicial practice, a default judgment from the Singapore court was recognised in 2016.53 A default judgment from a US court was recognised in 2017.54
No express legislation is found in respect of the enforceability of an interlocutory judgment. In a decision, an interlocutory judgment (a divorce judgment) made by an American court was considered to be legally effective and recognised in accordance with Articles 281 and 282 of the CPL.55 In general, an interlocutory judgment may be enforced once the requirements for judgment recognition and enforcement are met.56
iii. Jurisdiction of the foreign court
The CPL and the SPC Judicial Interpretation do not refer to the requirement of jurisdiction of the foreign court, except for one article in the Supreme People's Court provisions on divorce judgment recognition which clearly requires that the foreign court must have jurisdiction.57 The above provisions also keep silent on which law applies to determine the issue of the proper jurisdiction of the foreign court. However, it is widely recognised by scholars that the foreign court must have competent jurisdiction over the case.58
As mentioned above, there are three different ways in which the bilateral treaties handle the issue of jurisdiction of the rendering court. This reporter considers that it is reasonable to deduce that the court of origin must have jurisdiction in accordance with its own law59 and the exclusive jurisdiction of the court of enforcement should not be infringed.60 Under the CPL, Chinese courts have exclusive jurisdiction over certain types of cases,61 such as disputes relating to immovables located in China. If the assumption of jurisdiction by a foreign court conflicts with the exclusive jurisdiction of the Chinese court, it will refuse to recognise or enforce the foreign judgment.
iv. Merits review
In the view of the legislation and judicial practice, it has been accepted that only deficiency or defect of procedure of legal proceedings may be challenged in Chinese courts. The merits of the foreign judgment are not subject to review. The courts of China will not retry the merits of the underlying case and will not question the foreign court's determination on the facts and application of law. Accordingly, the courts of China would not refuse to recognise and enforce a foreign judgment on the ground that the foreign court made an error of fact or an error of law or both.62
v. Money or non-money judgments
The wording of Chinese law does not distinguish between the recognition and enforcement of monetary and non-monetary foreign judgments. Further, there is no special rule for default interest on a judgment. Generally, China allows for the enforcement of foreign monetary judgments in civil and commercial matters and the judgment creditor is entitled to default interest.63
Under Chinese law,64 compensation or judgments for damages awarded in domestic criminal proceedings are enforceable. There is no authority on whether a foreign judgment involving penal, tax or other public law may be enforced or not, at least in circumstances where no treaty relation exists. The Chinese Mainland–Hong Kong SAR Arrangement 200865 and the Chinese Mainland–Hong Kong SAR Arrangement 201766 expressly exclude from its scope judgments of taxes and fines. Under some bilateral judicial assistance agreements, a judgment rendered in any criminal proceedings for the payment of a sum of money in respect of compensation or damages to an injured party is enforceable in China, such as under the agreements with Laos67 and Vietnam.68 This reporter considers that it is reasonable to presume that outside this context, the courts of China will refuse to recognise and enforce foreign judgments involving taxes, fines or penalties.69
An Uzbekistan judgment which included the collection of a certain sum of taxes was refused enforcement; however, the enforceability of a tax judgment per se was not touched on in the discussion.70
In Chinese legislation, no express rules regarding the enforcement of non-monetary judgments exist, except on the recognition of divorce judgments, judgments involving personal status such as parenthood and legitimation71 and bankruptcy judgments. It remains doubtful whether the courts of China will recognise and enforce other types of foreign non-monetary judgments. In judicial practice, it seems that some courts take a more open attitude. By way of example, non-monetary foreign judgments regarding bankruptcy administration have been recognised by local courts.72 In the Chinese Mainland–Macau SAR Arrangement, litigants of judgments not ordering monetary payment may apply for recognition alone.73
Whether provisional measures can be recognised or enforced in China needs further clarification. In the Chinese Mainland–Hong Kong SAR Arrangement 2008, the court addressed may issue orders of asset attachment in support of the recognition and enforcement of a judgment from the court of the contracting party.74 Certain bilateral treaties entered into by China expressly exclude provisional measures.75 For example, the Sino–United Arab Emirates Agreement excludes from its scope preservation or provisional measures except those in aid of claims for living expenses.76
There is no legislation and there appear to be no cases in which a court of China has enforced a non-monetary order such as specific performance. The Chinese Mainland–Hong Kong SAR Arrangement 2008 explicitly provides that only monetary judgments may be recognised and enforced under the Arrangement.77
With regard to injunctions, the recognition of a Korean court's injunction against payment was denied on the ground that it was a provisional one.78 Another Chinese decision shows that the Chinese court assumed jurisdiction over the dispute instead of deciding the enforceability of an anti-suit injunction from an English court.79 The prevailing view appears to be that decisions in foreign preliminary or provisional proceedings are not enforceable as they are not final and conclusive. However, this issue has not been touched on by the Supreme People's Court.
It remains untouched whether the courts of China will enforce foreign asset-freezing orders. If the order seeking enforcement is granted on an ex parte basis, it would be difficult for Chinese courts to enforce it in support of a foreign action.
As mentioned above, there is no provision regarding the recognition and enforcement of a judgment obtained by fraud in the legislation, bilateral agreements or conventions which China has concluded, aside from three articles in the Chinese Mainland–Hong Kong SAR Arrangements and the 1969 Convention. Also, there is no reported case. A refusal of such a judgment may be established via application of public policy. It would be reasonable that fraud as a defence should generally be limited to instances of extrinsic fraud, as under Chinese law the court would not retry the merits of the underlying case.
vii. Due process
The SPC Judicial Interpretation explicitly stipulates due process as a requirement for the recognition and enforcement of foreign judgments.80 As mentioned above, all the bilateral judicial assistance agreements unanimously and explicitly set forth the due process requirement. It has been accepted that under the principle of reciprocity, the lack of due process is an important defence to refuse recognition and enforcement. In judicial practice, it is often successfully invoked as a defence. Under the SPC Judicial Interpretation, the fact that the default party has not been duly served will be considered as a lack of or breach of due process. A Canadian divorce judgment was refused recognition on the ground that the applicant did not provide evidence to prove that the respondent had been properly served.81
As to which law is applicable to determine the existence of such breaches, the Chinese courts may adopt the approach laid down in most bilateral agreements, namely, the law of the rendering state applies. However, in judicial practice, the Chinese courts tend to apply Chinese law.82
viii. Res judicata
Courts of China will refuse to recognise and enforce a foreign judgment conflicting with a judgment involving the same cause of action between the same parties rendered by the courts of China.83 The SPC Judicial Interpretation does not refer to the conflicts of two foreign judgments. This reporter considers that it would be reasonable to presume that if there are two conflicting foreign judgments, the court of China will determine that the judgment rendered earlier prevails as long as it meets the requirements for recognition.
ix. Breach of agreement
Under Chinese law, the courts of China will respect a choice of court agreement under certain preconditions.84 However, if the choice of court agreement is void in accordance with Chinese law,85 the assumption of jurisdiction of the foreign court is in conformity with its own law and it does not infringe the exclusive jurisdiction of the Chinese courts, the courts of China may not refuse to recognise and enforce it on the ground of breach of such an agreement.
China signed the Hague Convention of 30 June 2005 on Choice of Court Agreements on 12 September 2017. China still needs to ratify the Convention before it enters into force in China. It appears likely that China will ratify the Convention as soon as possible. Once China ratifies the Convention, it would be helpful to the recognition of foreign judgments in China and Chinese judgments internationally.
x. Public policy
Courts of China must refuse to recognise and enforce a foreign judgment if the foreign judgment is contrary to the public policy of China. Under Chinese law, public policy refers to matters relating to state sovereignty and security, basic principles of law86 and public social interests. Public policy is assessed against the foreign judgment itself not against the original cause of action.87
The mere fact that Chinese law lacks an analogous cause of action to that underlying the initial judgment will not necessarily render the judgment void against Chinese public policy.88 Public policy as a defence is seldom invoked to refuse recognition and enforcement of foreign judgments.
xi. In rem judgments
Chinese law does not differentiate between judgments in rem or in personam. The grounds for non-recognition of foreign judgments in rem should be identical to those of judgments in personam. In a case seeking the transfer of property on the basis of a judgment of the Massachusetts state court, the Chinese courts held that a foreign judgment could not be invoked directly as a basis for the registration of the transfer of property in China, supposing that it has not been recognised in China, for a foreign judgment is not entitled to have effect automatically. It seems to imply that if the judgment could have been recognised in China, it may form the basis for the registration of a transfer of property.89 However, as recognition of the judgment is involved, the competent jurisdiction of the rendering court over the immovable may be challenged in the Chinese court, for under Chinese law, the courts of China have exclusive jurisdiction over immovables located in the jurisdiction.90 Therefore, the judgment may probably be refused recognition on the ground of lack of competent jurisdiction.
xii. Limitation period
Under Chinese law, the recognition and enforcement of a foreign judgment would be denied if the limitation period of two years for applying for the enforcement of a foreign judgment has expired.91
which had the closest relation with the gambling debt should be applied, provided the parties had not made a choice of law. The judgment shows the tendency to apply Macau law to give effect to a gambling contract which is invalid and void in Chinese Mainland.
ABLI's other Jurisdictional Guides
See ABLI's Jurisdictional Guides for other Asian jurisdictions.