Enforcement of Foreign Judgments in China

2017 年 06 月 18 日

Zhu Huafang and Shi Jiayun

Tiantong & Partners

 

1 Treaties

Is your country party to any bilateral or multilateral treaties for the reciprocal recognition and enforcement of foreign judgments? What is the country’s approach to entering into these treaties and what if any amendments or reservations has your country made to such treaties?

As of 8 September 2016, China has entered into 37 bilateral judicial assistance treaties on civil or commercial matters, 33 of which contain regulations regarding recognition and enforcement of foreign judgments, namely treaties with Uzbekistan, Kazakhstan, Kirghizia, Tajikistan, Turkey, Cyprus, Laos, Vietnam, Mongolia, Bulgaria, Belarus, Poland, Russia, Romania, Ukraine, Hungary, Lithuania, Spain, Italy, France, Greece, Cuba, Egypt, Morocco, North Korea, United Arab Emirates, Kuwait, Brazil, Argentina, Peru, Algeria, Bosnia and Herzegovina and Tunisia. Decisions rendered by the courts of the above-mentioned states may be enforceable in China.

With regard to multilateral treaties, China is a party to the International Convention on Civil Liability for Oil Pollution Damages, according to which any judgment regarding oil pollution damages that is given by a court with jurisdiction and is enforceable in the state of origin shall be recognised

in any Contracting States. Apart from such treaties, China is not a signatory to any other multilateral treaties regarding recognition and enforcement of foreign judgments.

 

2 Intra-state variations

Is there uniformity in the law on the enforcement of foreign judgments among different jurisdictions within the country?

The laws on the enforcement of foreign judgments, mostly the Civil Procedure Law and judicial interpretation issued by the Supreme People’s Court (SPC), are uniformly applicable throughout Mainland China.

However, Hong Kong, Macao and Taiwan are usually regarded as different jurisdictions, and therefore different laws on the enforcement of foreign judgments apply. For instance, a judgment obtained in a court outside Hong Kong may be enforced in Hong Kong through the common law or under the Foreign Judgments (Reciprocal Enforcement) Ordinance.

 

3 Sources of law

What are the sources of law regarding the enforcement of foreign judgments?

In general, sources of Chinese law regarding enforcement of foreign judgments consist of (a) treaties to which China is a party, (b) legislations, (c) interpretations of laws and (d) case law.

(a) bilateral or multilateral treaties to which China is a party which contained regulations regarding recognition and enforcement of foreign judgments are important sources of law;

(b) laws and regulations are the primary sources of law in China. In terms of enforcing foreign judgments, the Civil Procedure Law (2012), the General Principles of Civil Law (1986) and the Law on the Application of Law for Foreign-related Civil Relations (2010) are the most relevant;

(c) interpretations issued by the SPC are deemed as authoritative. While deciding cases related to recognition and enforcement of foreign judgments, Chinese Courts would usually refer to the Interpretation of the Civil Procedure Law issued by the SPC (2015); and

(d) precedents are not primary sources of law in China, as China is a civil law country. Nevertheless, SPC case law or opinions provided by the SPC are often followed by the lower courts. For instance, a Letter of Replies issued by the SPC to the lower courts, which stipulates why the foreign judgments in question can or cannot be enforced, is a crucial reference to ascertain the law on enforcing foreign judgments in China.

 

4 Hague Convention requirements

To the extent the enforcing country is a signatory of the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, will the court require strict compliance with its provisions before recognizing a foreign judgment?

As mentioned above, China is not yet a signatory of the Hague Convention on Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters.

 

5 Limitation periods

What is the limitation period for enforcement of a foreign judgment? When does it commence to run? In what circumstances would the enforcing court consider the statute of limitations of the foreign jurisdiction?

As stipulated in Article 547 of the Interpretation of the Civil Procedure Law issued by the SPC, Article 239 of the Civil Procedure Law shall apply with respect to the limitation period for recognition and enforcement of foreign judgments. Article 239 provides that the limitation period for applying for enforcement of judgments is two years.

As to when such limitation period commences to run, three possible scenarios should be taken into consideration:

(a) it runs from the last day of the period of performance specified in the judgments;

(b) if a judgment requires performance in instalments, the two-year period runs for each instalment from the last date of the specified performance period; and

(c) if a period of performance is not specified in the judgments, it runs from the effective date of the judgments.

Furthermore, pursuant to Article 547 of the Interpretation of Civil Procedure Law issued by the SPC, where the party applies only for recognition, without applying for enforcement at the same time, the limitation period for enforcement shall be recalculated from the date when the ruling issued by the Chinese courts on the recognition application comes into force. Lastly, Chinese courts are unlikely to consider statutes of limitation in terms of recognition and enforcement of foreign judgments in foreign jurisdictions.

 

6 Types of enforceable order

Which remedies ordered by a foreign court are enforceable in your jurisdiction?

In so far as the remedies are available under Chinese law, they are usually enforceable unless otherwise provided by bilateral treaties to which China is a party.

Damages and specific performance are available remedies under Chinese law. With regard to temporary injunctive relief, it is usually issued pending the outcome of a lawsuit and therefore is unlikely to be recognized and enforced because it is not a final decision rendered by the Court.

So far as case law is concerned, monetary orders are generally enforceable, while no judgments concerning recognition of orders for specific performance have yet been found.

 

7 Competent courts

Must cases seeking enforcement of foreign judgments be brought in a particular court?

According to Article 281 of the Civil Procedure Law, a party may apply directly to the Intermediate People’s Court where the judgment debtor resides or where the property under enforcement is located for enforcement of foreign judgments.

 

8 Separation of recognition and enforcement

To what extent is the process for obtaining judicial recognition of a foreign judgment separate from the process for enforcement?

Under Chinese law, recognition and enforcement of foreign judgments are two separate processes, which can be demonstrated by the following:

(a) according to Article 546 of the Interpretation of Civil Procedure Law issued by the SPC, where a foreign judgment requires enforcement, a party shall first apply to the courts for recognition. Only when the court issues a ruling of recognition can the foreign judgment be enforced in China;

(b) recognition and enforcement are handled by two different divisions of the courts. Usually, the recognition of foreign judgments is handled by the divisions responsible for foreign-related commercial matters, while the enforcement is handled by the enforcement division of the courts; and

(c) the procedure for recognising a foreign judgment requires a hearing or hearings conducted by a panel of three judges, while the procedure for enforcement follows the same laws and regulations with regard to enforcement of domestic judgments, according to which no hearing would be necessary.

Nevertheless, the applicant can apply for the recognition and enforcement of foreign judgments at the same time.

 

9 Defences

Can a defendant raise merits-based defences to liability or to the scope of the award entered in the foreign jurisdiction, or is the defendant limited to more narrow grounds for challenging a foreign judgment?

In principle, Chinese courts would not review the merits of the decisions rendered by the foreign courts. However, in considering whether the grounds for refusal of recognition and enforcement are present, Chinese courts are not precluded from reviewing the substance of the foreign decisions. In particular, when considering whether the foreign judgment is consistent with the basic principles of the laws or public policy of China, Chinese courts may have to look into the merits of the judgments.

 

10 Injunctive relief

May a party obtain injunctive relief to prevent foreign judgment enforcement proceedings in your jurisdiction?

Such injunctive relief is unlikely to be obtained. Under Chinese law, injunctive reliefs are only applicable under limited circumstances, for instance, in maritime disputes, IP infringement matters or tort claims in relation to personal reputation. Prevention of foreign judgment enforcement proceedings does not fall within the scope of applying injunctive relief under Chinese law.

 

11 Basic requirements for recognition

What are the basic mandatory requirements for recognition of a foreign judgment?

The Civil Procedure Law and its judicial interpretation set out the following basic requirements for recognition of a foreign judgment:

(a) the judgment seeking recognition and enforcement is rendered by the court of a foreign state with which China has entered into a bilateral judicial assistance treaty regarding recognition and enforcement of judgments or with which China has a relationship of reciprocity(Article 281 of the Civil Procedure Law);

(b) the judgment seeking recognition and enforcement should be final and effective (Article 282 of the Civil Procedure Law);

(c) the judgment seeking recognition and enforcement is not contrary to the basic principles of the laws, sovereignty, security or public interests of China (Article 282 of the Civil Procedure Law);

(d) where the judgment seeking recognition and enforcement is rendered in default, the defaulting party has been duly served (Article 543 of the Interpretation of Civil Procedure Law); and

(e) no proceedings between the same parties, based on the same facts and having the same purpose (1) are pending before the Chinese courts; (2) have resulted in a decision by the Chinese courts; or (3) have resulted in a decision by a court of another state which has been recognised in China (Article 533 of the Interpretation of Civil Procedure Law).

In addition, most of the bilateral judicial assistance treaties to which China is a party require that the court rendering the judgment shall have jurisdiction over the dispute.

 

12 Other factors

May other non-mandatory factors for recognition of a foreign judgment be considered and if so what factors?

Besides the requirements set out in the Civil Procedure Law, different bilateral treaties to which China is a party generally impose additional requirements for recognition and enforcement, for instance, proper applicable law.

Article 22 (2) of the bilateral treaty between China and France provides that a judgment may be refused for recognition if the court rendering the judgment has applied the law other than that which would have been applicable according to the rules of private international law of the state addressed (the state where the judgment is rendered) in the event that the judgment decides a question relating to either the status or the capacity of a natural person.

 

13 Procedural equivalence

Is there a requirement that the judicial proceedings where the judgment was entered correspond to due process in your jurisdiction, and if so, how is that requirement evaluated?

Civil Procedure Law and most bilateral judicial assistance treaties to which China is a party stress the importance of due process in recognition and enforcement of foreign judgments, in particular the requirement to ensure proper service of process.

As is shown in relevant case law, what constitutes proper service of process depends on the relevant treaties to which China is a party, instead of the law where the judgment is rendered. According to most bilateral judicial cooperation treaties, direct service by registered mail is

not permissible.

 

14 Personal jurisdiction

Will the enforcing court examine whether the court where the judgment was entered had personal jurisdiction over the defendant, and if so, how is that requirement met?

Bilateral judicial cooperation treaties to which China is a party generally contain a requirement that the judgment seeking for recognition and enforcement is given by a court considered to have jurisdiction over the dispute. However, how to satisfy such a requirement varies across different

treaties.

For instance, in the bilateral treaty between China and Italy, Article 22 provides detailed requirements to ascertain whether or not the court rendering the judgment has jurisdiction, according to which if the defendant had, at the time when the proceedings were instituted, his or her habitual residence or a branch office in the State where the judgment is rendered,

the court shall be considered to have personal jurisdiction.

Meanwhile, Article 22(1) of the bilateral treaty between China and France provides that the recognition and enforcement of foreign judgment should be refused if according to the law in the state addressed the judgment was given by a court considered to have no jurisdiction over the dispute. Therefore, in the case of recognition and enforcement of French judgments in China, whether the court has personal jurisdiction over the defendant depends on Chinese law.

In conclusion, how to satisfy the requirement of personal jurisdiction depends mostly on the relevant bilateral treaties entered into by China.

 

15 Subject-matter jurisdiction

Will the enforcing court examine whether the court where the judgment was entered had subject-matter jurisdiction over the controversy, and if so, how is that requirement met?

As mentioned above, it is required that the judgments were given by a court which has jurisdiction over the dispute for the purpose of recognition and enforcement. However, how this requirement is met depends on the specific bilateral treaty in force.

 

16 Service

Must the defendant have been technically or formally served with notice of the original action in the foreign jurisdiction, or is actual notice sufficient? How much notice is usually considered sufficient?

Under Chinese law, defendants should be duly served in a way that is compatible with the relevant bilateral judicial cooperation treaties to which China is a party. Generally, bilateral treaties between China and other states contain the requirements for proper service. Most treaties require that service shall be effected through central authorities. Therefore, sending judicial documents by postal channels is usually considered unacceptable.

In view of the above, actual notice alone is not sufficient. Additionally, there are usually no specific requirements with respect to how much notice is sufficient.

 

17 Fairness of foreign jurisdiction

Will the court consider the relative inconvenience of the foreign jurisdiction to the defendant as a basis for declining to enforce a foreign judgment?

In general, Chinese laws and most bilateral treaties to which China is a signatory do not specifically provide that inconvenience of the foreign jurisdiction to constitute a ground for refusing recognition and enforcement of a foreign judgment.

 

18 Vitiation by fraud

Will the court examine the foreign judgment for allegations of fraud upon the defendant or the court?

In general, Chinese laws and most bilateral treaties entered into by China do not specifically provide that the foreign judgment shall be refused for recognition and enforcement if it was obtained by fraud. However, it is possible that the Chinese court would decline to recognise a judgment obtained by fraud on the ground that it is incompatible with the basic principles of law or public policy in China.

 

19 Public policy

Will the court examine the foreign judgment for consistency with the enforcing jurisdiction’s public policy and substantive laws?

It is stipulated in Article 282 of the Civil Procedure Law that foreign judgments entitled for recognition and enforcement in China shall not be contrary to the basic principles of the laws and public policy of China.

The scope of public policy is not specifically defined in Chinese law and is usually subject to the discretion of judges. However, SPC has given a restrictive interpretation with respect to public policy in the Castel Electronics Pty Ltd case which is related to the recognition and enforcement of foreign arbitral awards. According to the Castel case, violation of public policy means serious violation of the fundamental interests of China, such as violation of sovereignty or public safety.

 

20 Conflicting decisions

What will the court do if the foreign judgment sought to be enforced is in conflict with another final and conclusive judgment involving the same parties or parties in privity?

According to Article 533 of the Interpretation of Civil Procedure Law, for a case over which both Chinese courts and a foreign court have jurisdiction, if one party institutes an action in the foreign court whereas the other party institutes an action in China, the Chinese court may still seize the case. If, after a judgment is rendered, the foreign court or a party requests the Chinese court’s recognition and enforcement of the judgment rendered by the foreign court concerning the same case, the Chinese court shall decline such request, unless otherwise provided by the bilateral treaties to which China is a party.

Moreover, Article 533 provides that if a foreign judgment has already been recognised by a Chinese Court and a party institutes a proceeding over the same dispute in China, the Chinese court shall not seize the matter. In conclusion, if a proceeding regarding the same dispute has been pending before a Chinese court or has resulted in a decision which was given by a third country and has already been recognised by a Chinese Court, the foreign judgment concerning the same dispute is not entitled to recognition and enforcement in China.

 

21 Enforcement against third parties

Will a court apply the principles of agency or alter ego to enforce a judgment against a party other than the named judgment debtor?

It is unlikely for Chinese courts to enforce foreign judgments against a party other than the named judgment debtor based on the principles of agency or alter ego.

In the enforcement phase, the enforcing court would no longer examine the merits of the case and is only responsible for strictly executing the judgment. Therefore, enforcement is generally directed against the named judgment debtor and enforcement against third parties is applicable in the following limited circumstances as provided by the Civil Procedure Law and other relevant regulations:

(a) according to Article 232 of Civil Procedure Law, where the named judgment debtor is a legal person or any other organisation which has been terminated, enforcement can be directed against the successor to the rights and obligations of such legal persons or organisation; or

(b) according to Article 61 of Regulations regarding Enforcement of Judgment issued by the SPC (1998), where the judgment debtor is unable to repay the debt, but the debtor has mature creditor’s right towards a third party, the enforcing court, upon application of the judgment creditor or debtor, may enforce the judgment against the said third party if the third party has not raised any objection.

 

22 Alternative dispute resolution

What will the court do if the parties had an enforceable agreement to use alternative dispute resolution, and the defendant argues that this requirement was not followed by the party seeking to enforce?

For the purpose of recognition and enforcement of foreign judgments in China, it is generally required that the decision was given by a court which has jurisdiction over the dispute. In the event that there is an enforceable agreement to use alternative dispute resolution, such as a valid arbitration agreement with no evidence suggesting the party waiving arbitration jurisdiction, the court rendering the judgment would not be considered as having jurisdiction over the dispute, and thus the application for recognition and enforcement of a foreign judgment is likely to be declined.

Update and trends

As China is actively promoting the Silk Road Economic Belt and the 21st century Maritime Silk Road, also known as ‘The Belt and the Road’, there has been a heightened focus on judicial cooperation

between China and the countries involved in The Belt and the Road, in particular in the enforcement and recognition of foreign judgments.

In 2015, the SPC has issued a number of guiding cases related to The Belt and the Road, one of which concerned the recognition and enforcement of a foreign judgment given by a Polish court. In the said case, the Ningbo Intermediate Court reaffirmed the obligations of China to give equal protection to both domestic and foreign parties by complying with its bilateral judicial assistance treaties, and held that the foreign judgment in question shall be recognized and enforced. To some degree, this indicates China’s willingness to further develop and enhance the laws and judicial practices on recognition and enforcement of foreign judgements.

 

23 Favourably treated jurisdictions

Are judgments from some foreign jurisdictions given greater deference than judgments from others? If so, why?

Besides the requirements provided in the Civil Procedure Law and other relevant regulations which are equally applicable to all states, the grounds to refuse recognition and enforcement of foreign judgments vary across bilateral judicial assistance treaties to which China is a party. Therefore it is possible that judgment from some foreign jurisdiction would be reviewed according to less stringent requirements than judgment from others for the purpose of recognition and enforcement in China.

 

24 Alteration of awards

Will a court ever recognise only part of a judgment, or alter or limit the damage award?

Chinese laws and relevant bilateral treaties are silent on whether the Court could recognise only part of a judgment, or limit the damage award, particularly in cases where punitive damages are awarded and is contrary to Chinese law with respect to granting damages: for instance, Article 114 of the Chinese Contract Law prohibiting significantly high liquidated damages agreed by the parties.

 

25 Currency, interest, costs

In recognising a foreign judgment, does the court convert the damage award to local currency and take into account such factors as interest and court costs and exchange controls? If interest claims are allowed, which law governs the rate of interest?

The enforcement of foreign judgments follows the laws and regulations applicable to enforcement of domestic judgments. Generally speaking, in enforcing judgments involving foreign currency, the enforcing division would convert the damage award to local currency. As to which currency exchange rate to be used, different courts in China would have different practices. For instance, the Beijing High Court in its Regulation Regarding Enforcement of Judgments (2014) provides that the exchange rate at the date when the judgment is actually executed is to be adopted.

In addition, interest claims are allowed. In the event that the parties fail to agree on the interest rate, the Chinese court usually refers to LIBOR or the rates issued by the Chinese central bank.

 

26 Security

Is there a right to appeal from a judgment recognising or available to ensure the judgment will be enforceable against the defendant if and when it is affirmed?

Under Chinese law, there is no right to appeal from a judgment recognizing or enforcing a foreign judgment.

 

27 Enforcement process

Once a foreign judgment is recognised, what is the process for enforcing it in your jurisdiction?

Once a foreign judgment is recognised and the application for enforcement is filed, the case will be moved from the division in charge of the recognition procedure to the enforcement division. The enforcing division may take the following measures to enforce the judgment as provided in

the Civil Procedure Law:

(a) where the party against whom enforcement is sought fails to perform obligations determined in a legal instrument as required by a notice of enforcement, the party shall report its current property status and its property status for one year before receiving the enforcement notice.

If the party refuses to report or submits a false report, the Chinese court may, according to the severity of the circumstances, impose a fine or detention on a party who is a natural person, his or her legal representative, the primary person in charge or directly liable persons of the relevant entity (Article 241); and

(b) where the party against whom enforcement is sought fails to perform obligations determined in a legal instrument as required by a notice of enforcement, the Chinese court shall have the right to enquire from the relevant entities about the deposits, bonds, stocks, fund shares and other property of the party against whom enforcement is sought. The Chinese court shall have the right to seize, freeze, transfer or sell the property of the party against whom enforcement is sought according to different circumstances (Article 242).

 

28 Pitfalls

What are the most common pitfalls in seeking recognition or enforcement of a foreign judgment in your jurisdiction?

China is unlikely to recognise a court judgment (except divorce judgments) made by a country with which it has no bilateral treaty or no relationship of reciprocity. According to Article 544 of the Interpretation of Civil Procedure Law, if a court judgment is rendered in a state which has neither

entered into a bilateral judicial assistance treaty with China nor has a relationship of reciprocity with China, the Chinese court shall rule to dismiss the application, unless the judgment in question is a divorce judgment.

Although China has signed a number of bilateral judicial assistance treaties with other states, it has not entered into such bilateral treaties with its important trade partners such as Japan, the UK and the USA. Therefore judgments rendered in these countries are unlikely to be recognised or enforced in China unless they are divorce judgments.