Recognising foreign judgments under new Civil Procedure Law

Chinese courts are having to explore foreign-related legal issues as more and more foreign courts apply their jurisdiction’s laws and make judgments on Chinese interests. It’s a mark of China’s continual economic development and the economy’s increasing exposure to world markets. There is an increasing number of cases where foreign courts are applying for recognition and enforcement in China.

Assistance is arriving in the form of the foreign-related part of the new Civil Procedure Law (CPL), which will come into effect on 1 January 2024. The law incorporates the best of China’s experience in mutual legal assistance and is of great significance in unifying judicial expectations.

The author expects it to create a first-class business environment that is market-oriented, law-based and internationalised, safeguarding China’s sovereignty, security and development interests, and advancing the modernisation of its governance system and capacity.

This article analyses the new law’s major additions towards recognising and enforcing foreign court judgments in China.

What’s out

The original CPL established a framework of recognition and enforcement of foreign court judgments in China. The new law adds article 300, which focuses on the circumstances where foreign court judgments should not be recognised and enforced.

No jurisdiction. Judgments issued by foreign courts without jurisdiction over a dispute lack legitimacy. Therefore, the new CPL clarifies that such foreign court judgments will not be recognised and enforced by Chinese courts.

Article 301 stipulates four circumstances in which a foreign court has no jurisdiction:

• It has no jurisdiction over the dispute according to its laws;
• It has no proper connection with the dispute;
• It violates the exclusive jurisdiction of Chinese courts; and
• It violates the parties’ agreement on exclusive jurisdiction.

This addition demonstrates that China’s legislative tendency is to safeguard its judicial sovereignty and respect for autonomy of will.

Safeguarding participation. As a basic requirement of due process, the right of parties to participate in litigation runs through the entire process of civil litigation. Although the original CPL made no explicit provisions, in judicial practice the failure to safeguard the right to participate in litigation has become an important reason for Chinese courts to refuse to recognise and enforce foreign court judgments.

The new CPL has formally defined three specific situations where the right to participate should be considered to have been violated:

• The party concerned has not been lawfully summoned;
• The party concerned has not been given a reasonable opportunity to be heard and to argue; and
• The person without civil capacity has not been appropriately represented.

This clarifies the specific connotation of the right to participate in litigation.

Judgments by fraud. The principle of good faith is one of the fundamental principles of Chinese law. Under this principle, the law should negate foreign court judgments obtained by fraud, bribery, falsification of evidence and other improper means.

The new CPL, in line with the new Arrangement on Reciprocal Recognition and the Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (mainland-Hong Kong arrangement), also provides that such foreign court judgments will not be recognised and enforced.

Parallel proceedings. Parallel proceedings are common in cross-border civil and commercial disputes, and may jeopardise a country’s judicial sovereignty and waste judicial resources.

In line with international consensus, the new CPL has been amended so that, in an application for recognition and enforcement, if a Chinese court has already issued a judgment on the same dispute or has recognised the court judgment of a third country, the corresponding foreign court judgment will not be recognised and enforced.

This amendment helps to build a good international image for Chinese courts and safeguard China’s judicial sovereignty.

Chinese principles. China’s principles of law, sovereignty, security and social public interests are usually defined as a catch-all provision.

In previous judicial practice, Chinese courts rarely applied catch-all clauses to refuse to recognise and enforce foreign court judgments. The new CPL does not expand the scope of catch-all clauses, thus promoting the judicial tradition of prudence and modesty of Chinese courts.

International comity

Parallel proceedings not only involve the recognition and enforcement of foreign court judgments but may also have a bearing on the handling of the same dispute by Chinese courts.

In this regard, the new CPL promotes the principle of international comity by providing that, in the event of parallel proceedings, domestic proceedings should be suspended to:

• First, deal with the recognition and enforcement of foreign court judgments; and
• Then decide on the course of domestic proceedings.

If a foreign court judgment is recognised and enforced, the parallel domestic proceedings will be dismissed; if not, the suspended proceedings will be resumed.

Reconsideration

The original CPL did not provide remedies for parties that did not accept rulings. Article 303 of the new CPL entitles the parties to request the reconsideration of court rulings to protect their legitimate rights and interests.

This is consistent with the Provisions of the Supreme People’s Court on Recognition and Enforcement of Civil Judgments of Courts of the Taiwan Region, the Arrangement of the Supreme People’s Court on the Reciprocal Recognition and Enforcement of Civil and Commercial Judgments between the Mainland and the Macau Special Administrative Region, and the new mainland-HK arrangement, relatively unifying applicable laws in cross-border judicial assistance.

Conclusion

Based on the above-mentioned amendments, it is foreseeable that Chinese courts will create a more facilitated, substantive and transparent foreign-related judicial environment, actively empower themselves in cross-border civil and commercial trials, resolve disputes fairly and efficiently, safeguard the sovereignty, security and development interests of China, and create a new pattern in the construction of foreign-related rule of law.

Sun Jiajia is a senior partner at W&H Law Firm. She can be contacted by +86 139 1182 5033 or by e-mail by sunjiajia@weihenglaw.com