Enforcement of non-mainland judgments by PRC courts

Under PRC law, parties to contracts involving parties outside mainland China are generally free to agree to submit their disputes to a court either within or outside mainland China, subject to a few exceptions (articles 33 and 266 of the Civil Procedure Law [CPL]).

If a non-mainland court is chosen, the prospects of recognition and enforcement of the eventual judgment should be considered prior to entering into the contract. Contracting parties’ choice of jurisdiction clause will inevitably be informed by factors that include how effectively they will be able to seek recognition and enforcement of any judgment or arbitral award in the jurisdiction in which the parties’ assets are located.

If a dispute arises between the parties, the prospects of successful enforcement of the judgment or arbitral award against the judgment debtor’s assets located in China must be assessed in light of a detailed knowledge of PRC law, court processes and relevant local considerations. Acquiring such knowledge prior to entering into a contract will be of vital importance to a party in structuring a transaction to ensure adequate recourse in the event of a breach of contract. Such considerations may include, for example, the level and type of security provided under the contract, the corporate identity of a counterparty and the location of a counterparty’s assets.

Anthony Liu is a partner and James Zhang is an associate at King & Wood Mallesons (KWM) in Beijing. Louise England, a solicitor at KWM in Melbourne, co-authored this article