Overview of Sino-US judicial reciprocity

By Zhang Jinhui and Zhang Guanglei, Jingtian & Gongcheng
0
223

Judgments rendered by foreign courts may be recognised and enforced by courts in China based on international treaties to which China is a party, or the principle of reciprocity, according to articles 288 and 289 of the Civil Procedural Law.

As no treaty yet exists between China and the US in respect of mutual recognition and enforcement of civil and commercial judgments, for now Chinese courts rely on the principle of reciprocity to recognise and enforce judgments originating from US courts.

APPLICATION OF RECIPROCITY

Zhang Jinhui, Overview of Sino-US judicial reciprocity
Zhang Jinhui
Associate
Jingtian & Gongcheng

There is no specific, clear-cut provision in Chinese law regarding the principle of reciprocity. When handling requests for recognition and enforcement of foreign court judgments, Chinese courts typically exhibit considerable discretion in determining reciprocal relationship between China and other countries.

In its responses to requests for recognition and enforcement of a Japanese ruling by Gomi Akira in 1995, and a request for recognition and enforcement of an Australian ruling by DNT France Power Engine in 2006, the Supreme People’s Court (SPC) made it clear that the key to determining reciprocal relationship lies in precedence where Chinese court judgments were recognised and enforced by courts in the country of origin. The SPC’s ruling was largely followed by Chinese courts when handling such cases.

However, with increased cross-border judicial assistance and the launch of Belt and Road Initiative policies, the SPC has in recent years encouraged advancing of the reciprocity principle on multiple occasions.

This development is evidenced by the SPC’s Several Opinions on Providing Judicial Services and Guarantees for the Belt and Road Initiative, issued on 16 June 2015; the Opinions on Further Providing Judicial Services and Guarantees for the Belt and Road Initiative, issued on 9 December 2019; and the Nanning Statement of the 2nd China-ASEAN Justice Forum on 8 June 2017, which was arrived at with the SPC’s participation.

Accordingly, Chinese courts may take the lead in recognising and enforcing foreign judgments, even without precedence of Chinese court judgments being recognised and enforced by courts of the relevant foreign country.

PAST PRACTICE

In recognising and enforcing judgments of US courts, Chinese courts have in the past acknowledged the reciprocal relationship between China and the US, but on other occasions have also reached the opposite conclusion.

Zhang Guanglei , Jingtian & Gongcheng
Zhang Guanglei
Partner
Jingtian & Gongcheng

For example, in Liu Li v Tao Li and Tong Wu (2015), the Wuhan Intermediate People’s Court determined that a Sino-US reciprocal relationship existed, on the ground that a US court had in 2011 recognised and enforced the Chinese judgment in Hubei Gezhouba Sanlian and Hubei Pinghu Cruise v Robinson Helicopter (2009).

Likewise, in Wen Xiaochuan v Huang Kefeng and WBV International (2018), the Sino-US reciprocal relationship was re-affirmed by Ningbo Intermediate People’s Court based on precedence of a US court recognising and enforcing Chinese court decisions.

Nevertheless, in Kolmar Group v Jiangsu Textile Industry (Group) Import & Export (2016), heard at about the same period, the Nanchang Intermediate People’s Court determined that a reciprocal relationship did not exist between China and the US – a polar opposite conclusion from its Wuhan counterpart, despite having received an application to recognise and enforce a US court decision, along with evidence of precedence where the above Gezhouba Sanlian case rendering was recognised and enforced by a US court. It is noteworthy that the Nanchang court did not elaborate on a reason.

This seems to suggest that when dealing with such cases, Chinese courts will determine reciprocity on a case-by-case basis, instead of simply following precedence.

THE OUTLOOK

Reciprocity means exchange for mutual benefit, which by definition must be achieved from both sides. Recognition and enforcement of Chinese court decisions by US courts is highly relevant to determining the Sino-US reciprocal relationship by Chinese courts. There have been a number of such precedents in the US, including the above-mentioned Gezhouba Sanlian case, as well as Global Material Technologies v Dahzeng Metal Fibre (2015), Qiu Qinrong v Zhang Hongying et al (2017), and Liu Huizhi v Guan Guoqing et al (2020). However, in April 2015, the New York County Supreme Court determined, in Shanghai Yongrun Investment Management v Kashi Galaxy Venture Capital, that Chinese courts cannot provide fair judicial decisions on a level matching the US due process, and declined to recognise and enforce the relevant 2019 decision by the Beijing Higher People’s Court.

The first-instance decision of this case led to heated discussion, concerned that it would become a hindrance for Chinese courts to determine Sino-US reciprocity. But the Yongrun case took a turn on 10 March 2022, with the Appellate Division of the New York Supreme Court reversing its first-instance ruling on appeal.

The ruling concluded that: (1) the defendants had the opportunity to be heard, were represented by counsel, and had a right to appeal in China’s underlying proceedings, which was sufficient to support that the basic requisites of due process were met; (2) the court should not have dismissed the action on the ground that the human rights reports of the US State Department conclusively refuted the plaintiff’s allegation; (3) the reports did not constitute documentary evidence under New York’s Civil Practice Law and Rules; and (4) in any event, the reports do not utterly refute the plaintiff’s allegation that the civil law system governing the breach of contract business dispute was fair.

The second-instance ruling of the Yongrun case was not only yet another Chinese court decision recognised and enforced in the US, but also a positive addition to US courts’ judicial rules when it comes to recognising Chinese court rulings.

Undoubtedly, this will in future shed positive light on the prospect of Chinese courts’ determination of Sino-US reciprocity, as well as the recognition and enforcement of US court judgments in China.

Zhang Guanglei is a partner and Zhang Jinhui is an associate at Jingtian & Gongcheng. Guanglei is also an arbitrator of the Hong Kong International Arbitration Centre, Shanghai International Arbitration Centre and Shenzhen Court of International Arbitration.

collateral

Jingtian & Gongcheng

34/F, Tower 3, China Central Place

77 Jianguo Road
Beijing 100025, China

Tel: +86 10 5809 1515

Fax: +86 10 5809 1100

E-mail: zhang.guanglei@jingtian.com

www.jingtian.com