Reciprocity is key for recognition of foreign judgments

By Zhang Guanglei and Chen Cheng, Jingtian & Gongcheng
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China has only concluded treaties with a handful of countries involving mutual recognition and enforcement of judgments in civil and commercial cases. The Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters has yet to be ratified by the country’s lawmakers. For now, the common practice is to handle, recognise and enforce foreign judgments based on the principle of reciprocity.

An effective judgment may be recognised and enforced by a competent Chinese court based on an international treaty between both countries or by using the principle of reciprocity, according to articles 281 and 282 of the Civil Procedural Law.

张光磊, Zhang Guanglei, Partner, Jingtian & Gongcheng
Zhang Guanglei
Partner
Jingtian & Gongcheng

The legal applicability of reciprocity is not specified in China. Chinese courts, therefore, enjoy significant discretionary power when judging whether China has a reciprocal relationship with other nations. At present, recognition and enforcement of foreign judgments on the principle of reciprocity remains a rare occurrence, which indicates that Chinese courts are generally conservative in this regard.

A precedent established by the foreign court can do wonders. Dialling back the clock to the 1994 case where Gomi Akira, a Japanese citizen, applied to a Chinese court for recognition and enforcement of a Japanese judicial decision. In its 1995 reply to the Liaoning Higher People’s Court, the Supreme People’s Court (SPC), supporting the decision to reject the application, pointed out that there was no concluded international treaty between China and Japan concerning the mutual recognition and enforcement of court decisions and rulings, nor was there a reciprocal relationship.

Such grounds for rejection were repeated by the SPC in 2006, when DNT France Power Engine applied for the recognition and enforcement of an Australian court ruling. These cases reflect a key factor in applying the reciprocal principle – a precedent of the foreign country recognising and enforcing a judgment from a Chinese court.

This rule was subsequently largely followed by Chinese courts. In Kolmar Group v Jiangsu Textile Import & Export (2016), the Suzhou Intermediate People’s Court decided that a reciprocal relationship existed between China and Singapore on the grounds that a Chinese court decision was enforced by the Supreme Court of Singapore in 2014. In Pektor Art v Shanghai Chuangyi Baby Education (2019), the basis for a reciprocal relationship was acknowledged by an intermediate court in Shanghai, as the same had been applied in a South Korean court regarding a Chinese court ruling.

Similarly, in Wen Xiaochuan v Huang Kefeng and WBV International (2018), the Ningbo Intermediate People’s Court determined that a relationship of reciprocity did exist between the nations, given the precedent of a Chinese civil judgment being recognised and enforced by a US court.

陈程, Chen Cheng, Associate, Jingtian & Gongcheng
Chen Cheng
Associate
Jingtian & Gongcheng

A precedent does not ensure reciprocity. In Liu Li v Tao Li and Tong Wu (2015), the Wuhan Intermediate People’s Court recognised a Sino-US reciprocal relationship based on the fact that a decision by the Higher People’s Court of Hubei province had been recognised and enforced by a US court in 2011 (Hubei Gezhouba Sanlian and Hubei Pinghu Cruise v Robinson Helicopter). This case was further referenced in a 2016 case handled at the same time by Herbert Truhe, among others, when applying to the Nanchang Intermediate People’s Court to enforce a judgment by a US court. However, the Nanchang court rejected the application, citing a lack of reciprocity between China and the US.

In the cases Spring Comm v Piao Zonggen (2011) and Zhang Xiaoxi v Gui Yunfeng (2015), both the Shenzhen Intermediate People’s Court and Shenyang Intermediate People’s Court rejected the respective application to recognise and enforce a judgment by a South Korean court, pointing out the absence of any relevant treaty or reciprocal relationship. This, however, would appear to have been contradicted by the above-mentioned decision for Pektor Art v Shanghai Chuangyi Baby Education (2019), itself based on a 1999 decision by the Seoul Central District Court to recognise a 1997 ruling by the Weifang Intermediate People’s Court.

It should be noted that there was no explanation of why the Nanchang court reached an entirely different conclusion to the Wuhan court, nor any indication in the written judgments of the Shenzhen and Shenyang courts that applicants submitted any materials relating to the precedent at the South Korean court. It would seem that, even with the precedent of a foreign court recognising and enforcing a Chinese ruling, the Chinese court still reviews each application on a case-by-case basis, and the burden of proving a bilateral reciprocal relationship lies with the applicant.

OUTLOOK FOR RECIPROCITY

With more frequent international judicial co-operation and the implementation of the Belt and Road Initiative, Chinese courts are gradually opening up to foreign judicial assistance. Chinese courts are open to setting the precedent of providing judicial assistance to other countries along the belt and road and taking the first step in establishing reciprocal relationships, according to article 6 of the Several Opinions on Providing Judicial Services and Guarantees for the Belt and Road Initiative, issued by the SPC on 16 June 2015.

Furthermore, article 7 of the Nanning Statement of the 2nd China-Asean Justice Forum, co-approved by the SPC, states: “If there is no precedent for refusing to recognise and enforce civil commercial judgments on the grounds of reciprocity … within the scope permitted by the law in China, it can be presumed that there is a reciprocal relationship.”

This signals that Chinese courts may relax their standards for applying the principle of reciprocity in future.

The extended application of the reciprocity principle relies on mutual respect and co-operation between the nations. In April 2021, when handling the Shanghai Yongrun v Kashi Galaxy Venture Capital case, the Supreme Court of New York county rejected a 2019 decision by the Beijing Higher People’s Court on the grounds that Chinese courts cannot provide a fair judicial decision on a level matching the US due process. Such events cast a shadow over the prospect of future reciprocal recognition.

Zhang Guanglei is a partner and Chen Cheng is an associate at Jingtian & Gongcheng. Zhang is also an arbitrator of the Hong Kong International Arbitration Centre and Shanghai International Arbitration Centre

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