Tag:dispute-resolution-and-litigation-commercial-disputes
The Decision of the Standing Committee of the National People’s Congress on Amending the Civil Procedure Law of the People’s Republic of China officially came into effect on 1 January 2024. This amendment to the Civil Procedure Law will bring significant changes to the addressing of international commercial cases, making it crucial for multinational enterprises and Chinese enterprises engaged in cross-border transactions to pay close attention and make preparations. We introduce, through a series of articles, the impact of the amendments to Civil Procedure Law on the jurisdiction of international commercial cases and cross-border litigation, assisting enterprises in adapting to the changes. We have already published Litigation in China: Expansion of the Jurisdiction of Chinese Courts over Foreign-Related Cases, Litigation in China: Choice of Chinese Courts No Longer Requests Actual Connection with China, Litigation in China: How to Avoid Constituting Responding Jurisdiction in Foreign-related Cases, Litigation in China: Two New Types of Foreign-related Cases under the Exclusive Jurisdiction of Chinese Courts, Litigation in China: Development of Forum Non Conveniens Rules, Litigation in China: Accelerating the Process of Extraterritorial Service and Adding Extraterritorial Evidence Collection Methods, and Litigation in China: Race to Judgment in Cross-border Parallel Litigation.
Comparative analysis of relevant provisions
The Civil Procedure Law (2023 Amendment) (the “new CPL”) contains five articles on the recognition and enforcement of foreign judgments. Articles 298 and 299 remain substantially unchanged from the Civil Procedure Law (2021 Amendment), while Articles 300, 301 and 303 are newly introduced.
In addition to legislative changes, recent years have witnessed developments in judicial practices regarding the recognition and enforcement of foreign judgments. Considering both statutory provisions and judicial practices, we will systematically explore the implications of the 2023 amendment on rules concerning the recognition and enforcement of foreign judgments.
1. Bases for enforcement of foreign judgments in China: international conventions, bilateral treaties, and reciprocity
Article 298 of the Civil Procedure Law (2023 Amendment) provides for three bases for applying for recognition and enforcement of foreign judgments in China: international conventions, bilateral treaties, and reciprocity. If none of these exists, in accordance with Article 542[1] of the Interpretation of the Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China (Amended in 2022) (the CPL Interpretation), Chinese courts will rule to reject the application, except for divorce judgments[2].
（1）International conventions
The two relevant conventions relevant to China are the Convention on Choice of Court Agreements of 2005 (the “2005 Convention”) and the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters of 2019 (the “2019 Convention”).
The 2005 Convention applies to the recognition and enforcement of judgments rendered by foreign courts in international civil and commercial matters on the basis of exclusive choice of court agreements between the parties. Article 3 of the 2005 Convention provides a definition of “exclusive choice of court agreement”, which covers: (1) express exclusivity - an agreement concluded by two or more parties and designates, for the purpose of deciding disputes which have arisen or may arise in connection with a particular legal relationship, the courts of one Contracting State or one or more specific courts of one Contracting State to the exclusion of the jurisdiction of any other courts; and (2) constructive exclusivity - a choice of court agreement which designates the courts of one Contracting State or one or more specific courts of one Contracting State shall be deemed to be exclusive unless the parties have expressly provided otherwise. For a detailed introduction to the 2005 Convention, please read The Choice of Court Agreement and Its Implications on China released by the KWM Institute.
China signed the 2005 Convention on 12 September 2017, which is still awaiting ratification by the Standing Committee of the National People’s Congress. Therefore, parties currently may not apply to Chinese courts for recognition and enforcement of foreign judgments on the basis of the 2005 Convention.
The 2019 Convention applies to the recognition and enforcement of judgments rendered by foreign courts in civil and commercial matters, covering a broader scope than the 2005 Convention. For a detailed introduction to the 2019 Convention, please read Looking Ahead: Two Decades of Efforts Lead to the Passage of the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters released by the KWM Institute.
China participated in the negotiations of the 2019 Convention and signed its final text on 3 July 2019, but has not yet executed or ratified it. Therefore, parties currently may not apply to Chinese courts for recognition and enforcement of foreign judgments on the basis of the 2019 Convention.
（2）Bilateral treaties
As of 2023, China has signed bilateral treaties on mutual judicial assistance in civil and commercial matters with more than 30 countries, including France, Italy, Spain, Poland, Greece, Russia, the Republic of Korea, and the UAE. The majority of these treaties provides for recognition and enforcement of foreign judgments. For foreign civil and commercial judgments rendered by courts of countries that have signed bilateral treaties with China, parties may directly apply for recognition and enforcement in China on the basis of the bilateral treaties.
（3）Reciprocity
In the absence of international conventions or bilateral treaties to serve as a basis, or when such conventions or treaties exists but have limited coverage of judgments, parties may apply to Chinese courts for recognition and enforcement of foreign judgments on the basis of reciprocity. In practice, due to the lack of international conventions and the limited coverage of countries under bilateral treaties, the recognition and enforcement of most foreign judgments in China currently rely on reciprocity.
For a long time, Chinese courts have maintained a position of “de facto reciprocity”. In another word, the reciprocity between a country and China is determined based on whether there are precedents of courts of that country recognising and enforcing civil and commercial judgments made by Chinese courts. Due to very limited number of countries that meet this criterion, the number of cases in which China recognises foreign judgments on the basis of reciprocity is relatively small. In order to address this issue, the Supreme People’s Court (SPC) issued the Conference Summary of the National Symposium on Foreign-Related Commercial and Maritime Trial Work in January 2022 (the “2022 Foreign-Related Summary”). Article 44 of the 2022 Foreign-Related Summary clarifies the criteria for determining reciprocity.
Article 44: When hearing an application for recognition and enforcement of a judgement or ruling of a foreign court, a people’s court may determine that reciprocity exists under any of the following circumstances: (1) under the laws of the country of the foreign court, the civil and commercial judgments rendered by people’s courts may be recognised and enforced by the courts of that country; (2) China has reached an understanding or consensus on reciprocity with the country of the foreign court; or (3) the country of the foreign court makes a reciprocal commitment to China through diplomatic channels, or China makes a reciprocal commitment to the country of the foreign court through diplomatic channels, and there is no evidence that the country of the foreign court has ever refused to recognise and enforce the judgements and rulings of people’s courts on the ground that no reciprocity exists. The people’s court shall examine and determine the existence of reciprocity on a case-by-case basis.
The circumstance (1) above describes legal reciprocity. In March 2022, the Shanghai Maritime Court decided on the application made by Spar Shipping AS for recognition of a UK court judgment against Grand China Logistics Holding (Group) Co, Ltd ((2018) Hu 72 Xie Wai Ren No. 1). After seeking instructions from the SPC, the Shanghai Maritime Court adopted for the first time the legal reciprocity standard, finding that reciprocity existed between China and the UK in respect of recognition and enforcement of civil and commercial judgments. The finding did not require a precedent of the UK recognising and enforcing a Chinese judgment. This case represents the first instance of Chinese courts deviating from the original “de facto reciprocity” stance, marking a significant breakthrough. [3]
The circumstance (2) above indicates the mutual intentions between a foreign country and China on mutual recognition and enforcement of judgments without requiring the signing of treaties by both sides. For example, the Several Opinions on Providing Judicial Services and Guarantees by the People’s Courts for the Belt and Road Initiative and the Nanning Declaration at the 2nd China-ASEAN Justice Forum can be regarded as the basis for such a consensus between the two countries.
The circumstance (3) above describes a unilateral reciprocal commitment made by a foreign country to China or by China to a foreign country, with immediate effect upon being made. In practice, China previously made recognition and enforcement requests through judicial assistance channels to countries with which China had no treaty, and in these requests, China made reciprocal commitments (refer to China’s request for Azerbaijan to recognise and enforce a Chinese civil judgment). If a unilateral commitment is made to a foreign country, China should honour it when receiving an application for recognition and enforcement of a judgment of that country. The condition is that the foreign country has not refused to recognise and enforce Chinese judgments on the ground of non-existence of reciprocity.
It should be noted that reciprocity can be affected by the international landscape and diplomatic relations. As such, a court’s determination of reciprocity in a specific case does not establish a precedent. Therefore, a previous denial of reciprocity does not prevent its potential acknowledgement in future cases.
2. Grounds for rejecting recognition and enforcement
（1）Scope of application of Article 300
Article 299 of the new CPL (i.e. Article 289 of the CPL (2021 Amendment)) only addresses contravention of public policy as a basis for non-recognition and non-enforcement. The newly added Article 300 of the new CPL, which outlines five specific examination criteria, is significant in enforcing a foreign judgment or ruling in China.
The new Article 300 actually derives from Article 46 of the 2022 Foreign-Related Summary. A change in Article 300 is that in its first sentence, it removes the restriction of “under the principle of reciprocity” specified in Article 46. Does this imply that regardless of whether the application for enforcement is based on conventions, treaties, or reciprocity, Chinese courts will not recognise or enforce a foreign judgment or ruling in any of the circumstances specified in Article 300? How to address the discrepancy, if any, between the examination criteria under conventions or treaties and those of Article 300?
We believe that Article 300 applies to enforcement applications based on conventions, treaties, and reciprocity. However, if conventions or treaties provide examination criteria inconsistent with those of Article 300, the provisions of the conventions or treaties should prevail, and Article 300 should not apply. The reasons are as follows:
Firstly, Article 271 of the new CPL (i.e. Article 267 of the CPL (2021 Amendment)) [4] stipulates that in case of inconsistency between international treaties and the new CPL, international treaties shall apply (except for provisions that China has reserved). Therefore, if conventions or treaties provide examination criteria, Article 300 cannot be applied. For example, regarding grounds for refusal of recognition and enforcement, Article 9 of the 2005 Convention lists seven specific circumstances, and Article 7(1) of the 2019 Convention lists six specific circumstances. Upon effectiveness of the conventions in China, Article 300 will become inapplicable when parties seek enforcement based on the conventions.
Secondly, Article 33 of the 2022 Foreign-Related Summary provides that when a people’s court hears a case involving an application for recognition and enforcement of a foreign court judgment or ruling, it shall first examine whether the country and China have concluded or jointly acceded to an international treaty in accordance with Article 289 (now Article 299) of the CPL and Paragraph 1 of Article 544 of the CPL Interpretation. The international treaty, if any, shall prevail; or in the absence of such international treaty, or if the international treaty is silent on the relevant matter, the specific examination criteria under the 2022 Foreign-Related Summary may apply. In practice, it cannot be ruled out that bilateral treaties do not specify examination criteria for non-recognition and non-enforcement. In such cases, Article 300 still applies.
Therefore, it can be understood simply that Article 300 of the new CPL is not limited to applications for enforcement based on reciprocity. If bilateral conventions or treaties provide specific examination criteria for non-enforcement, China should conduct examinations in accordance with the provisions of conventions or treaties (rather than those of Article 300).
（2）Analysis of the five examination criteria
The five examination criteria will become central to dispute between parties during recognition, warranting close attention.
1）Jurisdictional Eligibility: Determining whether a foreign court has jurisdiction involves complex rules and raises questions about the design of jurisdictional agreements. Due to space constraints, we will address this issue separately in our next article. Please stay tuned.
2）Procedural Fairness: This requirement is reflected in all bilateral treaties entered into by China. Article 541 of the CPL Interpretation stipulates that when a foreign court judgment or ruling is rendered in absentia, the applicant must submit proof that the foreign court has lawfully issued the summons, unless the judgment or ruling explicitly states so. Procedural fairness is mainly manifested in the adequate protection of procedural rights for the losing party, including due notice and service, as well as access to the appropriate opportunity to participate in the proceedings on equal terms. The fairness of the procedure should primarily be assessed based on foreign law, but in extreme cases, Chinese law may also be applied for review (e.g., if it fails to meet the minimum requirements of Chinese law).
3）Fraudulent Defence: The requested country generally cannot review the merits of foreign court judgments or rulings. For instance, Article 8(2) of the 2005 Convention and Article 4(2) of the 2019 Convention both prohibit the review of the merits. However, fraud is the sole exception to this rule, making the issue a focal point of contention during the recognition. Although Article 300 does not define fraud, it does not confine fraud solely to procedural matters, unlike Article 9(d) of the 2005 Convention [5]. In accordance with the explanation to Article 7(b) in the Explanatory Report on the 2019 Convention [6], fraud refers to behaviour that deliberately seeks to deceive in order to secure an unfair or unlawful gain or to deprive another of a right. It applies to both fraud “in connection with a matter of procedure” (e.g., where a party deliberately “serves the writ […] on the wrong address” or “seeks to corrupt a judge or witness”) and substantive fraud (e.g., where a party “conceals key evidence”). Generally, the determination of fraud should be assessed under the laws of the requested country. According to international law theory, civil law countries typically include fraud within the realm of public policy.
4）Parallel Proceedings: In scenarios involving parallel proceedings, if a judgment or ruling is first rendered and becomes effective in China, then a foreign judgment or ruling on the same dispute cannot be recognised or enforced in China, as previously stipulated in Article 531 of the CPL Interpretation[7]. Additionally, if a judgment or ruling from Country A is first recognised in China, then a judgment or ruling from Country B on the same dispute cannot be recognised or enforced in China. The purpose of these provisions is to avoid contradictory judgments or rulings. The new CPL specifically regulates how Chinese courts should handle parallel proceedings. For a detailed discussion, please click through to read the article Litigation in China: Race to Judgment in Cross-border Parallel Litigation.
5）Public Policy: As an ancient institution in private international law, public policy has always been widely accepted by countries as a safety valve for safeguarding national interests. Article 300 of the new CPL reaffirms the provision regarding the reservation of public policy in Article 299. Despite the connotation and scope of public policy are ambiguous, Chinese courts have reached some consensus through long-term practice. For example, violations of public policy should not be casually invoked unless they reach a certain level of severity. Additionally, it has been explicitly stated in judicial reviews of foreign arbitration awards that either only harm to departmental or local interests or violations of mandatory provisions of Chinese law do not constitute violations of public policy. These practical standards will also apply to the recognition of foreign judgments or rulings. It should be noted that since Article 299 of the new CPL stipulates the reservation of public policy. Even if the international conventions or bilateral treaties invoked by the parties do not cite public policy as a ground for non-recognition and non-enforcement, Chinese courts still have the right to review whether there is a violation of public policy in accordance with Article 299 of the new CPL.
3. Procedure for enforcing foreign judgments or rulings in China
（1）Limitation Period for Enforcement Applications: In accordance with Article 545 of the CPL Interpretation [8], the period for seeking recognition and enforcement is two (2) years from the final day of the specified performance period in the foreign judgment or ruling. The limitation period may be suspended or interrupted, subject to CPL provisions governing the suspension and interruption of limitation of actions.
（2）Separate Applications for Recognition and Enforcement: As stipulated in Article 544 of the CPL Interpretation [9], parties are permitted to solely apply for the recognition of a foreign judgment or ruling without simultaneously seeking its enforcement. In situations where the prospects of recognition are uncertain, parties may choose to seek recognition alone, typically incurring lower costs. However, seeking enforcement requires the payment of an application fee based on the value of the subject matter, entailing the risk of financial loss.
（3）Jurisdiction and Objections: Pursuant to Article 235 [10] and Article 298 of the new CPL, a party may apply for recognition and enforcement at the intermediate people’s court of the place where the domicile or property of the respondent is located. If the respondent does not have any domicile or property in China, in accordance with Article 34 of the 2022 Foreign-Related Summary [11], the application may alternatively be submitted to the intermediate people’s court of the place where the applicant is domicile. If the respondent contests the court’s jurisdiction, Article 38 of the 2022 Foreign-Related Summary [12] provides the right to raise jurisdictional objections within the statutory period, with avenues for appealing against jurisdiction-related rulings if dissatisfied.
（4）Property Preservation: In accordance with Article 39 of the 2022 Foreign-Related Summary[13], a party has the right to request property preservation when seeking recognition and enforcement, provided that the party shall provide security. To avoid the risk of the respondent transferring assets to evade enforcement, it is advisable to apply for both recognition and enforcement simultaneously, as solely seeking recognition may potentially hinder a property preservation application.
（5）Hierarchical Reporting and Review Remedies: Chinese courts typically adopt a more prudent approach in handling foreign-related cases. Article 49 of the 2022 Foreign-Related Summary[14] establishes a hierarchical reporting mechanism for foreign-related cases. Specifically, cases reviewed based on reciprocity must be reported level by level up to the SPC for approval before a ruling is rendered. Additionally, Article 303 of the new CPL introduces, for the first time, a review remedy for parties dissatisfied with rulings, granting the high courts the authority to amend intermediate people’s court rulings during the review process.
Enterprises FAQ: Can the China-Singapore Memorandum be used as a basis for enforcement applications?
On 31 August 2018, China and Singapore signed the Memorandum of Guidance between the Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore on Recognition and Enforcement of Money Judgments in Commercial Cases (the “China-Singapore Memorandum”). While the China-Singapore Memorandum is advantageous, it is not a bilateral treaty. Therefore, parties may not rely on the China-Singapore Memorandum to apply for recognition and enforcement of Singapore judgments in China. Applications are subject to examination by Chinese courts based on reciprocity and the criteria set forth in Article 300 of the new CPL.
Enterprises FAQ: Can a foreign judgment be enforced in China if the foreign country has not recognised any Chinese judgment before?
Article 44 of the 2022 Foreign-Related Summary adopts a legal reciprocity standard. However, this does not imply that the courts will disregard whether foreign countries have recognised judgments from China in precedent cases. If such precedents exist, Chinese courts will take it as a consideration in determining the existence of reciprocity between the two countries. Conversely, if no such precedents exist, establishing reciprocity becomes more challenging, requiring a comprehensive consideration of other factors. In short, the existence of precedents is not a necessary condition but a favourable factor for establishing reciprocity. In absence of precedents, arguments should be grounded in foreign law and other judicial policy documents. Consequently, actively promoting the enforcement of Chinese judgments abroad remains equally crucial.
In the next article of the series, we will discuss the impact of CPL amendments on consensual jurisdiction of foreign courts. Stay tuned!
Thanks to associates Huang Yabing, Shen Yue, paralegal Liu Shuyang, and interns Tan Xiao, Zhang Xi, and Chi Yimeng for their contributions to this article.
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Where a party applies to an intermediate people’s court of the People’s Republic of China having jurisdiction for recognition and enforcement of a legally effective judgment or ruling of a foreign court, if the country of the foreign court has neither concluded or jointly acceded to an international treaty, nor has reciprocity with the People’s Republic of China, the people’s court shall dismiss the application, except where the party applies to the people’s court for recognition of a legally effective divorce judgment of a foreign court. If the application for recognition and enforcement is dismissed, the party may institute an action in a people’s court.
The Provisions on Issues Concerning the Acceptance by People’s Courts of Cases Involving Applications for Recognition of Divorce Judgments of Foreign Courts issued by the SPC shall apply to divorce judgments of foreign courts of a country that has no treaty or convention with China.
Landmark Recognition: Chinese Court Recognises UK Judgment, Unveiling New Understanding of Reciprocity, available at https://mp.weixin.qq.com/s/puFbIOVldTwl9FlSzxlB2w?from=industrynews&version=4.1.20.6006&platform=win.
Where there is any discrepancy between an international treaty concluded or acceded to by the People’s Republic of China and this Law, the provisions of the international treaty shall prevail, except for clauses to which the People’s Republic of China has declared reservations.
The judgement was obtained by fraud in connection with a matter of procedure.
The judgement was obtained by fraud.
For a case over which both a Chinese court and a foreign court have jurisdiction, where a party institutes an action in the foreign court and the counter party institutes an action in the Chinese court, the Chinese court may accept the case. Where, after a judgment is rendered, the foreign court applies or the party requests the people’s court to recognise and enforce the judgment or ruling of the foreign court concerning the case, the people’s court shall not grant such application or request, except it is otherwise prescribed by an international treaty concluded or acceded to by both countries. Where the judgment or ruling of the foreign court has been recognised by the people’s court and a party institutes an action in respect of the same dispute in the people’s court, the people’s court shall not accept the action.
During the period when a party applies for recognition and enforcement of a legally effective judgment or ruling of a foreign court or a foreign arbitration award, Article 246 of the CPL shall apply. Where the party only applies for recognition without applying for enforcement, the period of application for enforcement shall be recalculated from the date of effectiveness of the ruling issued by the people’s court on the recognition application.
Where a legally effective judgment or ruling of a foreign court or a foreign arbitration award requires enforcement by a Chinese court, a party shall first apply to a people’s court for recognition. When the people’s court rules for recognition after examination, the judgment shall be enforced in accordance with Part III of the CPL. Where the party only applies for recognition without applying for enforcement at the same time, the people’s court shall examine whether it shall grant recognition and render a ruling.
A legally effective civil judgment or ruling, or the property portion of a criminal judgment or ruling, shall be enforced by the people’s court of first instance or the people’s court at the same level as the people’s court of first instance at the place where the property under enforcement is located. Other legal instruments to be enforced by a people’s court as prescribed by law shall be enforced by the people’s court at the place of domicile of the party against whom enforcement is sought or at the place where the property under enforcement is located.
Where an applicant applies for recognition of a judgment or ruling of a foreign court, and the respondent has neither domicile nor property within the territory of China, the application may fall under the jurisdiction of an intermediate people’s court at the place of domicile of the applicant.
After a people’s court accepts an application for recognition and enforcement of a judgment or ruling of a foreign court, the respondent shall file a challenge to jurisdiction, if any, within 15 days of receipt of a copy of the application, or within 30 days of receipt of the copy if the respondent has no domicile within the territory of China. The people’s court shall examine and rule on the challenge to jurisdiction filed by the respondent. Any disagreeing party may appeal the ruling on the challenge to jurisdiction.
Where a party applies for property preservation after a people’s court accepts its application for recognition and enforcement of a judgment or ruling of a foreign court, the people’s court may refer to the provisions of the CPL and the relevant judicial interpretations. The applicant shall provide security, or if the applicant fails to do so, the application shall be ruled to be dismissed.
Where people’s courts at all levels close cases involving applications for recognition and enforcement of foreign court judgments, they shall file for recordation with the SPC level by level within 15 days of the ruling. The materials filed for recordation shall include applications submitted by the applicants, the foreign court judgment and its Chinese translation, and the ruling made by the people’s courts. For a case examined on the principle of reciprocity, the people’s court shall, before making a ruling, file its proposed opinion with the high people’s court of its jurisdiction for examination; if the high people’s court approves the proposed opinion, it shall file its examination opinion with the SPC for review. The people’s court may not make any ruling before the SPC replies.
