BackgroundAccordingto the Civil Procedure Law of the People’s Republic of China1(2017Revision, effective from July 1, 2017), international treaties and reciprocityare the two legal bases for recognition and enforcement of foreign courtjudgments.
However, due to the scarcity of treaties on civil and commercial judicialassistance between China and its large trading partners, such as the United States,the United Kingdom, Australia, Germany or Japan, most foreign court judgementshave to be relied upon the principle of reciprocity to be enforceable. Injudicial practice, Chinese courts generally apply the principle of de facto reciprocity, which requires asa prerequisite the precedent of a China’s court judgement having beenrecognized and enforced by the requesting state. This practice, essentiallycompelling other state to recognize and enforce China’s court judgement first, hindersthe realization of extra-territorial effect of foreign court judgement. Inthe past, there have been several precedents where PRC courts refused torecognize or enforce foreign court judgements on the grounds that no binding treatyon mutual recognition and enforcement existed between China and relevantforeign countries nor had the countries established reciprocity relationship, suchas Gomi Akira (a Japanese citizen)’s application to the Intermediate People’sCourt of Dalian City, Liaoning Province, PRC for recognition and enforcement ofa Japanese judicial court decision2, RussiaNational Symphony Orchestra and Art Mont Company’s application to Beijing No.2Intermediate People’s Court for recognition of a judgment of the High Court ofJustice in England3,and an Australian company’s request of enforcement of a judgement by the SupremeCourt of Western Australia in the Shenzhen Intermediate People’s Court.
4 Untilrecently, there was no positive report of a foreign court judgement beingenforced in China based on the principle of reciprocity. The picture has changedby the recent enforcement of US and Singapore court judgements in China on thebasis of reciprocity. In addition, China has taken a further step toward theenforcement of foreign court judgments by joining the EU, Singapore, Mexico, theUS and the Ukraine5,as a signatory to The Hague Convention on Choice-of-Court Agreements on September12, 2017.
Once ratified, China will commit to enforce civil and commercialjudgements from other contracting states’ courts in accordance with theexclusive jurisdiction clause. It appears that there will be a bright futurefor the foreign court judgement to be enforced in China and Chinese courtjudgements to be enforced internationally. Recent two enforced foreign courtjudgement cases OnJune 30, 2017, the Wuhan Intermediate Court6 inHubei Province enforced a monetary judgment (No. EC062608) from the Los AngelesCounty Superior Court in California. TheApplicant Liu Li (the Plaintiff) and the Respondent Tao Li (the Defendant) enteredinto an Equity Transfer Agreement (ETA) on September 22, 2013, under which TaoLi should transfer to Liu Li 50% of the shares of Jiajia Management Inc., acompany registered in California, United States of America.
After the ETA cameinto effect, Liu Li paid a total of 125,000 U.S. dollars to the Respondents.
Respondent Tong Wu is the husband of Respondent Tao Li. Tong Wu’s bank accountinformation as submitted by Liu Li shows that a total of 125,000 U.S. dollarsentered his account between September 14, 2013, and October 16, 2013. OnJuly 17, 2014, Liu Li lodged a lawsuit (case number EC062608) with the LosAngeles County Superior Court, CA, against the two Respondents, alleging thatthey obtained 125,000 U.S.
dollars by false equity transfer. On October 7,2014, Rolan, an American service process company, issued an investigativereport on the personal information and address of Tao Li and Tong Wu within theUnited States of America. The attorney hired by Liu Li in the United States ofAmerica posted the process to the address of the two Respondents shown in theinvestigative report, but the two Respondents could not be reached. On January8, 2015, judge William D. Stewart of the Los Angeles County Superior Court, CA,issued an order of publication to serve the summons and notices related to thecase by publication on SAN GABRIEL VALLEY TRIBUNE.
The service by publicationwas made four times on SAN GABRIEL VALLEY TRIBUNE on January 15, 22 and 29 andFebruary 5, 2015. On July 24, 2015, judge William D. Stewart of the Los AngelesCounty Superior Court, CA, issued a default judgment, since the courtconsidered that the two Respondents had received summons in due procedures butfailed to appear in court to respond to the suit. The court decided that twoRespondents Tao Li and Tong Wu should, jointly and severally, repay Liu Li125,000 U.S. dollars with prejudgment interest and court costs, totaling 147,492U.S. dollars.
Theattorney hired by Liu Li in the United States of America underwent the judgmentregistration and notification procedures on the date of the aforesaid judgment.A news report, “First Chinese Court Judgment Recognized and Enforced in theUnited States” (published on China Legal Journals, January 2010), states that theCalifornia US federal district court has recognized and enforced a civiljudgment of the Higher People’s Court of Hubei Province for the case of HubeiGezhouba Sanlian Industry Co., Ltd. and Hubei Pinghu Tour Boat Co., Ltd.
v.Robinson Helicopter Company, USA in 2009. Basedon the above facts, the Wuhan Intermediate Court in its decision in favor ofenforcement set forth, inter alia,the following reasons: Inthis case, since the Respondents Tao Li and Tong Wu own properties in Wuhan,and this Court, at the place of such properties and the place of habitualresidence of the Respondents, has jurisdiction over this case. AsUnited States of America and China have not concluded or jointly acceded to anyinternational treaty on the mutual recognition and enforcement of judgments offoreign courts, Liu’s application should be examined under the principle ofreciprocity. The evidence provided by the applicant proves that there is aprecedent that an America court has recognized and enforced a civil judgment ofa Chinese court.
It may be determined that there is a reciprocal relationshipbetween both sides in the recognition and enforcement of civil judgments. Similarreasoning can also be found in KolmarGroup AG v. Jiangsu Textile Industry (Group) Import & Export Co. Ltd,7where the Nanjing Intermediate People’s Court in Jiangsu Province enforced amonetary judgement from the Singapore High Court on December 9, 2016. AlthoughSingapore and China signed The People’s Republic of China and the RepublicSingapore Treaty on Civil and Commercial Judicial Assistance in 1997, suchTreaty is limited to the recognition and enforcement of arbitral award8and does not cover foreign court judgement enforcement. Therefore, therecognition and enforcement of the Singaporean court judgment can only be basedon the principle of reciprocity.
In this case, the Nanjing Court relied on a judgment of Giant Light Metal Technology (Kunshan) Co.v. Aksa Far East Pte Ltd.9By the High Court of Singapore in January 2014 in which Singaporean Courtrecognized a civil judgement rendered by the Intermediate People’s Court of SuzhouMunicipality, Jiangsu Province, and thus determined that a reciprocityrelationship has existed between China and Singapore.1 Article 281: Where an effectivejudgment or ruling of a foreign court requires recognition and enforcement by apeople’s court of the People’s Republic of China, a party may apply directly tothe intermediate people’s court of the People’s Republic of China havingjurisdiction for recognition and enforcement or apply to the foreign court forthe foreign court to request recognition and enforcement by the people’s courtin accordance with the provisions of an international treaty concluded oracceded to by the People’s Republic of China or under the principle ofreciprocity.2 See Zuigao Renmin Fayuan guanyu Woguo Renmin Fayuan Yingfou Chengrenhe Zhixing Riben Guo Fayuan Juti Zhaiquan Zhaiwu Neirong Caipan de Fuhan (???????????????????????????????????????) 1995 Min Ta Zi No.17.
The Reply of the Supreme People’s Court of China concerning Recognition andEnforcement of Japanese Judgment and Rulings on Credit and Debt (promulgatedby the Sup People’s Ct ., Jun. 26, 1995, effective Jun. 26, 1995)3 See Beijing No.2Intermediate People’s Court Judgement 2004 Er Zhong Min Te Zi No.
928. 4 See Zuigao Renmin Fayuan guanyu Shenqing Ren Fulaxi Dongli Fadong JiYouxian Gongsi Shenqing Chenren he Zhixing Aoda Liya Fayuan Pajue Yian deQingshi de Fuhan (??????????????????????????????????????????????) 2006 Min Si Ta ZiNo.45. The Reply of the Supreme People’s Court of China concerning the Requestof an Australian Company for the Recognition and Enforcement of a JudgmentRendered by the Supreme Court of Western Australia5 The US and Ukraine havesigned but not yet ratified.6 Liu Li v.
Tao Li and Tong Wu, Civil Ruling (2015) E WuhanZhong Minshang Waichuzi No. 267 Casenumber: (2016) Su 01 Xie Wai Ren No. 38 Article2. (3) of the Treaty: http://www.npc.gov.cn/wxzl/gongbao/2001-01/03/content_5007108.htm(Chinese version) 9 Casenumber: (2014) SGHC 16