As the international economic situation fluctuates, disputes in areas such as international trade and cross-border investment frequently occur. After cross-border disputes arise, the creditor may obtain effective judgments abroad, but sometimes due to the debtor’s lack of property overseas, enforcing the judgment there is not a good remedy. If the debtor owns property in China, then applying for recognition and enforcement of foreign civil judgments in China would be the best choice. In recent years, with the continuous improvement of China's foreign-related legal and regulatory system, China's judicial attitude in this field has changed from conservative to encouraging.
With rich experiences in cross-border litigation, Joius Law Firm has written a series of feature articles on recognition and enforcement, with detail introduction to the basic requirements, the jurisdiction issues, the key winning points in practice, the judicial remedies and so on. Additionally, this article will focus on the legislative history of China, especially on the principle of reciprocity, which is widely used when the related jurisdiction has no bilateral or multilateral with China. We hope this article may help you better understand the current judicial attitude held by the Chinese courts and the predictability of their judgments.
1. China Has Adopted the Theory of De Facto Reciprocity for a Long Time
According to Civil Procedure Law and relevant regulations, when there is no effective bilateral or multilateral judicial assistance treaty between China and the country or jurisdiction region where the foreign judgment was made, it is necessary to rely on the principle of reciprocity to determine whether the civil judgment can be recognized. However, it seems too simple and vague, as there are no specific provisions in the law of China has made its application rule clear. From the perspective of academic theory, the principle of reciprocity adopted by courts can be mainly divided into three types: de facto reciprocity, de jure reciprocity, and presumptive reciprocity.
■ l De facto reciprocity requires the existence of legal precedents between two countries which recognize and enforce judgments the other country have made, in order to determine whether a reciprocal relationship has been established. When both countries adopt a conservative de facto reciprocity, it is easy to fall into the ‘prisoner's dilemma’ of confronting each other.
■ De jure reciprocity requires that the conditions for the recognition and enforcement of foreign judgments of the two countries be basically equal, and that the possibility of recognition and enforcement of Chinese people courts’ judgments be reviewed. It does not require that there must be de facto reciprocity between two countries, but it puts forward higher requirements for the investigation of foreign laws.
■ Presumptive reciprocity: Under this standard, as long as there is no legal precedent of refusing the recognition and enforcement of the other country, it is presumed that there is a reciprocal relationship between the two countries.
China's judicial practice has long taken a relatively conservative position of de facto reciprocity. For cases where there is no legal precedent in judicial practice between two countries which recognizes and enforces the judgments of the other country, it is determined that a corresponding reciprocal relationship has not been established. The adherence to the standard of de facto reciprocity not only makes it difficult for Chinese courts to recognize and enforce foreign judgments, but also leads to foreign courts’ refusal. At the same time, a large number of cross-border parallel litigation phenomena have been derived. [1]
[1] Hongyu Shen.(2018). Research on Several Difficult Issues Concerning the Recognition and Enforcement of Foreign Civil and Commercial Judgments. Application of Law.
Yongjian Zhang, Lei Yang(2019). A New Exploration of Mutual Recognition and Enforcement of Civil and Commercial Judgments by Judicial Organs. People’s Justice.
2. Supreme People’s Court Strives to Promote the Theory of De Jure Reciprocity
In recent years, the Supreme People's Court has been committed to expanding the scope of recognition and enforcement of foreign civil and commercial judgments, continuously taking measures to guide the transformation of judicial attitude, and attempting to promote the transformation of reciprocal relations from de facto reciprocity to de jure reciprocity.
In June 2015, the Supreme People's Court issued Several Opinions on the People's Courts’ Provision of Judicial Services and Guarantees for the Construction of the "the Belt and Road", which clearly stated that, in the case that some countries or jurisdiction region along the "the Belt and Road" have not yet concluded judicial assistance agreements with China, according to the intention of international judicial cooperation, and the commitment of those countries to give China judicial reciprocity, it may be considered that the Chinses courts first provide judicial assistance to them, actively promoting the formation of a reciprocal relationship.
In June 2017, the Second China-ASEAN Justice Forum was held in Nanning, and the Nanning Statement adopted by the Forum led the proposal of Presumptive reciprocity on official occasions for the first time. Nanning Statement proposes that for countries that have not yet concluded international treaties on the recognition and enforcement of foreign civil and commercial judgments, if the courts of the other country have no legal precedent of refusing to recognize and enforce their own judgments, a reciprocal relationship with that country can be presumed to be within the scope permitted by its domestic law.
In July 2019, negotiations of the Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (hereinafter referred to as “Hague Judgments Convention”) were completed in Hague, with over 400 representatives participating from more than 70 countries, European Union, and more than 10 international organizations. The vice president of the conference, as the leader of the Chinese delegation to the Netherlands, Xu Hong, signed and confirmed the negotiating text of the Hague Judgments Convention. The Hague Judgments Convention is the first international convention to comprehensively establish uniform rules for the international circulation of civil and commercial judgments, systematically providing rules and conditions for the recognition and enforcement of civil and commercial judgments. Although it will take some time and procedures for China to formally ratify and accede to the Hague Judgments Convention, it fully demonstrates that China hopes further expand the scope of recognition and enforcement of foreign civil and commercial judgments, and is striving to promote judicial legislation for international judicial cooperation.
3. The Formal Establishment of De jure reciprocity in Judicial Practice
On December 31, 2021, the Supreme People’s Court issued Conference Summary of the National Symposium on Foreign-related Commercial and Maritime Trials of Courts (hereinafter referred to as the “2021 Conference Summary”), marking the beginning of China's judicial practice from de facto reciprocity to de jure reciprocity. According to Article 44 of 2021 Conference Summary, the determination of the reciprocity relationship will no longer be restricted to the de facto reciprocity. The people's courts examine and determine whether there is a reciprocity relationship on a case by case basis, and list the following approaches for determining the reciprocity relationship:
1. According to the laws of the country where the judgment is made, civil and commercial judgments made by Chinese people's courts can be recognized and enforced by the courts of that country.
2. China has reached a reciprocal understanding or consensus with the country where the court is located. Or,
3. The country where the court is located has made a reciprocal commitment to China through diplomatic channels, or China has made a reciprocal commitment to the country through diplomatic channels, and there is no evidence that the country has refused to recognize and enforce judgments and rulings made by the Chinese people's courts on the grounds that there is no reciprocal relationship.
Although 2021 Conference Summary is not a judicial interpretation that can be directly cited as the source of law, but as an important document intended to make the trials consistent nationwide, its influence on judicial practice is unquestionable. In fact, the section on the recognition and enforcement of foreign judgments in 2021 Conference Summary has drawn a lot of valuable experience from the negotiation process of the Hague Judgments Convention. In addition to the relevant content of the principle of reciprocity, it also includes issues regarding scope of application, due process, finality of judgments, punitive damages, public policy reservations, and so on.
Before the release of the 2021 Conference Summary, thanks to the good judicial cooperation relationship between China and Singapore, Shanghai First Intermediate People's Court had taken the lead in making the first case of recognizing de jure reciprocity in China. On July 29, 2021, Shanghai First Intermediate People's Court issued its cross-board assist judgment (2019) No. 22 ((2019)沪01协外认22号). Since the Supreme People's Court of China and the Supreme Court of Singapore has signed the Memorandum of Understanding[1]. The No.22 judgment states that “Chinese courts can recognize and enforce judgments of Singapore courts on the basis of reciprocity, and Singapore courts can enforce judgments of Chinese courts in accordance with the provisions of common law. There is de jure reciprocity between China and Singapore, so under equal circumstances civil and commercial judgments made in China can be recognized and enforced by the courts of Singapore.” Although before this case, the commercial judgments of Singapore courts have had precedents of recognition and enforcement in China[2], this case is the first time that Chinses court has explicitly recognized and enforced judgments of foreign courts based on de jure reciprocity, officially marking a remarkable change in China's judicial attitude.
[2] On August 31, 2018, the 2nd Singapore-China Legal and Judicial Round Table was solemnly held in Singapore. Zhou Qiang, Chief Justice of China and President of the Supreme People's Court of Singapore, signed the Memorandum of Guidance between the Supreme People's Court of the People's Republic of China and the Supreme Court of the Republic of Singapore on the Recognition and Enforcement of Money Judgments in Commercial Cases with Mei Dashun, Chief Justice of the Supreme Court of Singapore
4. In Recent Years, the Number of Cases of Recognition and Enforcement Has Increased Sharply, and Interregional Judicial Assistance Has Been Deepened
With the significant increase in the number of foreign-related cases in China, the number of cross-border judicial assistance has also increased. On October 28, 2022, Zhou Qiang, President of the Supreme People's Court, mentioned in his Report of the Supreme People's Court on the Work of the People's Court in Foreign-related Trials to the Standing Committee of the 13th National People's Congress:
■Since 2013, people’s courts nationwide have concluded 7313 applications for recognition and enforcement of civil and commercial judgments of foreign courts, involving nearly 40 countries such as the United Kingdom, the United States, Italy, and Australia.
■ Hong Kong and Macao have continuously deepened their interregional judicial assistance, signing 13 judicial assistance arrangements and 1 judicial assistance document with Hong Kong and Macao, and achieving mutual recognition and enforcement of over 90% of civil and commercial judgments in Hong Kong.
■ The Supreme People’s Court has continuously improved the multiple resolution mechanism for disputes involving Hong Kong, Macao, and Taiwan, and issued online mediation rules for people's courts. It has made it clear that eligible residents of Hong Kong, Macao, and Taiwan regions can enter the people's courts’ mediation platform to participate in the mediation of civil and commercial disputes involving Hong Kong, Macao, and Taiwan. It has jointly established a online mediation mechanism for disputes involving Taiwan with the Taiwan Affairs Office of the State Council, providing Taiwan compatriots with inclusive, efficient, intelligent, and accurate dispute resolution services.
From the above report, Chinese courts have been continuously committed to improving the quality and quantity of cross regional judicial assistance, and their position in supporting cross regional judicial assistance has gradually become clear. In particular, they have made outstanding achievements in areas related to Hong Kong, Macao, and Taiwan, aiming to provide residents of Hong Kong, Macao, and Taiwan with more convenient and inclusive dispute resolution mechanisms and services. It is also foreseeable that in the future, there will be more countries and regions where judgments can be recognized and enforced in China.
Under the background that the Chinese courts continuously support the development of cross-border judicial cooperation, the success rate for the overseas creditors to apply for recognition and enforcement of overseas judgments in China is increasing, and the convenience of related procedures is also enhanced. Up to now, Joius Law Firm has handled dozens of cross regional judicial assistance cases, summarized and published professional books such as "Practical Operation and Case Analysis of Cross border Collection of Creditors' Rights in Taiwan to the Mainland", and helped many overseas creditors successfully cross regional recourse against the debtor's property in Chinese Mainland. If you have any doubts regarding your financial claims with debtors in China, please feel free to contact us. We can provide professional judgment based on our accumulated practical experience in numerous cross-border litigation and recovery cases.
