At least once a month, one of our international litigation lawyers will get a call or an email from a U.S. lawyer seeking our help in taking a U.S. judgment (usually a default judgment) to China to enforce. The thinking of the U.S. lawyer is that all we need to do is go to a China court and ask it to convert the U.S. judgment into a Chinese judgment and then send out the Chinese equivalent of a sheriff to the Chinese company and start seizing its assets until it pays. It is actually nothing like this.
But every once in a while, one of our attorneys will get paid to conduct the research proving this on behalf of a U.S. plaintiff who wants to be able to show a court it should be entitled to collect all of its damages from a US-based defendant because it will never be able to collect anything from any potential Chinese defendant. The below is a less legalistic summary of our most recent research on this.
Article 282 of the PRC Civil Procedure Law, requires all of the following conditions be met for a foreign judgment to be recognized in China:
- The foreign judgment has taken legal effect in the jurisdiction in which it was rendered.
- The country where the deciding court is located has a treaty with China or is a signatory to an international treaty to which China is also a signatory or there is reciprocity between the countries.
- The foreign judgment does not violate any basic principles of Chinese law, national sovereignty, security, or social public interest.
Though China is a signatory to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, it is not a signatory to any international treaty on recognition and enforcement of foreign court judgments. There is no bilateral treaty between China and the U.S. on recognition and enforcement of foreign court judgments. There also is no bilateral treaty between the two countries on civil or commercial judicial assistance.
Even judgments from countries that have an enforcement treaty with China are often not enforced in China. For example, China and Australia entered into an agreement on reciprocal encouragement and protection of investments in 1988 that mandates both countries promulgate laws recognizing and enforcing each other’s judgments. But in response to a 2007 request by the Guangdong Province High People’s Court for instructions regarding an application by an Australian plaintiff for recognition and enforcement of an Australian court judgment, the Supreme People’s Court of China (the “SPC”) rejected enforcement since there was no international treaty to which China was a signatory nor any treaty between China and Australia on mutual recognition and enforcement of court judgments, nor any reciprocity between the two countries, the application should be rejected.
Since China is not a signatory to any international treaty on recognition and enforcement of foreign court judgments nor is there any treaty between China and the U.S. regarding judgment enforcement, the only possible way to get a U.S. judgment enforced in China would be if there were reciprocity between the two countries, but there isn’t.
In considering the question of reciprocity, a Chinese court will consider whether there is any precedent indicating reciprocity. In other words, the court will seek to determine whether there are prior cases where a U.S. court recognized or enforced a Chinese court’s decision. If there are no examples of a U.S. court having enforced a Chinese judgment, the Chinese court will almost certainly rule against enforcing the U.S. judgment because the reciprocity requirement will not have been met. If your judgment had come from a state court in a state that has enforced a Chinese judgment, your chances of being able to get a Chinese court to enforce your state court judgment. We could try to get your federal court judgment converted to a state court judgment in such a state, but we are not aware of anyone having done this and then successfully used the state court judgment to secure a China court judgment.
In 1994, the Dalian Intermediate People’s Court considered a Japanese party’s application to recognize and enforce a Japanese judgment and two rulings. The application was eventually referred to the SPC for guidance and the SPC held that given that there was no multilateral or bilateral treaty governing such matters between China and Japan and given that the two countries had not established reciprocity, the Japanese judgment would not be recognized or enforced by a Chinese court. This case confirms China requires factual reciprocity, not presumed reciprocity.
There are some instances where a federal court enforce a Chinese Judgment. On August 12, 2009, the United States District Court for the Central District of California issued a judgment enforcing a $6.5 million dollar Chinese judgment against an American corporate defendant under California’s version of the Uniform Foreign Money Judgments Recognition Act and in 2011, the Ninth Circuit Court of Appeals affirmed the district court’s decision. The plaintiffs in that case were Hubei Gezhouba Sanlian Industrial Co. Ltd. and Hubei Pinghu Cruise Co. Ltd., two PRC companies located in Hubei Province. The plaintiffs won a judgment against Robinson Helicopter Company Inc., a California corporation, at the Higher People’s Court of Hubei Province. The United States District Court for the Central District of California held that the PRC judgment was final, conclusive and enforceable under PRC laws and the plaintiffs were therefore entitled to an issuance of a domestic judgment in the amount of the PRC judgment.
This was the first time a U.S. Court recognized and enforced a PRC judgment, but it does not necessarily mean a Chinese court will automatically invoke the principle of reciprocity and recognize and enforce a U.S. court judgment. First, the enforcing court in that case is in California (though it was federal court), and the laws usually differ from state to state in the U.S., so it’s uncertain whether a Chinese court will deem the U.S., as a country, to have established a reciprocal relationship with China. Second, since the enforcing court was a federal court, it’s also not clear whether a Chinese court will deem a state court’s judgment enforceable in China. Third, the enforcing court is not the U.S. Supreme Court, thus, a Chinese court may not deem it to amount to reciprocity at the highest judicial level between the two countries. Finally, that case involved a U.S. defendant who had previously argued that only China had jurisdiction over the case, so it hardly could be deemed unfair for a U.S. court to rule on enforcing the Chinese judgment.
Chinese courts tend to be more willing to recognize and enforce foreign divorce judgments involving Chinese citizens so they don’t have to initiate a separate divorce proceeding. We are not aware of a single instance where a Chinese court enforced a U.S. non-divorce judgment.
This memorandum does not address the possibility of your suing the Chinese company directly in China and there are times where doing so makes sense.
In conclusion, a U.S. court judgment against ______________ will likely not be recognized or enforced in China. Unless ___________ has assets in the U.S. or in some country other than China that enforces US judgments, a US judgment will probably not be collectable against this company.