Enforcing U.S. Judgments in China
This post delves into recent developments that have transformed enforcing US monetary judgments in China.
From Ambiguity to Reciprocity: A Turning Point
Before 2018, enforcing US judgments in China relied heavily on the principle of reciprocity enshrined within Chinese domestic law. The problem? Reciprocity lacked a clear definition, leading to inconsistent interpretations by different Chinese courts. Traditionally, Chinese courts demanded a concrete example of a US court enforcing a Chinese judgment before it would recognize a US judgment. For example, if you were seeking to enforce a judgment from a Utah State court in a Chinese court, the Chinese court would not do that unless a Chinese court judgment had been enforced in that very same Utah court.
This created a significant hurdle for US plaintiffs seeking to enforce their judgments in China.
A 2017 Chinese court decision marked somewhat of a turning point. The Wuhan Intermediate People’s Court broke new ground by enforcing a California judgment. This case hinged on the precedent set by Hubei Gezhouba Sanlian Industrial Co., Ltd. v. Robinson Helicopter Co., Inc. In the Robinson Helicopter Case, a US District Court in California had enforced a judgment issued by a Chinese court. The Wuhan court viewed this as establishing the necessary reciprocity, paving the way for enforcement of the California judgment.
The Wuhan Decision Takes Root: A Wave of Recognition
Following the Wuhan decision, some other Chinese courts began enforcing US judgments based on the principle of reciprocity. The year 2022 saw further progress. In that year, the Guangzhou Intermediate People’s Court issued a series of rulings enforcing US judgments. Notably, the defendant in these cases argued that the Wuhan Case should be applied, and the Guangzhou Court dismissed these arguments, and the Guangzhou rulings were approved by the Supreme People’s Court, China’s highest court. This top-level endorsement signals national recognition of judgment reciprocity between China and the US.
Beyond Precedent: Unveiling the Nuances
The cases since 2018 offer the following valuable insights for enforcing a United States judgement in China:
- Federal vs. State Judgments: Chinese courts appear to treat both federal and state court judgments from the US equally for reciprocity purposes. This simplifies the process for US plaintiffs, as the level of the US court issuing the judgment doesn’t seem to be a significant factor. Nonetheless, I have found that federal court judgments are generally easier and more likely to be enforced than state court judgments. For this reason, my law firm’s international litigation team often will seek to convert state court judgments into federal court judgments before we take them to China or anywhere overseas for enforcement.
- Origin State and Summary Judgments: The state where the US judgment originated does not seem to be a major consideration for Chinese courts. Additionally, some cases suggest that Chinese courts may recognize US summary judgment decisions, even though there’s no equivalent concept in Chinese law. This is a positive development for US plaintiffs who may have obtained summary judgments in their favor. Default judgments are far less likely to be enforced.
- Finality and Punitive Damages: The US judgment must be final and non-appealable to be enforceable in China. Judgments from US courts that are still under appeal generally will not be recognized. Furthermore, Chinese law doesn’t have a concept of punitive damages, so punitive damage awards included in the US judgment are not likely to be enforced in China.
2023 Amendments to China’s Civil Procedure Law
In 2023, China amended its Civil Procedure Law, including provisions impacting the enforcement of foreign judgments in China. Here’s a breakdown of the key points:
- Expanded Jurisdiction: The amendments broaden the scope of disputes where Chinese courts can exercise jurisdiction over foreign-related matters. This potentially allows for easier enforcement of foreign judgments related to these newly included disputes.
- “Proper Connection” Clause: A new clause allows Chinese courts to consider cases with a “proper connection” to China, even if the traditional criteria (e.g., defendant’s domicile) aren’t met. This opens doors for enforcing judgments from cases with a strong link to China.
Navigating the Nuances: Reciprocity and Beyond
Though reciprocity remains a key factor, the 2023 amendments introduce other considerations for enforcing foreign judgments in China. Let’s delve into these additional aspects:
- Scrutiny by Chinese Courts: Chinese courts still have authority to review foreign judgments on various grounds, including violation of Chinese public policy or procedural irregularities. This can make enforcement unpredictable.
- Focus on building a strong case: To improve your chances of enforcement, ensure your judgments are well-documented and meet Chinese legal standards. If you are suing a Chinese company in the United States, consult with a lawyer knowledgeable about China judgment enforcement law before drafting your complaint. Additionally, ensure proper service of the Chinese defendant pursuant to the Hague Convention and relevant Chinese service requirements.
- Reciprocity Principle: China still primarily relies on reciprocity for enforcing foreign judgments. This means a foreign court judgment will likely only be recognized and enforced in China if Chinese judgments are similarly recognized and enforced in the issuing country. The extent of reciprocity can be unclear, creating uncertainty.
- Enforcement by Treaty: This blog post focuses on the enforcement of United States judgments in China, and it focuses on the reciprocity requirement for those judgments because there is no treaty between the United States and China on enforcement of judgment. Around thirty countries, including have treaties with China, agreeing to enforce the judgments of the other country. These treaties supersede the need for court reciprocity. Our law firm often sees this with our Spanish clients because Spain has an enforcement of judgments treaty with China.
The Future of China Enforcement of US Judgments
Recent cases in China, coupled with the 2023 amendments to the Civil Procedure Law, suggest that US judgments are generally enforceable in China under the principle of reciprocity. China’s amended Civil Procedure Law provides clearer criteria for enforcing foreign judgments, including those from the US. These new guidelines offer a more predictable and streamlined process for US plaintiffs seeking enforcement in China.
In large part due to recent case law and China’s Civil Procedure Law’s 2023 amendments, my law firm is right now working with Beijing counsel to enforce a U.S. judgement, and I will update this blog post when we see resolution in that matter.
