Israel recognizes Chinese judgment under reciprocity

By Sally Wang, Martin Hu & Partners
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The Israeli High Court of Justice, on 15 August 2017, rendered a ruling to recognize and enforce a judgment rendered by the Intermediate People’s Court of Nantong, Jiangsu province on 4 December 2009. With this, the dust finally settled on a dispute that lasted close to 10 years, ending with the plaintiff prevailing and the effective judgment being recognized and enforced by a foreign court. The essential issue here is, in the absence of an agreement for the mutual recognition and enforcement of judgments between China and Israel, the Israeli court, based on the “principle of reciprocity”, actively moved to recognize and enforce a judgment rendered by a Chinese court against an Israeli citizen in a contractual dispute.

王娅瑾 SALLY WANG 胡光律师事务所合伙人 Partner Martin Hu & Partners
王娅瑾
SALLY WANG
胡光律师事务所合伙人
Partner
Martin Hu & Partners

Overview of the case. A Chinese citizen surnamed Chu (the plaintiff) instituted a legal action against an Israeli citizen, Itshak Reitmann, (the defendant), claiming that the defendant failed to perform his obligations as agreed, and demanding that he return the corresponding commission and the workers’ wages that were advanced. Jiangsu Overseas Group participated in the suit as a third party. Through the trial, the Nantong court found that: (1) the service co-operation contract between the defendant and the third party was lawful and valid; (2) as the service co-operation contract was unrealizable, the parties had terminated it early; and (3) on this basis, the defendant was required to refund the entirety of the commission paid to him by the third party.

None of the parties filed an appeal after the rendering of the judgment. As the defendant had no property in China available for enforcement, the third party, after the judgment became effective, applied to the Tel Aviv District Court for recognition and enforcement of the judgment. Following the trial, the Tel Aviv District Court held that the principle of reciprocity under Israeli law was applicable to the case and, accordingly, ruled to recognize and enforce the judgment rendered by the Nantong court. Dissatisfied with the ruling, the defendant appealed to the Supreme Court of Israel. Following a trial lasting more than one year, the Supreme Court of Israel upheld the judgment of the Tel Aviv District Court.

Principle of reciprocity. China and Israel have not executed any agreement for the mutual recognition and enforcement of judgments, and neither is a signatory to any similar multilateral agreement. So on what grounds did the two Israeli courts ultimately rule to recognize and enforce the Chinese judgment? We can find the answer in the Israeli courts’ understanding and application of the “principle of reciprocity” in the case.

Reciprocity is one of the preconditions for the recognition and enforcement of a foreign judgment in Israel – if the laws of the country that rendered the foreign judgment do not provide for the enforcement of Israeli judgments, then such a foreign judgment cannot be recognized and enforced in Israel either. This is consistent with the regulations of the majority of countries regarding the recognition and enforcement of foreign judgments, i.e., it is preconditioned on reciprocity. Purely from this perspective, it would seem that the Israeli courts should not have recognized and enforced the Nantong court’s judgment. It depends on how the Israeli courts put the principle of reciprocity in practice.

When an Israeli court is considering whether a country rendering a foreign judgment recognizes and enforces Israeli judgments, it will mainly assess the likelihood of an Israeli judgment being recognized and enforced in that foreign jurisdiction. Accordingly, even if there is no agreement for the recognition and enforcement of judgments between the country that rendered the foreign judgment and Israel, and there is no instance of that country having recognized and enforced an Israeli judgment, the Israeli court will not simply find that the principle of reciprocity is inapplicable, and refuse to recognize and enforce the foreign judgment in question. Furthermore, the burden of proof does not fall on the party applying for enforcement of the judgment, but on the party that is opposing such enforcement.

Returning to this case, in order to demonstrate whether a Chinese court is likely to recognize and enforce an Israeli judgment, the Israeli court asked an expert to issue an opinion on Chinese law. The expert argued that Chinese law expressly provides that the “principle of reciprocity” may be relied on when dealing with the recognition and enforcement of an effective judgment of a foreign court. If, after review, the Chinese court holds that the judgment does not violate the basic principles of Chinese laws, or run counter to national sovereignty, security or the public interest, and rules to recognize its validity, and deems that enforcement is required, it will issue an enforcement order, which will be handled in accordance with relevant laws.

In addition to the above-mentioned expert opinion, the Israeli courts considered the provisions on judicial assistance under Chinese laws and the judicial interpretations of the Supreme People’s Court (SPC) and had the following perspective: even in the absence of an agreement on the mutual recognition and enforcement of judgments, Chinese courts are still likely to recognize and enforce effective Israeli judgments on the basis of the “principle of reciprocity”. Accordingly, Israeli courts should, on the basis of this principle, recognize and enforce qualified effective judgments rendered by Chinese courts.

Lesson from the case. That Israeli courts can, in the absence of any bilateral agreement or international treaty or any prior instance of a Chinese court having enforced an Israeli court judgment, nevertheless recognize and enforce a Chinese court judgment demonstrates their international outlook.

It is not just coincidence that the SPC also expressed a similar viewpoint in the Several Opinions on the Provision by People’s Courts of Judicial Services and Protection for the Construction of the Belt and Road, including: requiring strengthening of international judicial assistance with the countries along the Belt and Road, and duly protecting the lawful rights and interests of Chinese and foreign parties; requiring actively exploring the strengthening of regional judicial assistance and promoting the conclusion of bilateral or multilateral judicial assistance agreements; and requiring, in the absence of a judicial assistance agreement with any country along the Belt and Road, that consideration be given to Chinese courts offering judicial assistance to parties from such country, based on an intent of international judicial co-operation and exchange, the counterpart country committing to giving judicial reciprocity to China, etc., so as to procure the creation of a reciprocal relationship and the gradual expansion of the scope of international judicial assistance.

Sally Wang is a partner at Martin Hu & Partners in Shanghai

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