PRC first: court recognizes foreign judgment based on reciprocity

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The Nanjing Intermediate People’s Court on 9 December 2016 handed down a decision recognizing and enforcing a civil judgment made by the Singapore High Court based on the principle of reciprocity. This is the first time that a Chinese court has recognized and enforced a Singapore commercial judgment.

PRC first court recognizes foreign judgement based on reciprocityMore significantly, this is the first time that a Chinese court has recognized and enforced a foreign court judgment based on the principle of reciprocity in the absence of a bilateral treaty for mutual recognition and enforcement of judgments.

Prior to the Nanjing IPC decision, the authors have not seen any reported cases of Chinese courts recognizing a foreign court judgment based on the principle of reciprocity. The Nanjing IPC decision indicates that Chinese courts are prepared to apply the principle of reciprocity to enforce foreign judgments in the absence of conventions or treaties. This is a positive development for parties seeking to enforce foreign judgments in China.

For years, Chinese courts have taken a conservative position in invoking the principle of reciprocity. Pursuant to the PRC Civil Procedure Law, Chinese courts can recognize and enforce foreign court judgments only on the basis of international convention, bilateral treaties or the principle of reciprocity, provided they do not violate basic principles of Chinese law, state sovereignty and security, or public interest.

China has not ratified the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters. Nor has China entered into a bilateral treaty with major jurisdictions such as Singapore, the US and the UK for mutual recognition and enforcement of court judgments. As such, the only practical available ground to recognize commercial judgments from these jurisdictions is the principle of reciprocity.

However, there is no official interpretation, either legislative or judicial, on what constitutes reciprocity, and the basis of the application. It has been commonly understood that reciprocity is interpreted as the willingness by a foreign court to enforce a judgment issued by a Chinese court. In practice, this has been difficult to establish.

The Nanjing IPC decision suggests that if a foreign court has previously enforced a Chinese court judgment, a Chinese court is likely to apply the principle of reciprocity to enforce the court judgment of that foreign nation. Parties seeking to enforce such judgments will have a greater chance of enforcing their judgments without the need to re-litigate their cases.

Background to the decision

In the underlying case, a Swiss company, Swissco, had a dispute over a sales agreement with a Nanjing based company. The parties resolved the dispute by entering into a settlement agreement, which provided that all disputes be submitted to the Singapore High Court. However, the Nanjing company failed to comply with the settlement agreement.

Swissco commenced action before the Singapore High Court resulting in a judgment issued by that court in October 2015 against the Nanjing company. Swissco then applied to the Nanjing court to recognize and enforce the Singapore judgment.

The Nanjing court held that the court can issue an order recognizing and enforcing foreign court judgments if the following three conditions are met:

  1. There is no applicable convention or treaty between the two nations;
  2. The courts in the foreign nation have recognized a judgment issued by a Chinese court; and
  3. The underlying foreign judgment does not violate the basic principles of the PRC laws, state sovereignty, security or public interest.

Although China and Singapore are parties to a bilateral treaty relating to judicial assistance, this treaty does not provide for the reciprocal enforcement of court judgments. In the absence of an applicable bilateral treaty, the Nanjing court held that the principle of reciprocity could be applied in this matter. This is based on the fact that in January 2014, the Singapore court had enforced a court judgment issued by the Jiangsu Suzhou Intermediate Court (see Giant Light Metal Technology (Kunshan) v Aksa Far East [2014]).

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at: [email protected]