Along with some friction in recent trade relations, the growing scale of the economic relationship between the People’s Republic of China (PRC) and the United States has given rise to an ever-greater number of civil and commercial disputes. For decades, the common assumption among American lawyers was that enforcing a U.S. court judgment in the PRC was difficult, if not impossible. The same view was widely held by Chinese lawyers regarding Chinese court judgments in the U.S. Absent a mutual recognition treaty, so the theory held, there was little point in litigating in one country with the expectation of enforcing a judgment in the other. Indeed, for a relatively long period it was difficult for PRC and U.S. judgments to be recognized and enforced in the other country (with the exception of divorce judgments).1 This has, to some extent, hindered “[t]he mobility of court judgments and judicial exchanges and cooperation between relevant countries”.2
Over the last 10 to 15 years, this perception has become increasingly outdated. Since 2009, American courts have routinely recognized Chinese court judgments if they meet basic procedural and statutory requirements. On June 30, 2017, a PRC court for the first time acknowledged the existence of a reciprocal relationship between China and the U.S. and recognized and enforced a U.S. judgment. Since then, various PRC courts have recognized and enforced U.S. judgments on the basis of the reciprocal relationship between China and the U.S. This has been possible due to new interpretations of “reciprocity” under Chinese law.
This article discusses the development of the recognition and enforcement of Chinese court judgments by U.S. courts, and the growing reciprocal recognition of U.S. civil and commercial judgments in China based on current PRC laws, policies and judicial practice.
Recognition and Enforcement of Chinese Court Judgments in the U.S.
Legal Bases for Recognition and Enforcement
In 2009, the U.S. District Court for the Southern District of Indiana set forth what is now the typical approach in American courts to enforcing Chinese judgments.
The issue is whether a foreign company that acquired a money judgment in a foreign jurisdiction against a foreign defendant can file a suit in the United States to execute upon that judgment and attach a res belonging to the judgment defendant when that res is found in the United States. The answer to that question is yes.3
In numerous decisions across the U.S., the courts have demonstrated that they are amenable to the enforcement of Chinese court judgments if the substantive and procedural requirements of the controlling law are met, either the state’s implementation of the Uniform Foreign Money-Judgment Recognition Act, (UFMJRA) a uniform law adopted by all but 12 states4, or common law principles arising largely from an 1895 Supreme Court case on which the UFMJRA is largely (although not entirely) based.5
Presumptive Entitlement to Recognition of Chinese Court Judgments
U.S. federal (and occasionally state) courts have granted recognition of Chinese court judgments in a wide array of cases and rejected claims for non-recognition on several different grounds. For example, in 2011 the Ninth Circuit Court of Appeals held in Hubei Gezhouba Sanlian Indus., Co. v. Robinson Helicopter Co.6 that technical non-compliance with the Hague Convention on foreign service could not be an independent basis for the non-recognition of a Chinese court judgment that otherwise met the criteria for recognition under California’s implementation of the UFMJRA.7 In two cases in 2015 and 2017, a California federal court ruled for the recognition of Chinese court judgments through an analogy to U.S. civil procedure requirements (as also outlined in the UFMJRA) such as subject matter and personal jurisdiction,8 due process requirements,9 and whether the judgment was final or if the case remained subject to appeal in China.10 An Illinois federal court agreed, holding in 2015 that a Chinese court judgment was “presumptively entitled”11 to recognition by a U.S. court under the UFMJRA when the parties seeking recognition showed that it (1) granted or denied the recovery of a sum of money; and (2) was final, conclusive, and enforceable under the law of that foreign country.12
Limited Bases for Denial of Recognition
U.S. courts require that foreign judgments arising from foreign legal systems meet certain standards to be recognized under the controlling state law, although as one legal scholar noted, “[t]his ground for nonrecognition is very difficult to establish.”13 In Global Material Technologies, Inc., for instance, an Illinois federal court held that a foreign judgment would not be entitled to recognition in a U.S. court when the foreign court either did not have personal jurisdiction over the matter or the foreign hearing was not fundamentally fair, meaning that the party opposing recognition provided evidence that the foreign judicial system as a whole was not entitled to comity because of a failure to adhere to the standards of impartiality and due process required in the U.S.14 Similarly, in Ningbo FTZ Sanbang Industrial Company v. Frost National Bank,15 the Fifth Circuit Court of Appeals denied enforcement of a Chinese court judgment on the basis that the party seeking recognition failed to meet the statutory procedural requirements of Texas’s implementation of the UFMJRA.16 Additionally, the U.S. District Court for the Western District of Washington (as affirmed by the Ninth Circuit Court of Appeals) dismissed a motion to recognize a Chinese court injunction against a U.S. company because, among other issues, the Chinese litigation was not final.17
Such recognition is apparently only “presumptively” granted to monetary judgments. The enforcement of Chinese injunctions in the U.S. does not appear to have occurred. In Beijing Zhongyi Zhongbiao Electronic Information Technology Company, the District Court for the Western District of Washington found “no basis to recognize a foreign court’s factual findings in this U.S. copyright action,”18 although this was premised on the non-final nature of the foreign litigation. U.S. courts do not generally seem to take issue with the Chinese legal system itself. One New York state trial court slip opinion denied enforcement of a Chinese court judgment on the grounds that the judgment “was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law”19. This was reversed upon appeal.20 Indeed, the Supreme Court, Appellate Division of New York explained that “[t]he allegations that defendants had an opportunity to be heard, were represented by counsel, and had a right to appeal in the underlying proceeding in the People’s Republic of China (PRC) sufficiently pleaded that the basic requisites of due process were met.”21
Recognition and Enforcement of American Court Judgments in China
Legal Bases for Recognition and Enforcement of Foreign Civil and Commercial Judgments under Chinese Law
The 2021 amendment to the Civil Procedure Law of the PRC (the “Civil Procedure Law”) provides a framework for PRC courts to recognize and enforce foreign court judgments. According to Article 289 of the Civil Procedure Law:
For a judgment or ruling made by a foreign court which has come into legal effect for which recognition and enforcement are applied or requested, where a People’s Court concludes, upon examination pursuant to the international treaty concluded or participated by the PRC or in accordance with the principle of reciprocity, that the basic principle of the PRC laws or the sovereignty, security or public interest of the country is not violated by it, the People’s Court shall recognize its validity; where there is a need for enforcement, an enforcement order shall be issued and enforced pursuant to the relevant provisions hereof. Where the People’s Court deemed that the basic principle of the PRC laws or the sovereignty, security or public interest of the country is violated, the judgment or ruling made by the foreign court shall not be recognized and enforced.”22
For any foreign judgment to be recognized and enforced by a PRC court, it needs to meet the following four requirements:
1) The foreign judgment must have come into legal effect, i.e., be final and conclusive;
2) China and such foreign country have concluded an international treaty on the recognition and enforcement of the judgment of the other country, or there exists a reciprocal relationship between the two countries;
3) The recognition and enforcement of such judgment will not violate the basic principles of PRC law; and
4) The recognition and enforcement of such judgment will not violate the national sovereignty, security, or the social and public interests of the PRC.
Since China and the U.S. have not concluded any international treaties on the recognition and enforcement of judgments rendered by each other’s courts, to fulfill the second criterion the recognition and enforcement of U.S. judgments by the PRC courts must be subject to a reciprocal relationship between the two countries.
The Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work of Courts23 (the “Minutes”) is an official document issued by the Supreme People’s Court on judicial issues and plays a strong guiding role in the judicial practice of the PRC courts. The Minutes further clarify the criteria for the non-recognition and enforcement of foreign judgments.
For example, Article 45 of the Minutes provides that, “[w]here the judgment rendered by a foreign court awards damages which obviously exceed the actual losses, the People’s Court may rule not to recognize and enforce the excessive part.”24 Under PRC law, damages are primarily compensatory instead of punitive.25 Therefore, if a judgment awards punitive damages that significantly exceed the losses actually incurred, such an award, being mainly punitive in nature, violates the basic principles of Chinese law and cannot be recognized and enforced by the PRC courts. Article 46 of the Minutes lists four grounds for the non-recognition and enforcement of foreign judgments, which can be interpreted as examples of violating “the basic principle of PRC laws” as provided in the Civil Procedure Law:
(1) The court of the country where the judgment is made has no jurisdiction over the case according to PRC law;
(2) The respondent has not been lawfully summoned or has been lawfully summoned but has not been given a reasonable opportunity to make a statement or debate, or the litigant without litigation capacity has not been properly represented;
(3) The judgment is obtained by fraud; or
(4) The People’s Court has made a judgment on the same dispute or has recognized and enforced a judgment or arbitral award made by a third country on the same dispute.
Since April 2017, there have been at least seven published PRC cases involving the recognition and enforcement of U.S. civil and commercial judgments (other than divorce cases). Since the first recognition of the reciprocal relationship between China and the U.S. by a PRC court on June 30, 2017 in Case No. (2015) E Wuhan Zhong Min Shang Wai Chu Zi No. 00026,26 PRC courts have, in principle, recognized and enforced U.S. civil and commercial judgments based on the reciprocal relationship between the two countries.27 This also demonstrates respect in PRC judicial practice for the provisions of the Civil Procedure Law and the Minutes. Indeed, the reasons for failure to (fully) recognize and enforce U.S. judgments in subsequent PRC court cases were that: (1) the U.S. judgment was not final because it was appealed in the U.S.,28 and (2) the U.S. judgment ordered the defendant to pay punitive damages.29 These procedural issues underlying the denial of recognition and enforcement are similar to the reasons provided by U.S. courts for denying the recognition of certain non-complying Chinese court judgments.
Shift from “De Facto Reciprocity” to “De Jure Reciprocity”
In China, the standard of “de facto reciprocity” has been adopted for the identification of reciprocal relationships. The standard of “de facto reciprocity” means reciprocity between a state and another state can only be identified by the existence of a precedent of the recognition of that state’s judgment in the other state’s courts. This is also evident from the court’s reasoning in the above summary. Although PRC courts generally recognize U.S. judgments based on the principle of reciprocity according to recent judicial practice, there has been controversy over the meaning of “de facto reciprocity.” Therefore, the existence of a “de facto reciprocity” relationship between China and the U.S. may be in doubt. For example, in both Case No. (2016) Gan 01 Min Chu No. 35430 and Case No. (2015) E Wuhan Zhong Min Shang Wai Chu Zi No. 00026, the applicants relied on the Californian District Court’s 2011 decision recognizing a Chinese court judgment in Hubei Gezhouba Sanlian Indus., Co.31 to prove the reciprocal relationship between China and the U.S.: the applicant in the former case failed, but the applicant in the latter case succeeded. The judge in Case No. 354 (2016) Gan 01 Min Chu did not elaborate on the reasons why there was no reciprocal relationship between China and the U.S. However, in Case No. (2015) E Wuhan Zhong Min Shang Wai Chu Zi No. 00026, the court acknowledged that the decision in Hubei Gezhouba Sanlian Indus., Co. demonstrated the existence of a precedent in the U.S. for recognizing and enforcing civil judgments rendered by PRC courts, and thus it was reasonable to conclude that a reciprocal relationship exists between the U.S. and China for the mutual recognition and enforcement of each other’s civil judgments. After establishing that a reciprocal relationship existed for recognizing court judgments, the PRC court further found that it should recognize the specific U.S. civil judgment because it did not violate the basic principles of PRC law or violate the national sovereignty, security and social and public interests.32 Therefore, there may be controversy as to whether Gezhouba can directly prove “de facto reciprocity” between China and the U.S.
This uncertainty was generally eliminated after the formal promulgation of the Minutes. Article 44 of the Minutes provides that:
When a People’s Court hears a case involving an application for the recognition and enforcement of a judgment or ruling of a foreign court, it may determine the existence of a reciprocal relationship between the parties under any of the following circumstances:
(1) A civil or commercial judgment made by a People’s Court can be recognized and enforced by a court in that country in accordance with the laws of the country where the court is located;
(2) China reached an understanding or consensus of reciprocity with the country where the court is located; or
(3) The country where the court is located has made reciprocity commitments to China through diplomatic channels, or China has made reciprocity commitments to the country where the court is located through diplomatic channels, and there is no evidence to prove that the country where the court is located has refused to recognize and enforce the judgment or ruling made by a People’s Court on the ground that there is no reciprocity.33
Chinese courts no longer only use the “de facto reciprocity” standard when determining reciprocity but have recognized that reciprocity can also be proved by “de jure reciprocity”. PRC courts have found that there exists a reciprocal relationship between China and the foreign country so long as, theoretically, the foreign courts will recognize PRC judgments, even where there is no precedent of the foreign courts recognizing PRC judgments. As a result, parties applying for future recognition and enforcement of U.S. judgments in Chinese courts can not only prove “de facto reciprocity” by providing PRC judgments that have been recognized by the U.S. courts, but they can also prove “de jure reciprocity” by demonstrating that PRC judgments will be recognized and enforced under the laws of the U.S. (or the state where the U.S. judgment was issued).
Unless the U.S. judgment in the case is expressly precluded from recognition and enforcement by the Civil Procedure Law and other legal provisions, it is almost certain that such judgment can be recognized and enforced by Chinese courts, especially considering the increase in the recognition and enforcement of PRC judgments in the U.S. and the broadened legal basis for PRC courts to determine the existing reciprocal relationship.
Conclusion
Both China and the U.S. appear to be working towards permitting the mutual recognition of court judgments so long as doing so does not breach any domestic legal requirements. In this, the two countries take a similar approach to the mutual recognition and enforcement of foreign court judgments, although Chinese law includes a requirement for reciprocity that many U.S. state laws lack.
On September 27, 2022, the Supreme People’s Court of China held a press conference on the high-level opening-up of foreign-related commercial and maritime trial services. During the conference, an official said that the Supreme People’s Court will “further promote international judicial cooperation on the recognition and enforcement of civil and commercial judgments, facilitate the resolution of cross-border civil and commercial disputes, and support the development of an open world economy.”34 The continued recognition of Chinese court judgments in the U.S., combined with the recent rejection of denial of enforcement35 on the grounds that the Chinese judicial system is incompatible with U.S. standards of due process, and the ever-greater adoption by the states of the UFMJRA, demonstrates a trend in U.S. judicial and legislative circles towards normalizing the recognition of PRC court judgments that meet procedural requirements.36
With the recognition of the reciprocal relationship between China and the U.S. in judicial practice and the liberalization of the standards for determining reciprocal relationships, China-U.S. cross-border litigation will provide new impetus to the resolution of civil and commercial disputes between the two countries. This will further promote the opening of international trade and investment between the United States and China, resulting in greater prosperity for both nations and counterbalancing other trade disputes that threaten to undo the recent advances in globalization.
*This article was co-authored by JunHe Partner Zhenyong (Allan) Ye and Frost Brown Todd Attorney-at-law Aaron M. Bernay. JunHe’s summer intern Shizun Zhou and summer associate James Hardman from Frost Brown Todd also contributed.
For further information, please contact:
YE, Zhenyong, Partner, JunHE
yezhy@junhe.com
1. For the sake of discussion in this article, the term “civil and commercial judgments” does not include divorce judgments. A divorce judgment rendered by a foreign court can be recognized and enforced in China in accordance with the Provisions of the Supreme People’s Court on Application Procedures for Chinese Citizens for Recognition of Divorce Judgments Rendered by Foreign Courts and is not subject to the conclusion of a mutual legal assistance agreement or the existence of reciprocal relationship between China and the foreign country.
2. Professor Jingdong Liu and Doctor Can Zhang, Empirical Study on the Recognition and Enforcement of Effective Judgments of Foreign Courts in China, STRAITS LAW JOURNAL, Vol. 3, No. 3, 2021, http://iolaw.cssn.cn/zxzp/202202/t20220207_5391540.shtml.
3. KIC Suzhou Auto. Prod. Ltd. v. Xuguo, No. 1:05-CV-1158-LJM-DML, 2009 WL 10687812, at *1 (S.D. Ind. June 3, 2009).
4. The twelve states that continue to rely on the common law are Arkansas, Kansas, Kentucky, Louisiana, Mississippi,
New Hampshire, South Carolina, South Dakota, Vermont, West Virginia, Wisconsin and Wyoming. Notably, three states de novo have adopted the UFMJRA since 2020. Two distinct versions of the UFMJRA exist: the 1962 version and the updated 2005 version. The former has been adopted by eight states: Alaska, Connecticut, Florida, Maryland, Massachusetts, Missouri, New Jersey, and Ohio and the updated version has been adopted by the remaining thirty states. See Foreign-Country Money Judgments Recognition Act, Uniform Law Commission (last visited July 25, 2023), https://www.uniformlaws.org/committees/community-home?CommunityKey=ae280c30-094a-4d8f-b722-8dcd614a8f3e.
5. Hilton v. Guyot, 159 U.S. 113 (1895). See also William S. Dodge and Wenliang Zhang, Reciprocity in China-US Judgments Recognition, 53 Vanderbilt J. of Transnational L., 1541, 1561-1563 (2021). The modern common law standard for recognizing or denying recognition of a foreign court judgment is articulated in the Restatement of Foreign Relations Law, which courts may rely on in their decisions (see, e.g., LG Display Co. v. Obayashi Seikou Co., 919 F. Supp. 2d 17, 30-31 (D.D.C. 2013)). Notably, the common law standard and the UFMJRA adopted by most of the states does not look to mutual reciprocity as a factor in recognizing foreign court judgments, even though the Hilton Court held that this was a major factor. Hilton at 228. Six states, i.e., Arizona, Florida, Maine, Massachusetts, Ohio, and Texas have added either a mandatory or a discretionary reciprocity requirement. Dodge at 1567.
6. 425 F. App’x 580 (9th Cir. 2011).
7. Id. at 581 (“because RHC has not shown that California courts may refuse to recognize foreign money judgments on grounds other than those listed in the UFMJRA, any technical non-compliance with the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, T.I.A.S. No. 6638, cannot serve as an independent basis for non-recognition of the PRC judgment.)
8. Qiu v. Zhang, No. CV 17-05446-JFW, 2017 WL 10574227, at *3 (C.D. Cal. 2017) (“[The Chinese court] had subject matter jurisdiction and personal jurisdiction”.)
9. Id. (“[T]he Chinese court was an impartial tribunal”). See also Liu v. Guan, Index No. 713741/2019 (N.Y. Sup. Ct., Jan. 7, 2020) (“Plaintiff’s submissions demonstrate that the Chinese legal system comports with the due process requirements and the public policy of New York….”).
10. Anyang Xinyi Elec. Glass Co. v. B & F Int’l (USA), Inc., No. CV 15-00862- BRO (AJWx), 2015 WL 12859716, at *4 (C.D. Cal. 2015)) (“In China, a judgment is finalized once the time to appeal expires and no appeal has been filed.”) See also Hubei Gezhouba Sanlian Indus. Co. v. Robinson Helicopter Co., No. 2:06-CV-01798-FMCSSX, 2009 WL 2190187, at *7 (C.D. Cal. July 22, 2009), aff’d, 425 F. App’x 580 (9th Cir. 2011).
11. Glob. Material Techs., Inc. v. Dazheng Metal Fibre Co., No. 12 CV 1851, at *16 (N.D. Ill. May 1, 2015).
12. Id. at *15-16.
13. William S. Dodge and Wenliang Zhang, Reciprocity in China-US Judgments Recognition, 53 Vanderbilt J. of Transnational L., 1541, 1563 (2021).
14. Id. at *16-18.
15. 38 F. App’x 415 (5th Cir. 2009).
16. Id. at 417.
17. Beijing Zhongyi Zhongbiao Elec. Info. Tech. Co. v. Microsoft Corp., No. C13-1300-MJP, 2013 WL 6979555, at *4 (W.D. Wash. Oct. 31, 2013), aff’d, 655 F. App’x 564 (9th Cir. 2016).
18. Beijing Zhongyi Zhongbiao Elec. Info. Tech. Co. at *4.
19. Shanghai Yongrun Investment Management Co. v. Kashi Galaxy Venture Capital Co., 2021 NY Slip Op 31459(U). See also William S. Dodge, Decision Denying Enforcement of Chinese Judgment Threatens Reciprocity, NY Law Journal (Jun. 17, 2021), https://www.law.com/newyorklawjournal/2021/06/17/decision-denying-enforcement-of-chinese-judgment-threatens-reciprocity/?slreturn=20230530154233.
20. Shanghai Yongrun Inv. Mgmt. Co. v. Xu, 203 A.D.3d 495, 160 N.Y.S.3d 874 (2022).
21. Id.
22. Civil Procedure Law of the People’s Republic of China (promulgated by the Standing Comm. Nat’l People’s Cong., Apr. 9, 1991, rev’d Dec. 24, 2021, effective Jan. 1, 2022), art. 289.
23. Promulgated Jan. 24, 2022.
24. Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work of Courts (Jan. 24, 2022), Art. 45.
25. Article 179 of the PRC Civil Code provides that, “[t]he methods of bearing civil liability mainly include: (I) Cessation of infringements; (II) Removal of obstacles; (III) Elimination of dangers; (IV) Return of property; (V) Restoration to the original condition; (VI) Repair, reworking or replacement; (VII) Continuous performance; (VIII) Compensation for losses; (IX) Payment of damages for breach of contract; (X) Elimination of ill effects and rehabilitation of reputation; and (XI) Extension of an apology. Where the law contains provisions on punitive compensation, such provisions shall apply.”
26. Civil Ruling on the Application for Recognition and Enforcement of a Civil Judgment of a Foreign Court by Liu Li, Applicant, and Tao Li and Tong Wu, Respondents, (2015) E Wuhan Zhong Min Shang Wai Chu Zi No. 00026, the Intermediate People’s Court of Wuhan City, Hubei Province (June 30, 2017) (ruling that the court should recognize and enforce a July 24, 2015 default judgment ruling issued by Los Angeles Superior Court judge William D. Stewart in the matter of a fraudulent money transfer because a reciprocal relationship between the PRC and the United States existed and the U.S. court decision violated neither the basic principles of PRC law nor Chinese national sovereignty, security and social and public interests).
27. See, e.g., (2018) Zhe 02 Xie Wai Ren No. 6, Intermediate People’s Court of Ningbo City, Zhejiang Province (Sep. 23, 2020) (reaching similar conclusions to the court in (2015) E Wuhan Zhong Min Shang Wai Chu Zi No. 00026).
28. (2017) Su 02 Xie Wai Ren No. 1 b, Intermediate People’s Court of Wuxi City, Jiangsu Province (Nov. 5, 2020).
29. (2019) Yue 01 Xie Wai Ren No. 3, Intermediate People’s Court of Guangzhou City, Guangdong Province (Apr. 3, 2022).
30. (2016) Gan 01 Min Chu No. 354, Intermediate People’s Court of Nanchang, Jiangxi Province (Apr. 20, 2017) (ruling that China and the U.S. have not concluded any international treaties on the recognition and enforcement of each other’s judgments and rulings, nor have they established any reciprocal relationship).
31. 425 F. App’x 580 (9th Cir. 2011).
32. See also Dr. Jie (Jeanne) Huang, Chinese Court unprecedentedly recognized and enforced a U.S. commercial monetary judgment, China International Business and Economic Law (CIBEL) Centre of UNSW (Sep. 4, 2017), https://www.cibel.unsw.edu.au/news/chinese-court-unprecedentedly-recognized-and-enforced-us-commercial-monetary-judgment.
33. Minutes of the National Symposium on Foreign-related Commercial and Maritime Trial Work of Courts (Jan. 24, 2022), Art. 45.
34. Press conference on high-level opening-up of foreign-related commercial and maritime trial services on September 27, 2022, https://www.chinacourt.org/chat/fulltext/listId/53036/template/courtfbhnewcommon/subjectid/MzAwNCg0M4ABAA.shtml.
35. Shanghai Yongrun Inv. Mgmt. Co. v. Xu, 203 A.D.3d 495, 160 N.Y.S.3d 874 (2022).
36. See Foreign-Country Money Judgments Recognition Act, Uniform Law Commission (last visited July 25, 2023), https://www.uniformlaws.org/committees/community-home?communitykey=ae280c30-094a-4d8f-b722-8dcd614a8f3e.
