Recognition and enforcement of foreign judgments in Mainland China

Enforcement of a foreign judgment (other than Hong Kong)

Whilst China has been a contracting state to the New York Convention since around 1987, thus allowing recognition and enforcement of foreign arbitral awards in China, this is certainly not the case for recognition and enforcement of foreign judgments. Generally speaking, Chinese courts would only recognise and enforce a foreign judgment on the basis of international convention, bilateral treaties or “principle of reciprocity” provided always that such recognition and enforcement do not breach the basic principles of Chinese law, state sovereignty and security or public interest.

As of today, China has entered into 34 bilateral treaties with other countries for recognition and enforcement of their judgments. For those countries with which China does not have a bilateral treaty, which include its major investment partners, such as the US and the UK, the parties would need to rely on the “principle of reciprocity” to seek recognition and enforcement of foreign judgments by the local courts in China, which is always subject to judicial interpretation by the local People’s courts on a case by case basis. For further information about a recent landmark decision by the Shanghai Maritime Court for recognition and enforcement of a foreign judgment, please visit our article on this here.

Generally speaking, the application for recognition and enforcement of a foreign judgment in China carries a statutory limitation period of two years (which usually runs from the date of the judgment) (“Limitation Period”). The Limitation Period is considerably shorter than in other jurisdictions, such as Hong Kong which is 12 years in the case of enforcement of judgment. Usually, in preparing for the application, the parties are required to prepare a translation (by a certified translator) of all non-Chinese documents relating to the proceedings which have to be notarised by local China consular authorities. Parties should be aware that these essential steps may take weeks if not more to complete. Given that the Limitation Period is mandatory and cannot be extended by parties’ agreement, it is advisable that those who seek to enforce a judgment in China must act sooner rather than later, or otherwise their application will be time-barred under Chinese law.

Enforcement of a Hong Kong judgment

Although the standard of review adopted by the Chinese courts in dealing with an application for recognition and enforcement of a foreign judgment may vary (and sometimes more stringent), the position with respect to a judgment granted by the Hong Kong courts is vastly different. While Hong Kong is part of China, by virtue of the principle of the “one country, two systems”, Hong Kong continues to apply the common law. Over the years since the handover, Hong Kong and Mainland China have entered into a number of arrangements which greatly facilitated the recognition and enforcement of judgments or arbitral awards on both sides of the border. This includes, in particular, the grant of emergency relief such as asset preservation order by the People’s courts in aid of a Hong Kong arbitration. Further, a very innovative pilot scheme was recently implemented by the PRC Supreme Court for providing assistance to Hong Kong liquidators in three designated cities, including Shenzhen, Shanghai and Xiamen. This is the first time a PRC court has offered assistance to liquidators appointed in other jurisdictions. This is very relevant as more and more PRC companies have established offices in Hong Kong (or are listed in Hong Kong), with their substantial assets still located in Mainland China.

Recently, the Hong Kong Government has introduced the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Bill into the Legislative Council (LegCo) for the purpose of implementing the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (HKSAR) (“REJ Arrangement”) signed between the Hong Kong Government and the Supreme People's Court on 18 January 2019. Insofar as the scope of the REJ Arrangement is concerned, not only does it cover a wide range of judgments on contractual and tortious disputes, it also expressly includes judgments given in respect of certain types of disputes over intellectual property rights. Hong Kong has become the first jurisdiction to have made such an arrangement with Mainland China with such a wide coverage.

With all these mutual arrangements in place, it is generally believed that Hong Kong’s status as a leading hub for international legal and dispute resolution services in the Asia-Pacific Region and, in particular, as an international arbitration centre as well as its development into a regional intellectual property trading centre, is greatly enhanced. This is perhaps one of the main reasons why Hong Kong remains a go-to venue for dispute resolution in the region and the number of cases seeking to make use of the arrangements discussed above whether through Courts or the Hong Kong International Arbitration Centre have increased steadily in the last few years.