It is reported that investors in China directly invested into non-financial industries in over 164 countries and regions worldwide, with total investment up to US$ 170 billion and maintained a trade volume of over RMB 24 trillion in 2016. With the dynamic interaction between China and other countries, enforcement of foreign judgments in China has practically become more and more significant.
Under the Civil Procedure Law of the PRC, it is possible to enforce foreign judgments in China according to applicable treaties or the principle of reciprocity. Judgments from Taiwan, Macau and Hong Kong however can be enforced in China under reciprocal enforcement arrangements respectively. It should also be noted that the foreign judgments on divorce, but not on the monetary issues involved in divorce, are generally enforceable in China in the absence of treaty arrangement or reciprocity.
China has yet to enter into treaties for recognition and enforcement of judgments with its major trading and investment partners, including England, Japan, Germany, Australia and the USA, but with around 30 smaller countries, mostly developing.
As such, any case based on reciprocal relationship has been intensely reviewed and interpreted in legal profession. In fact, there is no official interpretation, either legislative or judicial, on the definition of reciprocity and the basis of the application. It is generally understood that a Chinese court will consider whether there is any precedent indicating reciprocity. In other words, a Chinese court may recognize and enforce the judgment of a foreign country only if the foreign country in question has recognized and enforced the judgment issued by Chinese courts before. In practice, the Chinese courts have traditionally adopted a conservative approach in enforcing foreign judgments on the basis of reciprocity.
On the other hand, it is reported that many foreign countries started to recognize and enforce the judgments from China, notably German, the USA, Israel, and Singapore. Due to this, the foreign judgment is gradually becoming enforceable in China. The most recent case is the decision made by a court in Nanjing in December 2016, where the court recognized and enforced the judgment relating to a commercial matter rendered by the Supreme Court of Singapore on 22 October 2015 on the ground of the principle of reciprocity. This decision is deemed a positive development although case laws are not applied in China. In addition, according to a speech made by a judge in the Supreme Court of China in 2016, Chinese courts may consider enforcing the judgment of a foreign country which has not recognized and enforced the judgment issued by Chinese courts before, but intends to do so.
A foreign judgment should be final and conclusive and should not violate the basic morals and principles of PRC law, state sovereignty, national security, and public interest in order to be enforced in China. The eligible parties to apply for enforcement are either the party who received the judgment or the foreign court that rendered it. The application should generally be filed within two years from the issuance of the judgment to the intermediate court which should have proper jurisdiction, i.e. over the property to be enforced against.
It is still uncertain if other Chinese courts will follow the approach of the court in Nanjing. Unless the Chinese defendant has assets in a foreign jurisdiction outside China or there is a clear record of “reciprocity” in such foreign jurisdiction, it is highly advisable to consider other approaches rather than litigating outside China. These approaches include: 1) international arbitration given the New York Convention ratified China, 2) litigation in Hong Kong according to the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters, and 3) litigation in China.