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1 March 20247 minute read

Enforcing US Monetary judgments in China: Rules and Cases

While geopolitical tension is making it more difficult to do business between the US and China, the world’s two largest economies still have frequent commercial interactions. In terms of judicial interaction with respect to mutual enforcement of judgments between these two countries, although there is no bilateral treaty, China has been gradually building up its legal framework to enforce US judgments. This article will discuss the current status of enforcing US monetary judgments in China.

 

What was the previous legal framework to enforce US judgments?

The enforcement of US judgments in China is governed by Chinese domestic law, in particular, the Civil Procedure Law (CPL). The current CPL (amended in 2023) provides that a Chinese court can enforce a foreign judgment pursuant to: (1) the international convention or bilateral treaty (which is not applicable to the US judgments as there is no such convention or treaty); or (2) the principle of reciprocity.

The principle of reciprocity is not defined in the CPL or anywhere else under Chinese law. For quite a long time, Chinese courts had interpreted the principle of reciprocity narrowly, to the extent that the jurisdiction where the foreign judgment was made must have in fact enforced a Chinese judgment. In the absence of an established precedent of this nature, however, Chinese courts generally found themselves less able to support attempts to recognise and enforce foreign judgments.

The above narrow interpretation had caused difficulties in enforcing US judgments in China over the years. The situation did not change until June 2017 when the Wuhan Intermediate People’s Court (the Wuhan Court), for the first instance, recognised and enforced a monetary judgment made by the Superior Court of California, County of Los Angeles (the Wuhan Case). The Wuhan Court found that an earlier matter of Hubei Gezhouba Sanlian Industrial Co., Ltd. et. Al. v. Robinson Helicopter Co., Inc., 06-01798 (C.D. Cal 2009) (the Sanlian Case) was an established precedent for a US court to enforce a Chinese judgment and thus formed the basis of reciprocity. In the Sanlian Case, the US District Court for the Central District of California enforced a Chinese judgment made by the Hubei High People’s Court, the appellant court of the Wuhan Court. That ruling was later affirmed by the United States Court of Appeals for the Ninth Circuit.

In the following years, Chinese courts began to enforce more US judgments (and other foreign judgments), but there were still no clear guidelines on how to enforce a US judgment. This changed in 2021, when the Supreme People’s Court promulgated National Courts Symposium on Trials of Foreign-related Commercial and Maritime Matters (the Memorandum) (see our previous post here).

 

A case study on the enforcement of  US judgments in China from 2013 to 2023

We have collected and reviewed the published Chinese cases on enforcing  US judgments from 2013 to 20231 and set them out in the following summary chart.

Key findings and observations

While the number of cases may be regrettably limited, the court rulings in the chart illustrate the Chinese courts’ attitudes towards the enforcement of US judgments. In early 2017, different Chinese courts had various views on interpreting the principle of reciprocity in practice. For example, while the Sanlian Case in 2011 formed a precedent for reciprocity in the Wuhan Court’s view (see Case 3), the Nanchang court did not appear to recognise the precedential value of the Sanlian Case and rejected the enforcement (see Case 1).

That said, the Wuhan Case is significant because it is the Chinese courts’ first-ever enforcement of a US judgment based on the principle or reciprocity. In the following three years (from 2018 to 2020), both courts in Shanghai and Ningbo ruled to enforce US judgments based on the reciprocity (see Case 5 and Case 6). While those courts did not expressly refer to the Wuhan Case/Sanlian Case in their rulings, it is believed that both courts determined the existence of reciprocity based on the Sanlian Case.

In March 2022, Guangzhou Intermediate People’s Court issued a series of rulings to enforce the US judgments (see Cases 8-10). Among those cases, the defendant challenged that the Sanlian Case and Wuhan Case were insufficient to establish the reciprocity. However, the challenge was dismissed by the court. It is worth noting that those Guangzhou rulings (especially in Case 9) have been approved by the Supreme People’s Court, the highest court in China. This signals that the top level also acknowledges the established reciprocity between China and the US.

Interestingly, most of the U.S judgments mentioned in the summary chart are made by courts in the California area, including the federal district court and the state court. However, the Chinese courts do not appear to distinguish between a federal court judgment or state court judgment in considering the reciprocity but consider them as a whole. For example, in the Sanlian Case, the Chinese judgment was enforced by the US federal court, but the Wuhan Case recognized and enforced a state court judgment.

The origin state of the US judgment also does not seem to be a considering factor. Taking Case 5 for instance, while the Wuhan Case was made on enforcing a California state judgment, the Shanghai court in Case 5 equally enforced the Illinois judgment made by the federal court. In addition, the fact that the judgment enforced by the Shanghai court was a summary judgment, indicated that the Chinese court did not treat the summary judgment differently from other types of judgments, although there is no such concept of summary judgment in China’s legal system.

Notwithstanding the above, the cases also flag some risks of certain US judgments. For example, the US judgment to be enforced in China should be final and non-appealable, as the judgment made by the first instance court may not be considered “final” if there is still an ongoing appeal (see Case 7). This is because the Chinese law only treats the non-appealable judgment as “enforceable” under the CPL. Besides, as shown in the Cases 8-10, the punitive damage parts are not recognised by the Chinese courts as the Chinese law does not have a similar legal concept.

 

Developments in rules to enforce US judgments

As illustrated above, US judgments are generally eligible for enforcement in China.

Aside from those case-driven developments, Chinese legislators have also taken steps to standardise the criteria in enforcing a foreign judgment (including the US judgment). New articles on enforcing the foreign judgments have been introduced into the 2023 Amendments to the CPL (which became effective on 1 January 2024, see our previous post here), which provides that a US judgment, like other foreign judgments, can generally be recognised and enforced in China unless:

  1. the foreign court has no jurisdiction over the case.
  2. the respondent has not been lawfully summoned or has not been given a reasonable opportunity to present its case, or the party without the capacity to action is not properly represented.
  3. the judgment or ruling is obtained by fraud.
  4. the Chinese court has rendered a judgment/ruling on the same dispute or has recognised a judgment/ruling rendered by another foreign court on the same dispute.
  5. the enforcement of foreign judgment violates China’s public interests.

The new rules offer more detailed practical guidelines on enforcing a US judgment in China. These new rules may enhance the possibility of getting a US judgment enforced in China. In addition to this criteria, we should also bear in mind the miscellaneous requirements to enforce the US judgment, such as the finality requirement. .

If you have any questions or would like to discuss any of the information in this article, please feel free to get in touch with the authors.


1 Not all Chinese judgments are published online. Therefore it is possible that the summary does not capture all the relevant judgments.
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