Tuesday, 16 May 2017

The PRC Enforces a Foreign Judgment

For a long time it has been virtually impossible to have a foreign judgment enforced in the People’s Republic of China (“PRC”).  The PRC civil procedure law does not allow for enforcement unless the PRC is obligated to under a treaty or on the basis of reciprocity: see Article 282 of the PRC Civil Procedural Law.  The PRC has entered into treaties regarding judgments, all of which are bi-lateral, with thirty countries, including Hong Kong, but Canada is not among them.  The PRC has until now never enforced a judgment on the basis of reciprocity.  Some countries – such as Japan – have refused to enforce a PRC judgment because the PRC have not enforced their judgments. 

For the first time, in December 2016, a PRC court recognized and enforced a foreign judgment on the basis of reciprocity.  The Nanjing Intermediate People’s Court enforced a judgment of the Singapore High Court in the Kolmar Group AG case.  A Swiss company had successfully sued a Nanjing company in the High Court of Singapore, as per the jurisdiction selection clause of an agreement between them, and obtained a default judgment for US$350,000. The Swiss company applied to the Chinese Court for enforcement of that judgment on grounds of reciprocity.  The Singapore court had enforced a judgment of the Jiangsu Suzhou Intermediate People’s Court in 2014[1].  There is no treaty for enforcement of judgments between Switzerland and the PRC. Thus it is clear that the Chinese court’s decision to allow enforcement was based on reciprocity.  What remains unclear whether the Chinese courts will require that the originating jurisdiction have already enforced a Chinese judgment, or whether it is enough that the law of that originating jurisdiction would permit enforcement.     

This distinction is important for Canadian judgment creditors.  As far as I know, no Canadian court has ever enforced a PRC judgment.  But nor , as far as I know, has a Canadian court refused to enforce one at all, let alone refused  on grounds other than the established defences to enforcement, e.g. the originating court lacked jurisdiction, lack of notice or other breach of natural justice, fraud or the judgment was not final.    Given Canada’s comparatively liberal rules about enforcement of foreign judgments, one can expect that eventually a Canadian court will enforce a PRC judgment.    Canadian judgment creditors may have to wait until a Canadian court does enforce a PRC judgment before they will be able to enforce in the PRC.  American judgment creditors will be more encouraged, in that an American court has enforced a PRC judgment.   

Even if the Chinese courts follow the narrower concept of reciprocity, the Nanjing court’s ruling nonetheless signifies a big step forward for enforcement of foreign judgments, and is to be celebrated.

[1] Giant Light Metal Technology (Kunshan) Co Ltd. v. Aksa Far East Pte Ltd.  [2014] SGHC 16

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