Reciprocity in China-US Judgments Recognition.

• Author: Dodge, William S.

TABLE OF CONTENTS I. INTRODUCTION 1542 II. RECOGNITION OF US JUDGMENTS IN CHINA 1545 A. Recognition through International Treaties 1546 B. Recognition under Domestic Law 1548 1. The "Legally Effective" Requirement 1549 2. Reciprocity 1551 3. Public Policy 1553 4. Other Possible Requirements 1554 C. New Developments in Judgments Recognition 1555 III. RECOGNITION OF CHINESE JUDGMENTS IN THE UNITED STATES 1558 A. Deciding Where to Enforce 1560 B. The Uniform Acts 1561 1. Mandatory Grounds for Nonrecognition 1563 2. Discretionary Grounds for Nonrecognition 1565 3. Reciprocity 1567 C. Common-Law States 1568 IV. CHINESE AND US PRACTICE COMPARED 1570 A. Structural Differences 1571 B. Similar Rules 1572 C. Implications for Reciprocity 1575 V. FUTURE PROSPECTS 1578 A. A Bilateral Treaty 1578 B. Multilateral Conventions 1579 C. Domestic Law 1581 VI. CONCLUSION 1582 I. INTRODUCTION

Despite recent talk of "trade wars" and "decoupling," China and the United States remain among each other's largest trading partners. (1) As one economist recently observed, "it is impossible to decouple the two largest economies in the world." (2) With business relations come business disputes. Parties from China and the United States often choose international commercial arbitration to settle their disputes. But not all China-US contracts have arbitration clauses, and not all disputes arise out of contracts. Some disputes inevitably find their way into Chinese or US courts and result in judgments that must be enforced in the other country.

The conventional wisdom has been that enforcing US judgments in China is difficult. (3) The absence of Chinese decisions finding a reciprocal relationship with the United States prior to 2017 also indicates some skepticism, at least among Chinese courts, that Chinese judgments would be enforced in the United States. But recent developments challenge those views. Since the 2009 US federal court decision enforcing a Chinese judgment in Hubei Gezhouba Sanlian Industrial Co. v. Robinson Helicopter Co. (4) courts in the United States have consistently recognized and enforced Chinese court judgments in the same way as court judgments from other countries. Chinese courts have recently reciprocated, with Liu v. Tao (5) enforcing a US state court judgment in 2017 and Nalco Co. v. Chen (6) enforcing a US federal court judgment in 2018. Whereas the US enforcement of Chinese judgments simply represents the application of existing US rules on the recognition and enforcement of foreign judgments, the Chinese enforcement of US judgments is occurring within the context of rethinking China's traditional approach to reciprocity in the enforcement of foreign judgments.

The legal frameworks governing foreign judgments in China and the United States are quite different. China's rules on foreign judgments are established at the national level by China's Civil Procedure Law (CPL), which provides for the enforcement of legally effective foreign judgments pursuant to international treaties or in accordance with the principle of reciprocity. (7) Although China has bilateral treaties providing for the recognition of foreign judgments with many countries, it has none with the United States. (8) The absence of a treaty between China and the United States brings the principle of reciprocity to the forefront, a principle China's Supreme People's Court (SPC) has traditionally interpreted quite strictly to require prior recognition of Chinese judgments by the legal system in question. (9)

In the United States, the rules on foreign judgments are not established at the national level by federal law but rather by the laws of the fifty states. (10) Thirty-six of those states have adopted one of two uniform acts on foreign judgments, while in fourteen states, common law governs the enforcement of foreign judgments. (11) From a Chinese perspective, the US approach to foreign judgments raises a number of important questions. In applying China's reciprocity requirement, should Chinese courts treat the United States as a whole, treat the thirty-six states that have adopted one of the uniform acts as a whole, or treat each US state individually? Should Chinese courts consider federal and state court decisions as equivalent for establishing reciprocity? It is also worth noting that, in contrast to China's approach, a large majority of US states have no reciprocity requirement for the enforcement of foreign judgments, which means that courts in these states will enforce Chinese judgments even if China would not enforce similar US judgments. (12)

Recent developments warrant a fresh look at the relationship between China and the United States with respect to the recognition and enforcement of judgments. (13) In the United States, there is now more than a decade of case law recognizing and enforcing Chinese court judgments. In China, there are now decisions finding that the United States meets the CPL's strict reciprocity requirement, while the SPC has moved to relax this reciprocity requirement in at least some contexts. Developments at the Hague Conference on Private International Law offer another possible path for strengthening the reciprocal enforcement of China--US judgments. Mutual ratification of the 2005 Hague Convention on Choice of Court Agreements (which both China and the United States have signed but not ratified) or the broader 2019 Hague Judgments Convention would revolutionize the enforcement of judgments between China and the United States, although neither seems likely in the short term.

This Article proceeds in four main parts. Part II looks at the recognition of US judgments in China, outlining the Chinese framework for the recognition of foreign judgments generally and discussing recent cases involving US judgments. Part III examines the recognition of Chinese judgments in the United States, explaining the rules established by the uniform acts adopted in thirty-six states and by the common law in the remaining fourteen states, as well as how those rules have been applied to Chinese judgments by state and federal courts. Part IV compares the approaches of China and the United States, highlighting their differences with respect to reciprocity while noting other similarities. Finally, Part V evaluates the possibilities for future cooperation. It notes that mutual ratification of the Hague Choice of Court Convention or the Hague Judgments Convention would be highly desirable but remains unlikely, primarily because of disagreements in the United States about how such conventions should be implemented in US domestic law. Part VI concludes that progress in the recognition and enforcement of China-US judgments is most likely to come from continued judicial practice under existing rules and from China's shifting approach to reciprocity.

2. RECOGNITION OF US JUDGMENTS IN CHINA

   For recognition and enforcement of foreign judgments in China, the point of departure is the CPL, which was passed by the National People's Congress (NPC) in 1991. Article 281 of the CPL outlines the procedure, providing that foreign judgment creditors or foreign courts may apply for recognition and enforcement to the intermediate people's court with jurisdiction. (14) Article 282 of the CPL lays down substantive requirements for recognition--that the foreign judgment is legally effective, that recognition is supported by an international treaty or the principle of reciprocity, and that the judgment does not violate Chinese public policy. (15) Roughly speaking, recognition and enforcement of foreign judgments in China may follow an international treaty path or a domestic law path based on the principle of reciprocity. Because no international treaty on the recognition of judgments between China and the United States currently exists, the recognition of US judgments in China must rely on reciprocity under Chinese domestic laws.

   1. Recognition through International Treaties

      As of today, China has concluded thirty-nine bilateral treaties on judicial assistance in civil and commercial matters, thirty-five of which provide for the recognition of judgments. (16) These bilateral treaties contain relatively detailed rules on the recognition of judgments, although their provisions have evolved since China concluded its first bilateral treaty with France in 1987. (17) The latest bilateral treaty between China and Ethiopia, for example, closely follows the 2019 Hague Judgments Convention in both form and content and includes provisions on the scope of recognizable judgments, (18) the parties that may apply for recognition and enforcement, (19) the documents that must be submitted, (20) indirect jurisdiction, (21) the recognition procedure, (22) grounds for refusing recognition, (23) and the effects of recognition. (24) Such bilateral treaties provide a more detailed and modern framework for recognition than the CPL discussed below. China's bilateral treaties ensure reciprocity in the recognition and enforcement of judgments while avoiding the strict reciprocity requirement set forth in China's domestic laws. In fact, the first successful recognition cases in China were brought under such treaties. (25)

      However, the role of such treaties should not be exaggerated. Only a limited number of countries have signed bilateral judicial assistance treaties with China. (26) No such treaties exist between China and its biggest trading partners, including the United States, Japan, South Korea, Germany, the United Kingdom, and Australia. (27) There appears to be little hope for such treaties between China and these countries, at least in the short term. Consequently, it is unrealistic to expect a bilateral treaty to provide for recognition and enforcement between China and the United States. (28)

      Multilateral conventions provide a potentially more promising path. In recent years, China has been actively participating in the Hague Conference on Private International Law (HCCH)...