Enforcement of Judgments 2019 Comparisons

Last Updated August 05, 2019

Law and Practice

Authors



King & Wood Mallesons is an international law firm headquartered in Asia. As an international law firm able to practice in the PRC, Hong Kong, Australia, the UK, the US and the European Union, KWM’s presence and resources are profound. Leveraging its exceptional legal expertise and depth of knowledge in the Chinese market, it advises both Chinese and overseas clients on a full range of domestic and cross-border transactions. KWM provides comprehensive legal services in both domestic and cross-border dispute resolution. With over 20 years of experience in litigation and alternative dispute resolution, it takes the lead in the industry in providing domestic and international clients with powerful legal support. KWM has represented clients in numerous complicated cases of recognition and/or enforcement before courts around the world.

In mainland China, enterprise-related information (eg the equity investment made in a company) is made available to the public through the National Enterprise Credit Information Publicity System, which is maintained by the relevant authority and several large websites.

Information on intellectual property rights such as patents and trademarks is also made available to the public through official websites maintained by the relevant authorities.

In addition, certain types of assets, including real estate, motor vehicles and ships, are registered with the competent government authorities. These authorities normally allow searches of asset information, either on-site or online, subject to certain restrictions.

Moreover, a party can also learn about equity investments, accounts receivables, major acquisitions and other asset information of a listed company through disclosure documents made to the stock exchange.

In general, there are only a limited number of ways in which one party is able research the asset position of the other party. However, a party applying for the enforcement of a judgment can seek assistance from the people’s court to identify the assets of the party against whom enforcement is being sought. The people’s court has the power to identify the defendant’s asset position in various ways:

  • The Supreme People’s Court maintains an online enforcement investigation and control system that permits investigations into several categories of assets held by the defendant. The system is said to connect with multiple governmental entities, including the Ministry of Public Security, the Ministry of Civil Affairs, the Ministry of Natural Resources, the Ministry of Transport and the People’s Bank of China etc, as well as thousands of financial institutions. Similar systems are maintained by the local people’s courts as well.
  • The people’s courts can investigate and verify leads provided by the applicant.
  • The people’s courts can issue the defendant with a property report order, requiring the defendant to report or provide an update on the status of his or her property. Such property report orders shall state the scope and period of the reported property, as well as the legal consequences of refusing to provide a report or making a false report.
  • The people’s courts can issue a search order in circumstances where the defendant has concealed his or her property and/or his or her books of account.
  • The people’s courts can summon the defendant or his or her legal representative, person-in-charge, de facto controller or other responsible person to answer the court’s inquiries about the defendant’s property.
  • If a defendant refuses to submit a report on his or her property status, the people’s courts can order an audit into the defendant’s financial status  and require the defendant to provide the required financial material.
  • The people’s courts can impose a fine or detain the defendant or the person in charge in the case of a company if they refuse to cooperate with the court in identifying the property in question.
  • The people’s courts can post an advertisement, offering a reward through official channels maintained by the court system, to gather information on the assets of the defendant.

After identifying enforceable assets through the above investigation measures, the people’s courts can take further steps to seize, withhold, freeze or dispose of the defendant’s property. Where assistance is required from third parties, the court can issue a Notice on Assistance for Enforcement to the party concerned.

There are several different types of domestic judgments:

  • depending on the litigation procedures applied, judgments are normally divided into civil judgments, criminal judgments and administrative judgments;
  • depending on the stage of the litigation process, judgments can be divided into judgments of first instance, judgments of second instance and judgments upon retrial;
  • depending on whether the defendant appears at the hearing, judgments can be divided into default judgments and judgments on the merits;
  • depending on the nature of the judgment, judgments can be divided into judgments for money and specific performance, confirmatory judgments and judgments for alteration. Judgments for money and specific performance obligate a party to perform certain obligations in favour of the other party. Confirmatory judgments confirm the existence or non-existence of certain legal relationships between the parties. Judgments for alteration alters the prior legal relationship between the parties; 
  • depending on whether the judgment deals with all the claims, there are partial judgments and full judgments.

While no interim judgments are issued in mainland China, the people’s court does make rulings over certain procedural and substantive matters such as: refusing to accept an action, objection to jurisdiction, dismissing an action, property preservation and advance enforcement, suspension or termination of enforcement and revoking or not enforcing an arbitral award. The people’s courts can also make decisions over certain other procedural matters, eg whether a judge shall withdraw from hearing a case.

For the purpose of this guide, this chapter will only address civil and commercial judgments and the term judgment shall be understood broadly to include court rulings that require enforcement.

The Civil Procedural Law of the People’s Republic of China (“Civil Procedural Law”) has a chapter about the enforcement of effective domestic civil judgments and the property part of a criminal judgment or ruling. The Supreme People’s Court published several judicial interpretations in answer to specific, detailed questions in relation to enforcement.

Foreign judgments and foreign arbitral awards, once recognised domestically pursuant to the relevant international treaties/conventions or the principle of reciprocity, follow the enforcement procedure as set out below, subject to specific provisions to the contrary:

Application

The applicant shall apply to the court of first instance or the court of the place where the property subject to enforcement is located (to be of equal status as the court of first instance) within two years of the last day of the performance period stipulated in the judgment or, alternatively, the effective date of the judgment.

Acceptance of the Case

The people’s court will formally accept the case after reviewing the application materials.

Service of Legal Documents

The people’s court will then serve a Notice on Enforcement on the defendant. The court can also issue a Notice on Assistance for Enforcement to third parties where assistance is required for identifying and seizing control of the assets.

Enforcement Measures

During enforcement, the people’s court can take various measures to identify, control and dispose of the defendant’s assets. For example:

  • require the bank where the defendant has a bank account to make a transfer direct to the applicant;
  • require the relevant registration authorities of equitable interests, real estate, ships, motor vehicles, securities etc to directly change the registration of ownership from the defendant to the applicant;
  • require third parties that owe money to the defendant to pay the applicant directly;
  • require the employer that the defendant works for to pay his salary direct to the applicant; and
  • where property that has been seized, withheld or frozen needs to be sold, the people’s court may dispose of the property by sell-off or auction. 

Objection to Enforcement

The applicant may face different types of objections from the defendant or other interested parties during the enforcement procedure. The court will consider and rule on such objections. The court will normally not stay an enforcement procedure, save in circumstances that require the enforcement procedure to be postponed or suspended according to the relevant rules; for instance, where an interested party claims to be the owner of the property subject to enforcement.

Conclusion of Enforcement

The enforcement case can be concluded upon the occurrence of certain circumstances, for instance:

  • where the defendant, voluntarily or compelled to do so by the people’s court, fulfills his or her obligations;
  • where the parties have reached and fully performed an enforcement reconciliation agreement;
  • where the defendant has no enforceable assets. In this case, the applicant may apply to resume the enforcement procedure if enforceable assets are later identified; 
  • where the effective judgment is reversed upon re-trial; and
  • where the defendant as a company is declared bankrupt.

Instead of commencing separate enforcement proceedings on his or her own account, an applicant can apply to participate in the distribution of property in circumstances where enforcement proceedings have already been commenced against the defendant by another creditor and the applicant finds that the defendant is unable to pay off all of the debts. In these circumstances, the court will work out a property distribution plan among all the creditors by reference to the priority of the debts and the time when enforcement measures were taken by the respective people’s courts.

If the defendant is a company and it cannot pay off the debt, upon the written consent of either the defendant or any applicant in any enforcement procedures the enforcement case shall be handed over to the intermediate people’s court of the place where the defendant is domiciled or to a designated lower people’s court upon approval by the higher people’s court for commencing bankruptcy proceedings. The enforcement shall be terminated and all the applicants in the various enforcement procedures will need to participate in the bankruptcy proceedings in order to be paid.

The costs of enforcing domestic judgments normally consist of the expenses incurred during the process of enforcement together with the attorney’s fee. Although the people’s court charges application fees based on the judgment sum being enforced, the people’s court does not require the applicant to pre-pay such fees.

Expenses incurred during the enforcement procedure shall be borne by the defendant. For instance, where the applicant requests the publication of a party’s failure to perform an effective judgment through the media, media fees will be incurred. Where the enforcement involves the warehousing and shipping of movable property, warehousing and shipping costs will be incurred. Where the assets need to be valued and auctioned, costs for valuation and auction will be incurred. In practice, the applicant needs to pre-pay these expenses so that the people’s court can proceed with the enforcement, but he or she will be reimbursed from the proceeds of the enforcement.

Due to the complexity of enforcement, the applicants normally engage attorneys to provide professional services. The attorney’s fees vary depending on the circumstances of the case and are borne by the applicant.

Where there is enforceable property, the enforcement procedure shall be concluded within six months following the people’s court’s acceptance of the case. However, in practice, the enforcement procedure is likely to take more than six months due to various reasons, for instance:

  • if the circumstances require, the people’s court may extend the time line after obtaining approval from its president or vice president;
  • according to the law, the six-month period does not include: (i) the time taken to serve the ruling on the defendant by way of a public announcement; (ii) the time taken for deferment of enforcement; (iii) the time taken for suspension of enforcement; (iv) the time taken for enquiring to the higher people’s courts about the application of law; (v) the time taken for enquiring to the higher people’s courts about enforcement conflicts with other courts; (vi) the time taken for the audit, valuation and winding up of assets by professional institutions; and (vii) the time taken for auctioning and selling off the seized property; and

If the enforcement proceedings turn into bankruptcy proceedings, there may be more uncertainties that require more time.

It is also likely that a judgment cannot be enforced at all under certain circumstances, which are detailed in 2.6 Unenforceable Domestic Judgments.

Therefore, depending on the specifics of the case, eg whether the defendant has enforceable property and the type of property, the length of the enforcement procedure can vary significantly. 

After obtaining an effective judgment, the Applicant can apply for enforcement. During the enforcement procedure, the people’s court can take various measures, as summarised in Section 1, to determine the defendant’s assets.

The defendant may challenge the enforcement of a domestic judgment under the following circumstances:

  • if the defendant seeks a retrial of an effective judgment and the people’s court issues a ruling on the said retrial. In this case, the enforcement process shall be suspended pending the outcome of the retrial. It should be noted that the enforcement process would only be suspended following the people’s court ruling on a retrial. An application for retrial per se will not guarantee suspension;
  • if the applicant applied for enforcement after the expiry of the statute of limitation, ie two years from the last day of the performance period specified in the judgment or, alternatively, the effective date of the judgment, the defendant can challenge the enforcement; or
  • if the enforcement measures taken by the people’s court are improper, or if the ownership of the subject matter subject to enforcement is in dispute, the defendant may file an objection. If the objection is confirmed, the people’s court shall cancel or rectify the enforcement measures.

In principle, domestic judgments are enforceable in mainland China. However, the laws of mainland China require the termination of enforcement under certain circumstances and prohibit enforcement in certain subject areas.

Pursuant to Article 257 of the Civil Procedural Law, a judgment cannot be enforced in the following circumstances and the people’s court shall terminate the enforcement thereof:

  • where the judgment has been reversed upon retrial;
  • where the defendant dies with no estate and has no successors to his or her obligations;
  • where the person entitled to alimony, payment of maintenance or payment of child support dies; and
  • where the defendant suffers hardship and is unable to repay his or her borrowings from living expenses, has no source of income and has lost his or her ability to work.

According to Article 5 of the Provisions of the Supreme People’s Court for the People’s Courts to Seal up, Distrain and Freeze Property in Civil Enforcement, the following subject matters cannot be enforced against:

  • clothes, furniture, kitchenware, tableware, other necessities for family life, living expenses, articles required for completing compulsory education, auxiliary devices and medical articles required for the physically handicapped that are necessary for the defendant and his dependent family members;
  • unpublicised inventions or unpublished works of the defendant; and       
  • medals and other articles of honour and commendation of the defendant.

China Judgments Online, maintained by the Supreme People’s Court, is the unified platform for the publication of judgments by people’s courts across the country.

Judgments involving state secrets, juvenile delinquency, divorce proceedings, child support, guardianship of children or cases settled by mediation shall not be published online. However, the court shall publish information on the case number, the trial court, the date of judgment and the grounds for non-disclosure of these judgments unless the disclosure of such information may result in the disclosure of state secrets.

For judgments that may be published, the court shall publish a full text of the judgment online; however, certain information relating to personal privacy, commercial secrets and other information the court deems inappropriate to disclose will be redacted.

The Supreme People’s Court also maintains China Enforcement Information Online, which publishes a list of dishonest defendants who have failed to perform their obligations. The list discloses basic information about the defendant, his or her obligations under the effective judgments, his or her performance of the said obligations and specific descriptions of his or her dishonest conduct etc.

If a defendant pays what is owed, he or she can be removed from the list of dishonest debtors. However, published judgments will not be removed.

When enforcing a foreign judgment in mainland China, the applicant may encounter the following legal issues:

Recognition

Before a foreign judgment can be enforced it must first be recognised by a people’s court. In practice, the applicant would normally apply for recognition and enforcement at the same time. In such circumstances, the people’s court will make a ruling on recognition and then assign the case to the enforcement division of the court.

Jurisdiction

Pursuant to Article 281 of the Civil Procedural Law, a foreign judgment may be recognised and enforced in mainland China upon receipt of an application by the applicant or if requested to do so by the foreign court that rendered the judgment. The same article provides that the application or request for recognition and enforcement shall be heard by an intermediate people’s court.

With regard to territorial jurisdiction, reference may be made to the provisions regarding territorial jurisdiction as provided in the Civil Procedural Law. In practice, the applicant normally applies to the court of the place where the enforceable asset is located or the place where the defendant is domiciled.

Statute of Limitation

Any application for the recognition and enforcement of a foreign judgment shall be made before the expiry of the statute of limitation, ie two years from the last day of the performance period stipulated in the judgment or, alternatively, the effective date of the judgment.

Where recognition of a foreign judgment is sought separately, the applicant shall apply for enforcement within two years from the date when the ruling of the people’s court on recognition became effective.

Basis for Recognition and Enforcement

Pursuant to Article 281 of the Civil Procedural Law, the people’s court will recognise and enforce effective foreign judgments in accordance with international treaties and conventions on the recognition and enforcement of foreign judgments to which both China and the country or region where the judgment was made are parties, or pursuant to the principle of reciprocity. In the case of a foreign divorce judgment, Chinese civilians can apply for recognition in accordance with the Notice of the Supreme People’s Court on the Provisions Concerning the Application of Chinese Civilians for Recognition of Foreign Divorce Judgments.

To date, more than 35 countries and regions have concluded or acceded to international treaties/conventions with China on the recognition and enforcement of foreign judgments. However, there are still a number of countries, such as the UK, Germany and Japan, that have not entered into international treaties/conventions with China.

On 12 September 2017, China signed the Hague Convention on the Choice of Court Agreements, pursuant to which the contracting states recognise and enforce foreign judgments made by a court chosen by the parties to an international civil or commercial case. However, this convention has yet to come into force in China. Recently, the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (the “2 July 2019 Convention”) was adopted by the delegates of the Hague Conference on Private International Law. Similar to the purpose and mechanism of the New York Convention, the 2 July 2019 Convention is intended to establish a uniform standard and framework for the recognition and enforcement of foreign civil and commercial judgments. However, this convention has yet to come into force in China. Therefore, the number of foreign judgments recognised and enforced is rather small.

With regard to the application of the principle of reciprocity, the people’s court takes a strict attitude and will only apply such a principle if the applicant is able to provide sufficient evidence to demonstrate that the country or region where the judgment was made has a history of recognising and enforcing judgments of the people’s court. Due to this high threshold, the people’s court has only recognised and enforced a few foreign judgments. However, against the background of the “one belt and one road” initiative, the people’s courts are encouraged to actively apply the principle of reciprocity in order to facilitate commercial cooperation among neighbouring countries.

Review Standards

Upon receiving an application for the recognition and enforcement of a foreign judgment, the people’s court shall decide whether the application is consistent with the international treaties/conventions or the principle of the reciprocity; in particular, whether such judgments comply with the primary principles of Chinese law and respect state sovereignty, security and the social and public interests of China. If the foreign judgment is in compliance with the above, the people’s court will recognise the foreign judgment. The foreign judgment, upon being recognised, shall then have the same legal effect as a domestic judgment. The Chinese court will issue an enforcement order if and when enforcement is requested.

Objections to Recognition and Enforcement

The defendant can challenge a foreign judgment by invoking the grounds provided in the applicable international treaties/conventions or the principle of reciprocity, which are summarised in 3.6. As mentioned above, by raising such a challenge the defendant is actually asking the people’s courts not to recognise the validity of a foreign judgment.

Even if a people’s court recognises the foreign judgment, the applicant may still face objections similar to those for enforcing a domestic judgment, as mentioned in 2.2, from the defendant or from other interested parties. 

Enforcement Process

Pursuant to Article 282 of the Civil Procedure Law, once a foreign judgment is recognised it can be enforced in accordance with the provisions in the Civil Procedure Law. Unless there are special rules for the enforcement of a foreign judgment, eg jurisdiction, the process of enforcing a domestic judgment is the same as enforcement of a foreign judgment.

Property Preservation

Whereas the Civil Procedural Law and the international treaties/conventions are silent on whether the people’s court shall take property preservation measures either before or after it accepts the application for recognition of a foreign judgment, in practice the people’s court is unwilling to take property preservation measures. 

Regional Arrangements within China

To avoid any doubt, mainland China has concluded bilateral arrangements with Hong Kong, Macau and Taiwan pursuant to which judgments made in those regions must seek recognition and enforcement in mainland China. While the process for seeking recognition and enforcement is similar to that of foreign judgments, there are special and different provisions regarding jurisdiction, property preservation, time limits etc. In particular, an applicant is allowed to apply to a higher people’s court for reconsideration if the competent people’s court refuses to recognise and enforce the judgment.  An applicant is, therefore, recommended to take a close look at these bilateral arrangements before seeking recognition and enforcement before a people’s court. This Q&A does not expand on such regional bilateral arrangements. 

As mentioned above, a foreign judgment has to meet the requirements for recognition, as set out in the international treaties/conventions or under the principle of reciprocity before it can be enforced.

From a substantive perspective, if there are no international treaties/conventions or reciprocal relationships, or if the application fails to meet the requirements for recognition and enforcement, the people’s court will refuse recognition and enforcement.

One exception applies to the recognition of a foreign divorce judgment. An applicant may invoke the Notice of the Supreme People’s Court on the Provisions Concerning the Application of Chinese Civilians for Recognition of Foreign Divorce Judgment, even in the absence of any international treaties/conventions or reciprocal relationships.

From a procedural perspective, once a foreign judgment is recognised and enters into enforcement, the people’s court approaches different types of foreign judgments in a relatively uniform manner (by making reference to the same process under the Civil Procedural Law, which is summarised in 3.4 Process of Enforcing Judgments).

As summarised in 3.2 Variations in Approach to Enforcement above, instead of setting out unenforceable foreign judgments by category, the international treaties/conventions provide various grounds for challenging the enforcement of a foreign judgment.

Pursuant to Article 282 of the Civil Procedure Law, once a foreign judgment is recognised it can be enforced in accordance with the provisions in the Civil Procedure Law. Unless there are special rules for the enforcement of a foreign judgment, eg jurisdiction, the process for enforcing a domestic judgment applies equally to the enforcement of a foreign judgment.

The rules regarding the costs and time taken to enforce a foreign judgment are similar to those of a domestic judgment, except that the applicant shall pre-pay the application fees.

Pursuant to Article 14 (1) of Measures for the Payment of Court Fees, the application fees shall be calculated based on the judgment sum being enforced. Specifically, where there is no enforceable amount, the court charges between RMB50 and RMB500 for each case. Where the amount is less than RMB10,000 the court charges RMB50; for that part above RMB10,000 the court charges 1.5% for sums up to RMB500,0000, 1% for sums between RMB500,000 and RMB5,000,000, 0.5% for the sums between RMB5,000,000 and RMB10,000,000 and 0.1% for sums exceeding RMB10,000,000.

In practice, the enforcement of a foreign judgment normally incurs additional expenses, such as translation, notarisation and authentication, which also extends the time taken to process the judgment.

While the laws of mainland China set a six-month time limit for the enforcement of a domestic judgment, no such statutory time limit applies to foreign judgments.

The grounds for challenging enforcement varies and depends on the specific provisions of the international treaties and conventions concluded by or acceded to by China.

Subject the specific provisions therein, the international treaties and conventions allow an applicant to challenge the enforcement of a foreign judgement on the following grounds:

  • the judgment has not come into effect, is not final or is not enforceable in accordance with the laws of the country where the judgment was rendered;
  • the defendant was not legally summoned in accordance with the law of the place of the court rendering the judgment, or, although the defendant was legally summoned, he or she was not given a reasonable opportunity to make representations or to defend the case;
  • the judgment was obtained by fraud;
  • the court rendering the judgment had no jurisdiction;
  • the judgment was rendered in an action which was accepted by the foreign court after a people’s court had already accepted an action on the same dispute;
  • a people’s court had rendered a judgment on the same dispute, or had recognised a judgment on the same dispute of another country or place;       
  • recognition and enforcement of the judgment would be manifestly contrary to the basic principles of the law or the social and public interests of China; and
  • the applicant made the application after the expiry of the statute of limitation.

Multiple legal issues arise during the enforcement of an arbitral award. For instance:

Types of arbitral award

The Civil Procedural Law and the Arbitration Law of the People’s Republic of China (“Arbitration Law”) provide grounds to deny enforcement of arbitral awards rendered by arbitration institutions based within mainland China. Depending on whether the case involves any foreign elements, such arbitral awards are further divided into foreign-related arbitral awards and non-foreign-related arbitral awards. Both types of arbitral awards can be enforced directly in mainland China. However, the grounds for revoking or denying enforcement of the two types of arbitral awards are different, which are summarised in 4.6.

After China signed the New York Convention, an applicant can apply for recognition and enforcement of “arbitral awards made in the territory of a state other than the state where the recognition and enforcement of such awards are sought”. Due to China’s reservation, “arbitral awards not considered as domestic awards in the state where their recognition and enforcement are sought” (“Non-domestic Award”) cannot be recognised by the people’s court. As the laws of mainland China and the New York Convention adopt different standards in categorising arbitral awards, ie the location of the arbitration institution for the laws of mainland China versus the seat of arbitration for the New York Convention, certain arbitral awards that do not fit in with such standards cannot be recognised and/or enforced in mainland China due to the lack of a proper legal basis under either the laws of mainland China or the New York Convention. 

The people’s courts are exploring ways to resolve such lacunae. In a judgment rendered by the Nanjing Intermediate People’s Court, the court ordered enforcement of a CIETAC arbitral award rendered in Hong Kong by applying the bilateral arrangement on the enforcement of arbitral awards between Hong Kong and mainland China. This reflects the people’s court’s inclination to interpret the laws in a proper way to not frustrate the validity of an arbitral award. 

Jurisdiction

Under the laws of mainland China, the application for recognition and/or enforcement of an arbitral award shall be filed with the intermediate people’s court of the place where the enforceable asset is located or where the defendant is domiciled. The competent people’s court can designate a proper lower court to enforce the arbitral award upon satisfaction of certain requirements and approval by the higher people’s court.

Statute of Limitation

Similar to the recognition and/or enforcement of a judgment, any application for recognition and/or enforcement of an arbitral award shall be made before the expiry of the statute of limitation, ie two years from the last day of the performance period stipulated in the arbitral award or, alternatively, the effective date of the arbitral award.

Nonetheless, where recognition of a foreign arbitral award is sought first, the applicant should apply for enforcement within two years from the date when the ruling of the people’s court on recognition comes into effect.

Basis for Recognition and/or Enforcement

For arbitral awards made by arbitration institutions based within mainland China, the applicant can apply to the competent court for enforcement pursuant to the Civil Procedural Law and Arbitration Law. For foreign arbitral awards, the applicant can apply for recognition and enforcement in accordance with the New York Convention.

Objections to Recognition and/or Enforcement

The Civil Procedural Law provides for different grounds for revoking or refusing the enforcement of arbitral awards made by arbitration institutions based within mainland China, while the New York Convention provides for the grounds for refusing the recognition and enforcement of a foreign arbitral award. Please see 4.6 for details.

Enforcement Process

The Civil Procedural Law governs procedural matters during the enforcement of arbitral awards, and the process of enforcing a domestic judgment, as specified in 2.2, applies equally to enforcement of arbitral awards subject to specific provisions.

In order to facilitate the recognition and/or enforcement of arbitral awards in mainland China, the Supreme People’s Court established an internal reporting system:

a)       when the competent intermediate people’s court determines not to recognise or enforce a foreign-related arbitral award or a foreign arbitral award, it shall internally file an application for verification with the higher people’s court within the jurisdiction; upon review of the higher people's court, the intermediate people's court may render a ruling to recognise and enforce the arbitral award or to refuse recognition and enforcement based on the review opinions of the higher people's court.

b)       where, upon review, the higher people’s court concurs with the intermediate people's court, it shall internally file an application for verification with the Supreme People's Court. Upon review of the Supreme People's Court, the intermediate people's court may render a ruling to recognise and enforce the arbitral award or to refuse recognition and enforcement based on the opinions of the Supreme People's Court.

In exceptional circumstances where the parties are domiciled in different provinces or the grounds for rejecting recognition and enforcement is inconsistent with the social and public interests of China, the higher people's court shall internally file an application for verification with the Supreme People's Court if it concurs with the intermediate people's court’s decision not to recognise or enforce a non-foreign-related arbitral award. Upon review of the Supreme People's Court’s decision, the intermediate people's court may then render a ruling to recognise and enforce the arbitral award or refuse recognition and enforcement based on the review opinions of the Supreme People's Court.

Preservation Measures

Since the Civil Procedural Law and the international treaties and conventions are silent on whether the people’s court can take property preservation measures before or after acceptance of the application for recognition of a foreign arbitral award, in practice the people’s court is relatively unwilling to take property preservation measures. 

Regional Arrangements within China

To avoid any doubt, mainland China has concluded bilateral arrangements with Hong Kong, Macau and Taiwan, pursuant to which arbitral awards made in Hong Kong need to seek enforcement in mainland China while those made in Macau and Taiwan need to seek both recognition and enforcement. There are also special provisions regarding several matters under such bilateral arrangements compared to foreign arbitral awards. For instance, in case of an arbitral award rendered in Taiwan and Macau, an applicant is allowed to apply for property preservation before or after the people’s court accepts its application for recognition and enforcement. Therefore, an applicant is recommended to take a closer look at such bilateral arrangements before seeking recognition and enforcement before a people’s court. This Q&A does not expand on such regional bilateral arrangements.

As mentioned above, different rules apply to different types of arbitral awards, either from a procedural or substantive perspective:

  • First, arbitral awards made by arbitration institutions based within mainland China can be directly enforced. Foreign arbitral awards must be recognised before they can be enforced;
  • Second, the grounds for revoking or denying enforcement of arbitral awards made by arbitration institutions based within mainland China are different to those for refusing recognition and enforcement of foreign arbitral awards under the New York Convention. While the former slightly touches on substantive issues (see 4.6 Variation in Approach to Arbitral Awards), the latter focuses only on procedural defects in arbitral proceedings; and
  • Third, as mentioned above, the reporting and verification process varies according to the type of arbitral award.

As summarised in 4.6 Challenging Enforcement of Arbitral Awards below, instead of setting out unenforceable arbitral awards by category, the Civil Procedural Law and the international treaties/conventions provide various grounds to challenge the enforcement of an arbitral award.

The process of enforcing arbitral awards is similar to that of enforcing a judgment. Please refer to 2.2 Enforcement of Domestic Judgements and 3.4 Process of Enforcing Foreign Judgments.

The rules regarding the cost and time taken to enforce arbitral awards and judgments are similar.

However, a foreign arbitral award is subject to an explicit time limit, ie if the people’s court determines to recognise and enforce the foreign arbitral award it must conclude the recognition procedure within two months of acceptance of the case and, if no special circumstances require otherwise, to conclude the enforcement procedure within six months after the ruling on recognition was made. If the people’s court determines not to recognise and enforce the foreign arbitral award, it is required to follow the internal reporting process as specified in 4.1 Legal Issues Concerning Enforcement of Arbitral Awards within two months after acceptance of the case.   

For non-foreign related arbitral awards, the circumstances where the people’s court will refuse enforcement include where:

  • the parties had no arbitration clause in their contract, nor did they subsequently reach a written agreement on arbitration;
  • the matters dealt with in the award fell outside the scope of the arbitration agreement or were matters over which the arbitral body had no power to arbitrate;
  • the composition of the arbitral tribunal or the arbitral procedure contradicted the procedure prescribed by law;
  • the evidence on which the arbitral award was based was fabricated;
  • other parties concealed evidence from the arbitral institution, which was sufficient to affect the impartiality of the arbitral award;
  • the arbitrators committed embezzlement, accepted bribes or committed malpractice for personal benefit or perverted the course of the law; and
  • the court determined that enforcement of the arbitral award was against the social and public interests of China.

For foreign related arbitral awards, aside from the grounds stated in bullet points 1, 2, 3 and 7 above, a defendant may challenge an arbitral award if he or she was not notified of the appointment of an arbitrator, if the conduct of the arbitration procedure was improper or if he or she fails to present his or her case for reasons not attributable to them.

For foreign arbitral awards, Article 5 of the New York Convention sets forth the exhaustive grounds on which recognition and enforcement may be refused by a people’s court. From a procedural perspective, a defendant may challenge enforcement if the applicant applied for recognition and enforcement of an arbitral award after the expiry of the statute of limitations.

King & Wood Mallesons

19th Floor, East Tower
World Financial Center 1 Dongsanhuan Zhonglu
Chaoyang District
Beijing 100020
P. R. China

+86 10 5878 5056

+86 10 5878 5522

liuyuwu@cn.kwm.com https://www.kwm.com/en/cn
Author Business Card

Law and Practice

Authors



King & Wood Mallesons is an international law firm headquartered in Asia. As an international law firm able to practice in the PRC, Hong Kong, Australia, the UK, the US and the European Union, KWM’s presence and resources are profound. Leveraging its exceptional legal expertise and depth of knowledge in the Chinese market, it advises both Chinese and overseas clients on a full range of domestic and cross-border transactions. KWM provides comprehensive legal services in both domestic and cross-border dispute resolution. With over 20 years of experience in litigation and alternative dispute resolution, it takes the lead in the industry in providing domestic and international clients with powerful legal support. KWM has represented clients in numerous complicated cases of recognition and/or enforcement before courts around the world.

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.