In legal practice, parties can lawfully investigate another party’s assets through public channels. Asset clues that may be obtained via public database include:

• shareholding information (eg, companies the other party has invested in); and
• intellectual property registration information (eg, copyright ownership). 

Before or after the case filing, the plaintiff can apply to the court for a property preservation order against the defendant’s assets. The courts would not require defendants to disclose their assets by court orders unless the enforcement procedure is initiated by the winning party. 

In addition, when applying for property preservation, the plaintiff may also request the court to investigate the defendant’s assets via the court’s internal investigation and control system (the “CIIC System”). However, most courts are very cautious and will not use the CIIC System to investigate a defendant’s assets in the absence of any final judgment.

Pursuant to the PRC Civil Procedure Law (CPL), judicial documents issued by courts are generally divided into judgments and verdicts: 

• a judgment refers to the decision made by the court, through legal procedures, on the substantive issues of a case at the conclusion of a trial (eg, judgment of the first instance); and
• a verdict refers to the decision made by the court on significant procedural issues that arise during the course of a trial (eg, verdict on jurisdictional objection).

The CPL does not further classify judgments into different types. However, the academic community categorises judgments from a theoretical perspective, based on different criteria. For example, judgments can be classified – according to the type of claim – into performance judgments, declaratory judgments, and constitutive judgments, or they can be classified – based on whether the parties appeared in court – into adversarial judgments and default judgments. 

To ensure the enforcement of the judgment, the plaintiff can apply to the court for property preservation against the defendant before filing a lawsuit or during the litigation process. If the court agrees, it will issue a verdict to preserve the defendant’s property up to the amount of the plaintiff’s claims. Typically, the measures include:

• freezing the defendant’s bank accounts;
• freezing the defendant’s real estate, vehicles, and equity; and/or
• sending an assistance enforcement notice to the defendant’s debtors, requiring them to suspend fulfilling their debts to the defendant.

If the plaintiff subsequently wins the suit and the defendant refuses to pay, the plaintiff can apply for compulsory enforcement of the judgment. The enforcement court will forcibly execute the defendant’s property, including but not limited to:

• deducting cash deposits from the defendant’s bank accounts;
• auctioning the defendant’s real estate, vehicles and equity, and using the proceeds to fulfil the judgment;
• sending a notice to the defendant’s employer to deduct the defendant’s wages; and
• sending a notice to the defendant’s debtors, requiring them to directly fulfil the defendant’s due debts to the plaintiff.

If the defendant has no asset to satisfy the judgment, the plaintiff can also apply to the court for the defendant’s bankruptcy/reorganisation. Through the bankruptcy/reorganisation process, the administrator can thoroughly investigate and clarify the defendant’s assets (eg, applying to the competent court to invalidate fraudulent assets transfer deals), which will increase the chance of the judgment debt being paid in full.

Costs

In legal practice, the applicant does not need to pay case acceptance fees for the enforcement procedure. However, if the enforcement procedure involves judicial auction of the defendant’s property, additional costs such as asset appraisal fees and auction fees should be borne by the applicant.

Time

The enforcement procedure usually lasts six months, starting from the date the enforcement case is filed. If, upon investigation, it is found that the defendant has no executable assets, the court will issue a verdict to terminate the enforcement after the six-month period expires. If the plaintiff later obtains new evidence proving that the defendant has assets, they can apply for the resumption of enforcement.

If the judgment comes into force and the defendant refuses to satisfy the judgment debt, the plaintiff can apply for compulsory enforcement. In such a case, the enforcement judge would take the lead in investigating the defendant’s assets via the CIIC System. The system would enable the judge to access the defendant’s assets information in bank accounts, real estate, vehicles, etc, and take follow-up compulsory measures against these assets to satisfy the judgment.

Mainland China adopts a four-level, two-instance trial system. Put simply, after a first-instance judgment is rendered, if neither party appeals, the judgment becomes effective upon the expiration of the appeal period. If either party appeals, the second-instance court’s judgment is the final judgment and becomes effective upon issuance.

The enforcement application can only be filed based on an effective judgment (ie, either a first-instance judgment that has not been appealed or an effective second-instance judgment). Since the judgment has already come into force, the party subject to enforcement cannot request a suspension of the enforcement based on substantive reasons (such as factual errors in the judgment). 

Additionally, although parties can apply for a retrial after the judgment becomes effective, the retrial generally does not suspend the enforcement of the judgment.

Pursuant to the judicial interpretation of the CPL, an effective judgment applying for compulsory enforcement must contain clear ruling(s) requiring certain performance by the defendant. Therefore, in judicial practice, if the judgment does not contain such performance ruling(s) (ie, it merely confirms the validity of a contract, or it merely declares the termination of a contract), such a judgment cannot be enforced.

The PRC legal system does not have a central register of all judgments.

When applying for the recognition and enforcement of foreign judgments in mainland China, two issues need to be considered and examined:

• whether there is any legal basis for the recognition and enforcement of the judgment (see 3.2 Variations in Approach to Enforcement of Foreign Judgments); and
• if “yes”, whether the foreign judgment falls within the categories of judgments that may be refused recognition and enforcement according to the law (see 3.6 Challenging Enforcement of Foreign Judgments).

If a judgment has a legal basis for recognition and enforcement, and does not fall within the scope of refusal, then the judgment can be recognised and enforced in mainland China.

The legal basis for enforcing foreign judgments varies depending on the country where the judgment was made. Under the CPL, a foreign judgment may be recognised and enforced if it meets either of the following conditions: (i) the country where the deciding court is located has a treaty with China or is a signatory to an international treaty to which China is also a signatory (“Treaty Basis”); or (ii) there is reciprocity between the countries (“Reciprocity Basis”).

Treaty Basis

With respect to the Treaty Basis, mainland China is not a signatory to any international convention on recognition and enforcement of foreign court judgments. However, China has entered into bilateral judicial assistance treaties on enforcement of foreign judgments with 35 countries, which means that judgments rendered in these 35 jurisdictions meet the basis requirement and can be enforced in China.

Reciprocity Basis

With respect to the Reciprocity Basis, mainland China has expanded the concept of reciprocity in recent years to include de jure reciprocity, reciprocity formed by bilateral memorandum, and promised reciprocity. Historically, PRC courts have recognised the existence of China’s reciprocity with Singapore, South Korea, the US, the UK and Germany (although these judgments have no universal binding effect under PRC law, so other PRC courts might decide differently). 

If the country where judgment was made is found to have no treaty or reciprocity with the PRC, such judgment will not be recognised and enforced in mainland China.

In addition to the above, the CPL does not provide a specific category of foreign judgments that the PRC courts will not recognise and enforce. That said, the recognition and enforcement application may be challenged based on some of the grounds detailed in 3.6 Challenging Enforcement of Foreign Judgments.

Typically, there are two major steps to enforcing a foreign judgment, including (i) recognition of the judgment; and (ii) enforcement of the judgment.

Recognition of the Foreign Judgment

The applicant files the recognition application with the PRC court. In most cases, the court will hold hearing(s) for the case and subsequently render a verdict on it.

Enforcement of the Foreign Judgment

If the court recognises the foreign judgment, the applicant could then file a separate application for enforcement. The enforcement process of foreign judgments greatly resembles that of domestic judgements.

Costs

The case acceptance fee for the recognition procedure is CNY500, which must be pre-paid by the applicant. The applicant does not need to pay case acceptance fees for the enforcement procedure. 

Time

As to the recognition procedure, as the opposing party may bring up objections, the court may have to conduct a thorough review of the judgment (to see if there are any procedural defects). In these cases, based on experience, it might take one or more years for the court to render the verdict. 

As to the enforcement procedure, although the law stipulates a six-month enforcement period, the court has the right to extend this period due to the foreign-related factors of the case. Based on experience, the enforcement period may take one to two years.

Assuming the base requirement is met, an application for recognition and enforcement of a foreign judgement can be challenged for the following reasons:

• the foreign judgment has not taken legal effect in the jurisdiction in which it was rendered; 
• the foreign judgment violates basic principles of Chinese law, national sovereignty, security, or social public interest; 
• in the case of a default judgment, the defendant was not served with a proper notice of the proceedings;
• other judgment(s) exist that conflict with the foreign judgement applying for recognition and enforcement;
• the foreign court that rendered the foreign judgment has no jurisdiction over the case; 
• pursuant to PRC law, the foreign court making the judgment has no jurisdiction over the case; or
• the judgment was obtained through fraud.

When applying for (recognising and) enforcing arbitral awards in mainland China, two issues need to be considered and examined:

• whether there is any legal basis for the (recognition and) enforcement of the award (see 4.3 Categories of Arbitral Awards Not Enforced); and
• if “yes”, whether the award falls within the categories of awards that can be annulled or refused (recognition and) enforcement according to the law (see 4.6 Challenging Enforcement of Arbitral Awards).

If an arbitral award has a legal basis for recognition and enforcement, and does not fall within the scope of annulment or refusal, then it can be recognised and enforced in mainland China.

Generally speaking, under the PRC laws, arbitration awards can be categorised into the following three types based on their place of arbitration.

Domestic Awards

“Domestic awards” refers to awards where the place of arbitration is in mainland China. It is important to note that domestic awards can be further classified as pure-domestic awards (“PD awards”) and domestic awards with foreign elements (“FE awards”). The grounds for annulment and non-enforcement of PD awards and FE awards differ slightly.

Hong Kong, Macau, and Taiwan Awards

“Hong Kong, Macau, and Taiwan awards” refers to awards where the place of arbitration is in Hong Kong SAR, Macau SAR, or Taiwan. Such awards are recognised and enforced based on the bilateral arrangements between mainland China and these three regions.

Foreign Awards

“Foreign awards” refers to awards where the place of arbitration does not fall in mainland China, Hong Kong, Macau or Taiwan. Foreign arbitration awards are recognised and enforced in the PRC based on the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).

If the place of arbitration is neither in mainland China, Hong Kong, Macau or Taiwan, nor in a member country of the New York Convention, then such awards cannot be (recognised and) enforced in mainland China.

Hong Kong, Macau, and Taiwan Awards

As to the Hong Kong, Macau, and Taiwan awards, the applicant must complete two major steps to get the award enforced, that is, (i) recognition of the award; and (ii) enforcement of the award.

Recognition of the award

The applicant files the recognition application with the PRC court. In most cases, the court will hold hearing(s) about the case and will subsequently render a verdict on it.

Enforcement of the award

If the court recognises the award, the applicant could then file a separate application for enforcement.

Domestic Awards

As to the domestic award, the applicant only needs to file for enforcement of the award, due to its domestic nature.

Hong Kong, Macau, and Taiwan Awards

Regarding the Hong Kong, Macau, and Taiwan awards, since the applicant needs to go through both a recognition and enforcement process, the time and cost for completing these steps resemble those of enforcing a foreign judgement.

Cost

The applicant is required to pay CNY500 for the recognition procedure and does not need to pay any fees for the enforcement procedure.

Time

The recognition procedure may take one or more years, and the enforcement procedure may take one to two years.

Domestic Awards

As to the domestic award, the cost and time are as follows.

Cost

As the applicant only needs to go through the enforcement procedure, no fee is required. 

Time

It usually takes six months or more to complete the enforcement of a domestic award. However, it is important to note that the enforcement proceeding might be suspended due to an annulment procedure. After a domestic award takes effect, because the place of arbitration is mainland China, the losing party has the right to apply to the competent court to set aside the award based on a few grounds. This annulment procedure may have the effect of temporarily suspending the enforcement proceeding for four to six months. The enforcement will then only continue if the annulment application is dismissed. The losing party may also file an application for non-enforcement of the award, but its impact on the enforcement time period is limited.

The grounds for challenging enforcement of arbitral awards vary depending on the type of award. 

Foreign Awards, Hong Kong, Macau, and Taiwan Awards, and FE Awards

The grounds for challenging the enforcement of foreign awards, Hong Kong awards, Macau awards, Taiwan awards, and FE awards share many similarities, which include:

• there is no valid arbitration agreement/clause between the parties;
• a party did not receive proper notice of designating arbitrator(s) or was not afforded the opportunity to present the case;
• the formation of the tribunal or arbitration procedure did not comply with the arbitration rules or the applicable laws;
• the rulings in the award exceeded the scope of the disputes agreed in the arbitration agreement/clause;
• the award has not taken legal effect;
• the disputes adjudicated were not arbitrable; and
• the enforcement of the award would violate public policy.

PD Awards

The grounds for challenging the enforcement of PD awards include all the above grounds and the following additional grounds:

• the evidence (on which the award was based) was forged;
• the party concealed evidence from the tribunal that is sufficient to affect the fairness of the award; and
• the arbitrator engaged in corruption, accepted bribes, and perverted the course of justice during arbitration of the case.