On January 23, 2018, the 2nd Meeting of the Central Comprehensive Reform Strengthening Leading Group passed the Opinions on Establishing Dispute Resolution Mechanism and Institution for the Belt and Road Initiative. The Supreme People’s Court of the People’s Republic of China (the "Supreme Court") will establish international commercial tribunals in Beijing, Xi’an and Shenzhen respectively, for the purpose of establishing new "the Belt and Road Initiative" dispute resolution mechanism and institution toward the Land Silk Road and Maritime Silk Road respectively.

In the area of cross-border commercial transaction, arbitration and litigation are two of the most common dispute resolution methods. In practice, arbitration is more widely selected on the ground that recognition and enforcement of foreign arbitral awards is relatively easier than that of foreign court judgments. However, with China’s acceleration in developing the Belt and Road Initiative ("B&R Initiative") and promoting domestic companies to go global, inter alia, the establishment of resolution mechanism and institution particularly for disputes in relation to the B&R Initiative, new factors may be taken into consideration as to selecting the dispute resolution method when conducting B&R Initiative related investment. This article intends to briefly analyze the trend of cross-border dispute resolution in relation to the B&R Initiative from the perspective of recognition and enforcement of foreign court judgments and arbitral awards. In short, in terms of foreign court judgements, China and 21 B&R Initiative countries may mutually recognize and enforce the foreign court judgments of the other country, boosting the principle of reciprocity (the "Principle of Reciprocity") to be widely or even proactively applied. In terms of foreign arbitral awards, China and 65 B&R Initiative countries acceding to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention") may mutually recognize and enforce foreign arbitral awards of the member countries; while mutual recognition and enforcement of foreign arbitral awards between China and those B&R Initiative countries that did not accede to the New York Convention may also be promoted. 

China’s Recognition and Enforcement of Foreign Court Judgments

Recognition and enforcement of foreign court judgment is a relatively complicated issue in the area of cross-border dispute resolution since it implicates judicial sovereignty between nations. Article 282 of the Civil Procedure Law of the People’s Republic of China (the "Civil Procedure Law") explicitly provides that "when a people’s court receives an application or a request for recognition and enforcement of a legally effective judgment or ruling of a foreign court, it shall review such judgment or ruling pursuant to international treaties concluded or acceded to by the People's Republic of China (the "PRC") or in accordance with the Principle of Reciprocity. If, upon such review, the people’s court holds that such judgment or ruling neither contradicts the basic principles of the laws of the PRC nor violates state sovereignty, security and the social public interest, it shall rule to acknowledge its effectiveness. Where there is a need for enforcement, an enforcement order shall be issued and the enforcement shall be made pursuant to the relevant provisions of this Civil Procedure Law. If such judgment or ruling contradicts the basic principles of the laws of the PRC or violates state sovereignty, security or the social public interest, the people’s court shall refuse to recognize and enforce it." It can be seen that, the recognition and enforcement of foreign court judgments is based on either international treaties or the Principle of Reciprocity.

1.1

Recognition and Enforcement Based on Bilateral Treaties May Be More Open

The Convention on the Recognition and Enforcement of Foreign Judgments in International Civil and Commercial Matters was passed by the Hague Conference on Private International Law in February 1971. However, the practical effect of this Convention is extremely limited since few countries acceded to it. China is not a member either. Therefore, China only recognizes and enforces foreign court judgments based on the bilateral judicial assistance treaties signed with certain countries (excluding recognition of foreign court divorce judgments applied by Chinese citizens[1]).

As of December 31, 2017, China has concluded civil and/or commercial bilateral judicial assistance treaties with 37 countries (based on the effective time of the treaties), among which, 24 countries are B&R Initiative countries[2] (there are a total of 71 B&R Initiative countries according to the China official website named Belt and Road Portal[3]). The scope of judicial assistance in bilateral treaties with 21 B&R Initiative countries include recognition and enforcement of court judgments, meaning that court judgments of China are likely to be recognized and enforced in theses 21 B&R Initiative countries. Likewise, court judgments rendered in these 21 B&R Initiative countries are also likely to be recognized and enforced in China. The 21 B&R Initiative countries are as follows[4]:

Despite the fact that China has concluded bilateral judicial assistance treaties with the abovementioned countries, in general, it maintained a conservative attitude towards recognition and enforcement of foreign court judgments. However, with the constant development of the B&R Initiative construction, China is expected to be more open on recognition and enforcement of foreign court judgments based on bilateral judicial assistance treaties. On July 7, 2015, the Supreme Court released the Typical Cases concerning Judicial Service and Protection Provided by People’s Courts for the B&R Initiative Construction.[5] One of the listed cases is concerning the application by Poland FreeGuPohl Co., Ltd. for recognition and enforcement of a judgment made by a Polish court (Case [2013] Zhe Yong Min Que Zi No.1).  The Ningbo Intermediate People’s Court ruled that, "China and Poland have concluded the Treaty on Mutual Judicial Assistance in Civil and Criminal Matters, thus we shall review and examine whether to recognize the judgment made by the Poland court on the basis of the relevant provisions of the Civil Procedure Law and such Treaty".  The Supreme Court remarked that "China has concluded bilateral treaties with over 30 countries on judicial assistance in civil and commercial matters, of which some contain the content of mutual recognition and enforcement of civil and commercial judgments. This case demonstrates the position that Chinese courts effectively adhere to the judicial assistance treaties, legally recognize and enforce foreign court judgments in civil and commercial matters and equally protect legitimate rights and interests of both Chinese and foreign parties." 

1.2

Recognition and Enforcement Based on the Principle of Reciprocity May Be Further Deepened

In the absence of a bilateral judicial assistance treaty, whether the court judgments in one country could be recognized and enforced in another country depends on the existence of basis for reciprocity between these two countries, i.e. the application of Principle of Reciprocity. The Principle of Reciprocity means a country recognizes and enforces judgments made in other countries on equivalent conditions. In the current practice of private international law, most countries recognize and enforce foreign court judgments to a certain degree, and various theories regarding the Principle of Reciprocity have been brought forward, such as the theory of international comity, vested right, special law, debt, extension of the legal effect, etc.[6] The Principle of Reciprocity emphasizes that states shall treat each other equally based on the principle of reciprocity and joint development, otherwise they may be retaliated by the counterparty[7]. In China’s judicial practice, the application of the Principle of Reciprocity achieved a milestone along with the construction of B&R Initiative, and is expected to be more widely applied.

On December 9, 2016, the Nanjing Intermediate People’s Court of Jiangsu Province (the "Nanjing Court") rendered the civil ruling for the Case (2016) Su 01 Xie Wai Ren No. 3 (the "Nanjing Case"), in which Kolmar Group AG applied for recognition and enforcement of a civil judgment made by the High Court of Singapore. This was the first case of Chinese court recognizing and enforcing foreign court judgments based on the Principle of Reciprocity. In this civil ruling for the Nanjing Case, the Nanjing Court stated that, "the High Court of Singapore made the [2014]SGHC16 judgment which agreed to recognize and enforce the court judgment of the Suzhou Intermediate People’s Court of Jiangsu Province (the "Suzhou Court"); although Singapore and China have not concluded or jointly acceded to any international treaty with regard to mutual recognition and enforcement of effective court judgments, in view of the precedent of Singapore court’s recognizing and enforcing the civil judgment of the Suzhou Court, Chinese courts may recognize and enforce the civil judgments rendered by Singapore courts which satisfy relevant conditions based on the Principle of Reciprocity."

The above Nanjing Case was listed in the Second Batch of Typical Cases related to the Construction of B&R Initiative[8] issued by the Supreme Court on May 15, 2017. The Supreme Court commented that, "as provided in Article 282 of the Civil Procedure Law, the basis for recognition and enforcement of foreign court judgments shall be international treaties or the Principle of Reciprocity. Since less than one third of B&R Initiative countries have reached bilateral judicial assistance treaties with China, determining whether there exists reciprocal relationship between two countries becomes crucial in the decision of whether the commercial judgments rendered in the B&R Initiative countries could be recognized and enforced in China. This case, according to the precedent of Singapore court’s recognition and enforcement of the Chinese court’s judgment, found for the first time that China and Singapore have reciprocal relationship, and therefore recognized and enforced the commercial judgment of Singapore court based on the Principle of Reciprocity, which not only marked a milestone for mutual recognition and enforcement of commercial judgments rendered by both Chinese and Singapore courts, but also will strongly promote the judicial cooperation in the field of recognition and enforcement of civil and commercial judgments among the B&R Initiative countries."

On June 30, 2017, the Wuhan Intermediate People’s Court of Hubei Province (the "Wuhan Court") rendered the civil ruling for the Case (2015) E Wu Han Zhong Min Shang Wai Chu Zi No. 00026 (the "Wuhan Case"), which is widely regarded as the first Chinese court case recognizing and enforcing the commercial judgment of a U.S. court, and may be of great significance. The Wuhan Court ruled that, "pursuant to the report in (published in the "China Legal Journal", January 2010) submitted by the applicant, the civil judgment rendered by the Hubei Higher People’s Court (the "Hubei Higher Court") on product tort dispute case of Hubei Gezhouba Sanlian Industrial Co., Ltd. and Hubei Pinghu Tourist Boat Co., Ltd. v. US Robinson Helicopter Co., Ltd. had been recognized and enforced by the U.S. court. Since the U.S. and China have not concluded or jointly acceded to any international treaty on mutual recognition and enforcement of civil judgments, whether the applicant’s claim should be upheld shall be scrutinized in accordance with the Principle of Reciprocity. Upon examination, the evidence submitted by the applicant proved that the U.S. created the precedent of recognizing and enforcing the civil judgment rendered by the Chinese court. Therefore, we can determine that there exists reciprocal relationship between the two countries on mutual recognition and enforcement of civil judgments. "

In addition to Singapore and the U.S., the High Court of Berlin in Germany recognized a civil judgment of Wuxi Intermediate People’s Court of Jiangsu Province of China in 2006.[9] On October 6, 2015, the Tel Aviv Court of Israel made the verdict recognizing and enforcing a civil judgment rendered by Nantong Intermediate People’s Court of Jiangsu Province of China.[10] It is noteworthy whether Chinese courts will recognize and enforce foreign court judgments based on the Principle of Reciprocity on a continuous basis.

In the above Nanjing Case and Wuhan Case, the Chinese courts applied the Principle of Reciprocity based on the prerequisites that the courts of Singapore and U.S. recognized and enforced the Chinese court judgments in the first place. We observe that, (1) the Principle of Reciprocity in the Nanjing Case and Wuhan Case is applied on a passive basis.  In other words, in the absence of any precedent rulings made by one country which recognized and enforced the Chinese court’s judgments, the Chinese court will not recognize and enforce the court judgment in that country.  For instance, in the Reply of the Supreme Court on Whether Chinese People’s Court Shall Recognize and Enforce the Court Judgment of Japan Involving the Content of Creditors’ Rights and Debts ([1995] Min Ta Zi No. 17), the Supreme Court clarified that "China and Japan have not concluded or acceded to any international treaty with regard to mutual recognition and enforcement of court judgments or rulings, and there exists no reciprocal relationship either." Accordingly, the Japanese applicant’s claim for recognizing and enforcing the judgment of the Japanese court was denied.  Till now, China and Japan still refuse to recognize and enforce each other’s court judgments; and (2) In Chinese judicial practice, the criteria for how to determine whether the Principle of Reciprocity shall be applied is still unclear.  For example, it is uncertain whether the PRC court which applies the Principle of Reciprocity must be seated at the same territory as the PRC court whose judgment was recognized and enforced by the foreign country.  In the Nanjing Case, the Nanjing Court recognized and enforced the judgment of the Singapore court because the Singapore court recognized and enforced the judgment of Suzhou Court; both Nanjing Court and Suzhou Court are located in Jiangsu Province, PRC and are both intermediate courts.  In the Wuhan Case, the Wuhan Court recognized and enforced the judgment of the U.S. court because the U.S. court recognized and enforced the judgment of Hubei Higher Court; both Wuhan Court and Hubei Higher Court are located in Hubei Province, PRC. Therefore, it is noteworthy whether there will be any breakthrough in such territory restriction in recognition and enforcement based on the Principle of Reciprocity.

More importantly, along with China’s open-up policy and the further development of the B&R Initiative, the passive application of the Principle of Reciprocity may be changed. It is stated in the (Fa Fa [2015] No.9, hereinafter, "Circular No.9") that, "if the countries along the B&R Initiative have not yet concluded any treaties on mutual judicial assistance with China, Chinese court may, in accordance with the international judicial cooperation and communication intent as well as the commitments made by the other countries to provide judicial reciprocity to China, consider providing judicial assistance to the parties in other countries in advance, actively promote the formation of reciprocal relations and actively promote and gradually expand the scope of international judicial assistance."  Furthermore, the concluded on June 8, 2017 reached the following consensus on the communication and cooperation among the courts in China, the ASEAN countries and the South Asian countries, "For the countries that have not yet entered into any international treaty on recognizing and enforcing foreign court judgments, during their judicial proceedings of recognizing and enforcing civil and commercial judgments of the other country, they may presume the existence of reciprocal relationship with such country, provided that there is no precedent ruling in such country which refused to recognize and enforce the civil and commercial judgments rendered in its own country on the basis of reciprocity, to the extent permitted by its domestic law." With the increased number of international disputes related to the B&R Initiative, the trend of possible proactive application of the Principle of Reciprocity also deserves our close attention.

Recognition and Enforcement of Foreign Arbitral Awards in China

Considering the features that the arbitration proceeding is confidential, often adjudicated by professional and specialized arbitrators, and the arbitral awards can be more easily recognized and enforced, arbitration is often chosen as the means of dispute resolution for cross-border commercial transactions. The parties may select arbitral institutes in China, such as China International Economic and Trade Arbitration Commission, Shanghai International Arbitration Center, etc., as well as foreign arbitral institutes such as Hong Kong International Arbitration Center and Singapore International Arbitration Center.  According to Article 283 of the Civil Procedure Law, "in the case where an arbitral award of a foreign arbitration institute seeks recognition and enforcement by a PRC court, the relevant parties shall submit an application directly to an intermediate court where the party subject to enforcement resides or where the property of the party subject to enforcement is located. The People’s court shall handle the application pursuant to international treaties concluded or acceded to by China or in accordance with the Principle of Reciprocity." Therefore, the recognition and enforcement of foreign arbitral awards in China is also based on international treaties or the Principle of Reciprocity. 

2.1

Recognition and Enforcement of Foreign Arbitral Awards Pursuant to the New York Convention May Become More Predictable and Reliable

Different from recognition and enforcement of foreign court judgments, it is relatively easier to recognize and enforce foreign arbitral awards. In 1987, China acceded to the New York Convention. As of December 31, 2017, the number of contracting states of the New York Convention has increased to 157, and the most recent country acceded to the New York Convention is Angola (with a membership date of June 4, 2017). Among the 71 B&R Initiative countries, only 6 countries have not yet acceded to the New York Convention, i.e. Ethiopia, Turkmenistan, Yemen, Timor-Leste, Iraq and Maldives, respectively. The rest 65 B&R Initiative countries, all being contracting states of the New York Convention, are set forth as follows: 

According to the , China has made two reservations when acceding to the New York Convention, i.e. reciprocal reservation and commercial reservation. Therefore, China only recognizes and enforces arbitral awards rendered in the territory of the other contracting states on the basis of reciprocity; and only applies the New York Convention if the relevant disputes arise from contractual and non-contractual commercial legal relationships as defined under the laws of PRC. This means that, the commercial arbitral awards of the B&R Initiative countries which acceded to the New York Convention and have the foundation of reciprocity with China can be recognized and enforced in China. The arbitral awards of China can also be recognized and enforced in the 65 B&R Initiative countries acceding to the New York Convention, but subject to specific reservations made by these countries. Verification of specific reservations made by those countries is suggested when selecting the dispute resolution method for B&R Initiative related investment. The aforementioned Circular No.9 also states that, "it is imperative to correctly understand and apply the New York Convention, legally and timely recognize and enforce the foreign commercial and maritime arbitration awards related to the construction of B&R Initiative". It is thus predictable that the mutual recognition and enforcement of foreign arbitral awards based on the New York Convention will become more reliable in China.

It is noteworthy that, if both China and a B&R Initiative country are contracting states of the New York Convention, and they have also concluded a bilateral treaty on recognition and enforcement of arbitral awards, generally, the preference shall be given to the provisions of the bilateral treaty[11]. Among all B&R Initiative countries acceding to New York Conventions, 18 countries signed bilateral treaties with China, the content of which includes bilateral mutual judicial assistance on recognition and enforcement of arbitral awards. Those 18 countries are listed below:

It is also noteworthy that, the mutual judicial assistance between China and 3 countries (i.e. South Korea, Singapore and Thailand) includes recognition and enforcement of arbitral awards, but does not include recognition and enforcement of court judgments. When selecting the dispute resolution method for B&R Initiative related investment in these 3 countries, arbitration is still recommended, though China has applied the Principle of Reciprocity to recognize and enforce the Singapore court judgment.

2.2

 Recognition and Enforcement Based on the Principle of Reciprocity May Be Promoted

In the event that the country where the arbitral award is made is not a contracting state to the New York Convention, nor has it concluded a bilateral treaty with China on mutual recognition and enforcement of arbitral awards, the Chinese courts may recognize and enforce its arbitral awards based on the Principle of Reciprocity in accordance with Article 283 of the Civil Procedure Law. In practice, Chinese courts generally review such cases with reference to the procedures and conditions for recognition and enforcement of foreign court judgments[12].  However, so far, we have not identified a case that China applies the Principle of Reciprocity to recognize and enforce the arbitral award of a B&R Initiative country which has not acceded to the New York Convention. As discussed above, only 6 of the B&R Initiative countries have not acceded to the New York Convention, i.e. Ethiopia, Turkmenistan, Yemen, East Timor, Iraq and the Maldives, respectively. Neither have these countries concluded any bilateral treaties with China on recognition and enforcement of foreign arbitral awards. But it is rare for arbitration institutions in these countries being selected as cross-border dispute settlement arbitration institutions. If there is a cross-border commercial transaction between a Chinese enterprise and an enterprise in these countries, we suggest selecting arbitration by international arbitration institutions in China or other third countries, for example, the Singapore International Arbitration Center.

It is worth noting that, the aforementioned Circular No.9 requires courts in China "to promote mutual recognition and enforcement of arbitral awards with the countries along the B&R Initiative that have not acceded to the New York Convention". Therefore, along with the development of B&R Initiative construction, the arbitral awards of the aforementioned B&R Initiative countries that have not acceded to the New York Convention may also be expected to be recognized and enforced in China pursuant to the Principle of Reciprocity.

To sum up, in view of the further development of the B&R Initiative construction, provision of judicial services and protection for the B&R Initiative construction will also be promoted, which will significantly boost the resolution of cross-border disputes. We hold an optimistic attitude toward the diversified "B&R Initiative" related dispute settlement mechanism and institution to be established by China in the near future that integrally incorporates litigation, arbitration and mediation methods, and look forward to starting the new practice journey.

Appendix: Scope of Recognition and Enforcement in Bilateral Judicial Assistance Treaties Entered into by and between China and the B&R Initiative Countries.

[1]According to Article 1 and Article 2 of the Notice of the Supreme People's Court on Issues concerning Relevant Procedures for Chinese Citizen’s Application for Recognition of Foreign Court Divorce Judgments (the "Notice"), with respect to the divorce judgments rendered by foreign courts that have not entered into mutual judicial assistance treaties with China, the Chinese party may apply for recognition of the divorce judgment rendered by such foreign court in accordance with the Notice. With respect to the divorce judgments rendered by foreign courts that have entered into mutual judicial assistance treaties with China, the Chinese party may apply for recognition of the divorce judgment based on the treaty. However, the Notice shall not apply to the recognition and enforcement of marital properties division, the bearing of living expenses and child support in divorce judgments rendered by foreign courts.

[2] Please refer to the attached table for more details.

[3]Please refer to https://www.yidaiyilu.gov.cn/info/iList.jsp?cat_id=10037 for more details, visited on January 31, 2018.

[4] The scope of judicial assistance in all the treaties with these 21 B&R Initiative countries include recognition and enforcement of foreign court judgments; meanwhile, except the treaties with Kazakhstan, Tajikistan, the United Arab Emirate, Mongolia, Hungary and Belarus, treaties with other countries include recognition and enforcement of foreign arbitral awards.

[5]Please refer to http://www.court.gov.cn/zixun-xiangqing-14897.html for more details, visited on January 31, 2018.

[6]Chongli Xu, Economic Globalization and the Principle of Reciprocity for Recognition and Enforcement of Foreign Judgments, published in the Xiamen University Legal Review (the 8th Edition), the Xiamen University Press, 2004.

[7] Jiwen Wang, Discussion of the Principle of Reciprocity on Recognition and Enforcement of Foreign Judgments in China—Taking the Method of Interest Balance as a Tool, published on the Jurists Review, the 6th Edition in 2016.

[8]Please refer to http://www.court.gov.cn/zixun-xiangqing-44722.html for more details, visited on January 31, 2018.

[9]Yi Liu, Reconsideration of the Role of the Principle of Reciprocity in Recognition and Enforcement of Foreign Judgments——Taking the Case of Berlin High Court of Germany’s Recognition of the Judgment of Wuxi Intermediate Court in China as an example, published in The People’s Judicature, the 3rd Edition in 2009.

[10] Junya Lian, The Status, Difficulties and Changes on Application of the Principle of Reciprocity in Recognition and Enforcement of Foreign Court Judgments under the Belt and Road Initiative, published in the Journal of Henan University of Economics and Law, the 6th Edition in 2016 (the 158th Edition in general).

[11] As provided in Article 7 of the New York Convention, the provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting Nations. 

[12] Shuangyuan Li, Fuyong Ou, the Private International Law, published by the Peking University Press, the 4th Edition in January 2015, Page 494.

[13] Besides the Treaty with Laos which does not clarify, all the other 23 Treaties hereof can be applied to commercial matters.  They either specifically state that the commercial matters are included, or include the commercial matters in the definition of civil matters.

特别声明：

以上所刊登的文章仅代表作者本人观点，不代表北京市中伦律师事务所或其律师出具的任何形式之法律意见或建议。

如需转载或引用该等文章的任何内容，请私信沟通授权事宜，并于转载时在文章开头处注明来源于公众号"中伦视界"及作者姓名。未经本所书面授权，不得转载或使用该等文章中的任何内容，含图片、影像等试听资料。如您有意就相关议题进一步交流或探讨，欢迎与本所联系。