Enforcing Foreign Judgments in China -- Let's Sue Twice

The China Law Prof Blog just blogged on the "Arrangement Between the Mainland and the Macao Special Administrative Region on the Mutual Recognition and Enforcement of Civil and Commercial Judgments" set to go into effect on April 1, 2006.  Under this agreement, there will be very few grounds on which the courts of either China or Macao may decline to enforce legal judgments of the other. 

The China Law Prof notes that China has very few such agreements with other jurisdictions, and none with its major trading partners.  China does not yet have such an agreement even with Hong Kong, though it will soon be entering into an agreement with Hong Kong where the two "countries" will enforce judgments from the other country if (and only if) the parties specifically agreed by contract that either Hong Kong or China would be the exclusive forum for their dispute resolution:

In short, the agreement will treat such choices essentially as arbitration agreements - and indeed, that's pretty much what they are. The Hong Kong legal community is willing to help enforce the judgments of a forum to which the parties have voluntarily submitted their dispute, but won't go any further. Macao, by contrast, has gone all the way to a full-faith-and-credit approach.

United States and European lawyers and companies often call us for help getting their U.S. or European judgments enforced in China against Chinese companies.  A typical call usually goes something like this:

Caller:  I have a two million dollar judgment against Chinese company X in China, can you help me enforce it?

Me:  Is it a default judgment here in the United States?

Caller:  Yes.

Me:  The Chinese courts don't enforce United States' judgments and though they often at least look at the basis for a United States judgment on the merits, they don't give any credence whatsoever to United States default judgments.  To collect against this company in China we will need to sue them anew in China.  Did you discuss this possibility with your U.S. lawyer before you sued here? 

Caller:  [long silence] .... Yes.  He told me getting a judgment here couldn't hurt?

Me:  Did he charge you to get it?

Caller:  Yea.  I had to pay him and I had to pay all sorts of people to get that company served in China. 

Me:  Sorry. 

Bottom Line:  Don't bring a lawsuit outside China against a Chinese company without first making sure there is some benefit in doing so.  Better yet, put an arbitration provision in your contract with Chinese companies.  China (and just about every other country, for that matter) is a signator to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  This means China's courts generally will enforce an arbitration award from the jurisdiction in which the parties contractually agreed to arbitrate.