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Can Applicant Seek Interim Measures from Chinese Courts? - Breakthrough for Collecting Judgments in China Series (IX)

Sun, 15 May 2022
Categories: Insights
Editor: C. J. Observer

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Key takeaways:

  • The 2021 Conference Summary provides the rules on whether and how applicants may seek interim measures (conservatory measures) in cases of the recognition and enforcement of foreign judgments in China.
  • Yes, a party may seek property reservation directly from Chinese courts, after (or even before) filing an application for recognition and enforcement of foreign judgments.
  • The applicant shall provide a guarantee for the property preservation, otherwise the people's court shall rule to dismiss the application.

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China published a landmark judicial policy on the enforcement of foreign judgments in 2022, embarking on a new era for judgment collection in China.

The judicial policy is the “Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” (hereinafter the “2021 Conference Summary”, 全国法院涉外商事海事审判工作座谈会会议纪要) issued by the China’s Supreme People’s Court (SPC) on 31 Dec. 2021.

As part of the ‘Breakthrough for Collecting Judgments in China Series’, this post introduces Article 39 of the 2021 Conference Summary, which the rules on whether and how applicants may seek interim measures (conservatory measures) in cases of the recognition and enforcement of foreign judgments in China.

Texts of the 2021 Conference Summary

Article 39 of the 2021 Conference Summary [Conservatory Measures]:

"Where a party applies to the people's court for recognition and enforcement of a foreign judgment or ruling, after the people's court accepts the application, if the party applies for property preservation, the people's court may implement the property preservation with reference to the provisions of the Civil Procedure Law and relevant judicial interpretations. The applicant shall provide a guarantee for the property preservation, otherwise the people's court shall rule to dismiss the application."

Interpretations

1. The applicant may request the Chinese court to take interim measures (conservatory measures)

Interim measures are commonly referred to as "conservatory measures" in China.

In terms of recognition and enforcement of judgments, conservatory measures refer to certain measures taken by the court against the respondent, upon application by the applicant, in cases where it may be difficult to enforce the future judgment for reasons attributable to the respondent.

In such cases, conservatory measures can be roughly divided into two categories:

(1) Property preservation, which refers to the preservation of the property of the respondent;

(2) Conduct preservation, which refers to ordering the respondent to do certain acts or prohibiting it from doing certain acts.

Given that the major claim of the applicant is to use the executable property of the respondent to pay off the judgment debt, property preservation is the most commonly used conservatory measure in cases of recognition and enforcement of judgments.

2. Conservatory measures are critical in cases of judgment enforcement

In China, it is not rare that the judgment debtor evades its judgment debt. Many judgment debtors will quickly transfer, hide, sell or damage their assets once they find that they may lose the case or be subject to property execution. This greatly reduces the reimbursement rate after the judgment creditor wins the case.

Therefore, in China’s civil litigation, many plaintiffs will immediately apply to the court for conservatory measures after (or even before) filing an action, and so is the case when they apply to the court for judgment enforcement, with an aim to control the property of the judgment debtor as soon as possible.

Previously, there was no explicit legal basis on whether the applicant can apply for conservatory measures in cases of recognition and enforcement of foreign judgments, and views of Chinese courts on this issue varied from one to another. This has deprived the applicant of reasonable expectation on whether it can resort to such a mechanism.

Now, the 2021 Conference Summary officially recognizes this mechanism to protect the interests of the applicant.

3. What specific measures can Chinese courts take?

In terms of property preservation, the applicant may request the court to sequester, seize, freeze or otherwise dispose of (if legally feasible) the executable property of the respondent. 

Once the property is subject to such measures, the respondent is often unable to transfer, sell, control or use the property until the court uses the property to pay off the judgment debt.

4. What price does the applicant need to pay for this?

The court may, upon application by the applicant for conservatory measures, require the applicant to provide a guarantee to avoid the abuse of such measures by the applicant.

The applicant may provide a guarantee to the court with its own property or request a financial institution to do so on its behalf. At present, many financial institutions (including banks, insurance companies, guarantee companies, etc.) in China can provide such services.

 

 

Photo by Wangjue on Unsplash

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌

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