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Chinese Court Recognizes Singaporean Judgment Again: No Bilateral Treaty But Only Memorandum?

Sun, 19 Dec 2021
Categories: Insights

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Key Highlights:

  • In Power Solar System Co., Ltd. v. Suntech Power Investment Pte. Ltd.(2019), Shanghai First Intermediate People’s Court recognized and enforced a judgment of the Singapore High Court based on reciprocity.
  • This case marks the second time that a Singapore judgment has been recognized in China since the signing of China-Singapore MOG. Coincidentally, the de jure reciprocity, for the first time, was mentioned in the court ruling.
  • A memorandum that confirms reciprocity will play a more critical role in the toolkit of China’s Supreme People’s Court, in terms of loosening the criteria for recognizing and enforcing foreign judgments in the future.

In July 2021, a Chinese court recognized a Singapore judgment based on reciprocity, a key prerequisite that was earlier confirmed by the China-Singapore memorandum on recognition and enforcement of judgments.

This refers to the civil ruling of the Shanghai First Intermediate People’s Court (“Shanghai Court”) in Power Solar System Co., Ltd. v. Suntech Power Investment Pte. Ltd., (2019) Hu 01 Xie Wai Ren No. 22 ((2019) 沪01协外认22号), where the Shanghai Court recognized and enforced a judgment of the Singapore High Court.

This case marks the second time that a Singapore judgment has been recognized in China since the signing of China-Singapore Memorandum of Guidance on Recognition and Enforcement of Money Judgments in Commercial Cases (“MOG”) in 2018. 

Coincidentally, the de jure reciprocity, for the first time, was mentioned in the court ruling.

Starting from this case, we believe that a memorandum that confirms reciprocity will play a more critical role in the toolkit of China’s Supreme People’s Court (the SPC), in terms of loosening the criteria for recognizing and enforcing foreign judgments in the future.

1. Case overview

The Claimant, Power Solar System Co., Ltd., is a company incorporated in the British Virgin Islands, and the Respondent, Suntech Power Investment Pte. Ltd., is a company incorporated in Singapore.

The Claimant is one of the affiliates of a previous Chinese solar giant, Wuxi Suntech Power Co., Ltd. (“Wuxi Suntech Power”). Wuxi Suntech Power was placed in bankruptcy in 2013, which has brought a series of lawsuits around the world, including this case.

In early 2014, the Claimant filed a lawsuit (No. S59/2014) against the Respondent with the Singapore High Court, where the Claimant claimed loan recovery from the Respondent.

In July 2018, the Singapore High Court rendered a judgment and a ruling in the case, ordering the Respondent to pay the loan and interest thereon, as well as costs of the proceedings and other reasonable costs to the Claimant.

Thereafter, the Respondent filed an appeal to the Singapore Court of Appeal, but the appeal was dismissed for failure to pay the costs required by the Court.

Then, the Claimant applied to the Shanghai Court for recognition and enforcement of the Singaporean judgment.

On 25 Oct. 2019, the Shanghai Court accepted the case.

Among the defenses raised by the Respondent in the proceedings, two are of particular concern.

(1) There is no basis for the Chinese courts to recognize the Singaporean judgment.

The Respondent argued that there was no bilateral treaty on judicial assistance for the recognition and enforcement of judgments between Singapore and China, and the relevant China-Singapore MOG was not legally binding. 

(2) The Singaporean judgment is contrary to China’s public interest.

In the Respondent’s defense, the Chinese court has already disposed of the relevant claims in the bankruptcy reorganization procedure of Wuxi Suntech Power in a way that was inconsistent with that in the Singaporean judgment. Therefore, the Respondent believed the recognition of the Singapore judgment would be against China’s public interest.

However, the Shanghai Court did not uphold the Respondent’s above defenses and finally held in July 2021 that:

“The civil judgment and the ruling of costs made by the Singapore High Court have entered into force, and the Claimant’s application for recognition and enforcement of the judgment and ruling, based on the principle of reciprocity, is approved by the Court in accordance with law.”

2. Court views

(1) Is there any basis for the Chinese courts to recognize the Singaporean judgment?

The answer is “Yes”.

In its judgment, the Shanghai Court concluded that “there exists a reciprocal relationship between China and Singapore”, for the following two reasons.

A. De jure reciprocity

As the Shanghai Court stated in its judgment, 

“The MOG between the SPC and the Supreme Court of Singapore states that Chinese courts may recognize and enforce the judgments of Singaporean courts on the basis of reciprocity, and Singaporean courts may enforce the judgments of Chinese courts under common law. This indicates that there exists de jure reciprocity between China and Singapore and that civil and commercial judgments rendered by Chinese courts can be recognized and enforced by Singaporean courts under equal circumstances.”

B. De facto reciprocity

The Shanghai Court made further statements that

“There are precedents of the Singapore High Court recognizing and enforcing judgments of Chinese courts and vice versa, which indicates that there exists de facto reciprocity between China and Singapore."

(2) Is the Singaporean judgment contrary to China’s public interest?

The answer is “No”.

The Shanghai Court held that the fact that Chinese courts have ruled differently from Singaporean courts on disputes similar to this one “does not serve as a basis for finding the judgment of the Singapore High Court contrary to China’s public interest, because it’s the result of hearing cases under different legal systems by Chinese courts and Singaporean courts.”

3. Our comments

This case demonstrates the feasibility of confirming reciprocity through a memorandum between the Supreme Courts of the two countries.

What deserves particular concern from the case is that, Chinese local courts have found that de jure reciprocity exists between the two countries and have subsequently recognized Singaporean judgments on that basis since China and Singapore established reciprocity through the signing of the MOG.

Under Civil Procedure Law of the People’s Republic of China, a Chinese court may recognize a foreign judgment only if: 

A. China has entered into a bilateral treaty or an international convention with that country; or 

B. there exists reciprocity on recognition and enforcement of judgments between China and that country.

Prior to this, the Chinese court would determine that such reciprocity existed only when there was “de facto reciprocity”, which means that the foreign country has a precedent for the recognition of a Chinese judgment

Obviously, this is inconvenient.

If foreign courts have never had the opportunity to recognize a Chinese judgment, like Chad, they will have no opportunity to establish reciprocity with China.

If foreign courts have refused to recognize a Chinese judgment, like Japan, they will have no opportunity to establish reciprocity with China.

In addition, signing a bilateral treaty or accession to an international convention (such as the Hague Judgment Convention), is very costly and often takes many years.

In such cases, it is a shortcut for the Supreme Courts of both countries to sign a memorandum to establish reciprocity between them, like the MOG between China and Singapore.

It was proved to work well in the above case.

However, it is also possible for the Shanghai Court to recognize the Singaporean judgment just based on the existing de facto reciprocity between China and Singapore prior to that case. Therefore, the case is not enough yet to prove the method generally applicable. 

We can wait until there is a case where the Chinese court recognizes another country’s judgment only based on the similar MOG but without de facto reciprocity.

We were anticipating that China would loosen the criteria for recognizing and enforcing foreign judgments in its recently amended Civil Procedure Law. However, the draft amendment to the Civil Procedure Law published in October 2021 does not contain provisions on the recognition and enforcement of foreign judgments.

Therefore, if we can’t count on the amendment of the law in the near future, the memorandum of mutual recognition and enforcement of judgments will clearly play a more significant role.

 

 

Photo by Mike Enerio on Unsplash

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌

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