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Is Preservation of Property Available during Recognition and Enforcement of Foreign Judgment in China?

Sun, 18 Jul 2021
Categories: Insights

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Yes, Chinese courts can grant an application for preservation of property in cases enforcing foreign judgments, as shown by a recent case heard by Beijing Fourth Intermediate People’s Court.

During the application for recognition and enforcement of a foreign judgment before a Chinese court, the applicant may apply for the preservation of the respondent’s property.

Junhe, a Law Firm based in Beijing, posted an article on its social media account, stating that it has convinced the Beijing Fourth Intermediate People’s Court to grant the application for preservation of property during the review of the application to recognize and enforce a judgment of the Paris Commercial Court.

The author provides some interesting insights.

I. Background of the Case

At the end of 2020, the Beijing Fourth Intermediate People’s Court ruled to recognize and enforce the ordinance (“the ordinance involved”) issued by the Paris Commercial Court on 3 June 2015, which approved a settlement agreement and granted enforceability of the settlement agreement. The case amount was more than 46 million USD.

The Beijing Fourth Intermediate People’s Court issued a civil ruling on 10 Aug. 2017 during the review period of the ordinance involved, granting the application for preservation of property, and ruling to seize, confiscate, or freeze the respondent’s property and other interests within the amount applied for by the applicant.

The author believes that it may be the first time that a Chinese court adopts the preservation of property during the review of an application recognizing and enforcing foreign commercial judgments.

We have not found similar cases yet. If the author is right, this case does contain important lessons for such practice.

II. The current predicament: lack of regulation of Chinese law and international treaties

In accordance with Article 282 of the PRC Civil Procedure Law (CPL), the recognition and enforcement of foreign judgments shall be conducted pursuant to the international treaty that China has concluded or participated in or in accordance with the principle of reciprocity.

However, the bilateral treaties on judicial assistance currently concluded by China usually do not deal with the preservation of property in relation to the recognition and enforcement. For example, the Treaty Between the People’s Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters does not clearly stipulate the conditions for the preservation of property and the applicable procedures. Therefore, Chinese judges cannot directly rule on applications for the preservation of property in accordance with this agreement.

The CPL also lacks corresponding regulation. Part IV “Special Provisions on Foreign-Related Civil Procedures” (including Chapter 27 “Judicial Assistance”) does not provide specific regulation on the possibility of preserving property during the review of an application recognizing and enforcing foreign judgments.

Besides, the author has not found in public sources any jurisprudence granting the preservation of property during the review of recognition and enforcement of foreign judgments.

III. Grounds to break the predicament: vacancy in Chinese laws

The author convinced the judges on the following grounds.

The bilateral treaties clearly stipulate that except for matters specified therein, the contracting parties may apply their domestic law about the judicial assistance methods in their own territory. Therefore, if there is room in Chinese law, the preservation of property may be implemented.

Article 259 in Part IV “Special Provisions on Foreign-Related Civil Procedures” of the CPL provides that, “The provisions of this Part shall apply to foreign-related civil lawsuits carried out in China. Where this Part does not stipulate, other relevant provisions of this Law shall apply.”

Since Part IV does not provide for the preservation of property in the recognition and enforcement of foreign judgments, the provisions of the CPL regarding the preservation of property in domestic litigation in China shall be applied. 

Besides, CPL does not prohibit the preservation of property during the stage of recognition and enforcement of foreign judgments.

As a result, the court adopted the view and ruled to preserve the property.

IV. Our comments

In China, since it is commonly seen for the parties to transfer enforceable property, it is essential to take an early conservatory measure so as to ensure the enforcement of the judgment. This case indicates that a party may apply for the preservation of property immediately after the application for recognition and enforcement of a foreign judgment is filed with a Chinese court.

Additionally, we have not yet found the judgment of the case mentioned by the author. We will keep track of the publication of the judgments of the Chinese courts in this case and add them to our Case List.

Photo by Texco Kwok on Unsplash

 

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌

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