On 12 November 2019, Dr. Meng Yu, founder of China Justice Observer, is invited to the symposium of “Exploring New Horizons in Caribbean-China Trade and Investment Relations” held at Errol Barrow Centre for Creative Imagination, the University of the West Indies, Cave Hill, Barbados. Meng is invited to be a speaker on Panel One, titled “Evolving Dynamics of the BRI in the Caribbean and the Legal Norms and Principles underpinning the BRI”.
The symposium is co-organized by the Shridath Ramphal Centre (Shridath Ramphal Centre for International Trade Law, Policy and Services (SRC)), the Faculty of Law at the University of West Indies Cave Hill Campus and the Sir Arthur Lewis Institute of Social and Economic Studies (SALISES). The Panel One is moderated by Dr. Ronnie Yearwood (Faculty of Law, University of the West Indies, Cave Hill), and the panelists include Ambassador the Honourable Richard Bernal (Pro-Vice-Chancellor, Global Affairs, University of the West Indies, Mona), Sir Trevor Carmichael QC (Chairman, Partner at Chancery Chambers), Dr. Lan Hua ((Professor, International Law, China University), Dr. Don Marshall (Director, Senior Fellow, SALISES) and Dr. Meng Yu.
Below is the speech given by Meng, discussing the recognition and enforcement of judgments between China and the Caribbean, from a particular perspective of Caribbean Offshore Financial Centers (COFCs). Meng addressed (1) the significance of the recognition and enforcement of judgments to China’s cooperation with COFCs, (2) the possibility for China and COFCs to deepen cooperation on mutual recognition and enforcement of judgments, and (3) the feasibility of a framework for international cooperation in this area.
Today I would like to talk about what is known as ‘the last mile’ of cross-border dispute resolution, which is critical, but is overlooked most of the time. That is the recognition and enforcement of foreign judgments.（For more posts on recognition and enforcement of foreign judgments in China, please click here.）
When it comes to our topic in this Panel, I will focus on the mutual recognition and enforcement of judgments between China and the Caribbean, in particular, from the perspective of Caribbean Offshore Financial Centers (COFCs), such as Barbados, British Virgin Islands, Cayman Islands, and Costa Rica and the like.
And I will address the issue from the following three aspects: First, is it important for China and the COFCs to establish cooperation in this field? Second, if the answer is yes, is it possible for us to promote cooperation? Third, what are the available approaches then?
I. Why: Significance of the recognition and enforcement of judgments to China’s cooperation with the COFCs
The COFCs play a highly important role in China’s cross-border investment. Take Barbados for example, many foreign direct investments (FDIs) flowing into China come from Barbados, while many China’s outbound investments also flow into Barbados.
Therefore, the transaction structures (such as shareholders, directors and other arrangements) of many cross-border investments related to China are often realized through theses offshore companies registered in Barbados. Once disputes arise over the investment, the solutions thereto often involve these companies, as well as the mutual recognition and enforcement of judgments between China and Barbados.
To be more specific, firstly, some disputes need to be settled in Barbados, but judgments thereto need to be enforced in China. (For example, there is a very interesting and high-profile case in China, called the case of Mountain Breeze (Barbados) SRL, which is now hearing by the Supreme People’s Court of China. I would like to share with everyone later. In this case, in order to compete for control of a company in China, investors must rely on how the Barbados court finds the directorship of an offshore company in Barbados. At present, the Barbados High Court has not yet made a judgment. But one thing to be sure, once a Barbados judgment was made, there comes the matter of recognition of this judgment in a Chinese court.
Secondly, some disputes need to be settled in China, but judgments thereto need to be enforced in Barbados. This scenario usually occurs in the following three situations: (1) a Chinese court affirmed the ownership of a Barbados company’s equity in the judgment; (2) a Chinese court affirmed the shareholder of a Barbados company as the debtor in the judgment, and the debtor may need to pay off his debt with his equity in the company; (3) a Chinese court affirmed a Barbados company as the debtor in the judgment. The enforcement of the Chinese judgment needs to be realized through the adjustment of the Barbados company’s equity or the disposal of the Barbados company’s assets. This will involve the enforcement of Chinese judgments in Barbados.
Clearly, for Barbados, if the recognition and enforcement of judgments between China and Barbados cannot be realized, it will undoubtedly undermine the confidence of investors who wish to invest in China through Barbados offshore companies. By the same token, for China, it will discourage the investors of the same kind to invest in China. In other words, it is highly beneficial for both sides to improve the recognition and enforcement of judgments between China and Barbados.
II. What: Possibility of Deepening Cooperation on Mutual Recognition and Enforcement between China and the COFCs
With that being said, however, the status quo seems not to give much cause for optimism. Under Chinese law, the precondition to judgments recognition and enforcement is the existence of “Either Treaty or Reciprocity”. In other words, to start with an application for recognition of a foreign judgment in China, the prerequisite is that there exists either international treaties signed by China and the country concerned, or the reciprocal relationship between China and the country concerned. Traditionally, the criterion of reciprocal relationship adopted by Chinese courts is de facto reciprocity: only when the foreign country concerned has recognized and enforced Chinese judgments, will China confirm the existence of the reciprocal relationship between the two.
At present, the COFCs has not yet signed the aforementioned international treaties with China, and no reported precedent has been found yet to prove the reciprocal relationship between China and the COFCs.
However, we do have good news. since 2015, Chinese courts are trying to liberalize its rules, in the sense that it is loosening the criteria of reciprocity, which creates a realistic possibility for China and COFCs to deepen cooperation on mutual recognition and enforcement of judgments.
Just to name a few, one key document showing China’s liberalization in its rules would be the Opinions issued in 2015 by China’s Supreme People’s Court (SPC), i.e., “Several Opinions on Providing Judicial Services and Safeguards for the Construction of the ‘Belt and Road’ by People’s Courts”(关于人民法院为“一带一路“建设提供司法服务和保障的若干意见), which clearly pointed out that the judicial assistance should be strengthened, including: under the circumstance where some countries along the Belt and Road have not yet concluded judicial assistance agreements with China, however, Chinese courts may consider giving judicial assistance to the parties of the other country in advance according to the intention of the two sides in international judicial cooperation and exchanges, the promise of judicial reciprocity to be given by the other country to China, etc. In other words, even if foreign countries have not yet recognized and enforced Chinese judgments, China may recognize foreign judgments first under specific circumstances. This shows that the SPC is advocating positive and relaxed criteria for determining the reciprocal relationship. That’s a big step forward.
Following this milestone document, there come some more promising developments, including the “Nanning Statement” (2017) adopted by China and ASEAN countries, and the Memorandum of Guidance on Recognition and Enforcement of Money Judgments in Commercial Cases (MOG) (2018) signed by the Supreme Courts of China and Singapore.
III. How: Feasibility of a framework for international cooperation
The BRI provides an effective platform, not just for the delivery of finance in the form of loans, grants, and investments to help meet the funding gap, but also in the sense of promoting international judicial assistance.
To start with, the signing of international treaties, including bilateral judicial assistance agreements and related international conventions (e.g. Convention of 30 June 2005 on Choice of Court Agreements and Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters). This approach, perhaps, is the most desirable but the most difficult one to achieve.
In the current situation, two alternatives can be considered:
One is to establish consensus. This is to be promoted by courts in establishing consensus between the SPC of China and the Supreme Courts of COFCs on mutual recognition and enforcement of judgments, and to issue such a consensus in a joint statement or memorandum;
The other approach is to promoting test cases. This is to be promoted by legal practitioners, that is, lawyers of COFCs try to have Chinese judgments recognized by their local courts, while Chinese lawyers try to have COFCs judgments recognized by Chinese courts, thus setting a precedent for China and COFCs in such cases.
In order to promote investment under the BRI, it is necessary for China to deepen cooperation with COFCs in recognition and enforcement of judgments. At present, China and ASEAN have started such cooperation. In the future, the cooperation of this kind should be expanded to the Caribbean region, and the COFCs is definitely the first choice. It is definitely important, possible and feasible for us to develop cooperation in this very field.
 Dispute over a request for altering the corporate registration between Mountain Breeze (Barbados) SRL and Beijing-based Zhongtian Hongye Real Estate Consulting Ltd, available at http://english.court.gov.cn/2019-09/17/content_37511021.htm
Contributors: Meng Yu 余萌