Chinese Judgment Enforced in the United States

On August 12, 2009, the United States District Court for the Central District of California issued a judgment enforcing a $6.5 million dollar Chinese judgment against an American corporate defendant under California’s version of the Uniform Foreign Money Judgments Recognition Act.  The court’s full decision is available here

This case is unique because it is generally believed that United States courts will not enforce Chinese judgments given the lack of a treaty between the two countries on the issue and given that Chinese courts generally do not enforce United States judgments in China, which limits the argument for reciprocity in the United States.  Given this decision, California may become a favorable forum for enforcement of Chinese judgments in the United States.

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  • Gilles Cuniberti August 25, 2009, 8:31 am

    Trey,

    Thanks for this interesting report.

    I have a hard time understanding why it was thought that the US would not enforce the judgment for the sole reason that there was no treaty. The district court applied the relevant statute which is pretty liberal and governs, I understand, the enforcement of all foreign judgments.

    Also, the case is not one where some chinese party randomly showed up in the US with a Chinese judgment. The Chinese had first tried to litigate in the US. In order to get a forum non conveniens dismissal, the American party had argued that China is a great place to litigate, including that the Chinese judiciary is impartial. It had also agreed to submit to the jurisdicition of the Chinese court. So it was only logical that they would then, at some point, see the Chinese come back with a Chinese judgment, and that that a US court would take them to their word and enforce it.

    My conclusion is therefore that it is not so much an interesting case for enforcement of Chinese judgments in the US in general, but rather an very interesting case for those foreign plaintiffs first losing on conveniens grounds in the US.

    Gilles

  • Antonin I. Pribetic August 25, 2009, 11:09 am

    I agree with Gilles. Once the California defendant brought a motion to stay or dismiss the California State Action on the grounds that China was forum conveniens and that PRC courts were otherwise fair or unbiased; it was estopped from raising any impeachment defences to resist enforcement.

  • Trey Childress August 25, 2009, 8:09 pm

    Dear Gilles and Antonin:

    Thanks for your thoughts. I agree that this seems like a pretty straightforward application of the UFMJRA. That is what makes it interesting–for some reason US lawyers presume that even under the UFMJRA that Chinese judgments will not generally be enforced here. See http://www.law.com/jsp/article.jsp?id=1202433264700. Whether that is true as a statistical matter is unclear to me, althought it does appear to be the case that Chinese courts do not generally enforce US judgments, which discounts the reciprocity and comity interests at stake.

    I think your forum non conveniens point is a good one. Although, I would hesitate to say that one is estopped from arguing against enforcement just because a forum non motion is made. For instance, at the time the motion is made and granted a foreign country could have an adequate and fair court system. Yet, during the course of the litigation that may change. Such changed circumstances should be considered by the enforcing court. Similarly, fraud may unexpectedly arise in the proceedings that were not anticipated in the forum non motion. None of these examples apply in this case, of course.

    Thanks again,

    Trey

  • Antonin I. Pribetic August 25, 2009, 8:33 pm

    Dear Trey,

    At the outset, I found your comment to be very insightful and useful to my practice. It may very well be that the political winds of change in a foreign jurisdiction (e.g. military coup) would circumvent an estoppel argument. But this, in my view, is a public policy defence argument, which is problematic for a domestic court to inveigh against based upon traditional reciprocity or comity grounds. I appreciate that the USSC in Sinochem concluded that forum non conveniens is a non-merits ground for dismissal for which jurisdiction need not be established, but in Hubei v. Robinson Helicopter, the US defendant succeeded in bouncing the claim to China on forum non grounds.

    With respect to fraud, in Canada, at least, there is a distinction drawn between “intrinsic fraud” and “extrinsic fraud”. In Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416, Justice Major (for the majority) states:

    45 Courts have drawn a distinction between “intrinsic fraud” and “extrinsic fraud” in an attempt to clarify the types of fraud that can vitiate the judgment of a foreign court. Extrinsic fraud is identified as fraud going to the jurisdiction of the issuing court or the kind of fraud that misleads the court, foreign or domestic, into believing that it has jurisdiction over the cause of action. Evidence of this kind of fraud, if accepted, will justify setting aside the judgment. On the other hand, intrinsic fraud is fraud which goes to the merits of the case and to the existence of a cause of action. The extent to which evidence of intrinsic fraud can act as a defence to the recognition of a judgment has not been as clear as that of extrinsic fraud.

    Hence, if the California State Court was misled into believing that the PRC Court had jurisdiction, then there is an arguable intrinsic fraud defence. However, as you rightly point out, the US defendant argued that PRC was forum conveniens, such that the original jurisdictional facts in Hubei v. Robinson Helicopter, were unsupportive to challenge at the enforcement stage.

    Best,

    Antonin

  • Catherine Kessedjian August 26, 2009, 6:18 am

    Dear All,
    I am outside my jurisdiction and hence cannot check the accurate character of the “reciprocity” argument made in the posting.
    However, as some of you may know my doctoral dissertation, a looooooooooooog time ago, dealt with foreign judgments in the US. My recollection is that almost no State in the US had a reciprocity requirement, that part of Hilton v. Guyot being basically “lettre morte”. This is why when the ALI project was discussed (Rapporteurs Andy Lowenfeld and Linda Silberman), and because the “political” atmosphere had evolved somewhat in the US, (particularly in view of the European evolution of the law) there was a proposal to include a reciprocity requirement in the model law under discussion. This was highly debated and it was finally passed (I do not remember by what margin but anybody interested can look up the ALI proceedings for that year). Having said that, we all know the ALI model law is not (yet) hard law, so I would urge anybody interested in the reciprocity requirement as applied in the US for recognition and enforcement of foreign judgments, to check twice.
    Best to All,
    Catherine Kessedjian

  • Dr. Oliver L. Knöfel August 26, 2009, 7:30 am

    A reciprocity requirement is not so alien to the US legal systems as the previous comment seems to advocate, as anyone interested in the cross-border enforcement of maintenance orders (URESA, RURESA, UIFSA) will not hesitate to confirm.

  • Catherine Kessedjian August 26, 2009, 7:41 am

    Thank you for the precision, but maintenance and family law have always been treated differently from judgments in the commercial field which was the implicit starting point because of the posting.
    Best
    CK

  • Jie Huang August 27, 2009, 12:50 pm

    Regarding reciprocity under the US law for the recognition and enforcement of foreign judgments:

    In the US, the Uniform Foreign Money Judgments Recognition Act (UFMJRA), the Restatement III and the Uniform foreign-Country Money Judgments Recognition Act (UFCMJRA, 13 U.L.A. 5 (Supp. 2006) did not include a reciprocity requirement. Their purposes are to promote enforcement of US judgments in countries that have reciprocity requirements.

    The Hilton case has a reciprocity requirement, but this requirement was rejected by later cases like Somportex, Ltd. V. Philadelphia Chewing Gum Corp. 318 F.Supp. 161 (E.D.Pa. 1970) . In this case, P tried to enforce an English default judgment in Pennsylvania. D argued reciprocity. The court held that the Hilton decision was a pre-Erie case and it has never been suggested that it has constitutionally dictated and therefore binding on the states. The issue here is whether the courts of Pennsylvania would hold that reciprocity is a necessary precondition to the enforcement of foreign judgments. Since no Pennsylvania court has decided that reciprocity is necessary and NY and California have rejected reciprocity requirement becoz they adopted a policy that calls for an end to litigation. Moreover, the court argued that whether or not a foreign court would recognize an American judgment is not relevant to this policy.

    AIL proposed statute (2005) requires reciprocity (§7) becoz there was insufficient evidence to establish that no reciprocity requirement would have a greater effect on encouraging foreign recognition of US judgments. Also AIL hopes that a reciprocity requirement may create an incentive for foreign countries to enter international JRE negotiation with US. Moreover, § 10 of the ALI act, which provides for an expedited registration procedure available only for judgments issued by courts of countries that have made agreements with the US for reciprocal recognition.

  • Jie Huang August 27, 2009, 1:34 pm

    I agree the above discussion regarding forum non convenience. However, as for fraud, I assume that “intrinsic fraud” and “extrinsic fraud” both require that the allegation of fraud should be particular to this case. Therefore, it remains a question whether a general allegation of the incompetence of Mainland judicial system will be sufficient to deny the recognition and enforcement of a Mainland judgment on the grounds of fraud.

    In my view, the significance of the Robinson case lies in two aspects: which law should be applied to determine the finality of a foreign judgment, and will the Robinson judgment satisfy the reciprocity requirement under the Mainland Civil Procedural Law?

    First, Finality is not a requirement for judgment recognition and enforcement under Brussels I Regulation. But it is a requirement in the US and Hong Kong laws.

    In the US, the UFMJRA explicitly requires to apply the law of the judgment-rendering court for the finality issue. For example, “[T]he UFMJRA, adopted in California and codified at former California Code of Civil Procedure sections 1713 to 1713.8, applied to any foreign judgment that is final, conclusive, and enforceable under the laws where rendered. Former Cal. Civ. Proc. Code § 1713.2”. Hubei Gezhouba Sanlian Indus. Co. v. Robinson Helicopter Co., No. 2:06-cv-01798-FMC-SS-x 2009 WL 2190187, at *5 (C.D. Cal. July 22, 2009). The court held that “[t]he PRC Judgment was final, conclusive, and enforceable under the laws of the PRC…”) Id, *8.

    On the contrary, Hong Kong courts apply its own law to decide whether a foreign judgment is final. This played out in the leading case Chiyu Banking Corporation Limited v. Chan Tin Kwun [1996] 2 H.K.L.R. 395 (H.C.). This case concerns how a retrial, which may be brought by a procuratorate under the procedure for trial supervision, influences the finality of a Mainland judgment. In this case the plaintiff applied to a Hong Kong court for enforcing a Mainland judgment. This judgment was final under Mainland law because it was obtained in a first-instance People’s Court and then affirmed by an appellate court. The defendant applied to stay the Hong Kong proceedings on the grounds that he had requested a Mainland procurator to issue a protest. The defendant argued that if a protest was lodged in due course, the judgment-rendering court would have to order a retrial and possibly the court would revise the original judgment. The Hong Kong Supreme Court held that Mainland judgment was not final and conclusive for enforcement in Hong Kong in light of the procedure for trial supervision. Available at http://www.judiciary.gov.hk/en/legal_ref/judgments.htm. Chiyu became a precedent and followed by many later decisions. (eg, Wuhan Zhong Shuo Hong Real Estate Co. Ltd. v. the Kwong Sang Hong Int’l. Ltd. [2000] H.K.C. 711 (C.F.I.). Tan Tay Cuan v. Ng Chi Hung, [2001] H.K.C. 164 (C.F.I.). Chan Chow Yuen v Nangyang Commercial Bank Trustee Limited, and et al. HCAP 4/2002.) Notably, a dissenting judge in the Li You Rong v. Li Rui Qiong (CACV 159/2004) held that Chiyu should be set aside. However, the majority remanded the case on the procedural ground.

    As a summary, in Mainland China, a final judgment should not be subject to any appeal but can be subject to retrial in circumstances designated by its civil procedural law (Chapter 16). Hong Kong courts applied Hong Kong law to determine whether a Mainland judgment is final in its enforcement proceedings. And they concluded that Mainland jugments are not final because they are subject to retrial. However, the US court applied the Mainland law to determine whether a Mainland judgment is final. It answered yes that Mainland judgments are final under Mainland laws.

    More discussion can be found on http://www.asiabizblog.com/archives/2009/08/federal_court_e.htm.

    I would like to know the experts’ comments on this website: which law should be applied to determine the finality of a foreign judgments, the law of the state where the judgment-rendering court is located or where the requested court is located?

    (The requested court refers to the court that is requested to recognize and enforce a foreign judgment)

    The finality dispute between Mainland China and Hong Kong has been partly solved by an autonomous definition of finality in the 2006 Mainland-Hong Kong Judgment Recognition and Enforcement Arrangement.

    Second, the Robinson judgment also encourages us to explore the reciprocity requirement under the Art. 265 of the Mainland Civil Procedure Law. Mainland courts require a treaty or reciprocity before recognizing and enforcing a foreign judgments. Supposed that the Robinson judgment is upheld in the appeal, a question arises: how can an American judgment creditor pursuade a Chinese court that there is reciprocity between the US and China so Chinese courts should recognize and enforce US judgments?

    Reciprocity is very hard to define. What is its territorial coverage? After a California court recognized and enforced a Mainland judgment, should Mainland courts recognize and enforce judgments from all of the American states, only federal courts, federal courts located in California, or California state courts? What is its temporal coverage? Should Chinese courts recognize and enforce US judgments made after the Robinson judgments? What types of judgments does it cover? All monetary judgments?

  • Victor Varavenko August 29, 2009, 1:52 pm

    Dear All,
    Thanks for your thoughts on the subject. But I think that the reason of such decision of US court is a need to keep a «good face» in relations between US and China. US Private International Law has a lot of flexible rules and doctrines (forum non convenience, public policy, etc.), which let US judges to make decision desirable by US authorities. You need Chinese market and try to show your «good wheel». On the contrary, US courts make decisions to refuse enforcement when your authorities are not interested in development of relation with a country. For instance, it took place at the beginning of XX-th century, in relations with Soviet Union.
    My conclusion is that the economics reasons are the first in such cases. If politicians of a state are interested in cooperation with another state, lawyers of the first state’ll find a ground for recognition and enforcement of foreign judgment.