China Dismisses Application for Enforcing a US Judgment Due to Lack of Finality

Key takeaways:

In Wuxi Luoshe Printing & Dyeing Co. Ltd. v. Anshan Li et al. (2017) Su 02 Xie Wai Ren No. 1-2, the Chinese court in Wuxi, Jiangsu Province dismissed, on the ground of the lack of finality, the application for recognition and enforcement of the judgment rendered by a California state court.
If a foreign judgment is found not final or inconclusive, Chinese courts would render a ruling to dismiss the application. After the dismissal, the applicant may choose to re-apply when the application satisfies the requirements for acceptance later on. This rule was further confirmed and incorporated into the 2022 landmark judicial policy issued by China’s Supreme People’s Court.

On 5 Nov. 2020, in Wuxi Luoshe Printing & Dyeing Co. Ltd. v. Anshan Li et al. (2017) Su 02 Xie Wai Ren No. 1-2 ((2017)苏02协外认1号之二), the Wuxi Intermediate People’s Court of China (the “Wuxi Court”) ruled to dismiss the application for recognition and enforcement of the judgment rendered by the Superior Court of California, County of San Mateo (the “San Mateo County Superior Court”), on the ground that the applicant failed to prove the finality and conclusiveness of this foreign judgment.

The Wuxi Court further stated that the applicant can file an application for recognition and enforcement with the competent Chinese court again after obtaining a final and conclusive foreign judgment.

We believe that the further statement shows the friendly attitude of Chinese courts towards foreign judgments.

Table of Contents

I. Case overview

The applicant is composed of two parties, namely a Chinese company “Wuxi Luoshe Printing and Dyeing Co., Ltd.” (无锡洛社印染有限公司) and a Chinese citizen Huang Zhize.

The respondents are an American citizen Anshan Li and an American company TAHome Co., Ltd. (formerly known as Standard Fiber, Inc.).

On 8 Aug. 2017, the applicant applied to the Wuxi Court for recognition and enforcement of the civil judgment No. 502381 made by the San Mateo County Superior Court (the “San Mateo Judgment”).

On 5 Nov. 2020, the Wuxi Court made a civil ruling “(2017) Su 02 Xie Wai Ren No. 1-2”, dismissing the applicant’s application.

II. Case facts

A civil dispute over investment arose between the applicant and the respondent in the United States.

In January 2011, the applicant filed a lawsuit with the San Mateo County Superior Court against the respondent.

On 12 July 2016, the San Mateo County Superior Court made civil judgment No. 502381, ordering the respondent to indemnify the applicant.

According to the Affidavit of Mailing, the above judgment was served on each party on 12 July 2016.

On 28 Sept. 2016, dissatisfied with the judgment, Anshan Li filed a notice of appeal, which was registered by the 1st District Court of Appeal of California with No. A149522.

The applicant filed a lawsuit with the Wuxi Court to apply for recognition and enforcement of the San Mateo Judgment.

On 8 Aug. 2017, the Wuxi Court accepted the application.

On 5 Nov. 2020, the Wuxi Court made a ruling dismissing the application.

III. Court views

The Wuxi Court held that according to China’s Civil Procedure Law, the foreign judgment to be recognized and enforced by Chinese courts must be legally effective, that is, the foreign judgment should be final, conclusive and enforceable.

Therefore, in addition to being effective and enforceable according to the law of the judgment-rendering country, the foreign judgment must also be final and conclusive. A judgment pending appeal or in the process of appeal is neither a final nor conclusive judgment.

Although the San Mateo Judgment has entered into force and entered the enforcement procedure according to the laws of California, the judgment is under appeal due to the respondent’s appeal. When the Wuxi Court heard this case, the case was still being heard by the California Court of Appeal. Therefore, the judgment is neither a final nor conclusive one.

The finality of a foreign judgment is a procedural condition for the applicant to file an application for recognition and enforcement with a Chinese court. If the Chinese court finds that the procedural condition is not met after accepting the application, it will generally rule to dismiss the application.

Therefore, the Wuxi Court held that it should dismiss the application of the applicant in this case.

The Wuxi Court further stated in its judgment that, after the conclusion of the appeal procedure of the California Court of Appeal, the applicant can apply to the competent Chinese court for recognition and enforcement again after obtaining a final and conclusive judgment.

IV. Our comments

1. If you want to apply to a Chinese court for recognition of a foreign judgment, you should prove the finality of the judgment

When hearing a case of recognition and enforcement of a foreign judgment or ruling, if the authenticity of the foreign judgment or ruling cannot be verified, or if the foreign judgment or ruling has not yet entered into force, Chinese courts will rule to dismiss the application for recognition and enforcement.

Even when the application is dismissed, if the applicant applies again and the application meets the acceptance conditions, Chinese courts shall accept the application. Therefore, the applicant can apply to the Chinese court again after obtaining a final judgment.

This rule is later confirmed and incorporated into the 2022 landmark judicial policy issued by China’s Supreme People’s Court (SPC). For a detailed discussion, please read ‘How Chinese Courts Identify Foreign Judgments as Final and Conclusive? – Breakthrough for Collecting Judgments in China Series (IV)’.

3. Chinese courts hold a friendly attitude to US judgments

The Wuxi Court added in its judgment that the applicant can file an application again after obtaining a final judgment. Actually, it is extremely rare for Chinese courts to make such a reminder to the applicant in the judgment.

In most cases, Chinese courts only passively hear the application and defense of the parties, and will not take the initiative to put forward suggestions for the parties’ future litigation.

However, the Wuxi Court still made such a supplement here. In our opinion, this is because the Wuxi Court did not want to frustrate the applicant’s efforts to gain the recognition and enforcement of foreign judgments, especially American judgments.

The Wuxi Court hoped that the applicant, and even any readers who may have noticed its ruling, would not refrain from applying to Chinese courts for recognition and enforcement of foreign judgments because of its one-time dismissal.

Let’s have a brief history review: China recognized a US judgment for the first time in 2017 and confirmed the existence of reciprocity between China and the US though in the absence of international treaties or bilateral agreements on the recognition and enforcement of foreign judgments. Since then, the door for China to recognize the US judgment has been kicked open.

The landmark case is the ruling rendered by the Wuhan Intermediate People’s Court in Liu Li v. Taoli & Tongwu (2015) E Wu Han Zhong Min Shang Wai Chu Zi No. 00026” ((2015)鄂武汉中民商外初字第00026号) on 30 June 2017. In this case, the Wuhan court ruling recognized the judgment made by the Superior Court of California, County of Los Angeles, the US in Liu Li v. Tao Li and Tong Wu (LASC Case No. EC062608).

Thereafter, on 17 Sept. 2018, the Shanghai First Intermediate People’s Court made a ruling “(2017) Hu 01 Xie Wai Ren No. 16” ((2017)沪01协外认16号) recognizing the judgment in Nalco Co. v. Chen, No. 12 C 9931 (N.D. ILL. Aug. 22, 2013) made by the United States District Court for the Eastern District of Illinois in Nalco Co. v. Chen (2017).

We believe that the Wuxi Court wishes to keep expressing the friendly attitude of Chinese courts towards foreign judgments, even though it has dismissed the application on procedural grounds.

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