The First Time Australia Recognizes Chinese Civil Settlement Statements

Key takeaways:

In June 2022, the New South Wales Supreme Court of Australia ruled to recognize two Chinese civil settlement statements, marking the first time that Chinese settlement statements have been recognized by Australian courts (See Bank of China Limited v Chen [2022] NSWSC 749).
In this case, Chinese civil settlement statements were considered as ‘foreign judgments’ under Australian law.
Under Chinese law, civil settlement statements, sometimes translated as civil mediation judgments, are made by Chinese courts upon the settlement arrangement reached by the parties, and enjoy the same enforceability as the court judgments.

On 7 June 2022, the New South Wales Supreme Court of Australia (“NSWSC”), in the case of Bank of China Limited v Chen [2022] NSWSC 749, recognized two civil settlement statements rendered by Jimo Primary People’s Court, Qingdao, Shandong, China (“China Jimo Court”) on 23 Oct. 2019.

This case marks the first time that Chinese settlement statements have been recognized by Australian courts.

The core issue lies in whether the civil settlement statements rendered by Chinese courts, which the NSWSC translated as ‘civil mediation judgments’, could be recognized and enforced by Australian courts as foreign judgments.

I. Case overview

On 23 Oct. 2019, China Jimo Court issued two civil settlement statements to the dispute between applicant Bank of China and the respondent Chen Ying, namely:

i. the civil settlement statement (2019) Lu 0282 Min Chu No. 4209 ((2019)鲁0282民初4209号), which confirmed that the respondent Chen Ying shall pay CNY 17,990,172.26 to the applicant Bank of China;

ii. the civil settlement statement (2019) Lu 0282 Min Chu No. 4210 ((2019)鲁0282民初4210号), which confirmed that the respondent Chen Ying shall pay CNY 22,372,474.11 to the applicant Bank of China.

On 24 Dec. 2020, the plaintiff sought the enforcement at common law in Australia of two civil settlement statements.

The NSWSC made a decision on 7 June 2022, determining that “The judgments in Proceedings 4209 and 4210 embodied in the Documents (i.e. the two civil settlement statements) are enforceable.”

II. Court views

The NSWSC held that “Central to this dispute are the two Civil Mediation Judgments in Proceedings 4209 and 4210 referred to above.” That is, whether the two Civil Mediation Judgments constituted foreign judgments recognized and enforced by Australia.

The respondent filed a motion, arguing that the Civil Mediation Judgments sought to be recognized and enforced did not embody “judgments” within the meaning of Sch 6(m) of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

The evidence of Associate Professor Jie (Jeanne) Huang, in her expert reports established that a civil mediation judgment, such as those at issue in Proceedings 4209 and Proceedings 4210, possesses the factors which constitute a “judgment” under Australian law, namely by establishing res judicata and having mandatory enforceability and coercive authority (Professor Huang has published an article in Conflict of Law, introducing this case and her views.)

The NSWSC held that “Judgment” for the purposes of UCPR Sch 6(m) was not defined in the UCPR”. Under the common law, a “Judgment” is an order of Court which: gives rise to res judicata, takes effect through the authority of the Court, producing legal consequences through the very fact that it is made by the Court.

The NSWSC found that: (1) The two Civil Mediation Judgments are enforceable against the defendant immediately according to their terms in China and without the need for further or other order or judgment of the People’s Court; (2) The parties cannot vary or cancel the Civil Mediation Judgments without the permission of the China Jimo Court; (3) China’s Court exercises certain judicial power in making a Civil Mediation Judgment; (4) It is also supported by the fact that the enforcement mechanisms of Chinese Civil Procedure Law Art 234 apply likewise to a civil mediation judgment and a civil judgment; (5) It is not necessary for the parties to sign the civil mediation judgment for them to be effective, the court’s stamp being affixed and their service upon the parties is sufficient.

To conclude, “Given the above, it is my opinion that the Civil Mediation Judgments established res judicata, are mandatorily enforceable and have coercive authority and are therefore judgments for the purpose of the law of this jurisdiction”, indicated the NSWSC.

III. Our comments

Civil settlement statements are one common type of legal instrument made by Chinese courts in the trial of civil cases, featuring the use of China’s court-connected mediation.

The NSWSC accurately analyzed the civil mediation judgments and China’s court-connected mediation in the case of Bank of China Limited v Chen. It can be a valuable reference if you have obtained a civil settlement statement from a Chinese court and want to apply for recognition and enforcement in another country.

Here, we would also like to introduce how Chinese courts deal with civil disputes.

In brief, there are three possible outcomes for Chinese courts to handle a civil dispute:

i. The court makes a civil judgment without considering the parties’ opinions, thus confirming the claims. Since the judgment shows the court’s views, the parties can appeal against it.

ii. The court makes a settlement statement upon the settlement arrangement reached by the parties, thereby giving the settlement arrangement the same enforceability as the judgment. Since the settlement statement represents the parties’ voluntary agreement, they cannot appeal against it. Furthermore, since the court issues the settlement statement for its confirmation of the agreement of the parties, civil settlement statements can be enforced by the court just like judgments.

iii. If the plaintiff withdraws the case from the court after the parties reach a settlement agreement, the court would rule in favor of the withdrawal. At this point, there is only an ordinary settlement agreement reached by the parties, because the court has not actually made any substantive decision on the dispute. Therefore, the settlement agreement is merely a contract, and the parties are not entitled to request the court to enforce it.

Item ii above is the court-connected mediation we have introduced in the previous post “Mediation in China: Past and Present”.

“Court-connected mediation refers to the mediation conducted during a lawsuit.

Court-connected mediation is stipulated in the Civil Procedure Law. This type of mediation is conducted by a judge in civil proceedings. Mediation is not separate from the case trials, but is part of it. After the settlement agreement is reached, the court shall make a ‘settlement statement’(调解书). The settlement statement, just like the judgment, can be enforced by the court.”

As settlement statements issued by courts are enforceable, more and more Chinese mediation institutions are starting to cooperate with courts on making settlement statements so as to validate settlement agreements. It is called “judicial endorsement of mediation”. For a detailed discussion, see our earlier post “The Future of Mediation in China: Synergy between Litigation and Mediation”.

As we can learn from the case of Bank of China Limited v Chen, once a settlement agreement of a Chinese mediation institution is confirmed by a Chinese court, and the court makes a settlement statement, it is possible to be recognized and enforced by a foreign court. This can go some way in improving the global circulation of Chinese settlement agreements in the absence of China’s accession to the Singapore Convention.

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