U.S. EB-5 Visa Fraud Judgments Partially Recognized in China: Recognizing Damages But Not Punitive Damages
U.S. EB-5 Visa Fraud Judgments Partially Recognized in China: Recognizing Damages But Not Punitive Damages

U.S. EB-5 Visa Fraud Judgments Partially Recognized in China: Recognizing Damages But Not Punitive Damages

U.S. EB-5 Visa Fraud Judgments Partially Recognized in China: Recognizing Damages But Not Punitive Damages

Key takeaways:

  • In March 2022, Guangzhou Intermediate People’s Court of China ruled to partially recognize and enforce three EB-5 visa fraud-related judgments rendered by the US District Court for the Central District of California and the Superior Court of California, County of Los Angeles respectively (See Anqin Wang v. Fang Zeng (2019) Yue 01 Xie Wai Ren No. 3; Hui Jiang, Jun Huang, et al. v. Fang Zeng (2018) Yue 01 Xie Wai Ren No. 21, No. 26, No. 27, No. 28, No. 32, (2019) Yue 01 Xie Wai Ren No. 58; Yeqing Xia v. Fang Zeng (2019) Yue 01 Xie Wai Ren No. 22).
  • The Guangzhou Intermediate People’s Court recognized and enforced the damages in three U.S. judgments, but rejected the punitive damages therein.
  • These cases also echo the rule laid down by the landmark judicial policy in 2022, ‘[I]f the amount of damages awarded by the foreign judgment significantly exceeds the applicant’s actual loss, the Chinese court may not recognize and enforce the excess’.

On 4 and 7 Mar. 2022, the Guangzhou Intermediate People’s Court of Guangdong Province, China (hereinafter the “Guangzhou Intermediate People’s Court”) made eight rulings, partially recognizing and enforcing three EB-5 visa fraud-related judgments (hereinafter collectively referred to as the “U.S. Judgments”) rendered respectively by the United States District Court for the Central District of California (C.D. Cal.) and the Superior Court of California, County of Los Angeles (LASC).

In these rulings, the Guangzhou Intermediate People’s Court recognized and enforced the damages in three U.S. judgments, but rejected the punitive damages therein. This reflects the attitude of Chinese courts towards the damages in the recognition and enforcement of foreign judgments, namely: If the amount of damages awarded by the foreign judgment significantly exceeds the applicant’s actual loss, the Chinese court may not recognize and enforce the excess.

Specifically, these rulings include:

a. On 4 Mar. 2022, the Guangzhou Intermediate People’s Court partially recognized and enforced the civil judgment (Case No.CV-17-08936-MWF (RAOx)) rendered by C.D. Cal. in Anqin Wang v. Fang Zeng (2019) Yue 01 Xie Wai Ren No. 3 ((2019)粤01协外认3号).

b. On 4 Mar. 2022, the Guangzhou Intermediate People’s Court partially recognized and enforced the civil judgment (Case No. CV17-7149-MWF (RAOx)) rendered by C.D. Cal. in six cases of Hui Jiang, Jun Huang, et al. v. Fang Zeng (2018) Yue 01 Xie Wai Ren No. 21, No. 26, No. 27, No. 28, No. 32, ((2018)粤01协外认21、26、27、28、32号), (2019) Yue 01 Xie Wai Ren No. 58 ((2019)粤01协外认58号).

c. On 7 Mar. 2022, the Guangzhou Intermediate People’s Court partially recognized and enforced the civil judgment (Case No. BC661793) rendered by LASC in Yeqing Xia v. Fang Zeng (2019) Yue 01 Xie Wai Ren No. 22 ((2019)粤01协外认22号).

I. Case overview

The aforementioned U.S. Judgments concern an EB5 visa fraud case in the United States in 2017. For details of the case, please visit the website of the U.S. Department of Justice.

The eight applicants who applied to the Guangzhou Intermediate People’s Court were part of the victims of the said case, while the respondent was one of the participants of the fraud in the United States.

After winning a civil lawsuit against the participants of the fraud in the United States and these victims found that the respondent, as a debtor of the U.S. Judgments bearing joint and several liability, owned executable property, e.g., real estate, in Guangzhou, China.

To this end, they applied for recognition and enforcement of the U.S. Judgments with the Guangzhou Intermediate People’s Court, which then handled these eight applications as eight independent cases and made rulings respectively.

II. Court views

Chinese courts will examine applications for recognition and enforcement of foreign judgments from the perspectives of “Threshold” and “Criterion”. For more information about the analysis of “Threshold” and “Criterion”, please refer to our post “China Clears Final Hurdle for Recognition and Enforcement of Foreign Judgments in 2022”.

The Guangzhou Intermediate People’s Court, therefore, examined the applications of the parties along these lines.

1. Threshold: Reciprocal Relationship

The judgment can be enforced in China if the country where the judgment is rendered satisfies the following circumstances:

(1) The country has concluded an international or bilateral treaty with China in respect of recognition and enforcement of foreign judgments, or

(2) The country has a reciprocal relationship with China.

In these cases, the Guangzhou Intermediate People’s Court held that “given that China and the United States have not concluded or jointly acceded to international treaties on the mutual recognition and enforcement of civil and commercial judgments, the examination shall be subject to the principle of reciprocity.”

Given that China and the United States have established a reciprocal relationship in the recognition and enforcement of judgments, the Guangzhou Intermediate People’s Court held that it “can recognize and enforce U.S. civil judgments according to the principle of reciprocity.”

3. Criterion: Damages and Punitive Damages

The U.S. Judgments to be enforced all concerned damages and punitive damages. In these cases, the Guangzhou Intermediate People’s Court indicated that “it would not recognize and enforce the punitive damages in the U.S. Judgments which significantly exceeds the actual losses.” Namely:

(1) Recognize the main text of and the damages provided by the U.S. Judgments.

(2) Refuse to recognize the punitive damages provided by the U.S. Judgments.

III. Our comments

As indicated in our earlier post “Conditions for Enforcement of Foreign Judgments in China”, if the amount of damages awarded by the foreign judgment significantly exceeds the applicant’s actual loss, the Chinese court may not recognize and enforce the excess.

In some countries, courts may grant a large sum of punitive damages. However, in China, on the one hand, the basic principle of civil compensation is the “principle of full compensation”, which means compensation shall not exceed the losses incurred; on the other hand, a huge amount of punitive damages are not widely acceptable in China’s social and business practice for the time being.

That being said, China’s recent legislation moves gingerly beyond the “principle of full compensation”, i.e., punitive damages are recognized in specific areas and are required not to exceed a specific capped amount.

For example, China’s Civil Code, enacted in 2020, allows punitive damages in three areas, namely, intellectual property infringement, product liability, and environmental pollution.

For the time being, it seems that Chinese courts are not prepared to get such a breakthrough on punitive damages in the recognition and enforcement of foreign judgments.

It is fair to say that the eight rulings made by the Guangzhou Intermediate People’s Court echo the rule (Art. 45) laid down by the landmark judicial policy in 2022.


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