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GRAEME JOHNSON

Thank you for sharing this judgment.

To me, one of the most interesting aspects from a comparative perspective is that the District Court appears very readily to have concluded that the PRC judgment was "final, conclusive and enforceable" in accordance with the requirement of the Californian UFMRJA.

Such a finality requirement is, so far as I am aware, universal among common law jurisdictions. Usually it does not block enforcement of judgments which are not expressly "interim" or "interlocutory" in nature. However, in the PRC context, the equivalent requirement of "finality" under Hong Kong law has, time and again in recent years, been held to be a fatal bar to summary enforcement of mainland judgments in the Hong Kong courts, so I was interested to see no discussion of the point in the U.S. judgment.

The specific basis for finality of mainland judgments being questioned in Hong Kong is the existence of the "trial supervision" process under Chapter 16 of the mainland Civil Procedure Law: the existence of that process and its wide scope (at least in theory) has been repeatedly held by the Hong Kong courts to raise at least the realistic possibility of mainland judgments NEVER being regarded as "final" and hence NEVER enforceable in Hong Kong. No doubt last year's amendments to this aspect of the Civil Procedure Law will add fuel to the fire of judgment debtors' arguments on this point in Hong Kong. A recent judgment of the Hong Kong Court of Appeal on the subject is 李祐榮 v. 李瑞群, CACV 159/2004, available from the database at www.judiciary.gov.hk: that database also contains a number of other judgments to similar effect, including, most recently, Wu Wei v Liu Yi Ping, HCA 1452/2004, 30 January 2009 (see para 99).

I'm no expert on U.S. law and, in particular, I don't know what precise meaning U.S./Californian case law gives to the first nine words in the statutory (UFMJRA) phrase "under the law of the foreign country where rendered, is final, conclusive, and enforceable." However, in English and Hong Kong law it is clear that, whilst the finality of the foreign judgment is to be assessed according to foreign law, its characterisation as "final" (i.e. what "final" means) is a matter for the law of the enforcing court to determine. I would be interested to know if California / U.S. law is materially different on this point (i.e. whether it allows the foreign legal system to "self-certify" its judgments as "final"). If it's not different then I would be interested to know if anyone better informed than me about U.S. law can explain why a similar line of argument was not pursued by the debtor in the Robinson case. Perhaps it was unarguable for some reason not readily apparent to this non-U.S. lawyer, e.g. existing U.S. case law to the effect that Chapter 16 or its equivalent in other legal systems does not prevent judgments from being final.

Perhaps also, if the debtor had argued the finality point, it would have been met with a case-specific estoppel-type argument based on the types of equitable considerations which Don mentions below, though I must confess that I'm not sure how that would work technically since, at least in the legal systems I'm familiar with, the "finality" requirement is not merely a defence but actually goes to the court's jurisdiction (for a recent confirmation of this in HK see Westpac v. Gao Hui and others, HC (Intended Action) 27/2009, 25 May 2009, www.judiciary.gov.hk): it would seem contrary to principle to found jurisdiction on estoppels, equity and the like.

Two final observations:

1. I believe the "reciprocity" concept means different things in different civil law jurisdictions and (more to the point) does not yet have a precise accepted meaning in China. Certainly I think it would be wrong to expect a single instance of a U.S. court enforcing a PRC judgment to have much influence in persuading the PRC courts to enforce U.S. judgments without some directive from on high (i.e. SPC) to this effect. After all, Hong Kong courts have enforced mainland judgments in cases where the debtor has not effectively argued "finality" or other grounds, but the mainland courts have still not, so far as I know, enforced any HK judgments. Similarly, there is at least one German court decision from a few years ago enforcing a PRC judgment on the basis that reciprocity would be presumed absent evidence of non-reciprocity: but I'm not aware of any PRC courts enforcing German judgments. But maybe nobody's had a go, or maybe the relevant decisions aren't reported: I would certainly be delighted to hear if anyone has an example of enforcement on the basis of reciprocity in China or is aware of some other basis for thinking that the wind may be about to change!

2. As regards Rich's query about possible bilateral U.S.-China arrangements, I'm not aware of any in the pipeline, but there is a multilateral possibility on the horizon, namely the 2005 Hague Choice of Courts Convention (see www.hcch.net). China actively participated in the negotiation of this Convention (though has not yet signed it) and it appears likely soon to achieve "critical mass" as the European Community and United States both signed it earlier this year. That said, even if China, the United States and the European Community all ratify it, it will have a rather narrow field of application since it applies only to (in essence) "commercial" cases where judgment is rendered in accordance with an exclusive jurisdiction clause. However, where it does apply, it will apply to all judgments "on the merits" - it does not have a "finality" requirement of the type familiar from common law jurisdictions.

I hope the above is helpful.

Some further notes and thoughts which may be of interest (to someone somewhere!) are included in this email as a postscript.

Graeme Johnston
Herbert Smith LLP
Shanghai

POSTSCRIPT

There is a somewhat complex background to the Hong Kong law issue discussed above: the following notes may be useful to appreciate the full context in which it arises:

(a) The cases cited above are examples of what is known as "common law" enforcement in Hong Kong of non-Hong Kong judgments. "Common law" in this context means based on principles derived from case law rather than from statute (Hong Kong has some statutory provisions based on bilateral arrangements with various jurisdictions - the substantive features of these are, however, rather similar to the "common law" ones, and indeed to the relevant U.S. statutes, though they provide certain procedural advantages).

(b) Under the "common law" procedure one issues a writ (the usual form of originating process in HK), with the foreign judgment as one's cause of action, and then promptly applies for summary judgment. The finality point tends to be raised as a ground for denying summary judgment (together with whatever other points may be available to the defendant), with the aim of persuading the court to deny summary judgment and send the case to trial. Hence I use the phrase "realistic possibility" above to summarise what the cases have decided on the point.

(c) The point is treated as one of fact on which the defendant has to provide expert evidence in each case (see the Lam Chit Man litigation saga at www.judiciary.gov.hk for the consequences of not doing so) but once the defendant has done so in reasonably coherent form, the courts have been persuaded to refuse summary judgment.

(d) So far as I am aware, nobody has yet spent the money and time to go to trial and obtained a definitive ruling (based presumably on the testimony of cross-examined experts) as to whether the mainland trial supervision process is a good reason for denying enforcement. All the reported judgments are at the summary judgment stage only. One can of course understand that someone who has gone to the trouble and expense of obtaining judgment in the mainland and fighting and losing a summary judgment application in HK may think twice about whether to go to trial on the matter in HK, even on a limited factual front which ought not, in theory at least, to amount to re-litigating the merits.

(e) The same common law principles apply irrespective of whether the judgment in question is from a foreign country or simply from another jurisdiction within China, i.e. the mainland, Taiwan or Macau. However, the practical effect of the case law mentioned above is, rather ironically, that judgments from Taiwan (and, indeed, anywhere else in the world regardless of reciprocity) are readily enforceable in Hong Kong (see the Court of Final Appeal's judgment in Chen Li Hung v. Ting Lei Miao, FACV 2/1999, 27 January 2000, www.judiciary.gov.hk) whereas mainland judgments are not.

(f) Although the "finality" issue has been relied upon to deny enforcement of mainland judgments, it has not been a bar to successful FNC applications in favour of a mainland forum: see e.g. New Link Consultants Ltd v. Air China, HCA 515/2004, 3 May 2004 (available at www.judiciary.gov.hk)

(g) The "finality" issue was recognised as a significant one to be addressed in the context of negotiating the 2006 bilateral enforcement regime between Hong Kong and mainland China (which only applies to certain commercial judgments entered in accordance with exclusive jurisdiction clauses executed on or after 1 August 2008). See the legislative committee discussions on the arrangement and implementing legislation at www.legco.gov.hk and, for the way the matter was resolved, section 6 of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597), available at www.legislation.gov.hk

All the above is, I hope, factual. Some more speculative points are:

(1) Denying recognition to PRC judgments on rather technical "finality" grounds is doubtless less embarrassing in comity terms than denying recognition on more contentious "quality of justice" grounds. The latter has a particularly high risk of causing embarrassment in a Hong Kong court (this is not to say the judiciary has always shied away from it post-1997: see the dicta in Bayer Polymers v. ICBC, HCCL 307/1998, 22 November 1999, www.judiciary.gov.hk) but I expect it is fair to say that most judges in England, the United States and elsewhere would feel uncomfortable about criticising foreign legal systems without clear evidence of something "bad" affecting the particular case.

(2) It may be at least argued that a technical fallacy in the "finality" objection is that almost all legal systems have a way of re-opening judgments at first instance (i.e. other than by way of appeal) which are to some extent analogous to the mainland "trial supervision" process. See for example, para 94 of the Air China decision, quoting with apparent approval the defendant's expert evidence to the effect that "the Supervision Procedure has its roots in the Continental Legal System and has equivalents in Germany, Japan and Taiwan..... Second, compared with the available avenues under the common law system, the Supervision Procedure is not so drastically different anyway. The analogy is drawn with the common law doctrine that a judgment can always in principle be reopened for fraud." Another technical peculiarity in the HK case law is that it has for many years been accepted that a right of appeal does not prevent a judgment from being "final" - a rule which may be thought to have implications in the present context given that appeals are, in China as elsewhere, a much more common method of challenging judgments than invoking Chapter 16 or its foreign analogues.

(3) All that said, if mainland judgments were readily enforceable in Hong Kong then rather unedifying "races to judgment" might well be encouraged and might be thought to be somewhat one-sided for the sorts of reasons which Rich mentions, and bearing in mind also that mainland plaintiffs can often get more quickly to judgment in their home jurisdictions than is possible for a plaintiff in a common law jurisdiction, a point which is important since it would, if mainland judgments were enforceable, allows mainland plaintiffs not only positively to enforce their mainland judgment abroad but also to attempt to use it "defensively" in the foreign jurisdiction to have the foreign litigation dismissed on res judicata grounds before it even gets to trial.

Any imaginative litigator should readily be able to see that easy enforcement of mainland judgments in common law jurisdictions has potential (I say no more than that) for tilting the balance of power radically in competing Sino-foreign or mainland-HK cross-border litigation.

Randall Peerenboom

China has signed treaties with a number of countries for mutual enforcement, but never as far as I know recognized reciprocity, suggesting that treaties are the preferred approach.

In any event, although US courts have begun to recognize Chinese courts as an adequate forum in some FNC cases (staying or dismissing cases in the US so that they can be heard in China), there have also been cases that go the other way, and the issue is far from settled. As long as US courts are rejecting FNC on the grounds that Chinese courts do not provide an adequate forum (at least in reasonably "normal" commercial cases), I would think it would be difficult for Chinese courts to accept some reciprocity argument. I suppose the annual State Dept and CECC reports, which are quite critical of the Chinese legal system, also would not weigh in favor of recognizing reciprocity.

I suspect the more likely development will be the negotiation of more limited judicial assistance treaties. Both sides have an interest in greater judicial assistance in fighting terrorism, intl crime, money-laundering etc. China has sought the extradition or assisted in the prosecution in the US of bankers and govt officials who have embezzled funds. US parties have obtained judgments in the US against parties with assets in China or sought discovery of their assets from parties such as banks located in China. The current mechanisms provided in the CPL are too slow and cumbersome to work in practice. So there might be some room to expand judicial assistance for discovery purposes and/or enforcement.