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Newsletter: 2021 Typical Cases in Recognition and Enforcement of Overseas Judgments and Arbitral Awards

Author: Carrie (Jiajia) Sun; Katelyn (Yutong) Xiao


# PRC – Singapore

 

Case I - The first case applying legal reciprocity?

 

[Key Words: reciprocity; de facto reciprocity; legal reciprocity]

 

On July 29, 2021, the Third Intermediate People’s Court of Shanghai Municipality (“Court”) recognized and enforced a judgment rendered by Singapore High Court (“Judgment”) based on both de facto reciprocity and legal reciprocity (“Case”). In accordance with Article 281 of Civil Procedure Law of the People’s Republic of China (Amended in 2017),where a judgment or ruling made by a foreign court (“a foreign judgment”) which has come into legal effect requires recognition and enforcement by a People’s Court of the People’s Republic of China (“PRC”), the parties concerned may submit an application directly to an intermediate People’s Court of PRC which has jurisdiction over recognition and enforcement, or the foreign court may, pursuant to the provisions of the international treaty concluded or participated by the country and PRC or in accordance with the principle of reciprocity, request for recognition and enforcement by the People’s Court.

 

It is generally believed that PRC courts adopt a strict “de facto reciprocity” standard in judicial practice, i.e., Chinese courts shall consider recognizing reciprocity between a foreign country and PRC only if the court of the foreign country has previously enforced Chinese judgments. PRC and Singapore have established the “de facto reciprocity” since the case of “Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2014] 2 SLR 545”.

 

However, in the Case, it’s the first time that the PRC court recognizes the legal reciprocity relationship between PRC and Singapore based on Memorandum of Guidance Between the Supreme People’s Court of the Peoples’ Republic of China and the Supreme Court of Singapore on Recognition and Enforcement of Money Judgments in Commercial Cases signed by the authorized representatives of both countries on August 31, 2018. The legal reciprocity in PRC works in the way that after comparing the legal requirements of recognition and enforcement of foreign judgments between the foreign country and PRC, if the requirements of a foreign country are consistent with or less stringent than those stipulated by PRC law, PRC courts shall recognize the existence of legal reciprocity and accordingly recognize and enforce the foreign judgments.

 

The Case concerned a dispute arising out of a contract of assignment of claims between a solar system company registered in the British Virgin Islands and an investment company registered in Singapore.

 

[Case No.: (2019)沪01协外认22号]


Case II – Can the Blocking Measures “block” the recognition procedure?

 

[Key Awards: Blocking Measures; Blocking Act; Improper Extraterritorial Application]

 

On November 1, 2021, the Shanghai Financial Court (“Court”) recognized and enforced an Arbitral Award rendered by Singapore International Arbitration Centre (SIAC) (“Award”) (“Case”).

 

Unlike the common claims frequently raised by the respondents in other recognition cases in PRC, the Respondent claimed “refreshing” and “novel” rebuttal arguments: (i) the Award itself is partial since the chief arbitrator of the Arbitral Tribunal was seated in a law firm that sanctioned by the PRC Government on the grounds of malicious intentional dissemination of lies and false information; (ii) the Court shall comply with the Measures for Blocking Improper Extraterritorial Application of Foreign Laws and Measures (“Blocking Measures”) released by Ministry of Commerce of PRC on November 9, 2021, and protect Chinese civilian-run enterprises’ interests.

 

The Court adjudicated that all of the arguments raised by the Respondent shall be rejected. Among them, for the abovementioned point (i), the Court emphasized that it is not the chief arbitrator sanctioned by the PRC government. The sanction on his law firm was not within the examination scope of refusing recognition and enforcement of foreign arbitral awards under the New York Convention. As for point (ii), the Court held that the Blocking Measures is irrelevant with the Case since both parties chose arbitration voluntarily when concluding the contract. Moreover, the Court emphasized that “the rule of law is the best business environment”, meaning that the premise and the prerequisite for maximizing the protection of Chinese civilian-run enterprises shall be the rule of law principle, which did demonstrate the Chinese judiciary’s attitude.

 

The Case concerned a dispute arising out of an international guarantee between one of the largest banks in Australia and one of the International large-scale enterprise groups in PRC.

 

[Case No.: (2021)沪74协外认1号]

 

Case III – Can the doubled deferred interest be asserted?

 

[Key Award: doubled deferred interest]

 

On May 9, 2021, the Third Intermediate People’s Court of Tianjin Municipality (“Court”) recognized and enforced an Arbitral Award rendered by Singapore International Arbitration Centre (SIAC) (“Award”) (“Case”). During the trial, the Applicant asserted that the Respondent shall pay the doubled deferred interest resulting from its failure to comply with a legal instrument in force (in the Case, i.e., the Award) in accordance with Article 253 of Civil Procedure Law of the People’s Republic of China (Amended in 2017). The Court, however, considered that whether the doubled deferred interest shall be approved was not within the scope of the recognition phase, but specified that the Applicant could raise such claim during the enforcement stage. The Case concerned a dispute arising out of an international sale contract between a Singapore Company and another Chinese company registered in Tianjin, PRC.

 

[Case No.: (2021)津03协外认2号之一]

 

# Mainland China – Hong Kong

 

Case I – How to decide “res judicata”?

 

[Key Words: parallel litigations; res judicata]

 

On September 29, 2021, the Shanghai Financial Court (“Court”) recognized and enforced an Arbitral Award rendered by Hong Kong International Arbitration Center (HKIAC) (“Award”) (“Case”). The Respondent argued that there existed several parallel litigations between Mainland China and the HKIAC Arbitration, and some contents of the Award had been decided and settled by the previous Mainland China courts with regards to removing its name from the rolls, the right to be informed, and the distribution of investment profits, which did contradict with the principle of “res judicata”. The Court reviewed and analyzed the fact of the Case and further adjudicated that there was no overlap among prior judgments rendered by Mainland China courts and the Award. The Case concerned a dispute arising out of a limited partnership agreement among a Japanese company, an equity investment fund management partnership registered in PRC, and another company registered in Hong Kong.

 

[Case No.: (2020)沪74认港1号]

 

# PRC - Italy

 

Case I – Is the heir/heiress at law entitled to apply for recognition and enforcement?

 

[Key Awards: the heir/heiress at law; the scope of the estate]

 

On March 31, 2021, the Intermediate People's Court of Wenzhou City of Zhejiang Province (“Court”) recognized and enforced a judgment issued by the Brescia court in Italy (“Judgment”) (“Court”). The Applicant, in the Case, is not the Judgment creditor, who passed away before applying for recognition and enforcement of the Judgment, but his wife, the heiress at law. In accordance with Article 1122(1) of the PRC Civil Code, the estate refers to the lawful assets left over by a natural person upon his death. In PRC legal practice, the estate includes the creditor’s rights for which the subject matter of performance is property. The creditor’s right vested by a final and binding judgment shall be regarded as estate as well. Therefore, the Judgment creditor’s wife, as the heiress at law, has a direct stake in the Case, who shall be a qualified plaintiff in accordance with Article 119(1) of Civil Procedure Law of the People’s Republic of China (Amended in 2017) and is entitled to apply for recognition and enforcement of the Judgment. The Case concerned a dispute arising out of a rental contract between 2 Chinese citizens.

 

[Case No.: (2019)浙03协外认18号]

 

# PRC – the UK

 

Case I – How to decide the domicile for offshore companies in PRC?

 

[Key Words: challenge to the jurisdiction; domicile; registered address; principal place of business]

 

On January 22, 2021, the High People’s Court of Shanghai Municipality (“Court”) dismissed the appeal and upheld the decision rendered by Shanghai Maritime Court, recognizing and enforcing the Arbitral Award rendered by an ad hoc arbitral tribunal comprised by Charles Baker and Stuart Fitzpatrick, applying English law and following the arbitration rule of the London Maritime Arbitrators Association (LMAA) (“Award”) (“Case”).

 

The Court pointed out the main issue within the Respondent’s appeal was the disputed jurisdiction. The Respondent argued that since it had no principal place of business or assets in PRC, PRC courts had no jurisdiction over the Case. Both the Court and Shanghai Maritime Court noticed the following statement within the Award, which stated that “[t]he Charterers area corporation registered in the Marshall Islands, carrying out business in Shanghai, China”. Both courts then adjudicated the principal place of business of the Respondent shall be regarded as in Shanghai, even though the registered address was in the Marshall Islands. The principal place of business can be deemed as the domicile of a legal person in PRC in accordance with Article 3 of Interpretation of Supreme People’s Court on the Application of the Civil Procedure Law of the People’s Republic of China (Amended in 2020). Therefore, the Court upheld Shanghai Maritime Court did have jurisdiction over the Case in which the domicile of the Respondent was in the jurisdiction of Shanghai Maritime Court. The Case concerned a dispute arising out of a time charter between a company registered in the British Virgin Islands and another company registered in the Republic of the Marshall Islands.


[Case No.: (2020)沪民辖终110号;(2020)沪72协外认1号]