By Dorothy MurrayLiu Haitao (Harry)Li Ronghui (Sam) King & Wood Mallesons

On 12 September 2017, China signed the Hague Convention on Choice-of-Court Agreements[1] (the “Hague Convention”), joining the EU (including the UK), Singapore, Mexico, the US and the Ukraine[2] in an international framework to promote international trade and investment by encouraging judicial cooperation in the field of jurisdiction and the recognition and enforcement of judgments.

The Hague Convention seeks to replicate for court judgments what the New York Convention of 1958[3] has (largely) achieved for international arbitration awards, allowing a winning party to have its “win” recognised quickly and easily around the world with limited grounds for challenges on enforcement.

While the number of parties to the Hague Convention still falls somewhat short of the 157 signatories to the New York Convention, the signature by China marks an important step forward towards its global acceptance.

For investors in China, it is a further and welcome demonstration of the policy drive to integrate China into the global economy as it pioneers the Belt and Road Initiative (“BRI”).    BRI countries presently party to the Hague Convention include Singapore, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.

Historically, the enforcement of a foreign judgment was almost a mission impossible in China, compared to the enforcement of foreign arbitral awards.[4]  In 2015, however, the Chinese Supreme Court in a judicial guideline[5] encouraged the courts to establish reciprocity between BRI countries and China, even when there was no bilateral treaty for judicial cooperation.

With this clear guideline and now the Hague Convention, we can expect to see more decisions like the one from 30 June 2017, where the Wuhan Intermediate People’s Court recognized and enforced a first instance civil ruling of a U.S. court. In that decision, the Court recognised, and held to be enforceable in the PRC, a ruling of the Californian courts under a share purchase agreement including the principal sum due, interest and procedural costs.  The decision was on the basis that the applicant had shown that there was precedent for “recognition and enforcement of civil rulings of Chinese courts in US, so reciprocity for mutual recognition and enforcement of civil rulings is determined existing between the two countries.”

Though it may take some time for the Hague Convention to be applicable in China, it anticipates a new era for international judicial cooperation.  Choice-of-court clauses may become a practical alternative to the arbitration in international transactions.

It may still be an adventure to have a foreign ruling enforced in the PRC, but the journey will be much less formidable than before.

Which judgments can be enforced under the Convention? 

The Convention is the first multilateral international convention to unify judicial rules relating to the choice of court and the enforcement of the judgment in civil and commercial cases.  In accordance with the Convention, in general, the recognition and enforcement of a foreign judgment shall be satisfied with the following requirements:

  • The matter is an international civil or commercial dispute;
  • There is a valid exclusive choice of court agreement or clause[1];
  • The judgement is from a party to and is requested to be enforced in other party to the Convention; and
  • The judgment is final and effective. 

Which judgments are not covered or cannot be enforced under the Convention? 

Below is a summary of the exceptions to the application of the Convention and situations where a judgment may not be enforced: 

  • The judgment of particular matters, such as family, will, employment, capacity of the natural person, insolvency, transportation, maritime dispute, antitrust, personal injury, tort, property right, and some IP issues;
  • The choice of court agreement or clause is invalid;
  • Lawsuit initiated before the Convention takes effects in the that country;
  • The party lacks the capacity to conclude the choice of law agreement or clause;
  • The court proceedings is defective;
  • Public order concerns;
  • Conflict with judgement in the requested country;
  • Arbitration proceedings related;
  • Interim measures; or
  • Punitive damages.

When the Convention will be valid in China? 

Pursuant to the PRC Law on Procedures for Concluding a Treaty, the Convention still needs the approval by the National People’s Congress. After approval, the Ministry of Foreign Affair will submit a formal document to join the Convention.  And then the Convention will be effective in China in 3 months after the submission.

[1] The Hague Choice-of-Court Convention, formally the Convention of 30 June 2005 on Choice of Court Agreements is an international treaty reached within the Hague Conference on Private International Law.  It was concluded in 2005, and entered into force on 1 October 2015.  The aim of the Convention is to promote international trade and investment by encouraging judicial cooperation in the field of jurisdiction and recognition and enforcement of judgment. (The content of the Convention: )

[2] The US and Ukraine have signed but not yet ratified

[3] Full name :Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958

[4] Enforcing foreign arbitral awards in China – a review of the past twenty years, written by Meg Utterback, Li Ronghui and Holly Blackwell

[5] Several Opinions on Providing Judicial Services and Safeguards for the Construction of the “Belt and Road” by People’s Courts

[6] The choice of court agreement or clause should be concluded after the Convention takes into force in the chosen country.