| You may have a judgment from a United States court against a Chinese company, and are about to contemplate the possibility of enforcing it in the far east. Prior to the commencement of your enforcement journey, perhaps you wonder if this judgment could be enforced at all and if so, whether it would be a costly exercise? |
 Kelly Sikkema, Unsplash |
Well, due to the one-country-two-systems policy in place, one should first identify if the enforcement target is in Hong Kong Special Administrative Region (“SAR”) or Mainland China. Depending on the location of the target, the procedure, consideration and outcome could be different.
Enforcing U.S. Judgments in Hong Kong SAR
Generally speaking, foreign judgments may be enforced in Hong Kong either through the statutory route (Foreign Judgments (Reciprocal Enforcement) Ordinance (“FJREO”)) or the common law route. Whilst the FJREO covers 15 foreign countries such as Australia, Singapore, France and Germany, it does not include the United States. In the absence of any statutory mechanism to register judgments from the U.S., an American judgment holder could only rely on the common law regime, i.e., commence fresh proceedings by way of a Writ of Summons seeking to recognize the foreign judgment.
In order to be recognized as a Hong Kong judgment via the common law route, one must demonstrate to the satisfaction of the court the following questions:
- The foreign judgment must be final and conclusive;
- The foreign judgment be in the nature of a money award; and
- The foreign judgment must be “in personam”, i.e., against an individual or entity.
While the Hong Kong court will not re-try the case, the judgment debtor may raise defenses such as lack of jurisdiction, fraud or natural justice to strategically delay or even challenge the enforcement process.
Once an order recognizing the judgment is granted, the judgment creditor may proceed to enforce the judgment, depending on the types of assets available. Some common enforcement actions in Hong Kong are garnishee orders (i.e., to garnish properties from third parties who are indebted to the judgment debtor; for example, monies in a bank account) and charging orders (i.e., to place a charge over the properties of the judgment debtor, which requires subsequent application for a court order for sale), provided that it is known to the judgment creditor the whereabouts of the assets.
It is therefore advisable for judgment creditors to conduct an asset search against a judgment debtor prior to any enforcement actions. At times, a judgment creditor may also need to seek from the court an oral examination order against the director of a company to obtain information on the whereabouts of the assets.
Enforcing U.S. Judgments in Mainland China
If the target company is situated in Mainland China, the position would be very different. Enforcement of foreign judgments in Mainland China is governed by the Chinese domestic law, in particular the Civil Procedure Law (“CPL”). Currently, the CPL provides that a Chinese court may enforce a foreign judgment either through (i) an international convention or bilateral treaty (not applicable to the U.S.) or (ii) the principle of reciprocity.
Historically, it was extremely difficult to enforce any foreign judgments in Mainland China, but in recent years, there appears to have been a change in the attitude of the Chinese courts. Since 2017, there have been several successful cases where the Chinese courts recognized and allowed the enforcement of U.S. judgments based on the principle of reciprocity. Unfortunately, the principle of reciprocity is not defined by law and may be subject to different interpretations depending on the attitudes of the local courts. Broadly speaking, the interpretation of reciprocity has been that if a Chinese judgment has in the past been enforced in a particular state in the U.S., the Chinese local court would be more receptive to allow the enforcement of a U.S. judgment from that particular state in Mainland China.
China amended its Civil Procedure Law in 2023 to provide for wider coverage of enforceable foreign judgments. Notwithstanding the changes, the principle of reciprocity has yet to be widely adopted by the Chinese courts, leaving the situation uncertain and difficult for a U.S. judgement creditor.
Conclusion
The recognition and enforcement of U.S. judgments in Hong Kong SAR and Mainland China are quite different: it is more judgment creditor-friendly in Hong Kong, whereas the position remains uncertain in Mainland China, although enforcement may nonetheless be available. Extra attention should be given when drafting the dispute resolution clause of a contract, and parties should consider whether court litigation is most appropriate forum (as opposed to arbitration, which is generally enforceable by virtue of New York Convention) should you be in a dispute against a Chinese, non-Hong Kong party.
