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.