The claimant Spar was the shipowner of three vessels that were let on long term time charter to Grand China Shipping (Hong Kong) Co., Ltd (“GCS"). GCL, incorporated in Shanghai, is the parent company of GCS and provided guarantees to secure the performance of GSC’s obligations under the charterparties for the three vessels. The charterer GCS failed to pay the charter hire, and as a result the shipowner Spar claimed against the guarantor GCL before the English High Court, whose decision was later appealed by GCL to the Court of Appeal.  In both proceedings, the guarantor was held liable for the shipowner’s claims.  The guarantor participated in the court proceedings but did not honor the judgments.  Consequently, the shipowner resorted to the Court, which has the jurisdiction over the guarantor, for enforcement of the English Judgment. 

There is no multilateral or bilateral treaty between the UK and the PRC in respect of the enforcement of court judgments.  Therefore, the principle of reciprocity shall apply in the absence of any such treaty or convention.  This proposition is reflected in the Article 289 of the Civil Procedure Law of the People's Republic of China which provides that: -

“after examining an application or request for recognition and enforcement of an effective judgment or ruling of a foreign court in accordance with an international treaty concluded or acceded to by the People's Republic of China or under the principle of reciprocity, a people's court shall issue a ruling to recognize the legal force of the judgment or ruling and issue an order for enforcement as needed to enforce the judgment or ruling according to the relevant provisions of this Law if the people's court deems that the judgment or ruling does not violate the basic principles of the laws of the People's Republic of China and the sovereignty, security and public interest of the People's Republic of China. If the judgment or ruling violates the basic principles of the laws of the People's Republic of China or the sovereignty, security or public interest of the People's Republic of China, the people's court shall not grant recognition and enforcement."

The question put forward to the  Court is what constitutes “reciprocity". 

PRC law traditionally only allows a Chinese court to recognize and enforce a judgement of a foreign court only if any court in the foreign jurisdiction has previously enforced a Chinese judgement.  Apparently, this standard requires evidence that an English court had ever recognized and enforced a Chinese commercial judgment.  In the Spar Case, the Court was requested to determine whether the judgment of the case [2015] EWHC 999 (Comm) could substantiate the existence of proved reciprocity and accordingly meet the criterion.

The Court’s answer is no.  It held that the English High Court simply admitted the evidential value of the Chinese judgment in [2015] EWHC 999 (Comm), but such admission could not constitute the recognition of a Chinese judgment as the admission could by no means impose res judicate on the Chinese judgment.  If the Court follows the traditional approach, this would bring to an end of the English Judgment. 

The Court, however, denied that the reciprocity should be narrowly interpreted as existing only where a foreign court had enforced a Chinese commercial judgement.  It observed that: -

“Our Civil Procedure Law does not restrict the application of the principle of reciprocity only to that the relevant foreign court must recognize and enforce our judgment antecedently, and therefore the Court shall hold the reciprocity exists provided that a Chinese commercial judgment can be recognized and enforced by the foreign court in light of their law.  The precedent which shows that the foreign court had recognized and enforced the Chinese commercial judgment is, but no more, a clear proof that the foreign law operates as we so expect in this regard."

The Court’s above observation likely follows the approach “codified" in the Minutes of Meeting of the Trial Work of the National Courts on the Foreign-related Commercial and Maritime Matters issued on 31 December 2021 (the “Minutes") in respect of the recognition and enforcement of foreign judgments, which reads: -

“Section 44 Where the court exams the application to recognize and enforce a foreign court commercial judgment, the reciprocity may exist, if any of the following situations arise:

1. The Chinese commercial judgement can be recognized and enforced by the foreign court in light of their law;

2. Our government and the foreign government reach an understanding or consensus on the reciprocity;

3. Either of our or the foreign government has committed a promise of reciprocity to the other through the diplomatic channel, and there is no proof that the foreign court had ever refused the recognition and enforcement of our commercial judgment on the ground of the non-existence of reciprocity.

The Court shall examine the existence of reciprocity on a case-by-case basis."

It is worth further noting the section 49 of the Minutes requires that the decision to apply the principle of reciprocity should ultimately be approved by the People’s Supreme Court.  Therefore, we may say that the Order manifests the progress in law and the presumed reciprocity which was only explored in theory before is now recognized by Chinese courts. 

The Court indicated in the Order that if the jurisdiction of the English High Court was acquired by injunction, i.e., prohibiting either party to sue before a Chinese court, there may be a danger that the reciprocity might not be taken as existing between the jurisdictions.  Nonetheless, the Court found that the parties voluntarily submitted their disputes to the English High Court and that the alleged anti-suit injunction had no role to play in the Spar Case.  It seems we have to await another appropriate time to examine whether an English anti-suit injunction has any adverse effect on the establishment of the presumed reciprocity.

Despite that there are certain points for clarification, the Order as well as the Minutes definitely are an encouraging milestone in supporting the enforcement of foreign commercial judgements in China’s mainland.  In particular, this decision may to a large extent lessen the foreign party’s concern when they conclude a foreign court jurisdiction agreement with the Chinese party.  This may eventually promote foreign-related commercial activities.