Thoughts on The Chinese Decision On Recognizing a US Judgment

If you haven’t read Dr. Jie Huang’s important report on a Chinese court’s unprecedented recognition of a US commercial money judgment, read it now. This is a big deal. I have just a few comments on the development.

First, the service of process in the US decision was, apparently, service by publication. I assume for the moment that the service was valid under California law. In cases of service by publication, the service provisions of the Hague Service Convention does not apply, because there is no occasion to transmit a document abroad for service. (The default judgment provisions may apply, however). Still, it’s welcome news that the Chinese court apparently treated the question of service as one to be decided under the law of the forum. I don’t necessarily recommend aggressive use of service by publication, since it is the one method of service perhaps most likely to cause foreign courts to raise due process-type concerns.

Second, I think this is a very heartening sign about the Chinese courts and about US strategy in private international law. One of the things the United States has done very well historically is to give judicial assistance to litigants in other countries without requiring reciprocity. The theory has been that liberal US practice would encourage liberalization abroad, but it has not always been easy to see this in action. We see it in action here, though: the Chinese court cited one of several US decisions recognizing Chinese decisions as a basis for concluding that the US courts would give reciprocal treatment to Chinese decisions. This is just how reciprocity is supposed to work, and it goes to show that however some politicians today see the world, making the first move in a cooperative game is not just for suckers.

Third, it’s probably too soon to change strategies when doing business with Chinese firms or nationals. An agreement to arbitrate is often a good solution when doing business in China (though there are special considerations that you have to consider to ensure enforcement of an arbitral award in China, which I won’t cover here), and people who really know about Chinese law say that sometimes litigation in Chinese courts may be a reasonable option. Now we see that when enforcement will have to be in China, litigation in a US court may be a reasonable option, too, but remember that as of today, n=1.

5 responses to “Thoughts on The Chinese Decision On Recognizing a US Judgment”

  1. For commentary from a China expert, be sure also to read Dan Harris’s post. His overall conclusion is the same as the conclusion in the last paragraph of my post: it’s too soon to make big changes.

  2. […]  Ted Folkman takes a more optimistic, though cautious, view, in this morning’s Letters Blogatory.  Ted sees that glimmer of hope, but also cautions […]

  3. Jeanne Huang

    Thank you, Ted. I like what you wrote about the service of process.

    It is still unclear whether the Chinese court should make an independent determination of whether service was appropriate in the judgment rendering court. Further, which law that Chinese court should apply to determine the appropriateness of the service. The Liu Li court simply accepted the U.S. court’s decision that substituted service by publication was appropriate. HOWEVER, the Liu Li court also found that the two respondents’ habitual residence was in China. Therefore, the question is whether the Chinese court should apply the Hague Service Convention instead of the U.S. law to determine whether the service of process in the U.S. court is appropriate.

    Moreover, the Liu Li court does not make an independent determination of whether the U.S. court has jurisdiction and also which law should be applied to make such determination. Under Australian common law, Australian courts apply Australian law to determine whether the judgment rendering courts have international jurisdiction. In contrast, the Liu Li court does not examine the U.S. court’s jurisdiction at all.

    Chinese Supreme People’s Court should provide guidance to lower courts in these aspects. 

    1. Jeanne, thanks for your comment, and congratulations on your report! I trust you’ll keep of posted on any additional Chinese decisions along the lines you mention here.

      One point of clarification: the domicile of the Chinese defendants shouldn’t determine whether the Convention applies. If the method of service chosen does not require transmission of the document to China for service, then the Convention doesn’t apply no matter where the defendants live. Is that how Chinese courts see things?

      1. Jeanne Huang

        Dear Ted,

        In China, if a foreign defendant who has neither domicile/habitual residence nor a competent agent in China, Chinese courts will use the Hague Service Convention. In Chinese Civil Procedure Law, public announcement is the last resort for service but I do not think it can be applied to a foreign defendant in the above situation.

        I guess the defendants in the Liu Li case were in California so the court could use public announcement for service of process.

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