Introduction
Facts
Decision
Comment
On 17 March 2022, after approval of the Supreme People's Court of the People's Republic of China (PRC), the Shanghai Maritime Court published an effective civil order for the recognition of a series of court judgments and associated rulings given by the English High Court and Court of Appeal (English court's judgments) in the PRC. This is the first time that the court has recognised the English court's judgments according to the principle of reciprocity, as well as the latest "Memorandum of the National Courts' Symposium on Trials for Commercial and Maritime Cases" (memorandum) issued by the Supreme People's Court of the PRC in 2021.
The case of Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd(1) and Grand China Logistics Holding (Group) Co Ltd v Spar Shipping AS(2) arose due to the shipowner, Spar Shipping AS's, termination of three long-term charter parties on the grounds that the charterers had persistently failed to pay the hiring fees in advance, as required by the charter parties. As the charterers' parent company, Grand China Logistics Holding (Group) Co Ltd, had issued performance guarantees for the charterers and their court of jurisdiction was the English High Court, which is where the shipowner brought their lawsuit.
At first, the parent company did not object to the jurisdiction of English High Court and did not try to bring their lawsuit to a Chinese court. After the hearing, the English High Court was in favour of the shipowner's position and decided that the parent company should bear the liability for the hire amount of approximately $24 million.
The judgment of English High Court was appealed, and the Court of Appeal finally ruled that the parent company, as the guarantor for the charterers, should pay the shipowner the hiring fees due under the three charter parties, including damages, interest and costs.
In March 2018, the shipowner submitted an application to the Shanghai Maritime Court, where the parent company is located, requesting the Court to recognise the English court's judgment.
This case raised two questions:
- Could the Chinese court recognise the English court's judgment in accordance with existing laws of the PRC?
- Does the anti-suit injunction system of the English court impede the Chinese court from recognising and enforcing the English court's judgment?
Chinese laws on recognition and enforcement procedures
Article 288 of the Civil Procedure Law of the PRC provides the following:
Where a judgment or ruling made by a foreign court which has come into legal effect requires recognition and enforcement by a People's Court of the People's Republic of China, the parties concerned may submit an application directly to an intermediate People's Court of the People's Republic of China which has jurisdiction for recognition and enforcement, or the foreign court may, pursuant to the provisions of the international treaty concluded or participated by the country and the People's Republic of China or in accordance with the principle of reciprocity, request for recognition and enforcement by the People's Court.
In addition, the memorandum provides that:
- [Identification of Reciprocity] When a people's court hears a case of application for the recognition and enforcement of a judgment or ruling rendered by a foreign court, it may determine the existence of reciprocity under any of the following circumstances:
(1) A civil or commercial judgment made by a people's court can be recognized and enforced by a court in that country in accordance with the laws of the country where the court is located;
(2) China reached an understanding or consensus of reciprocity with the country where the court is located; and
(3) The country where the court is located has made reciprocity commitments to China through diplomatic channels, or China has made reciprocity commitments to the country where the court is located through diplomatic channels, and there is no evidence to prove that the country where the court is located has refused to recognize and enforce the judgment or ruling made by a people's court on the ground that there is no reciprocity.
The people's court shall examine and determine whether there is reciprocity on a case-by-case basis.
- [Causes of Non-recognition and Enforcement] For a legally effective judgment or ruling made by a foreign court, if a people's court determines that the judgment or ruling falls under any of the following circumstances after examining it in accordance with the principle of reciprocity, the court shall rule not to recognize and enforce the judgment or ruling:
(1) The court of the country where the judgment is made has no jurisdiction over the case according to the laws of the People's Republic of China;
(2) The respondent has not been lawfully summoned or has been lawfully summoned but has not been given a reasonable opportunity to make a statement or debate, or the litigant without litigation capacity has not been properly represented;
(3) The judgment is obtained by fraud; or
(4) The people's court has made a judgment on the same dispute or has recognized and enforced a judgment or arbitral award made by a third country on the same dispute.
Where a legally effective judgment or ruling made by a foreign court violates the basic principles of the laws of the People's Republic of China or violates State sovereignty, security and public interest, the judgment or ruling shall not be recognized and enforced. (Emphasis added.)
With regard to the first question, the Shanghai Maritime Court held that China may recognise and enforce the English court's judgment according to the principle of reciprocity, even if there is no common treaty between China and the United Kingdom. Further, according to the memorandum, the principle of reciprocity is not limited to the interpretation of foreign courts' prior recognition and enforcement of civil and commercial judgments of Chinese courts. Therefore, the Shanghai Maritime Court considered if, according to UK law, the civil and commercial judgments made by Chinese courts could be recognised by the foreign courts of the United Kingdom, as there is presumably a principle of reciprocity between China and the United Kingdom. Therefore, although the Shanghai Maritime Court found no precedent in which a civil and commercial judgment issued by a Chinese court was recognised and enforced by the English court, the principle that Chinese civil and commercial judgments can be recognised and enforced by the English courts was still satisfied.
With regard to the second question, although the English court did not issue an anti-suit injunction in this case, the parent company asserted that English courts issued anti-suit injunctions in a number of bill of lading transport cases. As such, if the judgment given by the Chinese court conflicts with the judgment of the relevant competent court in the United Kingdom, the English court will not recognise or enforce the Chinese judgment. The parent company pointed out that this clearly violates the principle of reciprocity in Chinese law. Thus, the parent company was of the opinion that the Court should not recognise the English court's judgment.
The Court did not agree with the comments and opinions of the parent company and held that the jurisdiction of the English High Court over the dispute involved did not derive from the anti-suit injunction but from the agreement of the parties in the performance guarantee. Consequently, the system of the anti-suit injunction was not a valid reason for refusing to recognise the English court's judgment.
Therefore, after obtaining prior approval of the Supreme People's Court of the PRC, the Shanghai Maritime Court issued a civil order to recognise the English court's judgment.
It is important for the winning party that a valid judgment or ruling can be enforced effectively and quickly. However, the difficulty of enforcing foreign judgments or rulings has always been a common problem in international judicial practices. In the past, Chinese courts have also rarely recognised and enforced a judgment or ruling rendered by a foreign court. Therefore, this case is expected to solve the difficulty of enforcing foreign judgments or rulings to a certain extent.
Further, this case shows that, while China has made great progress in economics, it also has an open and inclusive attitude in the field of foreign-related commercial trials and international judicial assistance.
For further information on this topic please contact Jin Yu-Lai at Shanghai Kai-Rong Law Firm by telephone (+86 21 5396 1065), fax (+86 21 5396 1204) or email ([email protected]). The Shanghai Kai-Rong Law Firm website can be accessed at www.skrlf.com.
Endnotes