The recognition and enforcement of English court judgments in China has now been made easier following a recent ground-breaking judgment by the Shanghai Maritime Court allowing for the recognition and enforcement of an English court judgment under the principle of reciprocity.

In Spar Shipping AS v Grand China Logistics Holding (Group) Co, Ltd. (2018) H72XWR No.1 the Court recognised that a judgment from the English court could be recognised and enforced by a court in the Chinese Mainland. This article will consider the practical implications of this decision for businesses who may already have a judgment against a Chinese entity they wish to enforce in China or who may be negotiating contractual arrangements with a Chinese entity and considering their dispute resolution options.

English Judgment

The English judgment was the result of a Court of Appeal decision in Grand China Logistics Holding (Group) Co. Ltd v Spar Shipping AS [2016] EWCA CIV 982. The case concerned the termination by a shipowner, Spar, of three long term charter parties on the grounds that the charterer failed to pay hire on time and in September 2011 Spar withdrew the vessels and terminated the charterparties. Spar then sued the charterer under the guarantees, claiming the balance of hire unpaid under the charters and damages for loss of bargain in respect of the unexpired term of the charters. The Court of Appeal found in favour of Spar and ordered the charterers’ parent company as guarantor to pay Spar the amounts due under the three charterparties including damages plus interest and costs.

Application for Recognition and Enforcement

In 2018, Spar filed a claim in the Shanghai Maritime Court, which was the court with jurisdiction over the charterer’s parent company, for the recognition and enforcement of the Court of Appeal judgment. The Shanghai Maritime Court concluded that there had been no previous precedent of an English court recognising a Chinese judgment, but it was satisfied that as a matter of principle a Chinese judgment could be recognised by an English court. This meant that the principle of reciprocity was engaged. Following its decision, the case was referred up to the Supreme People’s Court of the PRC for approval.

Before the Supreme Court of the PRC issued its ruling on the case, the Supreme Court issued a memorandum on the handling of commercial and maritime matters which was to have an important bearing on the case. Article 44 of the Memorandum provided that a condition for the recognition of foreign court judgment is that: “…according to the law of the country where the court is located, the civil and commercial judgments made by the People’s Court can be recognised and enforced by the courts of that country.” Following the issue of the memorandum the Supreme Court approved the Shanghai Maritime Court’s ruling and on 17 March 2022, the Shanghai Maritime Court handed down the Civil Ruling which allowed for the recognition and enforcement of the English judgment.

Practical Implications of this Ruling – opening up the Chinese courts

This judgment effectively opens up the Chinese courts to allow the enforcement of English judgments. It will be hoped that this judgment paves the way for the recognition of judgments not just from the English courts but also in other jurisdictions. However, there will be some limitations as not all judgments will be recognised for example, orders made at the pre-action stage such as anti-suit injunctions, or those where the Chinese court considers it has jurisdiction over the foreign court.

Crucially it provides parties with a viable alternative to arbitration when considering which mechanism to use to resolve any disputes between them. Contracts with Chinese parties have traditionally contained arbitration clauses as China is a signatory to the New York Convention which makes the recognition and enforcement of arbitral awards relatively easy. Easier recognition and enforcement of court judgments will promote the use of court litigation and allow parties to consider enforcement via the courts for the first time.