Chinese Court recognises Singaporean commercial judgment for the second time

On 2 August 2019, the Wenzhou Intermediate People’s Court of Zhejiang Province (Wenzhou Court) issued the Civil Ruling (2017) Zhe 03 Xie Wai Ren No. 7 (the Wenzhou Court Ruling) to recognise Judgement No. S139/2012 (Judgment) rendered by the Singapore High Court (Singapore Court) on 15 February 2013 (Oceanside Development Group Ltd. v. Chen Tongkao & Chen Xiudan, the Oceanside Case). This is the second time that a Chinese court has recognised a Singaporean commercial judgment on the principle of reciprocity based on Article 282 of the Chinese Civil Procedure Law.

Background

The Oceanside Case concerns an equity transfer dispute in which the debtors, two Chinese nationals (the Defendants) were sued for their failure to pay the amount of GBP 2.5 million to buy back shares from the creditor (the Claimant). The Claimant filed litigation against the Defendants with Singapore Court in February 2012. The Singapore Court served a court summons on the Defendants for the hearing dated 1 February 2013. However, the Defendants did not respond to the court summons nor did they attend the hearing. The Singapore Court thereby granted the opportunity for the Defendants to submit their defence on the condition of either providing a bank guarantee of GBP 2.5 million or paying the same amount to the court before 4pm, 15 February 2013. However, the Defendants again failed to comply with this directive by the Singapore Court.

As a result, the Singapore Court rendered a default judgement in favour of the Claimant. The Claimant had part of the Judgment enforced against the Defendants’ property in Singapore and also filed court proceedings for recognition of the Judgment with the Wenzhou Court for enforcement against the Defendants’ property in Mainland China.

The Wenzhou Court Ruling

One of the Defendants (also the Respondent in the Chinese court proceedings), Chen Xiudan objected to the Claimant’s application for recognition and argued that the Judgment was rendered in violation of the principle of equality of litigation rights under Article 8 of Chinese Civil Procedure Law, as the Defendants were requested to provide a guarantee of a significant amount within a few days to secure their right of defence. This is against “the basic principle of the laws of the People's Republic of China or the sovereignty, security or public interest of the State” (Article 282 of Chines Civil Procedure Law).

Moreover, Chen Xiudan contended that the Singapore Court failed to give its reasoning in detail in its Judgment as it ruled in default and directly without a substantive review of evidence. This severely impacts the Defendants’ legitimate interests.

The Wenzhou Court granted recognition of the Judgement and stated the following three reasons:

Firstly, the Judgement has been partially enforced in Singapore and is final and conclusive under Singaporean law.

Secondly, the Defendants had been properly summoned by the Singapore Court and the order by the Singapore Court does not violate Singaporean procedure law.

Lastly, there does not exist any other circumstance under which the Judgement is against the basic principles of Chinese law or sovereignty, security or public interest.

Comments

Notwithstanding that the Bilateral Treaty on Judicial Assistance in Civil and Commercial Matters (Bilateral Treaty) between China and Singapore had come into effect in early June 1999, this Bilateral Treaty only covers matters about service of legal documents, investigation and collection of evidence, recognition and enforcement of arbitral award and mutual provision of materials of legal practice in civil and commercial litigation. To date, China and Singapore have not entered into any bilateral treaty on the mutual recognition and enforcement of civil and commercial judgment nor acceded to the Convention of 2 July 2019 on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters.

On 9 December 2016, Nanjing Intermediate People’s Court (Nanjing Court) made a ruling to recognise and enforce a commercial judgment (No. 013) by the Singapore Court with the case reference of (2016) Su 01 Xie Wai Ren No. 3. It is the first time the Chinese court recognised and enforced a Singaporean commercial judgement on the principle of reciprocity, which is a landmark decision. In this case, Nanjing Court held that the Singapore Court had recognised and enforced a civil judgment of a Chinese court in 2014 and concluded that there exists reciprocity between China and Singapore. Note that this case is selected and included in the Second Group of Model Cases Involving Construction of the “Belt and Road” published by the Supreme People’s Court of People’s Republic of China (SPC).

On 31 August 2018, the SPC and the Supreme Court of Singapore signed a Memorandum of Guidance on Recognition and Enforcement of Money Judgments in Commercial Cases (the Memorandum). This Memorandum has no legally binding effect, does not constitute a treaty or legislation and is not binding on judges from either side. However, with the detailed guidance on mutual recognition and enforcement of judgments, the Memorandum provides a workable reference for courts when applying the principle of reciprocity under the Chinese Civil Procedure Law in practice.

This Wenzhou Court Ruling is a good example as the Wenzhou Court had been guided by and considered the provisions under Article 7 (a judgment has to be final and conclusive) and Article 10 (limited circumstances where a judgment may be challenged) of the Memorandum. We foresee that with more cases to “test” the application of the principle of reciprocity, the predictability and certainty of court practice on both sides would be greatly improved.

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The Memorandum

Article 7

A judgment of a Singapore court to be recognised and enforced in the People's Republic of China must be a final and conclusive judgment. Where the finality and conclusiveness of the judgment rendered or made by courts of Singapore sought for recognition and enforcement in a Chinese court are challenged, the finality and conclusiveness of the judgment shall be determined in accordance with Chinese law. A judgment subject to or under appeal is not final and conclusive.

Article 10

Where the above requirements are established to the satisfaction of courts of the People's Republic of China, a judgment of a Singapore court may be challenged only on limited grounds. Those grounds include but are not limited to: (a) the judgment is contrary to basic principles of the law of the People's Republic of China or will prejudice to its sovereignty, security or public Interests; (b) the judgment was obtained by fraud;   (c) the litigant had not been given proper notice of the judicial proceedings or had not been given a reasonable opportunity to defend the case; (d) the judicial panel is constituted by persons with personal interests in the outcome of the case; (e) the litigant without capacity for action has not been properly represented; (f) the litigation between the same litigants and on the same subject is pending in the courts of the People's Republic of China, or the courts of the People's Republic of China have rendered or made a final and conclusive judgment, or have recognized or enforced a final and conclusive judgment rendered by a third state or an arbitration award.