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Recognition and Enforcement of Foreign Judgments as a Tool of Dispute Resolution for OBOR

Recognition and Enforcement of Foreign Judgments as a Tool of Dispute Resolution for OBOR

September 28, 2017

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Paper presented at 2017 China Arbitration Summit on 20 September 2017 by Chief Justice Michael Hwang, Dubai International Financial Centre (DIFC) Courts

One of the matters that lawyers interested in OBOR need to know is what happens if their clients become involved in cross-border transactions in the OBOR region and end up in disputes with their business partners. Traditionally, the understanding is that international arbitration is the only method of dispute resolution, because over 150 States have ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, including nearly all the participating countries in OBOR. This makes arbitral awards very easy to enforce around the world.

However, my suggestion is that we should consider alternative or additional methods of dispute resolution for OBOR disputes which is through the recognition and enforcement of foreign judgments.

In common law countries, including commonwealth countries and former British colonies, the process for recognising and enforcing foreign judgments is generally uniform. This is because there is a common law for the recognition and enforcement of foreign judgments which applies in all common law countries. It is also easier to enforce a foreign judgment in common law countries, because there is no requirement of reciprocity for the enforcement of foreign judgments. So even if the foreign country does not enforce judgments from the common law country, the latter will still enforce the foreign judgment.

A few common law countries are participants in OBOR. These countries are Malaysia, Singapore, Brunei, New Zealand and South Africa. A few territories in civil law countries also apply the common law, including Hong Kong and the DIFC. Although there are not many common law countries which are participating in OBOR, many of these countries are leading global financial hubs through which many transactions in OBOR are likely to pass.

In civil law countries, there is no common law for the recognition and enforcement of foreign judgments. However, civil law countries impose similar requirements for recognising and enforcing foreign judgments (although there are some differences). For example, most civil law countries impose requirements concerning jurisdiction, public policy and due process. These are requirements which common law countries have as well.

So, it is not true to say that civil law countries are totally diverse. There are many similarities among civil law countries when it comes to recognising and enforcing foreign judgments.

Moreover, although most civil law countries require reciprocity, there is a trend of civil law countries abolishing the requirement. For example, Poland (which is a participating country in OBOR) used to require reciprocity. But in 2008, Poland repealed the requirement in its entirety.

Civil law countries are also interpreting the requirement more flexibly. For instance, although Russian law requires the existence of a treaty between Russia and the foreign country for the mutual recognition and enforcement of judgments, a Russian court in 2009 went beyond the plain wording of the legislation to hold that it was not necessary to prove a treaty relationship, so long as there was an actual reciprocal relationship between Russia and the foreign country. So, if one can prove the foreign country enforces Russian judgments, that is sufficient. Reciprocity is no longer a hurdle that cannot be overcome, as courts around the world are increasingly lowering the barriers.

In the DIFC, we are taking the initiative to improve the awareness of the international business community of the requirements for recognising and enforcing DIFC judgments in foreign countries, and foreign judgments in the DIFC. What we have done is to enter into memorandums of guidance with foreign countries separately, so as to spell out the requirements for recognising and enforcing DIFC judgments in the foreign country, and the foreign country’s judgments in the DIFC. We started out with common law jurisdictions such as England, Australia, Kenya, Singapore, Malaysia and New York, because we knew that they are generally receptive to enforcing foreign judgments. Next month we will be signing a memorandum of guidance with Zambia. However, in recent years, we are starting to enter into memorandums of guidance with civil law countries where it is not difficult to recognise and enforce DIFC judgments in those countries. For example, we have entered into memorandums of guidance with Kazakhstan and South Korea.

We have also prepared a guide with King & Wood Mallesons that sets out the requirements for the enforcement of DIFC judgments in mainland China, and mainland Chinese judgments in the DIFC. The English and Chinese versions of the Guide are available on the DIFC Courts’ website, so the public can access the Guide very easily.

The Guide is structured very simply. It first has a section on the requirements for enforcement of DIFC judgments in mainland China, and after that a section on the requirements for the enforcement of Chinese judgments in the DIFC. Both sections are thorough but easy to read. For example, in the case of Chinese judgments, the Guide briefly explains the six grounds on which the DIFC Courts will not enforce a Chinese judgment:

  • The judgment is not final and conclusive or unenforceable;
  • The judgment is issued by a court without jurisdiction;
  • The judgment supports a claim that violates DIFC laws or the public policy of the UAE;
  • The judgment violates DIFC laws on legal representatives of persons lacking in legal capacity;
  • The judgment debtor was not duly notified of the Chinese proceedings;
  • DIFC proceedings involving the same parties and subject matter were commenced before the Chinese proceedings were commenced, or the DIFC Court has recognised a third country’s final judgment on the matter involving the same parties and subject matter.

In addition to the substantive requirements, the Guide explains the procedures for enforcing judgments from one country in the other. For example, to enforce Chinese judgments in the DIFC, the Guide explains that the judgment creditor must submit a Claim to the DIFC Courts together with a certified copy of the Chinese judgment. Once the judgment debtor acknowledges service, the parties will exchange pleadings and the case will go to trial. Of course, the judgment creditor may apply for judgment without trial if it considers that the judgment clearly satisfies all the substantive requirements for enforcement in the DIFC. All of this is important information which Chinese lawyers need to know if their clients are trading or investing in the DIFC.

Memorandums of guidance are not legally binding so they do not change the law. They may be the first step in the harmonisation of laws among OBOR countries eventually, but what is valuable at the present moment in promoting trade and commerce is knowledge of how things actually work. So, if there are differences between OBOR countries, we should help to ensure that business entities know these differences. Appropriate legal steps can then be taken to protect their interests when they are investing in other OBOR countries.

And this brings me to the message of my speech. There is a real alternative to arbitration for resolving disputes arising from OBOR, which is international litigation. And to help the international business community appreciate that this option is available, courts including the Chinese courts should take the initiative to educate the international business community regarding the procedures for enforcing foreign judgments. One effective way to go about this is by entering into memorandums of guidance with courts around the world, as the DIFC courts have done, so that businesses in one OBOR country can know how to enforce a foreign judgment obtained in the another OBOR country so that such essential information can be added to the general business knowledge of OBOR countries to enable them to better plan their business and legal strategies.