The student-led Fordham China Law Society persevered through three months of uncertainty, rescheduling, and technical learning curves to virtually host its first annual symposium, titled “Recognition and Enforcement of Judgments between China and the U.S.,” on June 18. Five attorneys were invited to discuss how the recognition and enforcement of foreign judgments in the United States have the potential to fundamentally transform U.S.-China relations.
Michelle Ng, senior litigation associate at Pillsbury Winthrop Shaw Pittman, moderated the symposium’s two panels, which included James Berger ’93, partner at King & Spalding; Brian G. Burke ’05, head of Asia litigation and investigations practice at Shearman & Sterling; Chris Cogburn, trial lawyer at Kobre & Kim; Carol Lee, senior associate at Pillsbury Winthrop specializing in cross border litigation; and Geoffrey Sant, adjunct Fordham Law professor and partner and co-chair of the China Practice at Pillsbury Winthrop. Leitner Family Professor of Law Martin S. Flaherty provided opening and closing remarks.
A Breakthrough in Cooperation
In 2009, a federal district court in California enforced a $6.5 million Chinese commercial judgment against an American corporate defendant—marking the first time in history that a U.S. court enforced a Chinese judgment. The judgement sparked a vibrant debate about the possibility that the two countries would soon be on the path to reciprocity in recognition and enforcement. Since then, Chinese courts have recognized and enforced three judgments issued in the U.S. state and federal courts.
“Oftentimes, people like to discuss the recent fall of trade relationships, the break of diplomatic ties, and impacts on business transactions. In all such discussions, a deep understanding of legal implications behind both countries’ moves is quite necessary,” said Evelyn (Jixiu) Li ’20, event organizer and Fordham China Law Society co-founder and president. “It’s important to see whether the two countries will remain on the path to reciprocity and what the future might hold for those at the forefront of litigating in China and the U.S. “
New York’s Article 53
Unlike a majority of countries that treat cross border enforcement issues as a matter of treaty (which generally provide that judgments from one country will be enforceable in the other, provided there’s reciprocity), the U.S. does not have a treaty-based recognition system. Instead, it recognizes foreign judgments and decrees through comity—the legal principle that political entities will recognize each other’s courts and judgments. The hope, according to Berger, is that U.S. judgments—when taken to courts in a foreign country—will be given the same treatment out of deference and respect.
At the heart of this comity-based system is Article 53 of the Civil Practice Law and Rules, which is New York’s version of the Uniform Foreign-Country Money Judgments Recognition Act. Under this act, most foreign court judgments granting or denying the recovery of money can be enforced in New York. However, in order for a foreign judgment to be recognized in the U.S., it must not have been rendered under a judicial system that does not provide impartial tribunals or procedures compatible with the requirements of due process of law.
Article 53 requires impartial judiciary and due process procedures. Flaherty argued that U.S. judges should be aware that matters in China have gotten worse with respect to these requirements. For example, he mentioned how Chinese lawyers have been disbarred, detained, arrested, tortured, imprisoned—and have even disappeared—for representing clients the state and party do not like. Flaherty also spoke about the April 2019 revisions to the People’s Republic of China’s judges law regarding the selection and review processes for judges, which added the requirement that judges must support the party’s leadership and the socialist system.
“What we see under President Xi Jinping is the doubling down on the concept of rule by law, rather than rule of law. The law is an instrument of a party control and controlled by the state, meaning that if you’re in a commercial litigation and run afoul of some party official who has an interest in that litigation, chances are great that the party is going to exercise his influence in that instance,” Flaherty said. “Both the executive and legislative branches of the U.S. government expressed substantial doubts as to whether or not China has anything approaching an impartial judicial system with the basics of due process of law procedures.” He believes U.S. judges should apply the statute’s requirements and so avoid giving the imprimatur of U.S. courts on a regime that does not follow the rule of law.
Berger argues that Article 53 has, nonetheless, led to a view outside of the U.S. that American courts are imperialistic in nature when foreign judgments are not recognized. “I think people get this feeling because of the way the U.S. discovery system works and how U.S. judges will use discovery as a way to roughshod on people’s rights,” he explained. “In my experience, as somebody who has worked with lawyers and litigations in courts around the world and as somebody who litigates international disputes in U.S. courts, that is not my impression at all. I think U.S. judges, particularly federal judges, tend to be as modest as they can be and try to avoid stepping on toes of other countries. In the courts where I practice, which are typically in New York and the District of Columbia, most judges try to be deferential towards other countries’ legal systems.”
The Recognition Act is also used as an indirect way to enforce as a foreign arbitral award, according to Lee. “Ordinarily this act only applies to non-U.S. court judgments. However, if you want to get your arbitral award recognized through this act, one way you could do it is through domesticating the Chinese arbitral award in a court in China,” she explained.
Different Systems Yield Different Results
As noted by Berger, a major conflict found within enforcement is how the U.S. conducts its discovery system compared to other countries. While Europe has enacted privacy laws and in China there are state secrecy laws concerning financial privacy, discovery in U.S. courts allows for virtually everything to be turned over for examination. “You can get caught between the two systems—between the requirements of discovery and the requirements of protecting confidential records,” Sant said. “What I discovered is that generally, if these things are litigated, U.S. courts are not typically very much inclined to respect the foreign laws that are in conflict with the U.S. discovery. … U.S. courts typically find that the need for discovery outweighs the foreign country’s laws, which I believe is a concerning issue. I hope the Supreme Court addresses it because we do have a pressing need for resolution in some of the circuits’ splits on that issue.”
When reviewing enforcement in China, there is generally a preference towards arbitration over judgment, according to Burke. Arbitral awards are preferred because they tend to be easier and faster to enforce and are more easily recognized, especially in the Hong Kong International Arbitration Center (HKIAC). “The reason is that arbitral awards from Hong Kong are viewed as very friendly from the perspective of Chinese because there was an arrangement between mainland China and Hong Kong that promotes and supports the recognition of arbitral awards from the HKIAC. That doesn’t mean that arbitral awards issued from other states are not going to be recognized; it just means there is a fast track in Hong Kong,” Burke explained.
Cogburn observed that, if the judiciary in Hong Kong changes dramatically under the influence of the Beijing Arbitration Commission, there could be a domino-affecting impact. “If changes to the courts do indeed impact the extent to which American courts are willing to recognize judgments issued there, we should expect a probability that that will impact Hong Kong judgments across the board, not just in specific cases,” he said.
What the Future Could Hold
The rise of the global pandemic and fragile U.S.-China relations raises new stakes for the enforceability and recognition of foreign judgments in Chinese courts. “Chinese courts had recognized and enforced U.S. judgments in 2017 and 2018. As I sit here right now, I don’t anticipate that the trend for those kinds of cases will continue. However, the world is changing so quickly,” Burke said. “We don’t know how the world would look in December. We may have a different president or we may have the same president. The global COVID-19 pandemic may be under control or it may be completely out of control. I think that uncertainty and instability will probably influence the recognition of reciprocity in a negative way. I think the lack of stability in the current environment—and if that continues in the future environment—will likely have a downward pressure on reciprocity between U.S. and China judgments.”
The virtual symposium concluded with an hour-long networking session, in which 30 attendees had the opportunity to engage with the panelists. This optional feature, according to Li, proved to be a helpful platform for interaction between practicing lawyers and students interested in international law and U.S.-China relations.
“Two years ago, when my co-founders and I first established the Fordham China Law Society, we had a slogan of ‘making law school your own experience.’ The symposium was a perfect illustration of our founding mission,” Li said. “This event has definitely been one of my best Fordham Law experiences.”