Editor’s Note: The Fourth Seminar of the International Commercial Expert Committee of the Supreme People’s Court and Reappointment (New appointment) Ceremony of Expert Members was held successfully on September 25, 2024. Over 40 experts from more than 20 countries and regions focused on the theme of the “Collaborative Dialogue, Diverse Integration, Peaceful Development” during the seminar. Extensive and in-depth discussions were held within the framework of four specific issues. The texts of speeches delivered by the members of expert committee and distinguished guests during the discussion session on Topic Three Cross-border judicial cooperation in commercial courts: international agreements and judicial practice would be posted on the CICC’s website.

China’s Practice of Judicial Cooperation in Cross-border Insolvency

GAO Xiaoli

Member of the Adjudication Committee of the SPC

Chief Judge of the Second Civil Division

Distinguished Colleagues and Guests, Good Afternoon!

With the progression of economic globalization and periodic adjustments in the global economy, cross-border insolvencies are increasing. Strengthening judicial cooperation in cross-border insolvency has become a wide consensus. In recent years, China’s practice in this field has developed significantly, and relevant legislation is moving forward actively, showing prosperous future. I would like to take this opportunity to briefly introduce China’s practice in judicial cooperation concerning cross-border insolvency.

Firstly, Chinese Courts are Continuously Advancing Judicial Practice in Cross-border Insolvency, Accumulating Valuable Experience in Cooperation.

Article 5, Paragraph 2 of the Enterprise Bankruptcy Law of the People’s Republic of China provides the legal basis for Chinese courts to engage in judicial cooperation in cross-border insolvency. According to this provision: “Where a legally effective judgment or ruling made on a bankruptcy case by a court of another country involves a debtor’s property within the territory of the People’s Republic of China and the said court applies with or requests the people’s court to recognize and enforce it, the people’s court shall, according to the relevant international treaties that China has concluded or acceded to or on the basis of the principle of reciprocity, conduct examination thereof and, when believing that the said judgment or ruling does not violate the basic principles of the laws of the People’s Republic of China, does not jeopardize the sovereignty and security of the State or public interests, does not undermine the legitimate rights and interests of the creditors within the territory of the People’s Republic of China, decide to recognize and enforce the judgement or ruling.”

Although cross-border insolvency judicial cooperation could be categorized as international civil and commercial judicial assistance, the unique nature of insolvency has led global conventions on the mutual recognition and enforcement of civil and commercial judgments to exclude insolvency from their scope. However, in the bilateral treaties on civil and commercial judicial assistance that China has concluded with over 30 countries, the provisions on mutual recognition and enforcement of civil and commercial judgments do not exclude insolvency matters. Therefore, Chinese courts can engage in judicial cooperation on cross-border insolvency issues based on these bilateral treaties. For example, in 2001, the Intermediate People’s Court of Foshan City, Guangdong Province, recognized the insolvency ruling of the Milan Court in Italy, based on the “Treaty on Civil Judicial Assistance” between China and Italy.

In cases where no treaty exists, Chinese courts have actively applied the principle of reciprocity to facilitate cross-border insolvency judicial cooperation, transitioning from de facto reciprocity to de jure reciprocity, and even to presumed reciprocity, reflecting an increasingly open judicial approach. For instance, in 2023, the Shanghai 3rd Intermediate People’s Court recognized a “Civil Rehabilitation Proceedings” decision from the Tokyo District Court in Japan, while the Beijing 1st Intermediate People’s Court recognized an insolvency ruling from the Aachen District Court in Germany, approving the administrator’s duties in China. Additionally, Chinese courts have recognized and enforced bankruptcy judgments from Singapore court based on the reciprocity principle.

Chinese courts are adopting a more proactive and open judicial philosophy in response to the growing request for international cooperation in cross-border insolvency.

We are also pleased to see that Chinese bankruptcy rulings have been increasingly recognized and enforced by courts in the United States, the United Kingdom, Belgium, Singapore, and other countries, leading to the flourishing development of cross-border insolvency judicial cooperation across a broader field.

At the same time, we have deepened judicial practice in cross-border insolvency between Mainland China and the Hong Kong Special Administrative Region. On May 14, 2021, the Supreme People’s Court signed the “Minutes of the Meeting on Mutual Recognition and Assistance in Bankruptcy Proceedings between the Courts of the Mainland and the Hong Kong Special Administrative Region” with the Hong Kong SAR Government, and issued the “Opinions on the Pilot Program for Recognizing and Assisting Hong Kong SAR Bankruptcy Proceedings.” Courts in Shanghai, Xiamen, and Shenzhen have since handled multiple cases involving the recognition and assistance of Hong Kong bankruptcy proceedings. In fact, courts in the Hong Kong SAR have long recognized and assisted Mainland bankruptcy rulings based on common law principles, amassing extensive practical experience.

Secondly, the Long-standing Bankruptcy Trial Practices of Chinese Courts Lay a Solid Foundation for Cross-border Insolvency Judicial Cooperation.

Since the implementation of the Enterprise Bankruptcy Law of China in 2007, Chinese courts have actively leveraged the dual functions of bankruptcy trials—both liquidation and rescue. They have played a significant role in deepening supply-side structural reforms, mitigating risks, and optimizing the business environment, while accumulating substantial practical experience in adjudication. A large number of “zombie enterprises” have orderly exited the market through bankruptcy liquidation processes, freeing up and revitalizing market resources. Meanwhile, numerous enterprises with salvageable value have been rejuvenated through reorganization procedures, ensuring the effective protection of all parties’ interests. Judicial reforms have established a specialized adjudication framework, setting up 18 dedicated bankruptcy courts and 99 liquidation and bankruptcy trial divisions at the intermediate court level. Additionally, judicial guidance has been provided for 7,905 institutional administrators and 1,260 individual administrators, with the establishment of 231 administrators’ associations. A national information platform for enterprise bankruptcy and reorganization cases has been launched, with nearly 70,000 cases made publicly available. With strong support from the legislative authorities, the Supreme People’s Court has issued more than 30 judicial interpretations and normative documents regarding bankruptcy proceedings, ensuring uniformity in judicial rulings. Local courts have also been actively innovating. Courts in Shanghai and Beijing continue to improve institutional mechanisms for handling bankruptcy cases and are actively engaging in cross-border insolvency judicial cooperation. The Xiamen Intermediate People’s Court has created China’s first cross-border insolvency judicial assistance platform, enabling online applications, exchanges, and inquiries, and has developed guidelines for handling cross-border insolvency cases to enhance the quality and efficiency of judicial cooperation.

Thirdly, ongoing Legislative Improvements and Growing International Exchanges Create Positive Conditions for Advancing Cross-border Insolvency Judicial Cooperation.

At present, work on revising the Enterprise Bankruptcy Law of China is progressing, and there is hope that the current revision will draw on certain provisions of the UNCITRAL Model Law on Cross-Border Insolvency. This would provide Chinese courts with a stronger legal basis and institutional framework for conducting cross-border insolvency judicial cooperation.

In recent years, Chinese courts have actively engaged in international exchanges on cross-border insolvency with other countries, regions, and international organizations. Judges have participated in meetings of the Judicial Insolvency Network (JIN) initiated by the Supreme Court of Singapore, China-France Legal and Judicial Exchange Week, the China-Japan-Korea Judges’ Roundtable, the Asian Bankruptcy Reform Forum, and other platforms to exchange views on cutting-edge and hot issues in the field of cross-border insolvency, fostering mutual understanding and consensus.

In the future, we hope to work hand in hand with all parties to advance judicial cooperation in cross-border insolvency, providing high-quality judicial services for the construction of an open world economy.

*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.