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.

Cross-border Judicial Cooperation between China and Germany in the Recognition and Enforcement of Foreign Judgments

Dr. Peter Malanczuk

Member of International Law Association Committee on International Commercial Arbitration

Member of Academic Advisory Council of the University of Heidelberg

Introduction

Our session, Topic 3, is centered on “Cross-border judicial cooperation in commercial courts: international agreements and judicial practice.”

My presentation will focus on a specific aspect of this judicial cooperation: the recognition and enforcement of foreign judgments, particularly examining the relationship between China and Germany, my home country. It will be limited to civil and commercial matters.

Given the extensive trade and investment ties between China and Germany, establishing effective legal frameworks for resolving disputes, including the mutual recognition and enforcement of court judgments, is crucial.

In the following, I will briefly discuss the relevant treaty background, then examine the domestic legal framework and judicial practices in China and Germany, and conclude with some thoughts on how to improve the recognition and enforcement of judgments between the two countries.

The Treaty Framework

In international commercial disputes, parties traditionally rely on well-established mechanisms such as international arbitration, supported by the widely adopted 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This convention, which includes China, Germany, and more than 170 other state parties, provides a robust framework for the enforcement of arbitral awards across borders.

Negotiation, mediation, and other forms of Alternative Dispute Resolution (ADR) may also play a significant role in resolving disputes.

In investor-state disputes, international arbitration is also frequently used, with about two-thirds of known cases resolved under the ICSID Convention (with approximately 160 state parties) and most of the remainder under the UNCITRAL Rules.

However, it is well-known that no international mechanism for the recognition and enforcement of foreign judgments is as comprehensive or widely accepted as the 1958 New York Convention is for arbitral awards.

The 2015 Hague Choice of Court Agreements Convention, which is limited in scope, governs the recognition and enforcement of judgments based on exclusive choice of court agreements. To date, it has about 35 contracting parties. Germany acceded to this convention in 2016, while China signed it in 2017 but has not yet ratified it.

More ambitious in its scope, the 2019 Hague Judgments Convention aims to establish a global framework for recognizing and enforcing foreign judgments in civil and commercial matters, covering a broader range of jurisdiction clauses than the 2015 Convention. However, it has attracted few signatories so far. As a member of the EU, Germany has been bound by the 2019 Convention since 2023. Although China participated in its drafting, it has not yet signed the convention.

For Germany, instruments such as the Brussels I Regulation (Recast) (Regulation (EU) No 1215/2012), which governs the recognition and enforcement of civil and commercial judgments among EU member states, are of critical importance. The Lugano Convention, which extends the principles of the Brussels I Regulation to several non-EU countries, including Switzerland, Norway, and Iceland, is also relevant, though not applicable to China.

China has concluded 39 bilateral judicial assistance treaties, many of which broadly cover judicial cooperation, with most (but not all) including clauses on judgment enforcement in civil and commercial matters.

China’s bilateral judicial assistance treaties are predominantly with nations that hold significant economic or political ties with China, especially along the Belt and Road Initiative (BRI) routes. These treaties are essential for resolving cross-border disputes related to BRI projects and complement the numerous Bilateral Investment Treaties (BITs) China has with BRI partner states. However, they do not cover some major Western business partners.

Similarly, Germany has established bilateral judicial assistance treaties with several non-EU countries, including Israel and Tunisia.

Importantly, there is no bilateral agreement between China and Germany specifically addressing the recognition and enforcement of judgments.

In the absence of binding treaty obligations, China and Germany must rely on their respective national laws and general principles, such as reciprocity, to manage the mutual recognition and enforcement of judgments.

The Domestic Legal Framework

The legal systems of both China and Germany are rooted in the Civil Law tradition, leading to notable similarities in their legislative approaches. For instance, China has incorporated concepts from the German Civil Code into its own legal framework. But China is also often viewed as a hybrid system due to socialist and Anglo-American common law influences.

The German Code of Civil Procedure (ZPO) and the Chinese Civil Procedure Law (CPL), which underwent significant amendments in 2023 (effective from January 1, 2024), serve as the primary legal foundations for the recognition and enforcement of foreign judgments within their respective jurisdictions.

Germany

In Germany, the recognition and enforcement of foreign judgments in civil matters are governed by the Code of Civil Procedure (ZPO), specifically Sections 722, 723, and 328.

These provisions are primarily applicable when European Union law, such as the Brussels I Regulation (Recast), does not govern the recognition and enforcement process, making them particularly relevant in cases involving non-EU countries.

Sections 722 and 723 mandate that a foreign judgment must be declared enforceable by a German court. This process involves a separate judicial procedure (exequatur), where the court evaluates whether the foreign judgment meets the conditions for enforcement under German law.

Section 328 outlines the conditions under which recognition must be denied, including:

Lack of jurisdiction by the foreign court according to German law.

Improper notification of the defendant, affecting their ability to mount a defense.

Incompatibility of the judgment with other judgments recognized in Germany.

Fundamental incompatibility with German legal principles, particularly fundamental rights.

Absence of reciprocity between Germany and the foreign jurisdiction.

Special rules apply in certain areas, such as family law matters and insolvency cases.

Under Section 723(1) of the ZPO, German courts cannot review the merits of foreign judgments, and according to Section 723(2), the foreign judgment must be final under the laws of the originating court.

Typically, the process of obtaining enforcement in Germany takes between 4 to 7 months.

There is a right to appeal decisions regarding the enforceability of a foreign judgment.

However, there is generally no provision for provisional measures or anti-suit injunctions against the recognition or enforcement of a foreign judgment.

China

The rules and procedures for the recognition and enforcement of foreign judgments in China are primarily governed by the PRC Civil Procedure Law (CPL) (中华人民共和国民事诉讼法).

The relevant provisions are found in Chapter 27 of the CPL, titled “Judicial Assistance,” which covers Articles 295 to 306.

Article 299 of the CPL states:

“After examining an application or request for the recognition and enforcement of an effective judgment or ruling rendered by a foreign court in accordance with an international treaty concluded or acceded to by the People’s Republic of China or under the principle of reciprocity, a people’s court shall render a ruling to recognize the legal force of the judgment or ruling and issue an order for enforcement as needed to enforce the judgment or ruling according to the relevant provisions of this Law, if the people’s court deems that the judgment or ruling neither violates the basic principles of laws of the People’s Republic of China nor damages the sovereignty, security, and public interest of the state.” (emphasis added)

In the 2023 revision of the CPL, a new Article 300 was introduced, incorporating content from a prior Supreme People’s Court (SPC) clarification. This article outlines the various grounds on which Chinese courts must refuse to recognize or enforce a foreign court judgment, which are in many respects similar to the relevant grounds for refusal under German law.

Article 301 specifies the circumstances under which a PRC court must determine that a foreign court lacks jurisdiction in a given case.

Additionally, the new Article 302 of the revised CPL addresses the suspension of a lawsuit by a People’s Court when it concerns the same dispute as an effective judgment of a foreign court, for which a party has applied for recognition and enforcement.

The 2023 CPL amendments also introduced a reconsideration process (复议) in Article 303, allowing parties to challenge a court’s ruling on the recognition and enforcement of a foreign judgment by applying to a higher-level court. However, the scope of this reconsideration is limited and does not appear to allow for a comprehensive appeal (上诉).

There are special arrangements for proceedings involving Hong Kong, Macau, and Taiwan, but these are not addressed here.

The aforementioned articles of the revised CPL certainly provide greater clarity on when foreign judgments may be recognized and enforced in China. However, in the absence of a treaty, the decision to recognize and enforce a foreign judgment in China continues to rely on the principle of reciprocity.

Analyzing reciprocity involves reviewing judicial practices in both the judgment-originating country and receiving country.

Judicial Practice

Judicial practices concerning the mutual recognition and enforcement of judgments between China and Germany remain inconclusive, with only a small number of relevant cases reported to date.

This scarcity can be partly attributed to the widespread preference for international arbitration. Under the 1958 New York Convention, arbitration offers a globally recognized mechanism and neutral venue for transnational dispute resolution, often favored over litigation.

Judicial practice also reveals some inconsistencies between Chinese and German courts in applying the principle of reciprocity and other legal standards. In the past, German courts have also refused to recognize and enforce judgments from Chinese courts, and due to the strict enforcement of the reciprocity principle, China has similarly refused to recognize and enforce German judgments.

Indeed, China has gradually liberalized its approach to the recognition and enforcement of foreign judgments. The 2010s saw a significant shift from a restrictive concept of de facto reciprocity to a more lenient notion of de jure reciprocity, and most recently, an even softer presumption of reciprocity.

Recent policy developments reflect China’s focus on supporting economic development and international cooperation, particularly within the Belt and Road Initiative (BRI).

The Supreme People’s Court’s 2015 statement highlights that in the absence of legal assistance agreements with BRI countries, Chinese courts may provide judicial assistance proactively to foster reciprocity.

This approach was further emphasized in the 2017 Nanning Statement from the 2nd China-ASEAN Justice Forum, which allows for a presumed reciprocal relationship unless explicitly refused by the other country due to a lack of reciprocity.

Moreover, the 2021 “Conference Summary of the Symposium on Foreign-related Commercial and Maritime Trials of Courts Nationwide” issued by the China Supreme People’s Court introduced new standards for interpreting reciprocity, shifting from de facto to de jure reciprocity.

While the Summary is not legally binding, it has significantly influenced judicial practice by offering detailed guidelines for reviewing foreign judgment-related applications and introducing an ex-ante internal approval mechanism to ensure impartial enforcement of foreign judgments by PRC courts.

The ongoing discussion in China regarding the interpretation of reciprocity shows a remarkable evolution from the original de facto reciprocity test to de jure reciprocity, reciprocal understanding or consensus, and reciprocal commitment.

Finally, presumptive reciprocity was acknowledged for the first time in a Chinese court decision by the Nanning Court in a judgment dated June 18, 2024, concerning the enforcement of a Thai monetary judgment in China.

German courts, on the other hand, define reciprocity under the ZPO based on the principle that there must be a mutual assurance that judgments rendered in Germany would be recognized and enforced in the foreign state under comparable conditions. Reciprocity does not require a formal treaty but instead focuses on whether the foreign jurisdiction generally recognizes German judgments.

The foreign country must apply conditions for the recognition and enforcement of judgments that are not substantially more restrictive than those applied by Germany. This may mean that the foreign state’s legal standards for recognizing foreign judgments should be similar to German standards, particularly regarding due process and public policy considerations.

Conclusions and Outlook

The key takeaway is that while there is an emerging pattern of recognition and enforcement of judgments between China and Germany, each case remains highly dependent on its specific circumstances. The absence of binding treaty obligations means that the principle of reciprocity often introduces legal uncertainty, as its interpretation varies between the two countries.

Furthermore, German courts place significant emphasis on the procedural integrity of foreign judgments, ensuring that due process is strictly observed. This rigorous scrutiny has resulted in several cases where judgments were not recognized due to perceived procedural deficiencies.

However, recent developments in China, particularly the gradual liberalization of its interpretation of reciprocity, have paved the way for greater acceptance of foreign judgments, including those from Germany.

Several strategies could further strengthen this positive trend:

1. Ratification of International Conventions: China could consider ratifying the 2015 Hague Choice of Court Agreements Convention and signing and ratifying the 2019 Hague Judgments Convention. Although this process would take time and may not resolve all bilateral issues, it would represent a significant step toward harmonizing recognition and enforcement practices.

2. Negotiating a Bilateral Treaty: China and Germany could explore the possibility of negotiating a bilateral treaty specifically focused on the recognition and enforcement of court judgments. While time-consuming and costly, this approach could provide the most effective and comprehensive solution. The existing bilateral treaties China has already conceded with France and Italy may serve as examples.

3. Leveraging Existing Cooperation Programs: The existing Sino-German Legal Cooperation Programme could be utilized to promote the discussion of harmonizing judgment enforcement practices. Currently running from 2022 to 2025, this program—commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ) and led by China’s Ministry of Justice—offers a platform for legal exchange. Since 2000, it has trained approximately 11,000 Chinese judges in legal methodology.

4. Engaging with International Commercial Courts: The ongoing global cooperation among international commercial courts, particularly through the Standing International Forum of Commercial Courts (SIFoCC), could also play a supportive role. The SIFoCC’s “Multilateral Memorandum on Enforcement of Commercial Judgments for Money” (2nd ed. 2021) is increasingly referred to and also contains instructive chapters on China and Germany, which are both SIFoCC member countries.

However, while China is actively involved in the SIFoCC through its China International Commercial Court (CICC), Germany’s international commercial court structure is still in its early stages.

Germany is making significant strides with the introduction of a draft bill by the German Federal Ministry of Justice on April 25, 2023. This bill aims to establish specialized commercial chambers at regional and higher regional courts, with proceedings conducted in English. The German Bundestag discussed the bill on October 12, 2023, and further deliberations are ongoing.

In fact, since 2018, Frankfurt has hosted a specialized international commercial court with English-language proceedings, and similar courts now exist in Stuttgart, Mannheim, and Berlin. The success of these courts will largely depend on their ability to attract cases, a challenge faced by similar courts in other countries.

The practical impact of recent developments—such as China’s Civil Procedure Law reform and Germany’s efforts to establish international commercial courts— on the recognition and enforcement of foreign judgments remains to be seen.

It’s worth noting that an increasing number of states have abolished the reciprocity requirement for the recognition of foreign judgments.

Additionally, one must be aware that, in practice, parties to international contracts have the choice to opt for international arbitration to avoid the uncertainties related to court jurisdiction and the enforcement of foreign judgments.

*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.