Why this is important: The ability to enforce an international arbitration award or court judgment is a key consideration when deciding whether to bring a legal action. While international arbitration awards are enforceable under the New York Convention, successful recovery also depends heavily on the degree of support of the local courts. This recent development signals a significant shift in China’s judicial attitude towards enforcement, making it more aligned with international practices and the comity of nations.
Three things you should know:
- Singapore and the People’s Republic of China (PRC) have issued a joint guidance note on how to enforce money judgments in commercial cases in each other’s courts. It is non-binding but helps streamline processes in both courts to ensure consistent procedures.
- The guidance note should be used when considering potential or existing disputes against companies with substantial assets in either Singapore or China.
- The guidance note also tells us when foreign money judgments may be challenged in either Singapore and China, and, therefore, have less chance of being enforced.
Background:
The Belt and Road Initiative has seen a significant rise in cross-border transactions involving parties from the PRC. The concurrent increase in Belt & Road disputes between PRC and non-PRC parties are likely to give rise to an increased demand for a neutral dispute resolution forum such as Singapore.
There is a recent development which could further enhance Singapore’s attractiveness as a venue for Belt & Road disputes. On 31 August 2018, the Supreme Court of Singapore and the Supreme People’s Court of the PRC signed a Memorandum of Guidance (MOG), which provided much-needed clarity on the recognition and enforcement of foreign judgments. Specifically, the MOG is a practical how-to guide for parties who have obtained final money judgments from either the Singapore or the PRC courts, and now wish to have these judgments recognised and enforced in either the PRC or Singapore, respectively.
Further, parties who have prevailed in an international arbitration in Singapore may also look to the MOG for additional guidance in the enforcement of their arbitral awards in the PRC. This point is further explained below.
Clear guidelines in both jurisdictions: The MOG provides for the basic procedures and the documents required to make an application for recognition and enforcement in each jurisdiction.
In considering such applications, both the Singapore and PRC courts will not review the merits of the money judgment of the other court. Neither may the judgment be challenged on the ground that it contains an error of fact or law. A judgment sought to be recognised and enforced may only be challenged on limited grounds, including:
- when the judgment is contrary to the basic principles of PRC law or contrary to Singapore public policy;
- when the judgment was obtained by fraud; or
- where the litigant was not given proper notice of the judicial proceedings.
Additionally, for PRC courts, a Singapore money judgment may be challenged if there is a pending action in the PRC courts between the same litigants on the same subject; or the PRC courts have previously recognised a final and conclusive judgment rendered by a third state or an arbitration award.
It also bears noting that the MOG provides that the PRC courts will not recognise and enforce Singapore judgments which relate to intellectual property rights, unfair competition, and monopolies.
What this means for parties:
1. Confidence in the enforcement of Singapore judgments in the PRC for Belt & Road disputes. Unlike the New York Convention for international arbitration, there are currently no treaties in place for the reciprocal recognition and enforcement of Singapore or PRC money judgments in the courts of the other. Nevertheless, there has been past precedent of the PRC court in Kolmar v Sutex recognising a Singapore judgment on the basis of reciprocity.
Thus, the MOG is a welcome development as it provides clarity for litigants in Singapore on the applicable rules governing recognition and enforcement in the PRC. Parties who have a claim against a PRC party, or a party which has substantial assets in the PRC against which they wish to enforce, should take the MOG into consideration in assessing the appropriate dispute resolution method to protect their interests. As the Singapore courts include the Singapore International Commercial Court, both Singapore and foreign parties may take advantage of this new development.
Moreover, the MOG can also assist parties who seek to enforce their international arbitration awards in the PRC. As an alternative to proceeding directly under the New York Convention before the PRC courts, which may at times be attended with practical and legal challenges, the award may instead also be converted into a money judgment by the Singapore High Court, under section 19 of the Singapore International Arbitration Act. The Singapore money judgment may then potentially be enforced before the PRC courts pursuant to the MOG. It remains to be seen whether the enhanced clarity brought by the MOG would render the enforcement of a Singapore court judgment in the PRC the preferred choice of enforcement.
2. Stronger need for a coordinated and coherent dispute resolution strategy to achieve successful enforcement. Considering that there may be difficulties in enforcing a Singapore money judgment in the PRC when there is a pending or completed similar matter between the same parties in the PRC, parties should ensure that they undertake a coordinated dispute resolution strategy across different jurisdictions, especially taking into account the interplay between international arbitration and court litigation. Further, for disputes involving intellectual property rights, unfair competition, and monopolies, Singapore parties who foresee the need for enforcement in the PRC may wish to consider proceeding directly before the PRC courts or availing of more appropriate modes of dispute resolution.
The full text of the MOG may be accessed here.
Eversheds Harry Elias regularly provides advice on different types of dispute resolution strategies to suit the client’s needs. We have extensive experience advising and successfully representing commercial enterprises with respect to international dispute resolution and the conduct of commercial and investment arbitration. We also have full rights of audience before all tiers of Singapore courts, and are thus uniquely placed to assist with Singapore law issues in cross-border disputes.
Author:
Francis Goh
Partner and Head of International Arbitration
Eversheds Harry Elias