A Chinese court has recognised a US money judgment. On 30 June 2017 the Wuhan Intermediate People's Court recognised a Los Angeles County Superior Court judgment for USD 147,492 in Liu Li v Tao Li and Tong Wu, relying on reciprocity. The case shows US judgments are not automatically unenforceable in China. It does not make recognition routine.
- The claim: USD 125,000 paid for a 50% stake in a US company that was never transferred. The California court entered judgment on 24 July 2015 for USD 147,492 including prejudgment interest.
- Reciprocity rested on Hubei Gezhouba Sanlian Industrial Co. v Robinson Helicopter Co., in which a US federal court in California had recognised a Hubei court judgment in 2009.
- Commentators noted clear limits: the debtors were individuals, Chinese court decisions are not binding precedent, and the earlier reciprocal case involved the same California and Hubei courts.
- For contracts still being negotiated with a Chinese counterparty, arbitration under the New York Convention usually remains the more predictable route to assets in China.
What happened
Liu Li paid USD 125,000 to Tao Li and Tong Wu, both Chinese citizens, under an agreement to acquire a 50% equity stake in a US company. The stake was never transferred. Liu Li sued in the Los Angeles County Superior Court for breach of the equity transfer agreement and fraudulent misappropriation, and on 24 July 2015 obtained a default judgment for USD 147,492, including prejudgment interest.
Liu Li then applied to the Wuhan Intermediate People's Court in Hubei Province to recognise and enforce the California judgment in China.
What the court decided
On 30 June 2017 the Wuhan court recognised the judgment on the basis of reciprocity. It pointed to Hubei Gezhouba Sanlian Industrial Co. v Robinson Helicopter Co., in which the US District Court for the Central District of California had recognised a civil judgment of a Hubei court in 2009. The decision is widely reported as the first time a Chinese court recognised a US commercial judgment.
What the case does not prove
US commentators were careful about how far it goes. Chinese court decisions do not bind other courts as precedent. The judgment debtors were individuals, not companies or state-owned enterprises. And the reciprocal example the court relied on involved the same pairing of California and Hubei courts. The decision showed that recognition of a US judgment is possible; it did not show that it is routine.
What has changed since
Since 1 January 2024 the amended Civil Procedure Law assesses reciprocity more broadly and sets out clearer grounds for refusal, including defective service and denial of a fair hearing. Our guide to enforcing foreign awards and judgments in China covers the current rules. Recognition is still a separate proceeding in China, with its own translation, authentication and cost.
If you hold a US judgment against a Chinese party
- Confirm there is something to enforce against. Check that the debtor has assets in China before spending on recognition.
- Keep proof of proper service. Defective service is one of the grounds on which recognition can be refused.
- For new contracts, choose the forum with enforcement in mind. See the China arbitration clause.
Where the counterparty's money is in China, the collection happens in Chinese courts whichever forum decided the dispute. Dispute resolution in China explains that stage.
Frequently asked questions
Yes. On 30 June 2017 the Wuhan Intermediate People's Court recognised a Los Angeles County Superior Court judgment for USD 147,492 in Liu Li v Tao Li and Tong Wu, on the basis of reciprocity.
No. The debtors were individuals rather than companies, Chinese court decisions are not binding precedent, and the earlier reciprocal case involved the same California and Hubei courts. Each application is decided on its own facts.
Often, where the counterparty's assets are in China. China enforces foreign arbitral awards under the New York Convention, which is generally more predictable than recognition of a foreign court judgment.
Sources
- The National Law Review: People's Republic of China Recognizes Commercial Judgment Entered by California Superior Court (dates, amount, reciprocity basis and limits).
- Mondaq: Wuhan Intermediate People's Court Recognises A US Court Judgment.
- Internal: enforcing foreign awards and judgments · a Singapore judgment enforced in Nanjing · dispute resolution.
This article is general information for foreign companies, not legal advice on any specific matter. Rules and practice change; please take advice on your facts.