CHINA Law and Practice Contributed by: Chen Yanhong, Beijing DHH Law Firm
tration authority and submit the security contract/ registration certificate for enforcement. For pledges (eg, equity), cancel the registration first, before enforcement. For guarantees, general guarantees require enforcing the debtor’s assets first, while joint liability guarantees allow direct enforcement against the guarantor. • Restrictions/concerns: “foreclosure clauses” are prohibited (no automatic transfer of collateral own- ership on default); disposal of certain collateral (eg, state-owned assets) needs regulatory approval; enforcement may be suspended in bankruptcy; cross-border security enforcement must comply with foreign exchange rules and rely on judicial assistance. Pursuant to PRC Law on the Application of Law to For- eign-Related Civil Relations and relevant judicial inter- pretations, parties to a foreign-related contract may agree to choose a foreign law as the governing law, but certain restrictions apply. First, if the contract dispute involves China’s “mandatory provisions” (eg, foreign exchange control, national financial security, foreign investment access), those provisions shall still apply Chinese law, and the foreign law agreement concern- ing them is invalid. Second, if the chosen foreign law violates China’s public interest, the court will refuse to apply it and instead enforce Chinese law. Additionally, for special contracts like real property rights contracts and Sino-foreign equity joint venture contracts per- formed in China, Chinese law is mandatorily applicable, and parties cannot choose a foreign governing law. Submission to a Foreign Court Chinese courts generally respect parties’ agreements to submit to a foreign court, but statutory conditions must be met. First, the jurisdiction agreement shall be in writing, and the chosen foreign court shall have a “practical connection” with the contract dispute (eg, the parties’ domicile, contract signing/performance place is in that foreign country). Second, if the dis- pute involves China’s exclusive jurisdiction (eg, real property rights disputes, disputes over Sino-foreign investment enterprise contracts performed in China), the agreement to choose a foreign court is invalid, and Chinese courts shall have exclusive jurisdiction. 6.2 Foreign Law and Jurisdiction Choice of Foreign Governing Law
Finally, even with a valid foreign jurisdiction agree- ment, if one party sues in a Chinese court and the other party not raise an objection to the jurisdiction but participates in the proceedings, the Chinese court may be deemed to have jurisdiction. Waiver of Immunity China adopts the “restrictive immunity principle” for state immunity. If a foreign party (eg, a foreign state, government agency) explicitly waives immunity (including jurisdiction and enforcement immunity) in writing through a contract, and the waiver does not violate PRC law or public interest, Chinese courts usu- ally recognise its validity. However, certain conditions apply: • first, the waiver must be “clear and specific”; implied acts (eg, only participating in litigation with- out explicit waiver) do not constitute a valid waiver; • second, a waiver of jurisdiction immunity does not equal a waiver of enforcement immunity, which requires a separate explicit waiver; and • third, if involving a foreign state’s core sovereign acts (eg, diplomatic, military acts), its immunity cannot be waived, and the relevant waiver agree- ment is invalid. 6.3 Foreign Court Judgments Under PRC law, the enforcement rules for foreign court judgments and arbitral awards differ. For foreign court judgments, pursuant to the Civil Procedure Law and relevant judicial interpretations, their recognition and enforcement in China require compliance with the “principle of reciprocity” (practical reciprocity is needed if no judicial assistance treaty exists between the two countries) and must not violate China’s funda- mental legal principles, national sovereignty, security, or public interests. The court only reviews the proce- dural legality of a judgment (eg, jurisdiction, the par- ties’ right to appear in court) and does not reconsider the merits of the case. However, the applicant must submit the required documents (such as a certified copy of the judgment and a translation). Once the review is approved, the judgment can be enforced directly without retrial. For foreign arbitral awards (including international commercial arbitral awards), in accordance with the
109 CHAMBERS.COM
Powered by FlippingBook