CHINA Trends and Developments Contributed by: Yaxing Zhang, Bing San, Lubin Qiang and Jiahui Zhu, Han Kun Law Offices
Advance compliance plan will significantly enhance the likelihood of successful recognition in China. Filing and reporting mechanism for the recognition and enforcement of foreign judgments Pursuant to the Judicial Minutes, when a people’s court concludes a case involving the application for the recognition and enforcement of a foreign judg - ment, it shall file the case level by level with the Supreme People’s Court for the record within 15 days after rendering the ruling. Prior to rendering a ruling, the people’s court that examines a case in accordance with the principle of reciprocity shall report the proposed handling opin - ions to the competent High People’s Court under the jurisdiction for review; if the High People’s Court agrees with the proposed handling opinions, it shall report its review opinions to the Supreme People’s Court for review. A ruling may be made only after the Supreme People’s Court gives a reply. Breakthrough Remedies for Creditors Facing Enforcement Impasses The enforcement impasse In Chinese enforcement practice, once a judgment, including a recognised foreign judgment, or arbitration award enters the compulsory enforcement phase, the enforcement court may investigate the debtor’s assets and take measures such as the freezing of assets, seizure or auction. However, if the enforcement court finds that the debtor lacks enforceable assets or the available assets cannot be disposed at that time, the court may, pursuant to statutory procedures, termi - nate the current enforcement proceedings. Such pro - ceedings may be recommenced if new asset clues are discovered. This common enforcement deadlock in termination of current enforcement proceeding is often caused by: • asset transfers or concealment by the debtor; • waivers of valuable claims; • shareholders’ failure to fulfil capital contribution obligations (especially in closely held companies); • capital withdrawal or undercapitalisation; and • corporate insolvency or de facto bankruptcy.
Recognising these realities, Chinese authorities have developed new remedial mechanisms in recent years to strengthen judgment enforcement and provide meaningful relief to creditors. Criminal liability for refusal to comply with effective judgments One powerful remedy is criminal prosecution for refus - al to comply with effective court judgments or rulings (the “offence”), provided for under Article 313 of the PRC Criminal Law. This provision has been clarified by multiple legislative and judicial documents, including the Interpretation by the Standing Committee of the National People’s Congress Regarding Article 313 of the PRC Criminal Law and the Interpretation on Sev - eral Issues Concerning the Application of Law in Han - dling Criminal Cases of Refusal to Comply with Judg - ments or Rulings (the “Judicial Interpretation”), which came into effect on 1 December 2024. The Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security recently issued the Opinions on Several Issues Concerning the Handling of Criminal Cases of Refusal to Execute Judgments or Rulings (the “Opinions”), effective on 1 July 2025, which clarify the procedures and key considerations for handling such cases. Key elements of this offence are as follows. • Scope of offenders – the statute applies to judg - ment debtors, guarantors, an obligor of assistance in enforcement, or any other person with the execution obligation who has the ability to enforce a judgment or ruling. Both individuals and legal entities can be ruled criminally liable. • Prohibited conduct – the conduct must involve wilful refusal to perform, despite the ability to do so, in serious or especially serious circumstances. Judicial interpretations list 13 serious scenarios and four especially serious ones, including but not limited to (i) malicious disposal of assets without consideration, such as transferring assets at a patently unreasonable low price, waiving claims or claim-related security interests, maliciously extend - ing the maturity of due claims, or disposing of assets through false settlements or sham transfers; (ii) malicious diminution of liable assets by acquir - ing others’ property at patently unreasonable high
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