Enforcing Chinese Judgments: A Response
October 10, 2022
Photo by Kayla Kozlowski on Unsplash
In July, Bill Dodge discussed the enforcement of Chinese judgments in U.S. courts, using the Shanghai Yongrun case as a recent example and arguing against systemic review of foreign legal systems. Along the way, he cited Judging China, a recent paper of mine. He accurately characterized me as less than enthusiastic about U.S. courts enforcing Chinese judgments. In this post, I’ll explain why and answer some of his points.
First Things First
First, let me get one thing out of the way: I don’t have any objections to the appellate result in Shanghai Yongrun, but I don’t agree with the way the court got there. To me, the parties’ contractual agreement to the jurisdiction of Chinese courts to settle disputes decides the matter. It’s no different from an arbitration agreement.
Second, I don’t think we can yet say it is “routine” for U.S. courts to enforce Chinese judgments. My research for Judging China found 16 cases where plaintiffs sought recognition of Chinese judgments; they won six times. Of course, recognition may be granted or denied for procedural reasons that have nothing to do with the Chinese legal system, but in any case, I would not want to call this “routine.”
Third, I share Bill’s pessimism about the ability of U.S. courts to evaluate foreign legal systems. The only time they need to do it is when the system is very different from our own, and yet it may require extensive study even to become aware that the difference exists. My research into the China-related forum non conveniens and judgment-recognition cases suggests that neither courts nor parties have the resources to undertake the kind of investigation that would be necessary.
Can Courts Assess the Fairness of Specific Proceedings?
The core of Bill’s argument against systemic assessments seems to be that courts can do the job of protecting defendants’ interests with case-specific assessments:
U.S. courts lack the institutional capacity to judge the adequacy of foreign legal systems. They are much more capable of determining whether there were serious problems with a particular proceedings based on evidence presented by the parties.
I am much less sanguine than Bill about the abilities of U.S. courts to figure this stuff out. First, they simply don’t get good information. Second, the very elements that make a judgment problematic—for example, judicial corruption or behind-the-scenes political interference—don’t take place in public and are therefore invisible. Thus, China and some other countries are different from the countries for which we can be pretty confident that any due process violations will be open and public. Opacity and corruption matter, and their levels differ across countries.
Lack of Good Information
My analysis of the 16 judgment-recognition cases included not just the judgments but also the filings of the parties, such as briefs and expert witness declarations. The evidence on which courts are making decisions about recognition is very thin. Only in Folex Golf Industries did parties present independent expert testimony on the fairness of the particular proceedings, and in no case did parties present independent expert testimony on the issue of systemic fairness (although some defendants did raise the issue in briefs).
Both plaintiffs and courts like to cite Robinson Helicopter, one of the first U.S. recognitions of a Chinese judgment, as a precedent, even though the defendant in that case made no arguments challenging the fairness of the Chinese legal system or the particular proceedings, and the court made no finding on those questions. They also like to cite the Supreme Court’s decision in Sinochem, upholding a district court’s forum non conveniens dismissal to China but on grounds that had nothing to do with the adequacy of the Chinese legal system, about which the Court heard literally not a single word of evidence or argument.
In other words, precedent, not facts, is guiding decision-making, and the precedent turns out upon examination not to stand for what it’s taken to stand for.
Invisibility of Due Process Problems
Some due process problems—failure to admit certain evidence, for example—will be clear from the record. But many of the due process problems in the Chinese system will not be. Chief among these are judicial corruption and political interference, which are endemic in the Chinese courts and by their nature invisible. They occur during a telephone call, a dinner in a restaurant, a nightclub outing.
Chinese courts are, by design, not independent arbiters of fact and law. They are in effect part of the executive. The State Department’s website states flatly that “[t]he judiciary [in China] does not enjoy independence from political influence.” Whatever critiques one might have about the use of State Department documents such as Country Reports on Human Rights Practices in litigation, this is just a fact affirmed by scholars and Chinese government sources themselves, who denounce the concept of judicial independence. Consequently, if a suitably senior official passes down an order to decide a case for the plaintiff, it will be decided that way, and there will be no record of that instruction available to the defendant. Such influence is built into the basic structure of the political system. It is a feature, not a bug.
What about truly improper influences such as bribery and favors for friends? These phenomena appear to be widespread. I refer readers to my paper for a fuller discussion with citations to sources but will note just two points here.
First, one scholar analyzed a 4,000-case dataset, supplemented with interviews with officials, judges, firm managers, and lawyers, to conclude that in commercial litigation,
firms use voice and exit to influence court decisions, and . . . judges bow to the pressures of local fiscal imperatives. . . . My interviews with government and court officials indicate that they are largely responsive to these business requests, especially when the businesses are important taxpayers. A judge explicitly told me, “You need to follow the money.”
Second, corruption rates among senior judges and judicial officials (we don’t hear about the lower-ranking ones) are astonishingly high. Consider announcements from September 2022 alone: The former Minister of Justice, Fu Zhenghua, was convicted on September 22 of accepting over $16 million in bribes over the years. In the same week, three former provincial police chiefs were sentenced on bribery charges. On September 28, it was announced that the former chief prosecutor of Shanghai, a jurisdiction of some 26 million people, had been removed from all posts, expelled from the Communist Party, and handed over to criminal investigative authorities on corruption charges. In the same month, a former vice president of the Supreme People’s Court was expelled from the Communist Party on corruption charges, put under criminal investigation, and recently formally arrested. Since 2008, two other senior judges at the Supreme People’s Court have also fallen on corruption charges. And these are only the cases we know about.
In such an environment, we cannot have confidence that U.S. courts would be able to figure out if any violations of due process occurred. As Bill writes, “the case-specific grounds require the party resisting recognition to have evidence that something went wrong in its case,” and in these cases the party would of course be unable to do so. For Bill, this is a virtue: “it is not clear why a party that cannot produce such evidence should be allowed to avoid a foreign judgment based on mere suspicion.” But it can equally be said that it is not clear why opacity—especially deliberate opacity—in a legal system should be rewarded with a presumption of propriety. Surely Bill does not mean to say that U.S. courts should uniformly enforce, say, North Korean judgments. I’m pretty sure no defendant would be able to produce much evidence about anything going on in the North Korean courts.
How Should the State Department Country Reports Be Treated?
Bill is concerned that State Department Human Rights reports are being used outside of their proper context when they are offered by defendants in support of claims that the Chinese legal system is inadequate. I agree that they are not prepared specifically with litigation and the enforcement of Chinese judgments in mind. And I agree that they should not be considered conclusive evidence, as the trial court did in Shanghai Yongrun. But I do think they should be considered relevant and reasonably reliable for what they say about specific features of the Chinese legal system.
In particular, I disagree with the idea that the Chinese legal system is bifurcated, with government interference possible in political cases but absent in commercial cases. Empirical research and fieldwork by scholars (for example, the study of commercial cases cited above) show that that’s just not the case. The Chinese court system and the political system of which it is a part don’t operate that way. There is no line between politically sensitive cases on the one hand and ordinary cases on the other. The same judges appointed through the same process and with the same incentive structure hear both kinds of cases. The same tools for interference exist in both.
When a State Department Country Report says that the Chinese judiciary is not independent of the Party or other state organs, it’s saying so in the context of human rights. But that does not make the statement less true generally. The 2015 Country Report for China states that corruption in the judiciary is widespread; it can hardly be imagined that this corruption is somehow confined to criminal and political cases and is absent in commercial cases. Thus, the State Department Country Reports cannot be disregarded on the grounds that they were not prepared with transnational commercial litigation in mind; we need to look at the specific assertions in the reports and assess whether (i) they are reliable and (ii) their reliability is for some reason limited to criminal and political cases.
How Much Should We Worry About Consequences?
I have two disagreements with Bill on the issue of consequences. The first is simply about the premises: would the consequences of non-recognition of Chinese judgments on a systematic basis be as dire as he suggests? The second is more fundamental: should the consequences he suggests, if accurate, drive judicial decision-making or legislative policy?
I think Bill is right to say that if the United States systematically refused to recognize Chinese judgments, Chinese courts would stop recognizing U.S. judgments, since they operate on the basis of reciprocity in the absence of a treaty. But Chinese courts barely recognize U.S. judgments at present and, given the downward spiral in U.S.-China relations, are unlikely to do so at any significant volume in the future.
As of August 21, 2022, Chinese courts had been asked to enforce U.S. judgments in ten cases. Enforcement was granted in four. (I am counting as one case three enforcement orders all relating to the same set of facts and the same defendant.) All involved persons who were either Chinese nationals or (apparently) of Chinese origin. To the best of my knowledge, Chinese courts have not yet enforced a U.S. judgment against a Chinese national and in favor of someone with no connections of birth or citizenship to China.
Should the consequences drive judicial decision-making? When applicable law on the recognition and enforcement of foreign judgments (for example, New York State law in the Shanghai Yongrun case, and the 2005 Uniform Act) requires courts to determine whether a foreign judicial system suffers from a systemic lack of due process, they must do so (assuming the issue is properly raised). The Act nowhere provides that courts should, when making that determination, do anything other than consider that specific question. We do not generally urge courts to allow concerns about consequences to influence their determinations of facts, and I don’t see a good reason for making an exception for facts about foreign legal systems in judgment-recognition cases.
Should consequences drive legislative policy? Let’s suppose that we have a free hand to figure out what the law should be. Here it is entirely appropriate to think about consequences. I agree with Bill that if U.S. courts start holding that a foreign country’s courts are systemically inadequate, that will disadvantage parties that hold untainted judgments. But at the same time, given the courts’ inability to pierce the opacity surrounding Chinese court proceedings and thus to see taint where it exists, it will also—quite properly—disadvantage parties that hold tainted judgments. The question, therefore, is whether we should systematically favor plaintiffs holding untainted judgments or defendants facing tainted judgments.
Here we come to what I suppose is a fundamental philosophical difference. I think that if we must choose, we should favor defendants facing possibly tainted judgments. When courts authorize the use of coercive state power, they should be satisfied that the person on the receiving end received due process. I just cannot see how it can on the one hand be unconstitutional for a U.S. court to railroad a defendant without offering due process, but on the other hand be acceptable to put the coercive machinery of the state in motion against a party solely because some other individual presents the court with a piece of paper from a foreign source, without any concern over whether that piece of paper was generated via due process. (Indeed, some scholars argue that it is unconstitutional to do so, although others disagree, as does a 2013 Ninth Circuit decision). In other words, I am more concerned about defendants having unfair judgments enforced against them than I am about plaintiffs not getting fair judgments enforced. The opposite position is not inherently unreasonable, but it’s not self-evidently correct either.
For the same reason, I am not distressed about the prospect of opening the door to similar findings of systemic inadequacy in the legal systems of countries other than China. If that means U.S. courts must stop enforcing their judgments, so be it. Why were we ever enforcing judgments from countries where we weren’t confident that their courts could provide due process?
In the end, I think the difference between Bill and me lies in our assessment of the ability of U.S. courts to obtain and process good information. I don’t think that the Chinese legal system is incapable of producing any fair judgments. What I do think is that in general we cannot know which particular judgments are fair.
This is why I don’t agree with his proposed approach: that a foreign system be considered systemically inadequate only if it is utterly incapable of producing a single fair judgment, ever—and that the burden be on the defendant to prove that. This seems to do away with the requirement entirely. Of how many legal systems would this be true, and how could a defendant possibly prove it? Again, the more opaque the legal system, the higher the defendant’s burden—and yet I think it’s fair to make at least the default assumption that the more opaque a legal system, the less likely it is to provide due process.