Previously it was very difficult and almost impossible for the Chinese authority to recognize and enforce a foreign judgement. A choice of ordinary courts in a third country rather than China seemed to favor the foreign counter party of a commercial contract. On the contrary, it was just for the benefit of the Chinese party, because a foreign judgement was meaningless in China.
Due to that reason we have always suggested arbitration for a China-related commercial contract to our German clients. An international arbitration award can be recognized and enforced in China, because China is a member of the New York Convention of 1958 and obliged to treat international arbitration awards according to the New York Convention.
But now the situation has changed. On 12 September, the Chinese authority signed the Hague Convention on Choice-of-Court Agreements (the “Hague Convention”) which sets the international framework on judicial cooperation in the field of jurisdiction, the recognition and enforcement of judgements. This convention focuses only on international civil and commercial cases. To apply for the use of this convention, there must be a valid exclusive choice of court first. Then the judgment must be final and effective and from a party to and is requested to be enforced in other party to the Hague Convention. The European Union, Mexico and Singapore are already parties to the Convention. The United States, Ukraine and China have signed the Hague Convention, but not yet ratified.
Although it will take several months until this Convention ratified in China. The clear guideline to Chinese courts has been set already, the judgements from other Hague Convention countries shall be accordingly recognized. Therefore the choice of a foreign court shall now also be considered for a China-related commercial contract.
