Satisfying a judgment debt sometimes requires taking steps in another jurisdiction. Enforcing a Chinese judgment in Australia is an essential step that creditors may need to take to pursue Australian assets and satisfy a Chinese judgment debt, an issue that arises frequently in cross-border disputes involving Chinese counterparties with Australian-based assets. The pathway to enforcement varies depending on whether the judgment was made in Hong Kong or Mainland China, and a separate process applies to enforcing a Chinese arbitral award.
Why is enforcement of foreign judgments critical for cross border businesses and investors?
In an increasingly globalised world, cross-border enforcement is critical. Enforcement of Chinese judgments in Australia allows businesses and investors to pursue Australian-based assets. A party holding a Chinese judgment may need to realise assets located in Australia, where one of the key benefits of enforcement is the ability to utilise powerful domestic enforcement mechanisms. Foreign investors may also be more willing to invest where their rights can be enforced effectively across jurisdictions.
What is the process for Hong Kong and reciprocal countries?
The Foreign Judgments Act 1991 (Cth) (FJA) and the Foreign Judgments Regulations 1992 (Cth) provide the statutory scheme for registering and enforcing certain foreign judgments in Australia. Australia extends statutory recognition to judgments from reciprocating countries listed in the Regulations, including specified superior courts in Hong Kong. Once registered, such judgments are enforceable as if they were Australian judgments.
Money judgments from the Hong Kong Court of Final Appeal and the High Court are registrable under the FJA. The limitation period to register a foreign judgment is six years from the date the foreign judgment was made. Once registered, a local enforcement period will apply, which can range from 12 to 15 years depending on the jurisdiction. After registration, a notice of registration must be served on the defendant. The defendant then has an opportunity to apply to set aside the registration. Once that period has expired, the plaintiff may proceed with enforcement using tools such as garnishee orders, or seizure and sale of property.
By contrast, judgments from countries that are not reciprocating jurisdictions – including Mainland China – cannot be registered under the FJA and must instead be enforced at common law, which involves a more complex process. For general information, refer to Enforcement of Foreign Judgments.
What is the process for Mainland China?
Mainland Chinese judgments are not automatically enforceable in Australia. Plaintiffs must follow the common law approach and commence proceedings in Australia to sue on the judgment debt, seeking a fresh Australian judgment that will be enforceable domestically.
What interim steps can be taken?
Asset Mapping
When considering local enforcement of a Chinese judgment, it is important to determine whether the defendant holds relevant assets in Australia. Relevant assets are those that have potential to go towards satisfying the Chinese judgment debt. The existence and value of assets should be investigated in the process of asset mapping. Relevant Australian assets include:
- interests in local businesses and subsidiaries, for example, if the defendant is a director or shareholder
- bank accounts
- real estate
- tangible assets such as vehicles
- registered security interests
- third parties holding assets on behalf of the defendant, for example, banks, stockbrokers or debtors of the defendant
Freezing Orders
Prior to commencing Australian enforcement proceedings, it can be valuable to seek a freezing order to protect relevant local assets. A freezing order prevents the defendant from dissipating (selling, transferring, or disposing of) their assets held in Australia. Generally, the order will be made without the defendant’s awareness, as notification will risk them dissipating the assets before the order is made.
An Australian court may grant a freezing order if:
- A judgment has been given, for example, a judgment debt decided by a Chinese court, that has sufficient prospects of enforceability in Australia;
- There is real risk that the defendant will dissipate Australian assets which could otherwise be used to satisfy the debt;
- The order is just and convenient; and
- The plaintiff is willing to compensate the defendant for damages if it is later determined that the freezing order should not have been granted.
The freezing order may remain in effect until the court determines whether the judgment from Mainland China is enforceable in Australia.
How long does the plaintiff have to seek enforceability in Australia?
The limitation period ranges from 6 to 15 years, depending on the state or territory in which enforcement is sought. An Australian court may stay enforcement if an appeal is pending in China.
What are the conditions to be met?
To enforce a Mainland Chinese judgment in Australia, the following conditions must be met:
- Jurisdiction: the Chinese court must have had authority to decide the matter.
- Final Judgment: the decision has completely resolved the dispute between the parties (subject to appeal).
- Identity of Parties: the Australian court proceedings must involve the same parties as the original Chinese judgment.
- Fixed Amount: the judgment must be for a fixed monetary sum (not taxes, fines, or penalties).
- No Vitiating Factors: the Chinese judgment cannot be the subject of fraud, deny natural justice, be in breach of Australian public policy, or inconsistent with an existing Australian judgment between the same parties.
How can a defendant oppose enforcement of a Chinese judgment in Australia?
It is possible for defendants to raise the following defences:
- Lack of Jurisdiction: a defendant may assert that the Chinese court lacked jurisdiction because the defendant was not present in China, did not agree to that court’s authority, or did not voluntarily take part in the proceedings.
- Contrary to Natural Justice/Procedural Unfairness: if one of the parties was not treated fairly in the Chinese court, for example, not given the opportunity to be heard or not given notice of the proceedings.
- Fraud: evidence of fraud in the Chinese proceedings.
- Public Policy Objections: a narrow defence, that can only be raised if enforcement of the judgment would be contrary to Australian public policy.
- Inconsistent earlier Australian judgment: If an Australian court has already issued a judgment involving the same parties and same claims, a subsequent Chinese judgment that conflicts with the Australian judgment will not be enforceable in Australia.
Can non-money judgments from a Chinese court be enforced?
A non-money judgment from a Chinese court, for example, specific performance (an order to fulfil a contractual obligation), is not directly enforceable. The plaintiff must instead initiate fresh proceedings in an Australian court, following domestic rules, procedures, and available remedies.
What’s required to enforce the Chinese judgment in Australia?
To enforce the Chinese judgment in Australia, the following must be provided:
- An authenticated copy of the Chinese judgment.
- English translations of all documents relevant to the Chinese proceedings, including the written judgment, records of service on the defendant, court documents, and details of contract jurisdiction clauses. The translator must provide an affidavit swearing that the translations are true and correct.
- The evidence must demonstrate the enforcement conditions, including, decision finality, identity of parties, that the court possessed jurisdiction, and the monetary sum.
- The plaintiff must adhere to court procedures of the designated Australian court.
- If expert evidence is required, an independent specialist should be engaged and the expert report must be translated into English.
What enforcement mechanisms are available?
The following enforcement mechanisms are available:
- Appointment of receiver to sell property to satisfy the debt.
- Garnishee orders to direct third parties to pay funds directly to the applicant.
- Writ of execution, which allows the sheriff’s office to seize and sell the debtor’s property.
- Charging orders, which impose a charge over the debtor’s financial securities, including bonds, shares, and dividends.
Have there been any successful cases?
Chinese judgments have already been successfully enforced in both Victoria and New South Wales.
In Bao v Qu; Tian (No 2) [2020] NSWSC 588 the New South Wales Supreme Court had to decide whether to enforce a judgment from Mainland China. From 2012 to 2013 the plaintiff made four loans to the defendants, totalling RMB 2,550,000 (over AU$500,000). The defendants failed to repay the loans, and in 2014, the plaintiff commenced proceedings in the People’s Court of Laoshan District Qingdao. The court made an order in favour of the plaintiff. This decision was appealed by one of the defendants in the Qingdao Intermediate People’s Court of Shandong Province but was dismissed, save for one loan, and the court varied the amount accordingly. However, following the decisions the defendants failed to pay the judgment debt.
As the defendants resided in New South Wales, the plaintiff sought local enforcement of the Chinese decision which would empower them to pursue Australian assets.
As it was a decision from Mainland China, the common law conditions needed to be met. It was established that the Chinese courts had jurisdiction, as the defendant’s decision to appeal the original judgment demonstrated that they had submitted to the jurisdiction of those courts. The foreign court judgment was final; there were no further grounds of appeal. The parties were identical, and the judgment was for a fixed, liquidated sum.
The NSW Supreme Court recognised and enforced the Mainland Chinese money judgment, which empowered the plaintiff to pursue the defendant’s Australian assets to satisfy the debt.
Chinese Arbitral Awards
How is a Chinese arbitral award enforced in Australia?
An arbitral award is a decision made by an arbitration tribunal to resolve a dispute. Arbitral awards are court enforceable and have the same effect as a court order. Australia is proactive in its enforcement of foreign arbitral awards. Practically, enforcement of a Chinese arbitral award is a less rigorous process than enforcement of a court judgment. The procedure for enforcing arbitral awards is the same for those issued in Hong Kong and China.
Australia and China are signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 treaty. The treaty is given effect through the enactment of the domestic legislation titled the International Arbitration Act 1974 (Cth) (Act). The effect of the treaty and the commonwealth legislation is arbitral awards from any contracting state can be enforced in Australia as if it were a judgment of that court. The objective of the Act is to facilitate international trade and commerce by encouraging the use of arbitration as a method of resolving disputes.
For a recent Chinese arbitral award enforcement, see Chinese Creditor Secures Australian Asset to Help Satisfy Foreign Arbitral Award.
In which court should you seek enforcement?
Holders of a Chinese arbitral award seeking Australian enforcement must commence in the Federal Court of Australia or a State/Territory Supreme Court. Although, the Federal Court is preferred because of its specialised arbitration practice area.
What’s required to enforce the arbitral award in Australia?
Enforcement of a foreign award is designed to be a swift process. The applicant must file an originating application and affidavit of the facts. The following documents must be included:
- An authenticated copy of the award.
- The original arbitration agreement or certified copy.
- Evidence of compliance and the debtor’s address.
- For any documents in another language, a certified translation must be provided.
Production of the award and the agreement creates a right to enforcement (subject to limited defences). Meaning if all documentation is in order and there have been no defences raised or applications to set aside, the court will make a recognition order of enforcement. Once the award is recognised it is converted into an enforceable judgment. Importantly, the application can be made without notifying the debtor. This is helpful, as the debtor will not have an opportunity to dissipate assets before the award is enforced.
Are there any limitation periods?
Yes, the limitation period is generally six years from the date the award was made. Once recognised, a local limitation period will apply which can range from 12 to 15 years, depending on where the award is enforced in Australia. Note that the enforcement period may be varied by the terms of the contract between the parties.
On what grounds can the other party defend enforcement of the award?
There are narrow grounds that can prevent a Chinese arbitral award being enforced in Australia. The limited grounds of defence include:
- The debtor was unable to present their case during arbitration.
- The debtor was not given notice.
- The composition of the arbitration tribunal was not procedurally correct or not in accordance with the law.
- Enforcement of the award would go against Australian public policy.
- The award has been suspended or set aside in China.
What interim measures can be taken?
While waiting to enforce a Chinese arbitral award interim measures can be used to protect assets, including:
- Freezing orders, to ensure the debtor does not dissipate assets.
- The court can order the debtor and third parties to disclose asset information through debtor examination or production orders.
What enforcement mechanisms are available?
Once a Chinese arbitral award becomes enforceable in Australia, it operates the same as a court order. This means the same enforcement mechanisms are available to the creditor, including, appointment of receiver to sell property, garnishee orders, writ of execution, and charging orders.
Why should contracts contain arbitration clauses?
The process for enforcing arbitral awards in Australia is more streamlined than enforcing a court judgment, with legislative provisions providing a high degree of certainty. It is therefore valuable to use precise contract drafting to include an arbitration clause in commercial transactions involving Australian and Chinese parties, or when contracting within China with parties who hold assets in Australia. In contrast to court judgments, which must be enforced through different processes in Australia depending on whether they come from Mainland China or Hong Kong, arbitral awards from both jurisdictions are enforced under the same procedure, making the process more straightforward.
Why engage Ironbridge Legal for pursuing Australian assets?
Successfully enforcing a Chinese judgment or arbitral award, whether from Mainland China or Hong Kong, requires specialised legal knowledge. At Ironbridge Legal, we combine practical expertise with a deep understanding of both Australian and Chinese legal systems to provide efficient and effective enforcement solutions. With a focus on strategic outcomes and meticulous attention to detail, Ironbridge Legal offers the experience and insight necessary to secure enforceable results in Australia.
Further Information
For further information about enforcing Chinese judgments and arbitral awards in Australia, including Hong Kong judgment registration and Mainland China common law enforcement, please contact the author of this article:
Trevor Withane
FOUNDER & MANAGING PARTNER
