China Foreign Judgment Update: New Bilateral Recognition Treaties Signed
China has significantly expanded its network of bilateral treaties governing the recognition and enforcement of foreign judgments, signing new agreements with several major trading partners in the first half of 2026. These developments mark a major shift in the landscape for international dispute resolution, providing foreign businesses with more predictable pathways for enforcing court judgments across borders. The new treaties, combined with China’s continued engagement with the Hague Convention on Choice of Court Agreements, are reshaping the strategic calculus for contract dispute resolution involving Chinese counterparties and opening up options that were previously unavailable to foreign litigants seeking to enforce court judgments in China.
The Treaty Expansion in Context
Historically, the enforcement of foreign commercial judgments in China was notoriously difficult. In the absence of bilateral treaties, parties seeking to enforce a foreign judgment in Chinese courts were required to rely on the principle of reciprocity, which Chinese courts interpreted inconsistently. The result was a patchwork of outcomes that made it nearly impossible for foreign litigants to predict whether a judgment obtained in their home jurisdiction would be enforceable against assets located in China. China has long maintained bilateral treaties on judicial assistance with a limited number of countries, primarily from the developing world. The new wave of treaty signings targets China’s most significant economic partners, reflecting a strategic recognition that predictable judgment enforcement is essential for maintaining foreign investor confidence and facilitating cross-border commerce. The treaties signed in 2026 include comprehensive recognition and enforcement provisions that go significantly beyond the scope of earlier judicial assistance agreements, covering monetary judgments, injunctive relief, and cost orders.
Countries Covered by New Treaties
The most significant new treaty is the bilateral arrangement with the European Union, which was finalized after four years of negotiations and covers all EU member states. This treaty establishes mutual recognition and enforcement of civil and commercial judgments, with limited exceptions for matters involving sovereignty, national security, and public policy. The treaty with the United Kingdom, negotiated separately following Brexit, mirrors the EU agreement in most material respects. Additional treaties signed in the first half of 2026 include agreements with Singapore, South Korea, Japan, Australia, and the United Arab Emirates. For each of these countries, the treaty establishes a streamlined enforcement procedure that eliminates the requirement for de novo review of the underlying dispute. Chinese courts are directed to recognize and enforce qualifying foreign judgments unless the defendant can establish one of the enumerated grounds for refusal, which include lack of proper jurisdiction in the originating court, violation of due process rights, inconsistency with a prior Chinese judgment on the same matter, or manifest incompatibility with Chinese public policy. The public policy exception, historically a broad loophole that Chinese courts used to refuse enforcement, has been significantly narrowed in the treaty text to apply only in cases involving fundamental principles of Chinese law or national sovereignty.
Procedural Requirements for Enforcement
Under the new treaties, parties seeking to enforce a foreign judgment in China must submit an application to the Intermediate People’s Court in the defendant’s place of domicile or where the defendant has enforceable assets. The application must include a certified copy of the judgment, evidence that the judgment is final and enforceable in the originating jurisdiction, proof of proper service on the defendant, and a certified translation of all documents into Chinese. The court is required to render a decision on recognition within six months of the application, a significant improvement over the previous timeline that could extend to two years or more due to procedural delays and judicial discretion. Chinese courts retain the authority to review whether the originating court had proper jurisdiction under the standards set forth in the treaty. For judgments originating in EU member states, the treaty provides that jurisdiction is properly established if the defendant was domiciled in the originating jurisdiction at the time the proceedings were commenced, the dispute arose from business activities conducted in the originating jurisdiction, or the parties had validly agreed to the jurisdiction of the originating court. This last ground is particularly important for foreign businesses, as it means that well-drafted forum selection clauses in commercial contracts provide a reliable basis for subsequent judgment enforcement.
Impact on Arbitration and Litigation Strategy
The expansion of judgment recognition treaties has significant implications for the forum selection decisions of foreign businesses contracting with Chinese counterparties. Historically, international arbitration seated outside China was the preferred dispute resolution mechanism because arbitral awards were enforceable under the New York Convention, to which China is a signatory. The new bilateral treaties now offer a credible alternative path for litigation in the courts of treaty partner countries, particularly for disputes where the factual connections to the foreign jurisdiction are strong and the judgment is likely to satisfy the jurisdictional requirements of the treaty. However, practitioners caution that arbitration retains important advantages in many cases. Arbitral awards are enforceable in China under the New York Convention without the need for a bilateral treaty, covering a broader range of countries than the current treaty network. Additionally, arbitral proceedings offer greater flexibility in the selection of arbitrators, procedural rules, and the governing law of the dispute. For disputes where the counterparty’s assets are located primarily in China and the substantive law of the contract is Chinese law, arbitration administered by CIETAC or the Beijing Arbitration Commission may still be the most practical option despite the new treaty availability.
Practical Implications for Contract Drafting
The new treaty environment requires foreign businesses to reconsider forum selection clauses in their contracts with Chinese counterparties. For companies based in treaty partner countries, a well-drafted choice of court clause designating the courts of that country now provides a more reliable enforcement path than at any previous point. The Hague Convention on Choice of Court Agreements, which entered into force between China, the EU, and several other major economies, provides an additional layer of protection by requiring courts in contracting states to respect exclusive forum selection clauses and to recognize and enforce resulting judgments. Key considerations for forum selection decisions include the location of the counterparty’s assets, the governing law of the contract, the relative cost and speed of litigation versus arbitration, and the availability of interim remedies in the chosen forum. Forum selection clauses should be drafted with specificity, clearly identifying the chosen court or courts and specifying whether the clause is exclusive or non-exclusive. Ambiguous forum selection language has been the source of significant satellite litigation in Chinese courts, and the clarified standards under the new treaties make precise drafting more important than ever for ensuring that enforcement proceeds smoothly.
Remaining Challenges and Areas of Uncertainty
Despite the positive developments, important challenges remain. The treaties have not yet been tested extensively in Chinese courts, and it remains to be seen how lower courts will apply the public policy exception in practice. Some foreign law firms have expressed concern that Chinese courts may interpret the public policy exception broadly in cases involving sensitive industries or state-owned enterprises. The treaties also do not cover judgments in matters involving antitrust, intellectual property, or insolvency, which are subject to separate legal frameworks. Another area of uncertainty involves the recognition of judgments that include punitive damages or multiple damages awards. Chinese law does not recognize punitive damages in commercial cases, and the treaties contain provisions allowing courts to reduce damage awards that are inconsistent with Chinese legal principles. Foreign litigants should be prepared for the possibility that Chinese courts will reduce or eliminate punitive elements of their judgments, and should structure their claims accordingly when litigation in a treaty partner country is anticipated. Monitoring early enforcement cases in Chinese courts will be essential for understanding how these provisions will be applied in practice.
Strategic Recommendations for Foreign Businesses
- Review all existing contracts with Chinese counterparties to assess whether forum selection clauses should be updated to take advantage of new treaty protections
- Consider whether litigation in treaty partner courts offers advantages over arbitration for specific commercial relationships
- Ensure that forum selection clauses are drafted with precision, clearly identifying the chosen court and the exclusive or non-exclusive nature of the clause
- Monitor the development of Chinese court practice under the new treaties before making final forum selection decisions
- Maintain awareness of the assets held by Chinese counterparties within China, as the practical value of any judgment depends on the availability of attachable assets
- Engage local counsel in both the originating jurisdiction and China to coordinate enforcement strategy at the outset of any significant commercial dispute
- Consider whether parallel proceedings in Chinese courts and foreign courts might be necessary to protect against the dissipation of assets during the pendency of the dispute
