Over the past decade, Chinese and U.S. courts have become increasingly willing to recognize and enforce each other’s judgments. But a decision by the Supreme Court of New York at the end of April threatens to bring this positive trend to a halt. In Shanghai Yongrun Investment Management Co. v. Kashi Galaxy Venture Capital Co., 2021 NY Slip Op 31459(U), Judge Arthur Engoron denied enforcement of a Chinese court judgment on the ground that the judgment “was rendered under a system which does not provide impartial tribunals or procedures compatible with the requirements of due process of law.” If upheld on appeal, this ruling means that no Chinese judgment would ever be enforceable in the state of New York. But the implications of the decision are even broader. Because China recognizes foreign judgments based on reciprocity, New York’s refusal to enforce Chinese judgments would inevitably lead Chinese courts to refuse to enforce New York judgments and, perhaps, U.S. judgments more generally.
The judgment in Shanghai Yongrun arose from an ordinary contractual dispute. Shanghai Yongrun had invested in Kashi Galaxy, and Kashi Galaxy agreed to repurchase the investment before an initial public offering. When Kashi Galaxy breached by failing to pay the full repurchase price, Shanghai Yongrun sued in a Beijing court as provided in the parties’ agreement. After a trial in which the defendants were represented by counsel, the Beijing court granted judgment for the plaintiff. The decision was affirmed on appeal but could not be enforced because there were insufficient assets within the court’s jurisdiction. The plaintiff alleged that the defendants had transferred their assets to the United States and brought suit to enforce the Chinese judgment in New York state court.
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