As the first case in history where a Chinese judgment was successfully recognized and enforced in the U.S., Hubei Gezhouba Sanlian v. Robinson is a milestone. Hubei Gezhouba Sanlian Industrial Co., Ltd. and Hubei Pinghu Cruise Co., Ltd vs. Robinson Helicopter Company, Inc. CV-01798-FMC (2009) (U.S. Court of Appeals, 9th Circuit – Case No. 09-56629.
作为有史以来第一例在美国成功承认和执行中国法院判决的案件，.Hubei Gezhouba Sanlian v. Robinson具有划时代的意义。 （案件判决详见：Hubei Gezhouba Sanlian Industrial Co., Ltd. and Hubei Pinghu Cruise Co., Ltd vs. Robinson Helicopter Company, Inc. CV-01798-FMC (2009) (U.S. Court of Appeals, 9th Circuit – Case No. 09-56629.)

The case involved a lawsuit over an accident in China involving a helicopter manufactured by Robinson Helicopter Company, Inc. (“Robinson Helicopters”) that resulted in the deaths of three people. A judgment in excess of six million U.S. Dollars was entered against Robinson Helicopters by the Shanghai Supreme Court after a lengthy evidentiary hearing before three judges. Robinson Helicopters did not participate in the hearing notwithstanding being served with notice of the hearing.

The United States District Court overcame the absence of any U.S./Chinese treaty for the enforcement of foreign judgments by relying on the California Uniform Foreign Money Judgment Recognition Act (UFMJRA) to enforce the Chinese judgment.

Based on the doctrine of “stare decisis”, which obligates trial judges and lower appellate courts to follow judicial precedent established by the appellate court judgment, creditors from China can, subject to the facts of the underlying case and the circumstances in which the Chinese judgment was obtained, file a civil action in a District Court in the Ninth Circuit for enforcement of the Chinese judgment.

The major issues considered by the District Court and by the Ninth District Courts of Appeal in granting recognition of the judgment against Robinson Helicopters were the following:

1. The jurisdiction of the Chinese court. The case was originally filed in the District Court in California. The Defendant filed a motion to stay the proceedings based on their argument that the District Court was not the proper court according to the principle of forum non conveniens and agreed to submit to the jurisdiction of the court in China as a condition of the District Court granting the motion to stay the proceedings. Therefore, when the judgment creditor filed the motion to enforce the Chinese judgment, Robinson Helicopters was estopped from arguing the Chinese Court did not have jurisdiction in the underlying case.

2. Whether the Defendant was denied” due process” in the judicial proceedings in China. Robinson Helicopters argued it was denied its right to due process in the Chinese judicial proceedings. The District Court concluded Robinson Helicopters had actual notice of the judicial proceedings in China and had both sufficient time and the opportunity to participate in the judicial proceedings. The judgment was entered by a panel of three judges after evidence was presented by the plaintiff during the evidentiary hearing. The District Court found the judicial proceedings in the Chinese court were fundamentally fair, did not offend against basic fairness and complied with the concept of “due process” in foreign judicial proceedings as set out in Society of Lloyd’s v. Ashenden, 233 F.3d 473, 476-77 (7th Cir. 2000); Shell Oil Co. v. Franco, 2004 WL 5615657 (C.D. Cal. 2004) (citing Ashenden).

3. Whether service of process was proper. The District Court determined service of process was made in compliance with the requirements of the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (“Hague Convention”).

4. Whether it would be equitable to enforce the Chinese judgment. The Defendant argued there are neither bilateral treaties nor multilateral international conventions between the U.S. and China with respect to the mutual recognition and enforcement of judgments issued by each country’s courts in civil and commercial matters. The District Court held lack of reciprocity is not grounds for refusal of recognition under the UFMJRA and it’s successor statute.

It is worth noting this case was very fact-specific. The Defendant by filing the motion to stay the action in California based on form non convens consented to jurisdiction over the case in the court in China and could not challenge the jurisdiction of the court in China in subsequent enforcement proceedings in the District Court. In addition, the Plaintiff made sure service of process strictly complied with the Hague Convention; the judicial proceedings in the Chinese court were complete, fair and complied with the U.S District Court’s due process requirements for proceedings in foreign countries; and the statute of limitations was property tolled.

Chinese entities doing business with U.S. persons or entities need to carefully draft their contracts to resolve all issues of jurisdiction, applicable laws, conflict of laws, service of process and enforcement of judgments obtained in China in the U.S. to take advantage of this judicial precedent. Chinese judgment creditors with judgments against U.S. persons or entities proposing to enforce the Chinese judgments in the U.S. who have not previously agreed on all these fundamental issues with the U.S. judgment debtor will have a difficult time fitting within the four corners of this judicial precedent. They may be successfully in enforcing a Chinese judgment in the Ninth District if they can establish the Chinese court was the forum convens, the U.S. defendant was properly served with process and had an opportunity to meaningfully participate in the legal proceedings in China, and the Chinese judicial proceedings conformed to the Ninth Circuit’s definition of due process in foreign judicial proceedings.

01/17/2011 Source: Xinhua

China’s supreme auditor announced Monday that 95 people were arrested, prosecuted or sentenced last year for embezzling public funds in 2009.

The actions resulted from a National Audit Office investigation into the central budget implementation and other financial revenue and spending in 2009.

A total of 104 cases had been referred to disciplinary or judicial departments and about 1,103 people been dealt with by Communist Party of China or governmental disciplinary bodies by the end of last year, according to a report on the NAO website.

About 122.3 billion yuan (18.61 billion U.S. dollars) had been recovered or returned by the end of last year, the report said.

The office published 28 cases of embezzlement that had been tackled by the end of last year in another report on its website.

They included the case of Tang Ruoxin, former general manager of China Export & Credit Insurance Corporation, who misused 300 million yuan in 2002 and 2003, of which 200 million yuan was not recovered.

Tang was sentenced to 14 years in prison for bribery and abuse of authority in February last year.

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By: Robert J. Allan

In early November I was asked by Professor He Zhiyi, the Director of the Management Case Center of Peking University, to prepare and present a paper entitled: “Western and Chinese Perspectives of Corporate Social Responsibility” at the Global CEO Forum in Beijing on November 15 and 16, 2008.

While researching and preparing the paper, which is posted on our web site, I came to believe the concept of social responsibility, which has many contemporary definitions but is most often considered to be responsible business behavior, was historically founded in Chinese cultural and currently accepted more by the Chinese government than Western governments.

My attendance at the conference validated this belief. All of the speakers representing the government emphasized the Chinese government’s commitment to the concept codified in Chapter 1 Article 5 of the Company Law of the People’s Republic of China.  This mandates a company shall comply not only with the laws and administration but also the obligations of business and social morality and shall bear social responsibility.

Cheng Siwei, a UCLA alumni and the Chairman of the organizing Committee for the conference and the Vice Chairman of the Standing Committee of the 10th National People’s Congress, gave the welcoming address. While recognizing the current global economic crisis, which Siwei defined as a crisis of confidence in Western governments and financial systems, he stated a long term climate change is more important to the world than the current crisis. Siwei closed his comments by saying we have one earth and we need to protect it together.

While it is easy to be skeptical of statements made by representatives of and “beautiful laws” passed by the Chinese government, my attendance at the conference convinced me that both the government of China and the major multinational corporations from China, influenced by the recent earthquake and its effect on Chinese society, are serious about implementing corporate social responsibility in China.

Unfortunately, the event was not as well attended as expected due to the current economic crisis. The chief executive officers of multinational corporations need to diligently attend to their corporate affairs.  Instead, the heads of both the Chinese and Western governments were attending the G20 summit in Washington which was hastily convened by President Bush.

Notwithstanding the absence of a strong Western presence at the forum, it was worth attending.  The forum definitely confirmed my belief that the government of China at all levels realize the future of sustainable development in China, and the world requires recognition and implementation of responsible business behavior emphasizing people, the planet, and profits.

Although President Hu Jintao and Premier Wen Jiabao both left messages of congratulation for President-Elect Obama’s , according to China Daily, this comment by Obama’s  has made many Chinese hesitant in their support to the new U.S. President-Elect. My question is why. China has always viewed the United States more as the competition than as a true friend for many years. So, why is Obama’s statement that the United States shares China’s view causing some dismay?

During the past four years, the United States, and especially the Bush administration, has pursued a policy of good will and free trade toward China. Obama’s future policy is still unclear and that unknown can cause a bit of panic, especially in this financial climate.

If Obama’s is right in his assessment of China, does that mean that he is considering less friendly relations? I doubt it. The financial crisis has shown us that the world is too interconnected and the United States and China rely on each other too much to be less friendly.

First, China owns $508 billion dollars of U.S. debt as of October 2008 (approx. 20%). Although it is unlikely that the Chinese will call up this debt, the United States are reliant on the Chinese.

Second, we are in the midst of a financial crisis. China’s $586 billion dollar infusion into the country spurred a strong market showing in Europe, Hong Kong, Japan, and the United States. The World Bank announced that the stimulus package would put China in a good position to expand its economy. An expansion of China’s expansion is good for the United States because it means FDI will gain more profits. It has already shown that the Chinese government has the power to improve confidences in the world stock markets.

Third, Obama’s understands the reality of the United States trade relationship with China. Even though China is a competitor, it is a competitor that has a huge trade surplus with the United States, US$25.3 billion in August 1008. Experts have suggested that a downturn in China’s economy would be even worse for United States markets.

Barack Obama’s point is well intended and an accurate portrayal of our relationship with China. To say that we are not friends is not saying that we are not going to be friendly. China has become a large and powerful force in the eight years of the Bush Administration. It would be unwise to not pursue a friendly policy, but it would imprudent to not pursue the relationship with caution and careful consideration of competing interests.

Asia Monitor reports in its October, 2008 issue on China’s continuing problem with “hot money”.

China’s foreign exchange reserves rose to US $1.809 trn in June, but a Ministry of Commerce source has revealed that around US $107.2 bn of the US $185.2 bn of FX inflows on the current account in the first five months of 2008 could not be explained.

The inflows of hot money are perceived to be hampering China’s attempt to curtail the ever increasing inflationary pressures.

Indeed, China’s policy of keeping its exchange rate undervalued for the sake of supporting its export sector, has ensured that concerns over hot money continue to rage as speculators bet on further significant yuan appreciation.

Meanwhile, massive inflows of foreign direct investment also continue to keep China’s capital and financial accounts in healthy surplus. China attracted US $60.7 bn in FDI in the first seven months of 2008, a 44.5% increase over the same period in 2007.

An announcement on the State Administration of Foreign Exchange’s website, the country’s foreign exchange regulator, said exporters will be required to park revenues in special accounts while the authorities verify if the funds are the results of genuine trade.

In an attempt to curb speculative inflows of capital, China issued new controls on transfers of currencies across its borders on August 6, with immediate effect. The new regulations call for penalties of up to 30% of the capital involved in any unauthorized inward or outward currency transfers which give authorities stronger control over such transactions and expand reporting requirements for financial institutions.

There has been a growing discussion among private sector economists about whether the authorities should introduce a large, one-off appreciation of the currency in order to limit speculation. However, most economists believe that the government would be very reluctant to take such a step as parts of the export sector are already suffering badly because of higher costs, including the stronger renminbi.

The White House announced that it will host an emergency 20 country summit on November 15, 2008 to discuss the world economic crisis.  The announcement comes after considerable pressure from both China and the EU.  Among those invited are: Argentina, Brazil, the EU, India, Saudi Arabia, the head of the IMF, president of the World Bank, the UN Secretary General, and the Chairman of the Financial Stability Forum.  Significantly, the White House announced the President-Elect would also be available to give his input.  Hopefully, the role and media coverage of the President-Elect in this summit will not overshadow the very real problem-solving that needs to be done at this historic summit.

With the stock markets gyrating wildly day after day, down now but maybe up at the time this blog is read, anticipation of the White House’s economic crisis summit will hopefully cause a rally.  Every fall of the NYSE and the other major stock markets cause economic shivers throughout the country and world.  In New York, where the losses and the fear are most apparent, each dip in the indexes has a severe negative psychological effect.

New York is not the only place were layoffs are becoming a regular phenomenon.  China announced this week that their economic growth has slowed considerably.  As a result there have been waves of layoffs in the manufacturing sector, and the valuations in the stock market and real estate market have suffered significantly.

With any luck, this economic crisis summit will reach the goals that President Hu Jintao presented to George Bush on Tuesday evening: (1) stabilization measures with immediate effect  (2) restoration of investor confidence, and (3) prevention of any further expansion of the crisis.

The only question is how to get there?  What are President George Bush’s real goals in hosting the summit?  As a lame duck, he can only have one goal: to salvage his reputation.  Is that motivation enough to find a solution to the crisis?  I hope so.