When doing business in China, some foreign clients may be required to collect debts through litigation. However, when a foreign client obtains a valid and favorable judgment, the other party may not want to enforce the judgment. This is one of the common stories that occurs when foreign clients collect debts through litigation.
Based on our rich experience in forcing debtors to enforce judgments through enforcement proceedings, we are preparing this article to present the details of how to enforce an effective judgment in Business Lawyers in China.
I. What is the enforcement of an effective judgment in China?
This means that the court ordered the defendant to reimburse the plaintiff’s money or to pay damages, the plaintiff can ask the court to execute the relevant properties of the defendant when the defendant refused to execute. This claimant is the enforcement claimant and the other party is the enforcement party.
II. When should the applicant request enforcement?
According to the law, the time limit for requesting enforcement is two years after the entry into force of the basis for enforcement (eg judgment, arbitral award). Please pay attention to the delay and protect the legal rights and interests in a timely manner.
III. What types of documents must be submitted for the request for enforcement?
The request for enforcement must indicate the basic information of the claimant and the party subject to enforcement, the basis for enforcement, the object of enforcement, information on the assets available for enforcement, etc. .
- Identity documents of the applicant and of the party subject to enforcement
Basis of execution
For example, a copy of a valid judgment must be submitted and the original must be provided for review.
IV. Does the plaintiff have to pay the court enforcement fee?
Generally, applicants are not required to pay the fulfillment application fee in advance. During the enforcement proceedings, the court will withhold the enforcement costs from the amount executed, and the costs will ultimately be borne by the party subject to enforcement.
V. How does the court take steps to enforce the judgment?
Step 1: Issue a notice of execution to the party subject to execution
After receiving a request for enforcement, the court issues a notice of enforcement to the party subject to enforcement and orders it to perform within the time limit set when the party subject to enforcement does not fulfill the obligations determined by the jugement.
Step 2: Begin the property investigation
Through the internal enforcement system, the court will conduct a thorough investigation of the properties on behalf of the party subject to enforcement, including, but not limited to, bank deposits, equity, property real estate, etc.
Step 3 ： Take coercive action
The court typically takes the following enforcement actions, including, but not limited to:
- search, freeze and transfer the deposit of the party subject to execution;
- withhold and withdraw the income of the party subject to enforcement;
- seal, seize, auction and sell the property of the party subject to execution;
- the search for assets hidden by the party subject to execution;
- compel the party subject to enforcement to perform the acts specified in the judgment.
Step 4 ： Restrict extravagant consumption
If the party subject to enforcement fails to meet the payment obligations as specified in the notice of enforcement, the court may take measures to restrict the extravagant consumption of that party and the relevant consumption not necessary in daily life. or the commercial exploitation thereof. Such a measure is generally applied by the applicant.
Related laws and regulations:
Several provisions of the Supreme People’s Court on the restriction of extravagant consumption and the relevant consumption of persons subject to execution (revised in 2015)
Article 3 After the measures of restriction of consumption have been taken against the person subject to enforcement who is a natural person, the person subject to enforcement shall not have the following extravagant acts of consumption and relevant acts of consumption not necessary in daily life or work:
- choose to take an airplane, a soft sleeper on a train, or a second or higher class sleeper on a boat, to travel;
- have extravagant consumption in hotels, restaurants, nightclubs, golf courses or other multi-star places;
- buy real estate, build or expand houses or decorate houses in a luxurious way;
- the rental of high-end office buildings, hotels, apartments or other office space;
- buy cars that are not needed for business;
- go on tour or on vacation;
- sending children to private schools with expensive tuition fees;
- spend a significant amount of money on the purchase of insurance wealth management products; and
- taking any seat in a Chinese G-series high-speed rail train or a first-class or higher seat in any other Chinese high-speed rail train, and other acts of consumption not necessary in daily life or work.
If the person subject to the execution is a company, after having been prohibited from extravagant consumption, this company and its legal representative, principal responsible and persons directly responsible for affecting the execution of debts are prohibited from committing the acts provided for in the previous paragraph. of this article. If the natural persons referred to in this paragraph intend to commit an act provided for in the previous paragraph by using their own property for private purposes, they may submit a request to the enforcement court which will approve it if the case is confirmed on examination.
Step 5: Include in blacklist
During the execution procedure, if the party subject to the execution has the capacity to execute but refuses to fulfill the obligations determined by the effective judgment (for example, the debtor has money, but refuses to pay the obligee the amount due as stated in the effective judgment.), the court may include the party subject to enforcement in the dishonest list (also called a kind of blacklist).
This information will be listed online, which alerts the debtor’s business partners, customers and the general public that the debtor had no business integrity.
(The execution information of the part subject to execution can be checked on this website: http://zxgk.court.gov.cn/)
In addition, being blacklisted will be subject to many restrictions, such as restrictions on loans, business, and extravagant consumption. These joint enforcement measures effectively guarantee a favorable outcome in enforcement cases.
Related laws and regulations:
Several provisions of the Supreme People’s Court on issuing the list of dishonest persons subject to execution (revised in 2017)
Article 1 The People’s Courts include litigants on the list of dishonest litigants and inflict credit penalties on them in accordance with the law, when the litigants do not perform the obligations determined by the legal acts in force, and commit one of the violations following:
- have the capacity to fulfill the obligations determined by the legal acts in force but refuse to do so;
- obstruct or reject the application by fabricating evidence, committing acts of violence or intimidating, etc. ;
- evade enforcement through false litigation, bogus arbitration or concealment and transfer of ownership, etc. ;
- violate the property declaration system;
- violate the consumption restriction order; Where
- refuse to execute or implement the settlement agreement without just cause.
- On Letter of request and WFOE
With regard to the serious situation, the court may adopt the custody measure against the party subject to execution, or even penal sanctions for resisting execution actions. Please note, however, that courts rarely take such serious action in practice.
We hope that listing some of the common measures that foreign clients may apply during the enforcement process can help achieve the goal of collecting debts in China. As the coronavirus continues to rage, it could be difficult for foreign customers to enter China. It is advisable to hire a lawyer to help with the enforcement of the judgment without the client having to travel to China in person to request enforcement.
Please note that this article deals with the situation in which the judgment is rendered in Mainland China. Regarding the enforcement of foreign judgments, the situation could be complicated and will be discussed in another article.
If you need help with debt collection by way of execution, please do not hesitate to contact us via [email protected]