Israel's Supreme Court declares Chinese Judgment Enforceable in Israel
By Eylam Weiss, Attorney at Law
A recent judgment by the Israeli Supreme Court declares a Chinese judgment enforceable in Israel, for the first time.
The judgment was given in a case involving an Israeli businessman named Reitman and a Chinese company. Reitman and the Chinese company were engaged in business for dispatching Chinese workers to other countries. When the business relationship terminated, the Chinese company submitted a lawsuit against Reitman in China. The Chinese court ordered Reitman to pay the Chinese company roughly USD 2 million.
The Chinese company applied to the Israeli District Court for declaring the Chinese judgment enforceable in Israel. The Israeli District Court declared the judgment enforceable, following which Reitman appealed to the Supreme Court (Israel's highest judicial instance) for changing the District Court's decision.
The main issue with which the Supreme Court dealt is the reciprocity requirement.
The Israeli Enforcement of Foreign Judgments Law – 1958, sets several conditions which need to be met in order to declare a foreign judgment enforceable in Israel. One of them is the reciprocity requirement, stating that a foreign judgment shall not be declared enforceable if it was granted in a foreign country in which Israeli judgments are not being enforced according to such country's law.
As the case at hand involves enforcement of a Chinese judgment, the question of reciprocity might have been easy to answer if there would have been examples of Israeli judgments enforced in China, or refused to be enforced. However, neither examples for Israeli judgments enforced nor examples of Israeli judgments refused to be enforced in China were brought before the court.
Accordingly, the Supreme Court analyzed the reciprocity requirement and ruled that, lacking any de-facto examples, the reciprocity requirement is satisfied if there is reasonable potential for enforcement of Israeli judgments in the relevant foreign country. This analysis is in line with a previous ruling by the Israeli court which approved the enforceability of a Russian judgment in Israel under similar circumstances.
Therefore, the Supreme Court analyzed the potential that Chinese courts would enforce Israeli judgments, based on opinions of Chinese law experts submitted by the parties. The Chinese company claimed that the Chinese law enables, in general, recognition of foreign judgments based on reciprocity. Reitman on the other hand claimed that China has never enforced a foreign judgment based on reciprocity where no treaty for mutual enforcement is in place (there is no such treaty between Israel and China); that instructions of the Chinese Supreme Court prevents enforcement of foreign judgments in such cases; and that under similar circumstances Chinese courts refused to enforce judgments granted in the UK and in Japan.
Despite these claims by Reitman, the Israeli Supreme Court adopted the position of the Chinese company and was convinced that there is reasonable potential for enforcement of Israeli judgments by Chinese courts.
The court also mentioned as basis for its ruling the rationale of encouraging the growing commercial relationship between Israel and China and the mutual support between foreign judicial systems, as well as avoiding a "vicious circle" where either country would avoid being the first to enforce.
The court also dismissed Reitman's additional defense arguments according to which the Chinese court did not have jurisdiction over the case and that the judgment was deceitfully obtained. Accordingly, the court upheld the District Court judgment and dismissed the appeal.
The possibility to mutually enforce judgments is of course good news for business between the countries, which is constantly increasing.
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Note: The above information is general and is not to be relied on. Advice of an experienced attorney should be obtained regarding any particular factual situation or legal issue.