What can I do if the Chinese defendant refuses to pay according to judgments?
When you sue a Chinese company that is dishonest in international trade and win the case, the losing Chinese company usually delays or refuses to pay you according to the civil judgment.
In this case, according to Article 236 of the PRC Civil Procedure Law (中华人民共和国民事诉讼法), in order to recover money from the losing party, you can apply to the court for enforcement of the effective judgment. And you don't have to worry about wasting the cost of applying if the enforcement fails, because according to the Measures for Payment of Litigation Costs (诉讼费用交纳办法) issued by the State Council of the PRC, although the court will charge an application fee when you apply for enforcement, the application fee does not need to be paid before the enforcement, but will be calculated and charged according to the amount successfully recovered after the end of the enforcement.
In addition, if you apply for enforcement of the civil judgement, recovering part of the money does not mean the end of the case or the end of the enforcement, you can continue the case until the full amount you can get as determined in the judgment is recovered.
Therefore, when the losing party refuses to pay you according to the judgment, applying for enforcement is a good way for you to recover money.
But sometimes, the losing company is a shell company and has no property to be enforced. In this case, although the losing company is shell, its shareholders are usually real, and since the shareholders of the shell company usually have personal property, you still have the opportunity to recover money by applying for enforcement. According to Article 17 of the Provisions on Modification and Addition of Parties in Civil Enforcement (关于民事执行中变更、追加当事人若干问题的规定) issued by the PRC Supreme People's Court, if the shareholders of the losing company have not actually paid their subscribed capital contributions, and the applicant applies for adding these shareholders as the people being enforced, the court should agree.
However, there are different opinions on whether the shareholder who has not actually paid his capital contributions, but whose payment period has not expired can be added as the person being enforced. If you apply to the court for enforcement and apply to add the shareholders of the shell company as the people being enforced, you may successfully recover money from the shareholders, or maybe the shareholders still have no any property to pay you even though the court approves your application. And it is also possible that the court does not approve your application to add the shareholders as the people being enforced.
In summary, since there is no need to pay the application fee in advance and it is possible to recover money, we suggest that you apply for enforcement if the losing party refuses to perform the judgment, and apply to add the shareholders of the losing company as the people being enforced if the losing company has no property.
Larry Zhou, Partner
Landing Law Offices China
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Linkedin: Larry Zhou