China’s Application of the Principle of Reciprocity in Recognizing Foreign Insolvency Proceedings: Status Quo, Challenges, and Prospects

In the context of the ongoing revision of the Enterprise Bankruptcy Law, China is exploring new approaches to determining reciprocity in the recognition of foreign insolvency proceedings. The long-standing reliance on de facto reciprocity may be subject to change. De jure reciprocity is expected to become the primary basis for determining reciprocity; however, the specific criteria for applying de jure reciprocity in international insolvency cases have yet to be clearly articulated. In certain diplomatic and judicial documents, China has adopted a presumed reciprocity approach toward ASEAN countries and those participating in the Belt and Road Initiative (BRI). However, there remains a lack of clear judicial guidance on how such reciprocity is to be presumed and applied. As for precedents, recent Chinese judicial documents highlight the distinctive nature of recognizing foreign insolvency proceedings, as opposed to the recognition of general foreign civil and commercial judgments. However, they have yet to clarify whether the reciprocity precedents developed in the context of general civil and commercial judgments may be applied to the recognition of foreign insolvency proceedings. To ensure consistency in the determination of reciprocity, the revised Enterprise Bankruptcy Law could establish de jure reciprocity as the primary method of recognition, apply presumed reciprocity to countries that have made reciprocal commitments with China in the field of insolvency, and explicitly clarify that reciprocity precedents concerning general civil and commercial judgments shall not apply to the recognition of foreign insolvency proceedings.