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  • Writer's pictureLarry Zhou

How to Smoothly Execute Mediation Payments in Foreign-related Litigation

In international litigation, after the foreign plaintiff wins the lawsuit or the parties ultimately mediate, how to successfully receive funds in foreign currency becomes the last pivotal step. Due to control measures over foreign currencies in China, banks have different scrutiny system, making it hard to transfer large sum of foreign exchange oversea. Regarding this issue, Landing Lawyers have the following steps for reference:


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Step 1: Confirm whether debtor has an account to pay foreign currency and to confirm the collection information


Please note that in order to successfully pass the scrutiny, it is better that the account to receive the final compensation payment in foreign exchange remains the same as the original payment account.


Step 2: The debtor first transfers a small amount of money to the foreign account


Wiring a large sum of money at once is vulnerable to be “intercepted”. Therefore, it is better to have the defendant transfer a small amount of money in foreign currency as an attempt and at the same time provide the bank slip to the beneficiary to verify if payment can be received.


If the small amount of money in foreign currency cannot be received, the subsequent large amount of compensation would also be hard to be remitted successfully and then other ways need to be considered.


Step 3: If step 2 succeeds, the debtor can transfer the remaining fund in a lump sum


After confirming that the foreign creditor can receive the first small amount of money, the debtor can continue to remit the remaining compensation amount in one lump sum, referring to the documents, information and procedures prepared for the first payment.


Step 4: Apply for unfreezing assets of debtor (if any)


If the defendant’s assets are frozen by court in the lawsuit, the foreign plaintiff has the initiative. Only after the creditor receives all the payments, will the assets of defendant be unfrozen upon request from the creditor, which will put pressure on the debtor to fully fulfill the duty.


Step 5: Apply to court for refund of litigation fees


After the case is closed by mediation, according to Chinese law, plaintiff is entitled to apply to the court for a refund of half of the litigation fees paid by plaintiff in advance.


Chinese courts cannot directly refund in foreign currency to foreign plaintiffs. If Chinese attornies have obtained legal authorization, they can collect the litigation fees returned by the court with the account of law firm and then return the fees to the foreign plaintiff's account by following aforementioned steps.


Step 6: If the judgment debtor fails to make full repayment, the plaintiff can apply for enforcement


If the debtor fails to repay as stipulated in the judgment or mediation agreement, the creditor can directly apply to the court for mandatory enforcement. If the debtor’s asset has been frozen, the court can directly transfer the fund to the plaintiff, which shorten and simplify the enforcement. Similarly, if the foreign plaintiff does not have an account in China receiving Renminbi, the aforementioned steps can be referred to complete the foreign currency transfer.


In sum, transferring funds in foreign currency has various difficulties. We have experience in assisting clients dealing with these issues. If you are interested, please feel free to contact us.

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