13May
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Lawsuits are being leveled on both sides of the Pacific as the PRC and the US accuse each other of causing the COVID-19 crisis. Meanwhile, as Congress debates immunity from COVID-19 suits for US businesses,[1] additional lawsuits are being filed against governors and universities.[2]

In one lawsuit that Legal Language Services recently reviewed, the plaintiffs sought to recover one-trillion dollars from the PRC for COVID-19 related damages.

One trillion dollars is no small sum, but neither are the costs in terms of time and effort spent to file litigation against China. And in today’s current state of crisis, one might wonder if that time might be better used elsewhere, especially when — as we will discuss below — actual return on investment may be minimal at best.

How likely are plaintiffs to see a return on investment when filing such litigation? And what are the challenges and barriers to filing a COVID-19-related lawsuit against the PRC?

How China Can Be Sued in a US Court

Under The Foreign Sovereign Immunities Act of 1976 (FSIA),[3] a foreign government can only be sued if the cause of action fits into an exception to the Act. The relevant exception here concerns a foreign government’s sponsorship of terrorism.[4]

Prior to 2016, only certain states were considered capable of sponsoring terrorism (e.g. North Korea and Iran) and only these states could be sued in US court under state sponsored terrorism exception. But in 2016, the Justice Against Sponsors of Terrorism Act (JASTA)[5] was enacted over President Obama’s veto.

JASTA grants US courts jurisdiction over any country that sponsors terrorism, not just so-called rogue nations. Under JASTA, Saudi Arabia, for the first time, acquired potential liability for sponsoring the 9-11 Attacks.[6]

Accordingly, JASTA is the basis by which claims against the PRC for COVID-19 damages can be asserted.

But having a claim means nothing unless a US court can assert jurisdiction over the PRC, and the first step toward asserting jurisdiction against any defendant is serving process.

How to Serve Process in China via FSIA

Under FSIA, attempts to serve process in a foreign country must be made using one of the following methods and in this specified order of preference:[7]

  1. By private methods previously agreed upon by the parties
  2. Pursuant to the Hague Convention
  3. Upon the foreign countries’ ministry of justice
  4. Via diplomatic means

Obviously, method 1 is not applicable for a tort claim against the PRC.

The efficacy of methods 2 and 3 vary by country. So while France and the United Kingdom routinely accept Hague Convention FSIA service, Turkey notoriously refuses to accept service by the first three methods above.

We do not have enough historical precedent to know how the government of the PRC will react to being served a FSIA complaint under the Hague Convention. As this decision is highly political, we can, however, extrapolate from past actions and surmise that the PRC will not accept service methods 2 or 3. Indeed it is not unusual for the Chinese Central Authority to allow certain defendants to refuse service – something that is prohibited under the Convention.[8]

As for method 4, if Trump starts a trade war with the PRC[9] — as he has recently been threatening — then this method too may become impossible.

This would leave US courts without a method to assert jurisdiction.

How Would Judgments Be Recognized and Enforced?

Let’s assume the PRC is properly served, what will be the PRC’s next move?

Given the official reaction by the government of the PRC to US accusations that the country is responsible for the VOCID-19 pandemic, and the public outrage in China in response to those accusations, it is likely the PRC would default on any and all FSIA-COVID-19 claims.

But regardless of whether the PRC does default or is found liable for COVID-19 related damages in a US court, the judgment will still have to be taken to China to be recognized and enforced.

Philosophically, the purpose of recognition procedure is for a court to rule that the foreign judgment can be used as evidence during the enforcement proceeding. The PRC requires that US judgments be legalized, in both their original English and in a Chinese translation.[10] Also key to such recognition is whether or not service of process upon a defendant was proper.[11]

Yet the greatest barrier to having a US judgment recognized and enforced by a Peoples Court in China is that the US and the PRC have not entered into a bilateral judgment recognition treaty.[12] This means that the Peoples Courts, while willing to enforce some US judgments, will review all future US judgments on an ad hoc basis.[13]

This problematic because “China adheres to the doctrine of absolute immunity”[14] A country that holds forth that it is an absolute sovereign is simply not going to recognize a foreign judgment that undermines its absolute position. Put more bluntly: it is very hard to imagine that the PRC will enforce a US judgement that makes the country liable for COVID-19 damages.

The Bottomline

The issues with service of process and judgment recognition are very significant barriers to collecting any damages from the PRC to cover the losses incurred in the US due to the coronavirus. If nothing is to be gained by filing suit against China, we need to ask why the US — as a nation — would want to antagonize the PRC? Political gain with a domestic audience in the US (or the PRC) must be weighed against the tangible damage to short run economic relationships and damage to long term benefits of international cooperation.

It is fair to note that international cooperation was quite helpful in the wake of the financial crisis of 2008 and the years immediately following.[15] If a good relationship between the PRC and the US were important then, it certainly remains important now.

 

Notes

[1] Jim Saksa: Democrats, tort lawyers pan McConnell’s liability immunity idea. Roll Call Ap 29, 2020; https://www.rollcall.com/2020/04/29/democrats-tort-lawyers-pan-mcconnells-liability-immunity-idea/.
[2] Hayley Fowler: Who’s being sued over coronavirus? China, universities and even governors. Here’s why. The Charlotte Observes May 1, 2020; https://www.charlotteobserver.com/news/coronavirus/article242437561.html#storylink=cpy.
[3] 28, §§ 1330, 1332, 1391, 1441, and 1602–1611.
[4] 28 U.S.C. § 1605A.
[5] Pub.L. 114–222; see also Seung Min Kim: Congress hands Obama first veto override. Politico August 28, 216; https://www.politico.com/story/2016/09/senate-jasta-228841.
[6] Jess Bravin and Andrew Restuccia: Alleged 9/11 Mastermind Open to Helping Victims’ Lawsuit if U.S. Spares Him Death Penalty. WSJ April 19, 2019; https://www.wsj.com/articles/alleged-9-11-mastermind-open-to-helping-victims-lawsuit-if-he-isnt-executed-11564426390.
[7] § 1608(A)
[8] Article 5.
[9] Keith Johnson:  As If Things Aren’t Bad Enough, Trump Mulls Fresh Trade War With China. Foreign Policy May 4, 2020; https://foreignpolicy.com/2020/05/04/trump-china-trade-war-restoring-tariffs-2020-election/.
[10] Personal written communication with Chinese attorney Meng Yu 余萌  (April 18, 2020).
[11] Uniform Foreign Money Judgments Recognition Act of 1962 (UFMJRA).
[12] Guodong Du 杜国栋 , Meng Yu 余萌 : April 2020 Update: List of China’s Cases on Recognition of Foreign Judgments. China Justice Observer April 18 2020; https://www.chinajusticeobserver.com/a/update-list-of-chinas-cases-on-recognition-of-foreign-judgments.
[13] Id.
[14] Guodong Du 杜国栋 , Meng Yu 余萌: A Wuhan Lawyer Suing the U.S. Government Over COVID-19? In China, Legal Impediments May Surface. China Judicial Observer Mar 25, 2020; https://www.chinajusticeobserver.com/a/a-wuhan-lawyer-suing-the-us-government-over-covid-19.
[15] Niall Ferguson: The Ascent of Money: A Financial History of the World (2008) The Penguin Press HC.


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