The Hong Kong Government has recently announced that the “Mainland Judgment in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance” (the “Ordinance”) will come into effect on 29 January 2024. The Ordinance codifies in Hong Kong the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region” that was signed between the Supreme People’s Court and the Hong Kong Government on 18 January 2019 (the “New Arrangement”). On the Mainland side, we expect the Supreme People’s Court to promulgate a judicial interpretation to implement the New Arrangement also by 29 January 2024, thereby giving full effect to the New Arrangement in both Hong Kong and the PRC.

The Ordinance will apply to all judgments made on or after 29 January 2024.

The current regime

At present and until the Ordinance comes into effect, the enforcement of commercial judgments between Hong Kong and the Mainland is governed by the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned” (the “Choice of Court Arrangement”).

The Choice of Court Arrangement is enshrined into Hong Kong legislation pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) that came into effect on 1 August 2008. The Choice of Court Arrangement will be superseded by the New Arrangement once the latter comes into effect, although the former may still be relied upon for the enforcement of any applicable judgments made prior to 29 January 2024.

The Choice of Court Arrangement, however, provides for a relatively narrow scope of application:

  • it covers only money judgments issued by designated courts; and
  • the designated court must have exercised its jurisdiction pursuant to a business-to-business agreement where the parties concerned have agreed in writing to designate a People’s Court of the Mainland or certain Hong Kong Courts to have exclusive jurisdiction for resolution of disputes arising from such agreement.

The stringent requirement for the agreement in question to contain an exclusive jurisdiction clause in favour of either the Hong Kong or Mainland Courts has been a stumbling block for parties wishing to make use of the Choice of Court Arrangement. This has significantly curtailed the applicability of the Choice of Court Arrangement. The restrictiveness of the Choice of Court Arrangement is most acutely felt by foreign parties with business interests in the Mainland, many of whom have a preference for non-exclusive or asymmetric jurisdiction clauses in favour of the Hong Kong or Mainland Courts; accordingly, any judgment on a dispute arising from contracts having such a non-exclusive jurisdiction clause cannot call upon the aid of the Choice of Court Arrangement.

Scope of the Ordinance

The Ordinance (and the New Arrangement) introduces eagerly anticipated expansions on the scope of coverage of eligible judgments:

  • it applies to any civil or commercial matter and is no longer limited to contractual disputes;[1]
  • it does away with the exclusive jurisdiction agreement requirement, which has now been replaced by a “close connection” requirement whereby the defendant or the dispute in question must have a jurisdictional connection with the court rendering judgment;[2]
  • both monetary and non-monetary judgments can be enforced;[3]
  • insofar as the enforcement of Hong Kong judgments in the Mainland is concerned, judgments of the Competition Tribunal, Lands Tribunal, and Labour Tribunal are also enforceable in the Mainland; and
  • it allows for simultaneous applications for enforcement in both Hong Kong and the Mainland if the assets of the party against whom enforcement is sought are situated in both jurisdictions.[4]

Under the Ordinance, legally enforceable[5] Mainland judgments given by the Primary People’s Courts or above in the following circumstances are registrable by the Hong Kong Court:

  • any Mainland judgment of the second instance (i.e. the Mainland appellate courts);
  • any Mainland judgment of the Primary People’s Courts from which no appeal is allowed, or the time limit for an appeal[6] has expired and no such appeal has been filed; and
  • any judgment as above made in accordance with the procedure for trial supervision[7].

The Ordinance also adds procedural certainty, providing that where an application is made in Hong Kong for registration of a Mainland judgment for the purpose of enforcement in Hong Kong, any pending Hong Kong proceedings in respect of the same cause of action between the same parties must be stayed. Similarly, where such registration application is pending or where a Mainland judgment has been registered under the Ordinance, a party under such judgment cannot commence proceedings before the Hong Kong Courts in respect of the same cause of action of that judgment.

In terms of the procedure for registering an eligible Mainland judgment in Hong Kong under the Ordinance, this remains unchanged from the current practice. A judgment creditor is to apply to the Hong Kong Court on an ex parte basis (i.e. without the need to inform the judgment debtor of the application), and the judgment debtor will only thereafter be served with a notice of the registration and the opportunity to apply to set aside registration[8] within 14 days after the date on which the notice of registration is served.

Limited grounds for refusal to recognise or enforce a judgment in Hong Kong or the Mainland

Under the New Arrangement, there are only limited grounds (and more limited grounds than those under the Choice of Court Arrangement) which, if proven, the Hong Kong or Mainland Court shall refuse to recognise or enforce a judgment or shall set aside the registration of the judgment[9], as follows:

  • the court that determined the dispute lacked jurisdiction to rule over it;
  • the defendant was not summoned in the proceedings in accordance with the relevant procedural laws, or was not given a reasonable opportunity to defend the proceedings;
  • the judgment was obtained by fraud;
  • the judgment was rendered on a cause of action after a court of the place where enforcement is sought had (a) already accepted the same cause of action, (b) rendered a judgment on the same cause of action, or (c) recognised a judgment on the same cause of action given by a court of another country;
  • an arbitral award on the same cause of action as the judgment was already given in, or recognised by, the place where enforcement is sought; and
  • enforcement of the judgment would be manifestly contrary to the public policy or the basic legal principles of the laws of the please where enforcement is sought.

There is also a discretionary ground for refusal to register a Mainland judgment if the proceedings before the Mainland court were contrary to a valid arbitration agreement or a valid agreement designating some other court as having jurisdiction over the dispute.

Conclusion

Once the Ordinance comes into effect on 29 January 2024, it will give parties with commercial interests in the Mainland and Hong Kong an additional and much-needed avenue for resolving disputes through either the courts of the Mainland and Hong Kong.

Previously, parties operating in Hong Kong and/or the Mainland wishing to keep open their enforcement options in the Mainland would likely be advised to insert a Hong Kong arbitration clause in the relevant agreement such that resort could be had under the “Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (which allows for the enforcement of arbitral awards in the two jurisdictions). Parties will post-January 2024 have the attractive and viable option, as an alternative to arbitration, of calling upon the assistance of the venerable Hong Kong Courts for resolving disputes where interests in both Hong Kong and the Mainland are involved, with the comfort of knowing that any judgment so rendered would be enforceable across the border.

The Ordinance, together with other existing reciprocal measures with the Mainland, continues to showcase and elevate Hong Kong’s unique and preferential position as a seat for dispute resolution where Mainland interests are involved.

For more information and practical details of the New Arrangement, please contact Peter Yuen, Partner, Howard Chan, Partner, or your usual Fangda Partners contact.

  1. Although some matters are expressly excluded under the Arrangement, such as (among others) administrative or regulatory matters, insolvency and bankruptcy, probate, particular matrimonial and family matters, particular intellectual property rights, as well as particular maritime matters. ↑
  2. “Close connection” such as a defendant’s place of residence or place of business was in the jurisdiction that rendered the judgment, the performance of the contract in dispute was in such jurisdiction; the tortious act was committed in such jurisdiction; and a written exclusive or non-exclusive jurisdiction clause in favour of such jurisdiction and there is a real connection between the parties or the dispute to that jurisdiction. ↑
  3. Exception applies to certain types of judgments. ↑
  4. However, the total amount recovered naturally cannot exceed the judgment debt. ↑
  5. Under the Choice of Court Arrangement, a party seeking to register a Mainland judgment must prove that the judgment is “final and conclusive”, which has led to some uncertainty in application, given the existence of a trial supervision system (see footnote 7). ↑
  6. The time limit for appeal against a judgment of the Primary People’s Court is 15 days or 10 days from the date of service of the judgment, depending on the type of judgment. If the appellant is not domiciled within the PRC, the time limit for appeal against a judgment of the Primary People’s Court is 30 days from the date of service of the judgment. ↑
  7. Trial supervision can be initiated either by the Higher People’s Court itself or upon a party’s application. If the Court initiates trial supervision, there is no time limit. If by application, it shall be made within 6 months of a judgment taking effect, or from the date the applicant discovers material new evidence. Once the trial supervision procedure is initiated, the Court will have 3 months to review whether the original judgment is erroneous and should be retried; if so, the Court will invalidate the original judgment and the case retried (otherwise the original judgment remains “final and conclusive”). The retrial process takes around 3 to 6 months. ↑
  8. On limited and defined grounds as set out in the Ordinance. ↑
  9. A party against whom a Mainland judgment registered in Hong Kong may be enforced against shall apply to set aside the registration of the Mainland judgment within 14 days from the date on which the notice of registration is served on it. ↑
Authors
Doris Yueng