On Monday, June 21 1999 Hong Kong's secretary for justice, Ms Elsie Leung, and China's vice president of the Supreme People's Court, Mr Shen Deyong, signed a memorandum of understanding for the reciprocal enforcement of arbitration awards.
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) sets out a straightforward procedure for enforcing arbitral awards internationally. As most nations have now signed the New York Convention, arbitral awards have much greater international recognition than the judgments of the majority of national courts. This ease of enforcement is one of the principal advantages that arbitration offers over litigation.
Hong Kong and China became parties to the New York Convention in 1977 and 1987 respectively and the Chinese and UK governments filed diplomatic notes with the United Nations to allow the New York Convention to be applied in Hong Kong after the 1997 handover. However, the convention applies only to awards made in another state. Consequently, as Hong Kong has been a part of the People's Republic of China since July 1 1997, awards made in Hong Kong or in the mainland can not be enforced in the other jurisdiction under the New York Convention's procedures.
This problem has now been largely remedied as a result of the agreement between Hong Kong and the PRC for the reciprocal recognition and enforcement of awards. The agreement will allow awards made by various authorized mainland arbitral authorities to be enforced by the High Court of Hong Kong, and for awards made in Hong Kong to be enforced by the Intermediate People's Court in the mainland.
The procedure for enforcing an arbitration award will require an applicant to submit to the court a written application, the arbitral award and the arbitration agreement, together with translations (where relevant). If these documents are submitted correctly, the court must enforce the award unless one of the following exceptions to enforcement apply:
- the arbitration agreement was invalid;
- one party was not given proper notice of the arbitrator's appointment or was not allowed to present his case;
- the award deals with matters outside the scope of the arbitration;
- a party to the agreement was under some incapacity when the agreement was made;
- the arbitration tribunal or its procedures did not comply with the arbitration agreement;
- the award is not binding in the place where it was made;
- the dispute could not have been referred to arbitration in the place where it is to be enforced; or
- the award is contrary to public policy.
These exceptions to automatic enforcement are the same as those set out in the New York Convention. If none of these exceptions exists, the unsuccessful party will not have the right to have the case reheard in court.
The new arrangement will apply to all awards made in the mainland or Hong Kong after July 1 1997. In cases where the courts have refused to accept or enforce awards between July 1 1997 and the effective date of the arrangement, the parties will be allowed to submit a new application. Applications for the enforcement of awards pre-dating the handover may not be covered by the agreement.
The Hong Kong administration envisages that the new arrangement will come into effect later this year with the Legislative Council's enactment of an Arbitration (Amendment) Bill. It is not clear when the new arrangements will come into effect in the mainland. In any event, there will be time limits for the enforcement of awards made before the arrangement comes into effect (six or 12 months from the effective date of the arrangement). It is therefore important to watch closely for the effective date each jurisdiction gives to the arrangement and to ensure that any proceedings are begun on time.
The Hong Kong/PRC agreement appears to address the concerns of the arbitration and business communities and provides a simple, and hopefully swift, method for enforcing awards between Hong Kong and the mainland. If the arrangement is applied in accordance with the spirit of the New York Convention, it will be of great benefit to those conducting cross-border business.
For further information on the above topic contact (Mark Lloyd-Williams or George Lamplough) at Herbert Smith by telephone (+852 2845 6639) or by fax (+852 2845 9099) or by email ([email protected] or [email protected]).
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