Introduction

On 18 January 2019 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 (HKSAR) was signed by the Supreme People's Court and the HKSAR government. This represents the sixth arrangement with the mainland on mutual legal assistance in civil and commercial matters and the third arrangement providing for recognition and enforcement of judgments between Hong Kong and the mainland in civil and commercial matters.

Background

In June 2017 the Hong Kong government issued a consultation paper on a proposed arrangement between Hong Kong and the mainland for the reciprocal recognition and enforcement of judgments in civil and commercial matters.(1)

The arrangement, when proposed, sought to widen the existing and limited scope for enforcement of mainland civil court judgments in Hong Kong and vice versa. As previously reported in October 2018, when the arrangement was proposed reciprocal enforcement of mainland and Hong Kong civil judgments extended only to:

  • monetary judgments made by Hong Kong and mainland courts, where the parties to a commercial agreement had expressly designated either jurisdiction as the exclusive jurisdiction for the determination of contractual disputes (the so-called 'choice of court arrangement', in force since 1 August 2008); and
  • matrimonial and family civil judgments (the so-called 'matrimonial arrangement', signed in June 2017 but yet to come into effect).

Mainland judgments which are not covered may still be enforced in Hong Kong at common law, but the requirements can be difficult to satisfy. For example, the Hong Kong courts have expressed doubts as to whether mainland judgments can be regarded as final and conclusive upon the merits of the claims (one of the requirements for enforcement at common law).(2) This is due to the review power exercisable under the trial supervision system on the mainland.

The arrangement, therefore, reflects not just increasing commercial activities between the two jurisdictions within 'One Country, Two Systems', but also a desire to widen the scope for reciprocal enforcement of civil judgments between the two jurisdictions.

The following developments have occurred since October 2018.

Developments

27 November 2018 – Legco discussion In line with the Hong Kong government's policy to promote Hong Kong as a leading centre for legal and dispute resolution services in Asia-Pacific, the Legislative Council Panel on Administration of Justice and Legal Services (Legco) met to discuss the proposed extension of the scope of arrangements on mutual legal assistance between the mainland and Hong Kong in civil and commercial matters.

Legco discussed:

  • the scope of the new arrangement – the idea being that the proposed arrangement should cover only judgments in matters considered to be 'civil and commercial' under both Hong Kong and mainland laws;
  • jurisdictional basis;
  • safeguards, such as grounds for refusal of recognition and enforcement of a relevant judgment (on the basis that it was, for example, obtained by fraud);
  • relief to be recognised and enforced, such as only monetary relief or only relief available under the law of the requested court (which would include both monetary and injunctive relief); and
  • the principle of enforceability and the level of courts covered by the arrangement.

Legco considered potential issues relating to:

  • the compatibility of the laws of Hong Kong and the mainland;
  • the independence of the mainland's judicial system; and
  • the effectiveness of the proposed safeguards against certain injustices.

However, the administration confirmed that the safeguards proposed were in line with the latest international practices. Hong Kong's statutory and common law regime, together with the proposed jurisdictional rules, are thought to strike the appropriate balance between the advantages of a more comprehensive reciprocal recognition and enforcement of judgments mechanism and certain perceived risks.(3)

11 January 2019 – secretary for justice confirms proposals have been fast tracked The secretary for justice confirmed that the long-awaited arrangement was due to be concluded and signed in the "near future" and also highlighted that efforts were being stepped up to pursue the study of establishing a workable legal mechanism between Hong Kong and the mainland with respect to insolvency and restructuring matters.(4)

18 January 2019 – signing of arrangement The arrangement was signed between the Supreme People's Court and the HKSAR government on 18 January 2019.(5) This makes it the sixth arrangement with the mainland on aspects of mutual legal assistance in civil and commercial matters and the third arrangement providing for recognition and enforcement of judgments between Hong Kong and the mainland in civil and commercial matters.(6)

Current position

It is now expected that legislation will be passed in 2019, following which the arrangement will come into effect.

The arrangement, once effective, should mean that parties will be better able to enforce judgments, in either jurisdiction, in matters ranging from contract to employment disputes, and will no longer be restricted in scope to monetary judgments arising out of proceedings pursuant to a choice of jurisdiction clause. The new mechanism excludes matters relating to (for example):

  • judicial review;
  • arbitration;
  • bankruptcy;
  • estate;
  • maritime; and
  • certain patent or IP rights.

The Hong Kong government is mindful of the growing need for the law to evolve to facilitate the recognition and enforcement of mainland judgments. Given the increasing commercial ties between Hong Kong and mainland businesses and individuals, the arrangement is expected to be welcome news for many.

Notably, the recognition and enforcement of judgments will be dealt with on a case-by-case basis; Hong Kong's courts will have the discretion to refuse to enforce a mainland judgment if it is (for example) manifestly contrary to the basic principles of Hong Kong law or Hong Kong public policy.(7) Further, the arrangement will not be a panacea for all things enforcement between the two jurisdictions. Expectations should be kept in check.

For further information on this topic please contact Gary Yin or Maria Petzsch at RPC by telephone (+852 2216 7000) or email (gary.yin@rpc.com.hk or maria.petzsch@rpc.com.hk). The RPC website can be accessed at www.rpc.co.uk.

Endnotes

(1) Consultation paper on the "Proposed Arrangement Between Hong Kong and the Mainland on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters" (July 2018). The consultation period closed on 24 September 2018, subject to late submissions agreed with the Department of Justice (Legal Policy Division).

(2) Supra note 1, at paragraph 8.

(3) Background brief on the "Proposed Arrangement Between Hong Kong and the Mainland on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters" (26 November 2018) and full minutes of the meeting of 27 November 2018 (see here).

(4) See paragraphs 25 to 26 of the Hon Teresa Cheng, GBS, SC, JP Secretary for Justice's speech at the Ceremonial Opening of the Legal Year 2019 (14 January 2019).

(5) See the arrangement, available online here.

(6) "Enforcement of civil and commercial judgments between Hong Kong and the Mainland".

(7) "Reciprocal deal between Hong Kong and mainland China will recognise court rulings on either side for cross-border disputes".

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