New reciprocal arrangement expands the scope for mutual enforcement of judgments between HK and the Mainland

This article discusses the key differences between the Existing Arrangement and the New Arrangement for the reciprocal recognition and enforcement of judgments relating to civil and commercial matters between Mainland China and Hong Kong.

On 18 January 2019, China and Hong Kong signed a new arrangement for the reciprocal recognition and enforcement of judgments relating to civil and commercial matters (the New Arrangement), which significantly expanded the scope of judgments that could be enforced between Hong Kong and Mainland China. The New Arrangement will take effect on a future date to be announced, after necessary procedures are put in place to enable implementation.

To recall, there exists a reciprocal enforcement arrangement between Hong Kong and the Mainland, which has been in effect since 2008, relating to civil and commercial court judgments (the Existing Arrangement). The New Arrangement will replace the Existing Arrangement once it comes into effect, and will apply to judgments made after its effective date.

There are two key differences between the New Arrangement and the Existing Arrangement.

First, the New Arrangement has a much wider application:

  • Exclusive jurisdiction requirement removed: The Existing Arrangement only applies to cases where under the relevant contract, the parties have agreed in writing that a court of Mainland China or Hong Kong has exclusive jurisdiction for resolving any dispute. That is no longer the case under the New Arrangement because the strict requirement for written exclusive jurisdiction agreement has been removed. Instead, the New Arrangement would be applicable to judgments made by courts with competent jurisdiction (to be determined by reference to factors such as the location of the defendant; the place of performance of the relevant contract or where the tort occurred; and the agreement and conduct of the parties).

  • Most civil and commercial cases covered: The Existing Arrangement applies to judgments in connection with disputes arising from civil or commercial contracts. The New Arrangement seems to expand this scope: most civil and commercial “matters” (and not necessarily only those arising out of civil or commercial contracts) will be covered unless expressly excluded (see below). Also, judgments for civil compensation in criminal cases are covered under the New Arrangement.

    The New Arrangement does not, however, apply to certain matters, such as judgments relating to corporate insolvency, debt restructuring, and personal bankruptcy; succession of estate of a deceased; certain matrimonial or family matters; certain maritime matters; arbitration-related cases; certain judgments regarding intellectual property rights; and administrative or regulatory proceedings.

  • Non-monetary judgments enforceable: The Existing Arrangement applies only to judgments for monetary relief. This will change when the New Arrangement takes effect: the New Arrangement generally applies to both monetary judgments and non-monetary judgments, with a few exceptions.

  • Lower court judgments being recognised: Under the Existing Arrangement, only judgments made by designated courts or higher courts could be mutually enforced (eg, in the PRC, judgments by an Intermediate People’s Court or above or certain designated basic courts, and in Hong Kong, by the District Court or above). Such restrictions are modified under the New Arrangement, and judgments made by lower courts and other tribunals (eg, the judgments of basic courts in the PRC under certain circumstances, and the Labour Tribunal, the Lands Tribunal, the Small Claims Tribunal and the Competition Tribunal in Hong Kong) can be recognised (and enforced) under the New Arrangement.

Second, the grounds for refusing reciprocal recognition and enforcement have been revised mainly to reflect the removal of the exclusive jurisdiction requirement, and to clarify certain grounds aimed at avoiding parallel proceedings. Therefore, it is no longer a ground of refusal under the New Arrangement if the jurisdiction agreement is found to be invalid given the applicable law; instead, the court in which enforcement is sought shall determine whether the original court rendering the judgment has jurisdiction with reference to the factors mentioned in the first bullet point above. The New Arrangement also provides that if a court in the place where enforcement is sought (eg, the Mainland) has already accepted jurisdiction over the dispute, a judgment from the court of the other jurisdiction (eg, Hong Kong) over the same dispute will not be enforced under the arrangement. This is to be contrasted with the corresponding provision in the Existing Arrangement, which imposes a higher threshold: enforcement will be refused only if a judgment has already been entered into by a court in the place where enforcement is sought.

Despite these changes, the New Arrangement retains some of the helpful features of the Existing Arrangement. Notably, the New Arrangement will continue to allow parties to apply for certain preservation measures/interim injunctions at the place of enforcement, both pending the recognition/enforcement decision of the relevant court in Hong Kong or the Mainland, and after such decision. In practice, this feature is extremely helpful to prevent defendants from dissipating assets prior to the claimant obtaining the relevant recognition/enforcement order.

The New Arrangement, once implemented, will establish a more comprehensive mechanism for the reciprocal recognition and enforcement of judgments in civil and commercial matters between Hong Kong and the Mainland. The move towards greater enforcement alignment is a reflection of the strong business and trading links between Hong Kong and the Mainland.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.