Enforcing HK awards in China: Is recognition necessary?

By Danny Deng, Boss & Young
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Up until now, three judicial interpretations including Taiwan provisions, Hong Kong arrangement and Macau arrangement have been promulgated by the Supreme People’s Court of the PRC in relation to the enforcement of Hong Kong, Macau and Taiwan arbitration awards, respectively.

Under the Taiwan provisions, applicants wishing to apply for the enforcement are mandatorily required to first file an application for recognition, or at least apply for recognition at the same time.

Danny Deng
Associate
Boss & Young

Under the Macau arrangement, recognition and enforcement applications are both mentioned. However, recognition is not mentioned under the Hong Kong arrangement. Some may argue this means that applicants can directly apply for enforcement of a Hong Kong award without recognition, while others hold that, as Hong Kong and mainland China are two different jurisdictions, recognition is a necessary prerequisite for enforcement. This is also an issue that lawyers encountered when enforcing Hong Kong arbitration awards on behalf of clients.

Divided judicial views

Opinions of various people’s courts are also divided on this matter. For example, Beijing No.4 Intermediate People’s Court, having centralized jurisdiction in Beijing over the first instance in Hong Kong, Macau and Taiwan-related civil and commercial cases, delivered its conflicted views in two applications of enforcement of a Hong Kong arbitration award. Under a civil ruling rendered by the Court on 9 May 2017, the court, based on the application of recognition and enforcement made by the applicant, first ruled the recognition of a Hong Kong arbitration award in dispute.

The court further ruled that the applicant may apply for a compulsory enforcement of such an award with the court, should the respondents fail to fulfill their obligations. Just two months after that ruling, however, the court ruled the enforcement of another Hong Kong arbitration award in another application of recognition and enforcement without first ruling on the recognition matter. Surprisingly, neither the Hong Kong arrangement nor the people’s courts have provided an affirmative conclusion over this matter.

A prerequisite or not?

Despite the above-mentioned, the author believes that recognition is a necessary prerequisite for the enforcement of Hong Kong arbitration awards. This can be inferred in accordance with several newly promulgated judicial interpretations, and the principles of inter-regional private law.

First, newly promulgated interpretations indicated the prerequisite of recognition. On 26 December 2017, the Supreme People’s Court promulgated two judicial interpretations regarding the handling of cases involving judicial review of arbitration, which became effective on 1 January 2018.

Article 1 of these two interpretations regulates that the judicial review of arbitration cases includes, among others, the cases of application for the recognition and enforcement of an arbitral award of Hong Kong, Macau and Taiwan. In other words, any Hong Kong arbitral award, like the Macau and Taiwan arbitral award, has to be recognized before its enforcement by the people’s court in mainland China.

As the above-mentioned two interpretations supersede any previous interpretations inconsistent with them, the Hong Kong arrangement has actually been modified ever since their implementation.

Second, the principles of inter-regional private law also require the recognition to be a condition precedent. Even under the principle of “One Country, Two Systems”, Hong Kong, Macau and Taiwan are all different legal jurisdictions from mainland China. Therefore, the validity of arbitral awards of Hong Kong in mainland China should first be examined and confirmed by a competent people’s court before its enforcement.

Conclusion

Notwithstanding that opinions are divided on this matter, parties intending to enforce a favourable Hong Kong arbitral award are recommended to file the applications of recognition and enforcement at the same time, based on the Provisions of the Supreme People’s Court on Several Issues relating to the Hearing of Cases Involving Judicial Review of Arbitration, and the Arrangements of the Supreme People’s Court on the Reciprocal Enforcement of Arbitration Awards by Mainland China and the Hong Kong Special Administrative Region.

Danny Deng is an associate at Boss & Young in Shanghai

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Email: danny.deng@boss-young.com