On 14 July 2006, the Hong Kong and central governments signed an agreement, entitled An Arrangement on Reciprocal 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, under which they agreed to recognise and enforce judgments made in each others’ courts.
The arrangement came into effect on 1 August 2008, after Hong Kong enacted the Mainland Judgments (Reciprocal Enforcement) Ordinance, and the Supreme People’s Court promulgated the relevant judicial interpretation.
Application of the arrangement is limited
The arrangement includes judgments and orders in civil or commercial matters given by a court in Hong Kong, and judgments, rulings, conciliatory statements or orders of payment in civil or commercial matters given by a designated mainland court.
The arrangement only applies to judgments that:
- require the payment of money (excluding sums payable in respect of taxes or other charges of a like nature, or in respect of a fine or other penalty);
- are made in respect of disputes arising out of commercial contracts. Employment and consumer contracts are specifically excluded;
- are made in relation to disputes where the parties have made a choice of court agreement, i.e. have agreed in writing to designate the court(s) in the mainland (where enforcement of a mainland judgment is sought in Hong Kong) or court(s) in Hong Kong (where enforcement of a Hong Kong judgment is sought on the mainland), to be the forum having sole jurisdiction to resolve the dispute, to the exclusion of all other jurisdictions;
- are made by those courts specified in the ordinance and judicial interpretation. In respect of mainland courts, this includes the Supreme People’s Court, the Higher or Intermediate People’s Court and certain authorised basic people’s courts. In respect of Hong Kong, this includes the District Court, High Court (CFI), Court of Appeal and Court of Final Appeal; and
- are final and conclusive. The Hong Kong courts require a certificate of “final judgment” issued by the relevant mainland court. The mainland courts require a copy of the sealed judgment together with a certificate issued by the court, certifying that the judgment is final and conclusive and enforceable in Hong Kong.
Time limits for enforcement applications
The application to enforce a judgment must be made within two years from the date on which the judgment takes effect, or where a period for performance is specified in the judgment, from the last day of that period. This time period is significantly shorter than the six-year time period within which an application for enforcement of a mainland award must be made in Hong Kong.
Grounds for refusing enforcement
The ordinance and judicial interpretation set out the following grounds upon which the court can refuse to recognise and enforce a judgment:
- the parties’ choice of court agreement is invalid under the law of the place chosen in the agreement, unless the chosen court has determined the choice of court agreement to be valid;
- the judgment has been wholly satisfied;
- the court of the place where enforcement is sought has exclusive jurisdiction over the case according to its law;
- the debtor did not appear in the original court to defend the proceedings and was either not properly summoned or had not been given sufficient time to defend the proceedings;
- the judgment was obtained by fraud;
- the court (or an arbitration body) of the place where enforcement is sought has made a prior judgment (or arbitration award) on the same cause of action between the parties;
- a judgment (or award) on the same cause of action between the parties has been given by a court (or arbitration body) in a place outside the place where enforcement is sought and the judgment (or award) has already been recognised in, or enforced by, the court in the place where enforcement is now sought;
- the mainland court considers that enforcement of the Hong Kong judgment is contrary to the social and public interests of the mainland or the Hong Kong court considers that enforcement of the mainland judgment is contrary to the public policy of Hong Kong.
Arrangement yet to gain practical significance
In an article dated 1 March 2013 entitled “Hong Kong law system’s good name brings in the cases”, the South China Morning Post (SCMP) newspaper stated that it had obtained figures from the Hong Kong judiciary that revealed the Hong Kong courts had not handled a single application to enforce a mainland judgment. The SCMP further reported that up to September 2012, only eight attempts had been made to get Hong Kong judgments enforced on the mainland.
We believe that the simple explanation for why the arrangement has had little practical significance is that hardly any contracts meet the strict jurisdiction requirement under the arrangement, either because they contain an arbitration clause or they otherwise provide for non-exclusive jurisdiction.
Arbitration the preferred DR mechanism
The position is quite different regarding the enforceability of awards. Arbitration was, and is, the preferred dispute resolution mechanism for Hong Kong-mainland related disputes, with enforceability of awards being one of the major advantages of arbitration over litigation. Since 1 February 2000, a reciprocal enforcement arrangement between Hong Kong and the mainland has been in place, which is widely used.
While Hong Kong courts are consistently known for being very supportive of arbitration and confine their role to determining, as mechanically as possible, whether or not grounds exist for refusing to enforce an award, uncertainties regarding enforcement of Hong Kong (and foreign) awards on the mainland remain, which primarily relate to practical difficulties that parties encounter when seeking enforcement on the mainland.
Cheung Kwok Kit and Philipp Hanusch are respectively partner and senior associate at Deacons in Hong Kong. They can be contacted respectively on +852 2825 9427 or 2826 5314, or by e-mail at [email protected] or [email protected]