27 March, 2019
On 18 January 2019, Hong Kong and the Mainland signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters between the Courts of the Mainland and of the Hong Kong Special Administrative Region ("HKSAR") ("the 2019 Arrangement"). It seeks to establish a bilateral legal mechanism with greater clarity and certainty for recognition and enforcement of judgments in a wider range of civil and commercial matters between the two places.
Background
It is Hong Kong's 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 in civil and commercial matters.
The first arrangement was the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the HKSAR Pursuant to Choice of Court Agreements between Parties Concerned ("Choice of Court Arrangement") signed in July 2006, which took effect on 1 August 2008.
However, it was limited in scope. It only applied to money judgments made by courts of either side where the parties to a commercial contract had agreed in writing to designate either the Mainland or Hong Kong as having the exclusive jurisdiction to determine a dispute arising from that contract.
The second arrangement was the Arrangement on Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases by the Courts of the Mainland and of the HKSAR ("Matrimonial Arrangement") signed in June 2017.
Scope of the Arrangement
The 2019 Arrangement has broadened the scope of the judgments which are considered to be of a "civil and commercial" nature under both the Mainland and Hong Kong law. It covers both monetary and non-monetary relief and includes all types of costs orders.
The 2019 Arrangement specifically excludes, amongst others: (i) judicial review cases or cases brought by the Securities and Futures Commission and Competition Commission; (ii) cases in relation to the succession, administration or distribution of the estate; (iii) maritime matters; (iv) corporate insolvency and debt restructuring and personal insolvency matters; and (v) judgments on the validity of an arbitration agreement and the setting aside of an arbitral award.
The 2019 Arrangement sets out jurisdictional grounds for the purpose of recognition and enforcement of judgments. It has taken into account Hong Kong's common law regime, the statutory mechanism under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) and the Draft Hague Judgments Convention). It is necessary to establish jurisdiction before a court can proceed to consider the recognition and enforcement. The requesting court shall be considered to have jurisdiction for the purpose of the 2019 Arrangement if one of the following conditions is satisfied:
- at the time the requesting court accepted the case, the defendant's "place of residence" was in the requesting place;
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at the time the requesting court accepted the case, the defendant maintained a representative office, branch, office, place of business or other establishment without separate legal personality at the requesting place, and the claim on which the judgment is based arose out of the activities of that establishment;
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the proceeding was brought on a contractual dispute and the place of performance of the contract is in the requesting place;
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the proceeding was brought on a tortious dispute and the act of infringement was committed in the requesting place;
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the parties to a contractual dispute or other disputes related to interests in property had expressly agreed in writing that the courts of the requesting place shall have jurisdiction over the relevant proceedings, and where the "place of residence" of all the parties to the judgment was at the requested place, the requesting place was the place where the contract was performed or signed, where the subject matter was situated etc., being a place which has an actual connection with the dispute; or
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the parties did not raise any objection as to the jurisdiction of the requesting court and participated in the proceedings in defence or reply, and where the "place of residence" of all the parties to the judgment was at the requested place, the requesting place was the place where the contract was performed or signed, where the subject matter was situated etc., being a place which has an actual connection with the dispute.
Apart from that, where the requested court considers that the requesting court had jurisdiction over the dispute according to the law of the requested place, the requested court may also determine that the requesting court has jurisdiction over the dispute.
The 2019 Arrangement sets out mandatory grounds for refusal of recognition and enforcement. These grounds include when the judgment does not meet the jurisdictional requirements or was obtained by fraud, or the respondent was not summoned in accordance with the law of the requesting place or was not given a reasonable opportunity to make representations or defend the case. Judgment that is manifestly contrary to the basic principles of law or public policy is also a mandatory ground for refusal. The 2019 Arrangement also provides a discretionary ground for refusal where the proceedings in the court of the requesting place were contrary to a valid arbitration agreement or jurisdiction agreement.
Next Steps
The 2019 Arrangement will be implemented in the Mainland and Hong Kong by way of judicial interpretation and local legislation respectively. Upon commencement, the 2019 Arrangement will supersede the Choice of Court Arrangement. The Choice of Court Arrangement will, however, continue to apply to a "choice of court agreement" in writing made between the parties before the commencement of the 2019 Arrangement.
At present, the Mainland and Hong Kong do not have statutory regimes empowering the courts on both sides to recognize and provide assistance in relation to insolvency proceedings. Given that cross-boundary insolvencies are increasingly common between the Mainland and Hong Kong, the current statutory regime is not satisfactory. As mentioned, the 2019 Arrangement specifically excludes judgments on corporate and personal insolvency matters. The Department of Justice, in the Consultation Paper (July 2018), announced that it is actively considering the proposal of entering into a separate bilateral arrangement with the Mainland on the recognition and enforcement of cross-boundary insolvency. It has proposed to conduct a stand-alone consultation exercise on the matter.
Conclusion
The signing of the 2019 Arrangement is a significant move for the Mainland and Hong Kong. It is a more comprehensive framework for recognition and enforcement of judgments and goes beyond the scope of the Choice of Court Arrangement and the Matrimonial Arrangement. The disputes with cross boundary elements could be dealt with more effectively and reduce the need for re-litigation of the same disputes in both places. It also offers better protection to the parties' interests and enhances Hong Kong's status as a regional centre for international legal and dispute resolution services.
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For further information, please contact:
Mun Yeow, Partner, Clyde & Co
mun.yeow@clydeco.com
