I. Introduction
On November 10, 2023, the Hong Kong Special Administrative Region (“HKSAR”) government published the “Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance” (“the Ordinance”) and the “Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Rules” (“the Rules”) in the Gazette, confirming that they will come into effect on January 29, 2024.
On January 18, 2019, the Supreme People’s Court and the Department of Justice (“DOJ”) of the HKSAR signed the “Arrangement for Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Cases between Courts of the Mainland and Hong Kong Special Administrative Region” (“the Arrangement”), which stipulated that the courts of Chinese Mainland and the HKSAR would mutually recognize and enforce effective judgments in civil and commercial matters that meet certain conditions.
According to Article 29 of the Arrangement, “The date of these Arrangements coming into force will be announced by both parties after the Supreme People’s Court issues the judicial interpretation and the Hong Kong SAR completes the relevant procedures.” The HKSAR government introduced the draft Ordinance and completed three readings in the Legislative Council of Hong Kong in October 2022. In order to facilitate the operation of the mechanism established under the Ordinance, the Chief Judge of the High Court of the HKSAR also formulated the aforementioned Rules based on the content of the Ordinance.
On November 10, 2023, the HKSAR government confirmed that the Supreme People’s Court and the HKSAR government agreed that the Arrangement would come into effect on January 29, 2024. The DOJ also confirmed through the Gazette that the Ordinance and the Rules will be implemented as of January 29, 2024. The HKSAR government announced that it is expected that the Supreme People’s Court will issue corresponding judicial interpretations on the implementation of the Arrangement.
We have not yet seen the judicial interpretations issued by the Supreme People’s Court on the Arrangement, but the confirmation of the implementation date of the Ordinance and the Rules has significant implications for judicial practice in Chinese Mainland and the HKSAR, and it is expected to have a major impact on the dispute resolution strategies and plans involving the two jurisdictions.
II. Key Provisions of the Arrangement and the Ordinance
After the implementation of the Arrangement and the Ordinance, the courts of Chinese Mainland and the HKSAR will mutually recognize and enforce civil and commercial judgments that meet the following conditions:
1. The judgment has become effective/enforceable;
2. The dispute does not belong to excluded types of disputes, such as marriage and family disputes, inheritance, intellectual property, maritime, bankruptcy, those concerning election qualifications and the capacity of natural persons, those concerning the effectiveness of arbitration agreements, or those concerning the recognition and enforcement of overseas judgments and arbitral awards;
3. Applications for the recognition and enforcement of judgments shall comply with corresponding application procedures (in Hong Kong, the registration procedure for Mainland judgments), including submitting the application, the effective judgment, the proof of the judgment’s effectiveness, and other materials.
It should be noted that the relevant judgment does not automatically take effect after registration. The courts, after accepting the application for recognition and enforcement of civil and commercial judgments submitted by the applicant, are empowered to determine whether to recognize and enforce the judgment based on the examination of the following matters:
- Whether the original court has jurisdiction over the case;
- Whether the effective judgment was obtained by fraud;
- Whether there are other judgments or arbitral awards on the same cause of action between the same parties;
- Whether the recognition and enforcement of the judgment would violate the basic principles of the local law or the public interest/public policy;
- Whether the judgment has been reversed or set aside through appeal or retrial procedures.
For a detailed analysis of the provisions of the Arrangement and the Ordinance from the perspective of Hong Kong law, please refer to the article “Analysis of the New Highlights of the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance in Hong Kong” published by JunHe’s Hong Kong team.
III. Practical Significance of the Arrangement and the Ordinance
The implementation of the Arrangement and the Ordinance will provide more reliable legal protection for civil and commercial judicial activities between the Mainland and the HKSAR. Parties in both places can more conveniently engage in legal proceedings and have confidence in relying on the mechanism of mutual recognition and the enforcement of civil and commercial judgments in both places to safeguard their rights and interests. We believe that its practical significance includes but is not limited to:
1. Effectively expanding the scope of mutual recognition and the enforcement of judgments in civil and commercial disputes
In terms of the judicial rights of the parties, the Arrangement and the Ordinance greatly expand the scope of mutual recognition and the enforcement of civil and commercial judgments between the two jurisdictions. Currently, the basis for mutual recognition and enforcement of court judgments between the two places is 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 Pursuant to Choice of Court Agreements between Parties Concerned Interpretation” (“the 2008 Arrangement”). According to the requirement of “jurisdiction agreements” under the provisions of this arrangement, parties can only apply for mutual recognition and enforcement of judgments in the courts of both places based on judgments made by the court with “exclusive jurisdiction agreed upon in writing”. Moreover, the 2008 Arrangement also limits the scope of civil and commercial judgments that can be recognized and enforced, allowing only monetary judgments to be recognized and enforced.
Due to the limited number of written agreements explicitly stating that the courts of the Mainland or the HKSAR have exclusive jurisdiction, the opportunity for parties to apply the 2008 Arrangement in judicial practice is not common. The Arrangement and the Ordinance remove the restriction of “jurisdiction agreements” and expand the categories of civil and commercial judgments that can be recognized and enforced. Except for certain specific types of disputes, the courts of both jurisdictions can mutually recognize and enforce most civil and commercial judgments commonly seen in commercial activities.
2. Effectively curbing the act of defendants maliciously transferring assets to evade court enforcement of judgments
In the current litigation and enforcement practice of Chinese courts, there are many cases where defendants intentionally transfer their assets to Hong Kong in order to evade court enforcement measures. Many defendants have previously taken advantage of the relatively immature judicial assistance between the Mainland and the HKSAR to evade the obligation to enforce effective judgments, resulting in a situation whereby the obligees have written judgments in their favor but are unable to realize their rights relief.
We understand that the implementation of the Arrangement and the Ordinance can to some extent fill this institutional loophole and effectively deter the act of defendants maliciously transferring assets between the Mainland and the HKSAR to evade court judgments. With the implementation of the Arrangement and the Ordinance, it will be more difficult for defendants to evade the enforcement of court judgments by transferring assets.
3. Fully expanding the strategic dimensions and options for cross-border litigation
After the introduction of the Arrangement and the Ordinance, parties involved in relevant civil and commercial disputes will no longer be restricted by the location of their assets when choosing the jurisdictional courts in the Mainland or the HKSAR. They can choose to file a lawsuit in one jurisdiction and then apply for recognition and enforcement in the other. The Arrangement and the Ordinance provide parties with ample space and convenience to choose the courts of the Mainland or the HKSAR for civil and commercial litigation. If the defendant’s assets are in the Mainland and the foreign party is more familiar with the common law system and less familiar with the Mainland’s judicial system, they can choose to file a lawsuit in the HKSAR court first and then apply for recognition and enforcement in the Mainland after obtaining a favorable judgment, and vice versa.
For lawyers in the Mainland and the HKSAR, the implementation of the Arrangement and the Ordinance will also provide more strategies and tools for dispute resolution. As lawyers, we can assist parties involved in cross-border disputes to fully compare the pros and cons of filing lawsuits in the Mainland and the HKSAR and provide tailored solutions and high-quality cross-border litigation services to parties based on their commercial needs. This will greatly reduce constraints imposed by the distribution of the defendant’s assets.
It should be pointed out that the courts in both jurisdictions currently do not support pre-litigation or mid-litigation property preservation assistance. An important issue for dispute resolution lawyers is whether it is possible to effectively utilize the existing judicial framework, make use of parallel litigation or a combination of different litigations to protect the litigants’ demands in one place and meet the needs of property preservation in another place, and ensure future enforcement procedures.
4. Comprehensively enhancing the credibility of the courts in both jurisdictions in international commercial judiciary
We believe that the implementation of the Arrangement and the Ordinance will bring about a “1+1>2” enhancement to the courts in both jurisdictions.
The implementation of the Arrangement and the Ordinance will not only provide more choices for civil and commercial disputes for parties in both places but also provide diverse litigation options for a wide range of cross-border parties. The mutual recognition and enforcement of civil and commercial judgments by the courts of both jurisdictions also endorses the content and judicial philosophy of their respective civil and commercial judgments. We believe that the trial quality of cross-border civil and commercial cases in both places will continue to improve. This is not only conducive to the improvement of mutual assistance and trust in commercial justice between the two jurisdictions, but will enhance the reputation and credibility of the courts in both jurisdictions in international commercial litigation.
As the implementation date of the Arrangement and the Ordinance approaches, we look forward to the mutual recognition and enforcement of civil and commercial judgments between the two jurisdictions in bringing procedural benefits and protection to the parties involved. As leading cross-border dispute resolution lawyers, we intend to make good use of this institutional platform to provide targeted litigation solutions and high-quality cross-border litigation services to the parties involved.
The JunHe dispute resolution team has accumulated vast experience in cross-border dispute resolution through numerous cases. With our offices and professional teams located throughout Chinese Mainland and Hong Kong, and with our long-standing cooperation with leading international law firms, we can provide comprehensive, professional, efficient, and convenient dispute resolution services to major state-owned enterprises, private enterprises, and multinational corporations.
For further information, please contact:
ZOU, Weining, Partner, JunHe
zouwn@junhe.com
1. Regarding the definitions of “effective judgment”, see Article 4 of the Arrangement, Section 8 and 9 of the Ordinance.
2. Regarding the categories and scopes of excluded disputes, see Article 3 of the Arrangement, Section 5-7 of the Ordinance.
3. Regarding the application procedures and materials for mutual recognition and enforcement of judgments in the Mainland and the HKSAR, see Article 7 and 8 of the Arrangement, Part 2 of the Ordinance.
4. Regarding detailed conditions for non-recognition and non-enforcement of the judgments, see Article 12 and 13 of the Arrangement, Section 22 of the Ordinance.
5. https://www.junhe.com/legal-updates/1999?locale=zh
