On 29 January 2024, a landmark regime was put in place to enhance the reciprocal enforcement of civil and commercial judgments between the Mainland and Hong Kong.
This new regime represents a significant milestone in the integration of enforcement of legal rights under “one country, two systems”. On one hand, it respects the integrity of the two legal systems; on the other hand, it has the potential to revolutionize the way judgments can be effectively enforced within the country.
Bridging the Divide: The Significance of the Arrangement
Prior to 29 January 2024, the Mainland-Hong Kong reciprocal enforcement regime was largely governed by the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters 《關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排》, which was signed on 14 July 2006.
To implement this 2006 Arrangement, the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) came into effect on 1 August 2008 in Hong Kong and a judicial interpretation《最高人民法院关于内地与香港特别行政区法院相互认可和执行当事人协议管辖的民商事案件判决的安排》was promulgated by the Supreme People’s Court on 1 August 2008 (“Pre-existing Regime”).
The Pre-existing Regime was, however, of limited applications (see below).
The process of recognition and enforcement of Hong Kong judgments in the Mainland had been a complex and often arduous one. Parties seeking to enforce a judgment obtained may face significant legal and administrative hurdles, delays and uncertainty in the resolution of their disputes. Very often, fresh legal action had to be commenced in the Mainland where the Hong Kong judgments obtained would only form part of the evidence presented to the courts in which enforcement was sought.
Aiming to enhance the regime, on 18 January 2019, the Mainland and Hong Kong signed another 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《关于内地与香港特别行政区法院相互认可和执行民商事案件判决的安排》. To implement this 2019 Arrangement:-
- the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) and the relevant practice direction (PD 38) came into effect in Hong Kong on 29 January 2024;
- reciprocal rules and regulations, including a judicial interpretation promulgated by the Supreme People’s Court《最高人民法院关于内地与香港特别行政区法院相互认可和执行民商事案件判决的安排》 on 26 January 2024, were implemented in the Mainland;
(collectively referred to as the “New Regime”).
This New Regime supersedes the Pre-existing Regime for judgements given on or after 29 January 2024. The Pre-existing Regime will, however, continue to apply to judgments obtained prior to 29 January 2024, and/or are granted by the courts based on an underlying agreement (with an exclusive jurisdiction clause) that was made before 29 January 2024.
Some of the key features under the New Regime are set out below.
New Regime vs Pre-Existing Regime
Expansion of scope of enforceable judgments
Under the New Regime, the scope of enforceable judgments is expanded to include both monetary and non-monetary judgments (such as declaratory relief, specific performance, injunction) obtained in commercial and non-commercial disputes. Orders, decrees, allocaturs granted by a Hong Kong Court and rulings, conciliatory statements or orders given by a Mainland Court, as well as compensation awarded in criminal proceedings, are also covered.
A number of matters are, however, expressly excluded under the New Regime, such as insolvency and bankruptcy matters, succession and administration or distribution of estate matters, administrative cases, and some matrimonial and family matters, intellectual property cases, arbitration matters; orders for interim relief and anti-suit injunction granted in Hong Kong; and preservation measures granted in the Mainland etc.
Enforceable judgments or orders are expanded to include:-
- those obtained in the Labour Tribunal, Lands Tribunal, Small Claims Tribunal and Competition Tribunal (in addition to the District Court and above under the Pre-existing Regime) in Hong Kong; and
- those obtained in all Primary People’s Courts provided that no appeal is allowed or the time for appeal has expired (in addition to the Supreme People’s Court, Higher People’s Court and Intermediate People’s Court under the Pre-existing Regime) in the Mainland.
Jurisdiction requirement
The New Regime no longer requires the underlying agreement to contain an exclusive jurisdiction clause. Instead, where there is no exclusive jurisdiction clause, the plaintiff only has to satisfy the jurisdiction requirement by showing that the original proceedings had sufficient connection with the original Court of which the judgment is made.
This provides the parties with greater flexibility in choosing the dispute resolution jurisdictions in their commercial and non-commercial contracts. Parties may also rely on the asymmetric jurisdiction clauses (AJCs) in their contracts for reciprocal enforcement of judgments under the New Regime. AJCs are one-sided clauses which usually provide that one party must sue the other party in courts of a specified country while the other party is free to sue in the jurisdiction of its choice. AJCs are excluded under the Pre-existing Regime, see for example Industrial and Commercial Bank of China (Asia) Limited v Wisdom Top International Limited [2020] HKCFI 322.
Effective Mainland judgments are sufficient
The New Regime further seeks to address the issue of the finality of Mainland judgments.
In the past, a creditor must satisfy the Hong Kong Court that the Mainland judgment is final and conclusive, which may sometimes be problematic since the legal system in the Mainland has a retrial mechanism. For example, in Wang Qian Wei v 郭文雨 & 郭小琼 [2018] HKCFI 2253 where the defendant opposed the registration of Mainland Judgment on the ground of the Mainland Judgment given by the first instance of Intermediate People’s Court in Xiamen City was not final and conclusive.
Under the New Regime, the Hong Kong courts will no longer have to consider whether a judgment obtained in the Mainland is final and conclusive. A legally “effective” Mainland judgment will be sufficient; and until the contrary is proved, the Mainland judgment is presumed to be effective when the original Mainland Court has issued a certificate certifying the same. This will hopefully avoid many potential challenges and debates on the subject matter. However, in the event that a debtor requests a retrial and the retrial is ordered or appeal is pending in the Mainland, the debtor may apply to set aside the registration proceedings and the Hong Kong Court may still exercise its discretionary power to adjourn the setting aside application until the retrial or appeal is disposed of.
The Practical Implications: Navigating the New Landscape
The New Regime has introduced a range of practical considerations for businesses and legal professionals navigating this new legal landscape. Firstly, it outlines a clear set of requirements and procedures for the recognition and enforcement of judgments. Understanding and adhering to these guidelines will be crucial for parties seeking to leverage the benefits of the arrangement.
Secondly, the New Regime will bring in new strategic considerations for parties engaging in cross-border transactions and/or disputes. The ability to enforce a judgment obtained in one jurisdiction within the other may influence the choice of jurisdiction and the litigation strategies employed. Legal professionals advising clients on cross-border disputes will need to carefully assess the implications of the arrangement and develop tailored strategies to optimize outcomes.
Thirdly, the New Regime may have broader implications for dispute resolution practices within the country. The arrangement could potentially affect a defendant’s position when seeking security for costs against a plaintiff in the Mainland. It may also incentivize parties to seek resolution through the local courts (rather than other means of alternative dispute resolutions), and will provide greater reliefs/comfort to the parties doing business or in litigation in the Mainland or Hong Kong by minimizing the practical effects of any action taken by a judgment debtor across the jurisdictions within the country hoping to evade liabilities of a judgment obtained.
Unlocking the Full Potential: Collaboration and Continuous Refinement
The successful implementation of the New Regime is a testament to the ongoing collaboration and commitment between the Mainland and Hong Kong. The true value of this New Regime and its effectiveness are, however, yet to be seen. Its full potential can only be realized through the continued refinement and adaptation of the framework to address the evolving needs of businesses and individuals in the modern landscape.
Our Expertise
Our team of dispute resolution lawyers has extensive experiences in navigating the complexitie of enforcement of cross-border judgments in various jurisdictions. We have a deep understanding of the specific requirements and procedures outlined in the mutual reciprocal arrangement, allowing us to develop tailored strategies for the recognition and enforcement of judgments obtained in the Mainland or Hong Kong.
With our years of experience, we have also cultivated a robust network of trusted legal partners across the Mainland and other key jurisdictions, and we are confident in providing seamless support to our clients, coordinating the mutual enforcement of judgments and leveraging the expertise of local counsel to overcome any jurisdictional hurdles, thereby adopting an integrated approach to enforce judgments obtained in an efficient and costs-effective manner.
