Reciprocal Enforcement of Hong Kong and PRC Court Judgements

The Arrangement, subject to relevant legislative backing in both jurisdictions before its implementation, expands the existing scope of mutual legal assistance between Hong Kong and the PRC. Current mutual arrangements are limited to the service of judicial documents in civil and criminal proceedings and the enforcement of arbitral awards.

Applicability

The Arrangement applies to final and conclusive money judgements (but is not applicable to orders for specific performance or injunctions) given by a designated Hong Kong or PRC court, exercising its jurisdiction pursuant to a valid “exclusive choice of court” clause contained in a commercial contract. The Arrangement excludes employment contracts and “contracts to which a natural person acting for personal consumption, family or other non-commercial purposes is a party” (see Article 3).

The judgement must relate to disputes in which the parties concerned have agreed, in written form, to expressly designate either a Hong Kong or a PRC court as the forum having exclusive jurisdiction for resolving such disputes. The Arrangement covers any Hong Kong judgement (including any judgement and order) of the Hong Kong District Court or above, and any PRC judgement (which includes any judgement, ruling, conciliation statement and order of payment) of an Intermediate People's Court or above or a Basic People's Court, which has been authorized to exercise jurisdiction in foreign-related civil and commercial cases. Only final and conclusive judgements are enforceable under the Arrangement.

The time limit for an applicant to apply for recognition and enforcement of a judgement is one year, if one or both parties are natural persons; or six months, if both parties are legal persons (for example, corporations) (see Article 8).

Where an application to enforce a PRC judgement is made in Hong Kong, the time limit is generally calculated from the last day of the period for performance specified in the judgement. In respect of an application to enforce a Hong Kong judgement in the PRC, the time limit is calculated from the day on which the judgement becomes enforceable.

Grounds for refusal of enforcement

Under Article 9 of the Arrangement, the grounds for refusal of enforcement include any of the following:

(i) the choice of court agreement is invalid under the law of the place (as chosen by the parties) where the original trial was conducted;

(ii) the judgement has been wholly satisfied;

(iii) there has been a failure to properly serve proceedings under the law of the place where the original trial was conducted;

(iv) the losing party has not been given enough time to defend its case;

(v) the judgement has been obtained by fraud;

(vi) the court of the place of enforcement has exclusive jurisdiction over the dispute;

(vii) the court of the place of enforcement has made a prior judgement on the same cause of action;

(viii) the PRC court considers that enforcement of the Hong Kong judgement in the PRC is contrary to the social and public interests of the PRC, and

(ix) the Hong Kong court considers that enforcement of the PRC judgement in Hong Kong is contrary to public policy in Hong Kong.

Comment

Despite the growing importance of Hong Kong as the venue for resolving Chinese-foreign disputes, Hong Kong judgements are presently unenforceable in the PRC. The PRC, being a civil law jurisdiction, does not have a rule that is similar to the common law rule, in Hong Kong, on recognition and enforcement of foreign judgements.

The objective of the Arrangement is to establish a convenient mechanism for the reciprocal enforcement of judgements made by Hong Kong and the PRC. However, it remains to be seen how practical the Arrangement will be for those doing business in China.

Enforcement of a Hong Kong judgement may be refused by a PRC court if it considers that enforcement of a Hong Kong judgement in the PRC is “contrary to the social and public interests of the PRC”, whereas a PRC judgement will only be refused enforcement in Hong Kong if it is contrary to “public policy in Hong Kong”. It is generally accepted that the notion of 'public policy' is to be construed narrowly as a matter of common law, whereas PRC courts have been known to apply the notion of “social and public interests” more liberally.

The 'exclusive jurisdiction' exception effectively restricts the types of disputes that fall under the Arrangement. For example, unless there is a valid agreement to arbitrate, Sino-foreign joint venture disputes are subject to the exclusive jurisdiction of PRC courts, which means litigation in Hong Kong remains unavailable as an option in respect of Sino-foreign disputes (and indeed any other disputes where PRC courts are deemed to have exclusive jurisdiction).

Nonetheless, if a truly workable and efficient system for reciprocal recognition of Hong Kong and PRC judgements develops, the Arrangement should serve to encourage foreign companies to elect to litigate in Hong Kong, which continues to enjoy a common law system with a robust and independent judiciary.