Groundbreaking Arrangement on Cross-border Enforcement of Judgments set to come into operation

Introduction

The current reciprocal recognition and enforcement arrangement of Court judgments between Mainland and Hong Kong 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 (Choice of Court Arrangement), which has been in force since the enactment of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) in 2008. Its distinctive requirement is an exclusive jurisdiction agreement between the parties in favour of the Mainland China / Hong Kong court which made the judgment, which has proven to be a hurdle for many judgment creditors.

The existing statutory regime will be superseded when the new Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and the Hong Kong Special Administrative Region, signed on 18 January 2019 (New Arrangement) comes into operation. The relevant legislation, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (MJREO), was passed by the Legislative Council on 26 October 2022.

After much anticipation, the Hong Kong Government announced on 10 November 2023 that the MJREO will come into operation on 29 January 2024.

The New Arrangement offers sweeping changes to the mutual recognition and enforcement of judgments between Mainland China and Hong Kong, which include broadening the scope of applicable judgments, expanding the scope of enforceable reliefs to both monetary and non-monetary reliefs, and mostly notably, removing the requirement of the presence of an exclusive jurisdiction clause in the underlying agreement.

Broadened Scope Of Applicable Judgments

The existing mechanism, i.e., the Choice of Court Arrangement, only covers commercial judgments, whereas the New Arrangement covers all subject matters of civil and commercial nature, as well as judgments in relation to civil damages awarded in criminal cases, unless expressly excluded in the New Arrangement.

Notably, the following judgments are excluded under the New Arrangement:

• Proceedings relating to administrative law or regulatory matters, for example judicial review cases, cases brought by the Securities Futures Commission and applications brought by the Competition Commission.
• Judgements on corporate insolvency, debt restructuring and bankruptcy. On this front, insolvency proceedings in Hong Kong and bankruptcy proceedings in Mainland China can seek recognition and assistance from Courts across the border in the pilot areas of Shanghai, Shenzhen and Xiamen according to the Record of Meeting of the Supreme People’s Court and the Government of the Hong Kong Special Administrative Region on Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region signed on 14 May 2021;
• Matters relating to the succession, administration or distribution of the estate of a deceased person;
• Judgments relating to matrimonial or family matters, including decrees of judicial separation. The New Arrangement however covers disputes between family members on division of property and on property arising from engagement agreements. Civil judgments in matrimonial and family matters are covered by the Matrimonial and Family Cases (Reciprocal Recognition and Enforcement) Ordinance (Cap. 639), which gives effect to the Arrangement on Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases by the Courts of the Mainland and of the Hong Kong Special Administrative Region signed on 20 June 2017;
• Certain judgments involving intellectual property rights, such as judgments ruling on the license fee rate of standard essential patents and judgments ruling on the validity, establishment or subsistence of intellectual property rights;
• Judgments relating to maritime matters;
• Judgments on the validity of an arbitration agreement and the setting aside of an arbitral award;
• Judgments ruling on a natural person’s qualification as a voter;
• Judgments declaring the disappearance or death of a natural person;
• Judgments ruling on the legal capacity of a natural person; and
• Judgments ruling on the recognition and enforcement of judgments and arbitral awards made by other countries or regions. The mutual enforcement of arbitral awards between Mainland China and Hong Kong is governed by a separate arrangement: Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region signed on 27 November 2020.

Expanded Scope of Enforceable Judgments and Reliefs

While the Choice of Court Arrangement only covers judgements made by the Court of Final Appeal, the Court of Appeal, the Court of First Instance and the District Court, the scope of the New Arrangement has been broadened to cover judgments made by the lower courts, including the Labour Tribunal, the Lands Tribunal, the Small Claims Tribunal and the Competition Tribunal.

In terms of the types of relief, the New Arrangement also expands the coverage to non-monetary reliefs. Parties under the Choice of Court Arrangement are only able to enforce a judgment ordering the payment of money. Under the New Arrangement, both monetary (excluding exemplary or punitive damages) and non-monetary reliefs (such as an order for specific performance) are enforceable, subject to exceptions concerning claims on infringement of intellectual property rights and trade secrets.

Removal of the exclusive jurisdiction requirement

One of the major hurdles for seeking mutual recognition and enforcement of Mainland China and Hong Kong judgments under the Choice of Court Arrangement is the requirement that the claims concerned have to be subject to an exclusive jurisdiction agreement. Parties seeking to enforce a Hong Kong judgment in Mainland China therefore need to expressly designate the Hong Kong court to have exclusive jurisdiction over the underlying dispute and vice versa.

The New Arrangement removes the “exclusive jurisdiction” requirement. Instead, the New Arrangement only requires an applicant to show that the underlying dispute is not subject to an exclusive jurisdiction agreement designating a certain foreign court to have exclusive jurisdiction. Further, the requesting court (i.e. the court giving the judgment) shall be considered to have jurisdiction over the dispute for the purpose of the New Arrangement if there is a connection between the dispute and the requesting place. Examples demonstrating the connection between the dispute and the requesting place include:

• The defendant’s place of residence (such as the habitual residence for a natural person and the place of principal office for a legal person) was in the requesting place.
• The defendant’s representative office, branch, or place of business was in the requesting place;
• The place of performance of the contract was in the requesting place; and
• The proceedings arise from a tortious dispute and the tortious act was committed in the requesting place.

Significance and implications

The long-awaited New Arrangement will come into effect on 29 January 2024. As discussed , the New Arrangement has expanded the Choice of Court Arrangement in terms of scope and depth. Coupled with the removal of the requirement of an exclusive jurisdiction agreement, it is foreseeable that a considerable number of future Mainland China and Hong Kong judgments can benefit from the New Arrangement and judgment creditors will be able to seek recognition and enforcement against the assets of the judgment debtors located across the border. The New Arrangement will only be applicable to judgments given on or after the commencement date of MJREO, i.e. 29 January 2024. Applicants with judgments given before 29 January 2024 can only seek to enforce the relevant judgments under the Choice of Court Arrangement, or by way of a fresh common law action.

Following the implementation of the New Arrangement, parties will have greater flexibility in determining the forum to bring their claims, because exclusive jurisdiction clause will no longer be required for enforcement of the resultant judgment across the border. With the expanded scope of mutual enforcement of judgment under the statutory regime, the need for re-litigation of the same disputes in both Mainland China and Hong Kong will be greatly reduced.

The New Arrangement more closely mirrors the existing statutory regime for enforcing foreign judgments in 15 designated countries under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) (FJREO). Under the FJREO, final and conclusive monetary judgments made by a superior court in one of the designated countries are registrable as a Hong Kong judgment and there is no “exclusive jurisdiction clause” requirement. However, there will still be some significant differences between the two statutory regimes (MJREO and FJREO), for example on the category of applicable judgments, jurisdictional requirements, as outlined above, which judgment creditors should pay close attention to.

Last but not least, when the MJREO comes into operation, Hong Kong will become the first and only jurisdiction outside of Mainland China to have an extensive reciprocal arrangement for mutual enforcement of judgments with Mainland China. This legal development will further enhance Hong Kong’s unique position as Asia’s leading dispute resolution center, which offers litigants world-class legal services, an independent judiciary and a close nexus with Mainland China in terms of social, legal and commercial aspects.