Cross-border enforcement of judgments – new mechanism comes into force 29 January 2024 | Hogan Lovells

The Hong Kong Secretary for Justice Paul Lam has appointed 29 January 2024 as the date when the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (the Ordinance) will come into force.

The Ordinance will introduce a comprehensive mechanism allowing for easier reciprocal enforcement of a wider range of Hong Kong judgments in mainland China and mainland judgments in Hong Kong and promises to further enhance Hong Kong’s attraction as a leading dispute resolution venue, particularly for litigation involving parties with assets located in mainland China.

The Ordinance implements the 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 which was signed on 18 January 2019 (the Arrangement). Both the Ordinance and the Arrangement were due to come into force simultaneously on the same date.

A comprehensive framework

The Arrangement provides a comprehensive framework for the reciprocal recognition and enforcement of judgments in civil and commercial matters between Hong Kong and mainland China.

It represents a distinct improvement to the existing “Choice of Court Arrangement” implemented in Hong Kong by the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (MJREO) that has been in place since 2008, as its scope covers both monetary and non-monetary judgments in civil and commercial matters in addition to compensatory damages awarded in criminal proceedings.

There will no longer be a need for the parties to have agreed in writing that (in the case of mainland judgments) the courts of mainland China (or Hong Kong, as the case may be) will have exclusive jurisdiction to determine the dispute as under the MJREO. This has proven to be a hurdle for some judgment creditors in the mainland. All the judgment creditor will need to show is that the mainland court (or the Hong Kong court, as the case may be) which delivered the judgment had jurisdiction over the proceedings.

Both commercial and civil judgments will be enforceable – the MJREO was limited to commercial judgments. The overriding principle is that judgments which are legally enforceable under the law of the requesting place will be eligible for recognition and enforcement under the Arrangement.

Under the new regime:

• A judgment creditor of a mainland judgment may apply to the Court of First Instance (CFI) to register a mainland judgment in a civil or commercial matter. Once registered, the judgment may be enforced in the same way as a normal CFI judgment.
• A holder of a Hong Kong judgment can apply for a certified copy and certificate from the court which can be used to help with seeking recognition and enforcement in the mainland.

Certain judgments, such as arbitration-related judgments, insolvency and bankruptcy-related judgments and intellectual property judgments concerning patents, are excluded from the new regime (see Hogan Lovells alert Cross-border enforcement of judgments in Hong Kong and the PRC – a new dawn for full details of this, registration requirements and so on).

A new dawn

Despite the exclusion of insolvency-related judgments, the Arrangement may have practical application where a creditor obtains a judgment in Hong Kong in respect of a debt under the loan facility or keepwell deed and then uses the judgment debt to pursue an action in the mainland.

The abolition of the requirement for an exclusive jurisdiction clause in the underlying agreement or facility agreement should help address issues that have arisen in the past (see Hogan Lovells alert Hybrid jurisdiction clauses – two new English and Hong Kong cases give confidence to lenders).

The Hong Kong – mainland China co-operation mechanism, under which liquidators from Hong Kong may apply to mainland courts for recognition of insolvency proceedings in Hong Kong, whilst bankruptcy administrators from the mainland can apply to the Hong Kong High Court for recognition of bankruptcy proceedings in the mainland, remains unaffected and operational in the three pilot provinces to which it relates (see Hogan Lovells alert Hong Kong and mainland China agree new co-operation mechanism for cross-border insolvency).

The new enforcement regime may have less practical application for intellectual property cases, however, given the carving out in section 7 of: tortious disputes concerning invention patents and utility models; licence fee rate determinations concerning Standard Essential Patents; “disputes concerning any other IP rights” that are not specified intellectual property rights (sections 5(1)(c) and 7); and all relief other than monetary relief in tortious IP disputes, apart from trade secrets disputes (section 16). However, as some of the carve-outs do not cover contractual disputes, parties to IP contracts should consider contractual protection of their IP rights when negotiating IP contracts.

The Arrangement will apply to both monetary and non-monetary judgments, including a prohibition, restriction or the performance of a particular act. Judgments given by courts of both places in respect of interim measures are excluded from the operation of the Arrangement and the Ordinance.

All in all, the coming into effect of the Arrangement and the Ordinance should do much to help achieve the aims of the new regime, by way of reducing the need to re-litigate judgments, providing a further dispute resolution option for parties involved in mainland transactions, improving access to justice and enhancing Hong Kong’s competitiveness as a centre for dispute resolution.

References

1 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 (《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》) 14 July 2006.

2 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, 14 May 2021.

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