Enforcement of HK Arbitral Awards and Judgements

2021-11-17

After the return of the Hong Kong Special Administrative Region ("Hong Kong") to Chinese sovereignty on 1 July 1997, economic and trade cooperation between Hong Kong and the mainland have increased dramatically. Since Hong Kong maintains an independent judicial system under the "one country, two systems" principle, the needs for much broader and deeper judicial cooperation between Hong Kong and the mainland are also increasing.

As Hong Kong is a special administrative region of China, international treaties such as the 1958 New York Convention are no longer applicable to cooperation between Hong Kong and the mainland. In practice, cooperation between the two judicial systems are implemented by arrangements between the Supreme People's Court of China and the Hong Kong government.

The following sections of this article will provide a brief overview of the main judicial cooperation arrangements between Hong Kong and the mainland, and then focus on the arrangements for reciprocal recognition and enforcement of Hong Kong arbitral awards and judgments from the mainland perspectives.

1.Main judicial cooperation arrangements

To date, the main arrangements for judicial cooperation between Hong Kong and the mainland include:

As it is not possible to conduct a detailed analysis of all of the above arrangements in this article, the following discussion will focus on reciprocal recognition and enforcement of Hong Kong arbitral awards and judgments in the mainland.

2.Enforcement of Hong Kong arbitral awards

As outlined above, the reciprocal enforcement of arbitral awards between Hong Kong and the mainland are regulated by two main arrangements:

（i）Arrangement for Reciprocal Enforcement of Arbitral Awards between the Courts of the Mainland and the Hong Kong Special Administrative Region (the "2000 Arrangement"), effective from 1 February 2000; and

（ii）Supplemental Arrangement for Reciprocal Enforcement of Arbitral Awards between the Courts of the Mainland and the Hong Kong Special Administrative Region (the "Supplemental Arrangement"), effective from 19 May 2021. 

As will be discussed below, the Supplemental Agreement supplements and expands the scope and application of the 2000 Arrangement significantly.

（1）Eligibility

Under the Supplementary Arrangement, all arbitral awards made pursuant to the Arbitration Ordinance of Hong Kong may be eligible for recognition and enforcement in the mainland. This clarifies and expands the scope of eligible arbitral awards in the 2000 Arrangement which now includes those made by ad hoc arbitrations in Hong Kong.

Section 5 of the Arbitration Ordinance provides that the ordinance applies to an arbitration under an arbitration agreement in which the place of arbitration is in Hong Kong. As such, arbitral awards made in Hong Kong by Hong Kong as well as international arbitration bodies and ad hoc arbitrations conducted in Hong Kong will all be eligible for enforcement in the mainland under the Supplemental Arrangement.

Similarly, the Supplemental Arrangement also provides that arbitral awards made in accordance with the Arbitration Law of the People's Republic of China may be eligible for recognition and enforcement in Hong Kong.

（2）Simultaneous enforcement

Article 3 of the Supplementary Arrangement provides that an applicant may apply both to the courts in Hong Kong and in the mainland for enforcement. This is a much welcome improvement from the 2000 Arrangement which prohibits such simultaneous enforcement actions.

（3）Defence to enforcement actions

Article 7 of the 2000 Arrangement lists seven possible defences to enforcement actions, the main grounds of which are further discussed below.

a.Invalid arbitration agreements

This is a defence commonly available in international treaties such as the New York Convention of 1958, the United Nations Model Law on International Commercial Arbitration of 1985, the European Convention on International Commercial Arbitration of 1961, the Convention on Solving Investment Disputes between National and Other nationals of 1965, the Arbitration Rules of the United Nations Commission on International Trade Law of 2010 and the Convention on Inter-American States of 1975.

In the mainland, the principle for determining whether an arbitration agreement is valid will be based on the governing law of the arbitration agreement between the parties, in the absence of which the law of the place of the arbitration will apply.

This principle was affirmed by the relevant Beijing court in the case of (2020) jing 04 ren gang No. 5. In this case, the parties agreed that English law should be the governing law of the contract but failed to select the governing law of the arbitration agreement. As the place of arbitration is Hong Kong, the relevant Beijing court found that Hong Kong law should govern the arbitration agreement and that the relevant arbitration agreement was valid under Hong Kong law.

b.Invalid service

The proper service of the notices of arbitration is an important procedural safeguard for rights of the respondents.

The Arbitration Law of the People's Republic of China does not stipulate when and how notices of arbitration may be served. In practice, mainland arbitration commissions typically provide in its rules that such notices are made upon actual receipt rather than upon sending (with a few notable exceptions).

In the case of (2017) hu 02 zhi yi No. 40, the relevant Shanghai court rejected the respondent's defence that it has not been properly served with certain notices of arbitration. The Shanghai court found that the relevant arbitration agreement was governed by Hong Kong law and was subject to the arbitration rules of Hong Kong International Arbitration Centre as well as the UNCITRAL Arbitration Rules. The Shanghai court held that under the applicable arbitration rules the relevant notices have been properly served as the Hong Kong International Arbitration Centre has confirmed that it has sent those notices by courier.

c.Arbitral awards falling outside the agreed scope

Pursuant to the 2000 Arrangement, arbitral awards which fall outside the agreed scope of arbitration are not enforceable. Such arbitral awards may include those in which:

(i)the disputes arbitrated are not those submitted for arbitration;

(ii)the disputes arbitrated fall outside the scope of the relevant arbitration agreement; or

(iii)the arbitral awards contain rulings on matters which fall outside the scope of the arbitration.

In the case of (2016) jing 04 ren gang No. 2, the relevant Beijing court refused to recognize and enforce an arbitral award made by Hong Kong International Arbitration Centre on the ground that the relevant arbitral award fell outside the agreed scope of arbitration.

In this case, the court found that the initial claims in the arbitration were made against five respondents only but the arbitral award was made against 21 respondents as a whole. As such the arbitral award falls within the scope of Article 7 of the 2000 Arrangement and therefore could not be enforced in the mainland.

d.Improper constitution of the arbitration tribunal

Under this defence, the respondent must provide evidence that the constitution or procedures of the arbitration tribunal is inconsistent with the arbitration agreement, or in the absence of such agreement, is inconsistent with the provisions of the law of the place of arbitration.

In November 2009, Kunming Railway Import and Export Company Limited successfully persuaded a court in Kunming to reject an enforcement action of an arbitral award made against it by the Hong Kong International Arbitration Centre on the ground that the relevant arbitration tribunal was improperly constituted.

The relevant Kunming court accepted the respondent's argument that the arbitration tribunal was made by a single arbitrator in breach of the relevant arbitration agreement which provides for a three-member arbitration tribunal.

e.Non-binding or invalid arbitral awards

The burden of proof will be on the respondent to show that the relevant arbitral award is not yet binding, or has been revoked or suspended by the court in the place of arbitration or under the law of the place of arbitration.

f.Non-arbitrable matters

The court in mainland may refuse to enforce a Hong Kong arbitral award if it finds that the subject matter of the arbitration is non-arbitrable according to the law of the mainland.

g.Violation of public interest

A court in the mainland may refuse to enforce a Hong Kong arbitral award if it finds that the enforcement of such arbitral award may be in violation of social or public interests.

In the case of (2020) jing 04 ren gang No. 5. the relevant Beijing court commented that social or public interests should be understood as the interests of all members of the society as a whole. Even if state-owned properties are involved in an enforcement action, the court should carry out a detailed analysis of whether the enforcement action may cause damages to the state-owned properties. The court further commented that matters related to state-owned properties should not be deemed to be related to public interests.

In the case of (2019) yue 72 ren gang No. 1, the relevant Guangdong court held that a breach of mainland laws should not be viewed as an equivalent of a violation of public interests. In order to constitute a violation of public interests, the breach would have to cause serious damages to the fundamental principle of laws of the mainland.

（4）Preservation measures

Under Article 4 of the Supplementary Arrangement, an applicant may apply for preservation measures (i.e. injunctions) both prior to or after the mainland court accepts the application for enforcement a Hong Kong arbitral award.

The specific arrangements for preservation measures are set out in the Arrangements for Reciprocal Preservation Assistance in Arbitration Proceedings between the Courts of the Mainland and the Hong Kong Special Administrative Region outlined above and will not be discussed in detail in this article.

It should be noted, however, Hong Kong is currently the only judicial system which has entered into arrangements for the provision of preservation measures in aid of arbitration proceedings with the mainland. Such arrangement has given Hong Kong a unique advantage as the preferred place of arbitration in disputes involving mainland parties or mainland assets.

3.Enforcement of Hong Kong judgments

The reciprocal recognition and enforcement of Hong Kong judgments in the mainland is (or will soon be) regulated by the following main arrangements:

(i)Arrangement for Reciprocal Recognition and Enforcement of Judgments on Civil and Commercial Cases under Consensual Jurisdiction between the Courts of the Mainland and the Hong Kong Special Administrative Region of 2006 (the "2006 Arrangement");

(ii)Arrangement for Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases between the Courts of the Mainland and the Hong Kong Special Administrative Region of 2017 (not yet effective); and

(iii)Arrangement for Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Cases between the Courts of the Mainland and the Hong Kong Special Administrative Region of 2019 (not yet effective).

As the latter two arrangements have yet to come into effect, the following discussion will focus on the key provisions of the 2006 Arrangement.

(1) Eligibility

Pursuant to Article I of the 2006 Arrangement, the main conditions for the reciprocal recognition and enforcement of a Hong Kong judgment in the mainland include:

a.Written governing agreement between the parties

Article 3 of the 2006 Arrangement defines "written governing agreement" as a written agreement which provides for the court in mainland or in Hong Kong to have exclusive jurisdiction over disputes arising between the relevant parties.

This narrow definition has created significant problems for parties seeking enforcement actions under the 2006 Arrangement. This is because in international cross border transactions the parties to a contract typically would provide for the court of a certain place to have non-exclusive jurisdiction over disputes arising under such contract. Such non-exclusive submission would enable the parties to preserve their rights to take legal actions in other jurisdictions where appropriate.

In the case of (2016) jin min Zhong No. 44, the parties to the relevant contract agreed to submit disputes arising under the contract to the court of Hong Kong for resolution. The relevant Tianjin court held that although the parties did not specifically submit to the exclusive jurisdiction of the court of Hong Kong, such submission was deemed to be exclusive submission and upheld the enforcement action.

However, in the case of (2016) yue 0391 min chu No.1944, 1945, the relevant Shenzhen court found that a submission to the non-exclusive jurisdiction of the court of Hong Kong was inconsistent with the requirements of the 2006 Arrangement and rejected the application for the enforcement of the relevant Hong Kong court judgment.

Furthermore, in the case of (2017) xiang min Zhong No. 692, the relevant Xiangtan court held that a simple Hong Kong governing law clause would not constitute a valid written governing agreement and rejected the application for the enforcement of the relevant Hong Kong court judgment.

b.Civil or commercial cases involving a payment of money

Under the 2006 Arrangement, eligible judgments must relate to civil or commercial matters which involve a payment of money. As such, judgments on contracts relating to employment, family or other non-commercial purposes are excluded from the application of the 2006 Arrangement.

c.Final and enforceable judgment

Under the 2006 Arrangement, final and enforceable judgements of Hong Kong refer to those made by the Court of Final Appeal, the Court of Appeal of the High Court, the Court of First Instance and the District Court of Hong Kong.

（2）Competent court

Pursuant to Articles 4 and 5 of the 2006 Arrangement, the application for enforcement of a Hong Kong judgment should be submitted to the Intermediate People's Court of the mainland in the place of the respondent's residence or where the respondent's property is located.  If there are two or more competent courts in the mainland, the applicant may only apply to one of such courts for enforcement.

However, an applicant may apply to courts in Hong Kong and the mainland for enforcement actions simultaneously if the courts in both places have competent jurisdictions.

（3）Preservation measures

Article 14 of the 2006 Arrangement provides that the court in the mainland may order preservation measures both prior to and after the court accepts the application for recognition and enforcement of a Hong Kong judgment.

As discussed above, there has been significant improvement on the provisions of judicial assistance between Hong Kong and the mainland. As the social and economic integration between Hong Kong and the mainland accelerates, Hong Kong and the mainland should further strengthen and expand its scope of judicial assistance to facilitate the growing needs of economy and trade between the two places.

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