The Hong Kong courts are often chosen by parties as the forum for dispute resolution arising from transactions with a mainland element. This is due to the excellent reputation of the courts for their independence and impartiality. English is the language generally used by the higher courts, and Hong Kong still maintains a common law system that it inherited from the UK. The courts can make laws in the form of case law, which is determined by rulings on legal precedents. 

Furthermore, Hong Kong still continues to be a leading arbitral seat  and has enjoyed the reciprocal enforcement of awards with the mainland. The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance will introduce a wide-ranging mechanism allowing for reciprocal enforcement of Hong Kong judgments in mainland China and mainland judgments in Hong Kong and promises to further enhance Hong Kong's standing as a leading dispute resolution venue. 

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).

The Ordinance was published days after the bill passed its third reading in Hong Kong's Legislative Council. Both it and the Arrangement will come into force in both Hong Kong and the mainland simultaneously once the relevant implementation mechanisms are in place in both jurisdictions. The new regime will apply to judgments given after the commencement date. In the mainland, the Arrangement will be implemented by way of judicial interpretation.

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 on 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 is no longer a need for the parties to have agreed in writing that (in the case of mainland judgments) the courts of mainland China will have exclusive jurisdiction to determine the dispute as under the MJREO. All the judgment creditor will need to show is that the mainland court which delivered the judgment had jurisdiction over the proceedings.

Judgments from lower courts such as the Labour Tribunal, Lands Tribunal and the Small Claims Tribunal in Hong Kong, and the lower level of courts in the mainland, can be recognised going forward under the Arrangement. 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.

Included judgments

A "Mainland Judgment" is a judgment that is given "in proceedings that are civil or commercial in nature under the law of the Mainland". These include judgments of the first instance from which no appeal is allowed, or where the time limit for an appeal has expired and no such appeal has been filed; and any judgments made in accordance with the trial supervision system in the mainland.

A "Hong Kong judgment" is a judgment that is civil or commercial in nature other than a judgment brought by way of judicial review or "any other proceedings arising directly out of the exercise of an administrative power".

Judgments in both places include judgments in criminal proceedings where an order has been made for the payment of money in respect of compensation or damages.

A legally enforceable Hong Kong judgment can be enforced in the mainland even though it is being appealed, however the relevant mainland court will have the discretion to suspend enforcement in the mainland until the appeal proceedings in Hong Kong have concluded.

Excluded judgments

Certain judgments are excluded from the operation of the Ordinance and the Arrangement. These include:

• Arbitration-related judgments

Judgments given in relation to "proceedings for the confirmation of the validity of an arbitration agreement or for an order to set aside an arbitral award" are expressly excluded from the scope of the Ordinance and the Arrangement. However there is already provision for the enforcement of such awards (see below).

Whilst judgments given in proceedings for the recognition and enforcement of an arbitral award are included, this only applies to judgments where the place of arbitration was either in Hong Kong or the mainland.

• Insolvency and bankruptcy judgments

Judgments that are "given in respect of a matter relating to a specified corporate process or the bankruptcy of a natural person" are excluded from the scope of the regime.

• Intellectual property judgments concerning patents

Mainland and Hong Kong judgments given in respect of certain intellectual property cases concerning the validity and infringement of certain patents and the determination of licence fee rates for standard essential patents are excluded.

Other excluded judgments include those relating to (i) certain matrimonial and family cases (section 6), (ii) in respect of a matter relating to the administration of estates (section 5(b)); (iii) maritime and marine matters (section 5(d)); (iv) specified election proceedings and matters relating to the death or incapacity or a natural person (section 5(f)).

Registering judgments

A judgment can only be registered if it is classed as an "effective judgment".

A mainland judgment is "effective" in the mainland if it is a judgment of the Supreme People's Court, a second instance judgment given by a Higher People's Court or an Intermediate People's Court, or if it is a first instance judgment given by a Higher People's Court, an Intermediate People's Court or a Primary People's Court in respect of which no appeal is allowed or where the time for filing an appeal has passed (section 8).

A Hong Kong judgment is "effective" in Hong Kong if (a) it is enforceable in Hong Kong; and (b) it is given by a specified Hong Kong court (section 9).

Once the judgment is "effective", a creditor under a mainland judgment in a civil or commercial matter may apply to the court for a registration order to register the judgment or any part of it, together with the prescribed fee.

For monetary judgments, an application for registration can be made on the date specified for payment in the judgment, or, if none is specified, the date on which the judgment becomes effective in the mainland.

For non-monetary judgments ordering a prohibition, restriction, or the performance of a particular act, an application for registration can be made with effect from the date upon which the non-compliance first occurs.

An application for certified copies and certificate is not required in respect of Hong Kong arbitral awards which can be enforced pursuant to the Arrangement and the Notice of Relevant Issues on the Enforcement of Hong Kong Arbitral Awards in the Mainland issued by the Supreme People's Court on 30 December 2009. Both institutional and ad hoc awards obtained in Hong Kong may be so enforced, by submitting an application for enforcement, the arbitral award and the arbitration agreement. No registration of the Hong Kong arbitral award is required on the mainland.

Mainland courts may refuse to enforce an arbitral award obtained in Hong Kong if, among other things, they believe that such enforcement would be contrary to public policy. There is a safeguard whereby the enforcement decision of the Intermediate People's Court shall be reviewed by a Higher Provincial Court and the Supreme People's Court if enforcement is refused. The Arrangement is silent in this regard with respect to court judgments.

Setting aside registration

An application can be made to set aside the registration of a mainland judgment within 14 days after the date on which a notice of registration is served on the person (Section 21(1)), however the court may specify a longer or shorter period within which an application for setting aside the registration may be made (Section 21(2)).

Some mainland judgments are expressly excluded – such as debt restructuring, corporate and personal insolvency, estate and family matters.

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 All clauses are not equal – Hong Kong Court rejects bank’s application for enforcement of judgment debt in mainland China).

The Hong Kong – mainland China co-operation mechanism, under which liquidators from Hong Kong main 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 and "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. 

Judgments given by courts of both places in respect of interim measures are excluded from the operation of the Arrangement and the Ordinance. During consideration of the legislation by the Panel on Administration of Justice and Legal Services, some members are reported to have felt "there was a need for similar interim measures to be available to a party seeking recognition and enforcement of a Mainland Judgment upon the passage of the Bill", but this suggestion was not taken up.

Another area raised as a concern was the question of when mainland judgments can be considered "final", given the possibility for parties to initiate a review of a judgment, which, as noted in the brief, "could result in the retrial of the case by the original trial court and might lead to uncertainties", and pointing to "cases decided by the Hong Kong court in which Mainland judgments were not considered as final and conclusive for the purpose of enforcement in Hong Kong under the common law."

The Administration observed that whilst retrial of a case in the mainland was possible under the "trial supervision system", such cases were rare. The Administration had taken "a pragmatic approach by adopting the principle that judgments which were legally enforceable under the law of the requesting place would be eligible for recognition and enforcement" under the Arrangement.

All in all, 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.