The new arrangement

Gazetted on 10 November 2023, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap 645) (“Ordinance”) and 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 (HKSAR) (Civil and Commercial Arrangement) (“Arrangement”) finally came into operation on 29 January 2024. The Ordinance and Arrangement apply to judgments handed down on or after the commencement date (i.e. 29 January 2024). In other words, the Ordinance replaces the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597). For the avoidance of doubt, the existing regime under Cap 597 continues to apply for judgments handed down prior to 29 January 2024. This newsletter sets out the key features of the Arrangement.

Removal of the exclusive jurisdiction clause requirement

Upon the implementation of the Ordinance, restrictions such as “non-exclusive jurisdiction clauses” and “asymmetric jurisdiction clauses” will no longer be obstacles to recognition and enforcement, enabling seamless cross border recognition and enforcement of judgments. The applicant may apply to the relevant courts with jurisdiction in the Mainland and Hong Kong simultaneously for recognition and enforcement of relevant judgments. The Mainland and Hong Kong courts should provide each other with information on the execution of the judgment upon the request of the counterpart court, and ensure that the total enforced amount does not exceed the amount determined in the original judgment.

Scope of applicable judgments, rulings etc.

Interim relief or anti-suit injunctions

Under the Arrangement, orders for interim relief or anti-suit injunctions cannot be directly recognized and/or enforced. However, interim measures can be applied for during the recognition and enforcement procedures. Mainland judgments that can be directly recognized under the Arrangement include judgments, rulings, conciliatory statements, orders of payment given or made by a court in the Mainland, and yet expressly exclude rulings given in respect of an interim measure. Hong Kong judgments that can be directly recognized, as discussed, do not include anti-suit injunctions and interim relief orders.

For a Mainland judgment that has been recognized in Hong Kong, the applicant can also request the Hong Kong court to issue a post-judgment injunction against the defendant’s Hong Kong assets. In the case 苏州太合汇投資管理有限公司 v 霍尔果斯市摩伽互联娱乐有限公司 [2023] 1 HKLRD 342, the plaintiff successfully applied for recognition of the Mainland judgment in Hong Kong, and based on this, obtained a freezing order from the Hong Kong court against the assets of the defendant (and its wholly-owned subsidiary) in Hong Kong.

Excluded judgments

Article 3 of the Arrangement excludes certain types of judgments in civil and commercial cases from the scope of application, such as cases involving payment of maintenance and the dissolution of an adoptive relationship in matrimonial cases, and cases in relation to succession to, or the administration or distribution of, an estate etc. Intellectual property cases in respect of patents are also excluded by the Ordinance expressly. Nonetheless, according to Article 14 of the Arrangement, if only the preliminary issues (i.e. not the key legal issues in question) in certain cases involve the above-mentioned issues, the Hong Kong courts should not refuse to recognize and enforce the relevant Mainland judgments.

Although the Arrangement does not apply to judgments in bankruptcy or insolvency cases, the Mainland and Hong Kong already have practices and relevant regulations for mutual recognition and assistance in the same and the Arrangement merely seek to supplement the existing legal regimes. For example, Hong Kong courts have recognized the winding-up proceedings of Mainland courts in Re CEFC Shanghai International Group Ltd [2020] 1 HKLRD 676 (Shanghai Huaxin case) in 2019.

In principle, the Arrangement does not apply to the recognition and enforcement of punitive damages. However, exceptions are made for cases such as intellectual property infringement cases. According to Article 17 of the Arrangement, i.e. section 18(3) of the Ordinance, punitive or exemplary damages in respect of a tortious dispute over an infringement of a specified intellectual property right committed in the Mainland or a civil dispute over an act of unfair competition under Article 6 of the Mainland Anti-Unfair Competition Law committed in the Mainland can be awarded. The same applies for judgments in cases of an infringement of a right in a trade secret.

Due process and setting aside

Whether the service of writs is lawful should be determined according to the law of the place of original proceedings. In order to reduce the risk that the judgment will not be recognized and enforced, the parties that seek to enforce the judgment may try to ensure that the Mainland court has given the parties sufficient opportunities to be heard. On the other hand, expert evidence may also be provided to prove that due process has been observed in the course of obtaining judgment.

Indeed, registration would be set aside if the court is satisfied that the judgment was obtained by fraud. That said, how to determine “fraud” may trigger another round of legal debate.

Parallel litigation

It is not uncommon for cases with non-exclusive jurisdiction to be tried simultaneously in the Mainland and Hong Kong based on the same set of facts and basis. The Arrangement provides that in case of parallel litigation and if an applicant applies to a court in one place to recognize and enforce a judgment of a court in another place, the court must accept the application of registration. It is for the applicant of the registration application to notify the adjudicating court of the application as soon as the application is made, and on receiving the notification, the adjudicating court must order that the parallel proceedings be stayed (Article 22 of the Arrangement).

The procedures of recognition

Enforcement of Hong Kong judgments in the Mainland

Such application shall be made to the Intermediate People’s Court of the place of residence of the applicant or the respondent, or where the property of the respondent lies. It should be noted that the “applicant’s place of residence” is a new option contained in the Arrangement to cater for the situations where a respondent may not reside in, or have any property in the Mainland. Relevant supporting documents would include an application containing matters stipulated in Article 9 of the Arrangement, a sealed judgment, the identity documents and evidence in respect of the respondent’s property.

Apart from recognizing and enforcing the judgment debt in full, the Mainland courts may either recognize and enforce the whole of the judgment debt, or only to recognize and enforce part of the judgment debt upon hearing of the matter. It should be noted that under Article 23 of the Arrangement, the applicant may not apply for recognition and enforcement if the Mainland court opts not to recognize the judgment debt at all and can only resort to commencing a fresh litigation. In case that the judgment debt is only recognized partially, certain injunctive measures may be applied by the Mainland court to prohibit dissipation of assets. Under Article 26 of the Arrangement, upon a ruling is made, the party aggrieved by the court decision may apply for a review within 10 days to a higher People’s Court.

Enforcement of Mainland judgments in Hong Kong

For Mainland judgments handed down on or after 29 January 2024, applications must be made in accordance with the Ordinance and the Arrangement by way of an Originating Summons and an ex-parte application, supported by a verifying affirmation, a draft order and other supporting documents such as identity documents and a sealed copy of the Mainland judgment. Such application must be made within two years from the date of relevant court documents or the last day of the performance period stipulated in the said court documents. Any applications to set aside registration by the respondent shall be made by way of a summons supported by an affirmation. Substantive hearing may be fixed to determine on the issues in question.