Reciprocal Enforcement of Judgments between Mainland China and Hong Kong
On 10 November 2023, the Hong Kong government announced that the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (“REJ”) and the accompanying Rules will come into effect on 29 January 2024.
The REJ will replace the existing arrangement between Mainland China and Hong Kong pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (“MJREO”) which came into force on 1 August 2008. The MJREO will continue to apply to judgments obtained prior to REJ’s start date of 29 January 2024.
Exclusive Jurisdiction Removal: Under the 2008 MJREO regime, judgments could only be reciprocally enforced if the parties had agreed to an exclusive jurisdiction clause in a contract that gave rise to the dispute. The REJ removes this requirement entirely.
Wider Scope: The 2008 MJREO allowed reciprocal enforcement only for contractual disputes. The REJ covers almost all matters of a civil and commercial nature unless it is expressly excluded.
More Enforceable Relief: Under the previous regime pursuant to the 2008 MJREO, only monetary relief could be the subject of reciprocal enforcement between Hong Kong and Mainland China. Non-monetary relief can now also be the subject of reciprocal enforcement such as declaratory relief or orders for specific performance.
What has been excluded?
The following matters have been excluded from reciprocal enforcement under the REJ:
- Arbitration related matters;
- Insolvency, restructuring and bankruptcy matters;
- Interim measures such as injunctions and freezing orders;
- Non-judicial proceedings such as administrative or regulatory proceedings;
- Succession, administration and/or distribution of an estate;
- Matrimonial or family cases which are covered by a separate ordinance, the Mainland Judgments in Matrimonial and Family Cases (Reciprocal Recognition and Enforcement) Ordinance (Cap. 639);
- Certain maritime related matters; and
- Certain intellectual property matters such as the infringement of patents, determination of licence fee rate of a patent.
Setting Aside Registered Judgments
A party must make an application to set aside a registered judgment in Hong Kong within 14 days from the date of which notice of registration is served upon that party. While this is a very short period of time, the time limit may be extended upon application.
The Court must set aside registration if a party can demonstrate any one of the following grounds:
- Original court did not have jurisdiction over the dispute;
- Defendant was not given reasonable opportunity to defend the proceedings;
- The judgment was obtained by fraud;
- The case was accepted by a Mainland Chinese court after the same case had already started in Hong Kong;
- Hong Kong court has given judgment on the same case;
- A court outside of Hong Kong has given judgment and the judgment has already been recognized or enforced in Hong Kong;
- There has been an arbitral award on the same case;
- Enforcement is contrary to public policy in Hong Kong;
- REJ was not complied with in some procedural or substantive way; or
- The registered judgment has been reversed or set aside pursuant to an appeal or re-trial.
Available Enforcement Remedies in Hong Kong
After registration, parties can take full advantage of all of the enforcement remedies available in Hong Kong as if the foreign judgment were given by the Hong Kong courts. These remedies include:
- Charging order on land, property or securities;
- Examination order against the judgment debtor to locate assets;
- Writ of execution for delivery of goods;
- Garnishee order which are typically used to require third party banks holdings funds of the judgment debtor to make payment to the judgment creditor; or
- Winding-up or bankruptcy order.
From an international business perspective, Hong Kong has now (more than ever before) become the venue of choice for resolving international or cross-border business disputes involving PRC parties or assets. In most commercial situations, parties can take advantage of the REJ to enforce Hong Kong judgments in China without the need to re-litigate which results in large cost and time savings.
In fraud and asset tracing cases, there is now potentially scope for victims of fraud to seek remedies in Hong Kong to recover stolen funds dissipated in Mainland China.
It remains to be seen to what degree Hong Kong assets will now be at risk of enforcement as a result of judgments from Mainland China rendered pursuant to Chinese law. There are a number of aspects of Chinese law which have no equivalent in Hong Kong or may be considered to be contrary to Hong Kong public policy, the latter being one of the grounds on which the Hong Kong judiciary may refuse to register or set aside the registration of a judgment from Mainland China. Jurisprudence in this area will no doubt develop over time.
Therefore, for individuals looking to protect their assets, proper planning will become increasingly important to mitigate against any unintended consequences of wider reciprocal enforcement of judgments between Hong Kong and Mainland China.