The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance

The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap 645) (“Ordinance”) came into effect in Hong Kong on 29 January 2024. This Ordinance marks a milestone to implement the arrangement between Hong Kong and Mainland China in relation to mutual recognition and enforcement of judgments, and greatly facilitates cross-border civil and commercial dispute resolution.

Over the past 20 years since the handover of Hong Kong to People’s Republic of China (PRC), the Supreme People’s Court of PRC and the Department of Justice of the HKSAR have signed multiple arrangements on judicial assistance in civil and commercial matters, of which three are focused on safeguarding the rights and interests of the entities. They are the “Arrangement for the Recognition and Enforcement of Judgments in Civil and Commercial Matters Pursuant to Choice of Court Agreements between the Parties Concerned” (hereinafter referred to as “Choice of Court Arrangement” ) 《協議管轄安排》on 14 July 2006; the Arrangement on Reciprocal Recognition and Enforcement of Civil Judgments in Matrimonial and Family Cases by the Courts of the Mainland and of the Hong Kong Special Administrative Region 《關於內地與香港特別行政區法院相互認可和執行婚姻家庭民事案件判決的安排》on 20 June 2017; 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 《關於內地與香港特別行政區法院相互認可和執行民商事案件判決的安排》on  18 January 2019, all of which aim to achieve the circulation of civil and commercial judgments between the two jurisdictions and alleviate the burden of repeated litigation by the parties. The first two arrangements have already come into effect. Finally, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (“Ordinance”) and the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Rules (Cap.645A) of the HKSAR comes into operation on 29 January 2024. Concurrently, the Arrangement on Mutual Recognition of Judgments in Civil and Commercial Matters 《民商事判决互认安排》has also been implemented in the Mainland, which will bring great convenience to the resolution of cross-border civil and commercial disputes.

In this article, we will briefly explain the new changes of reciprocal enforcement under the Ordinance and provide insights from Hong Kong and PRC perspective.

As the Mainland and HKSAR are two separate jurisdictions, judgments of the Mainland courts do not automatically take effect in Hong Kong. Surprisingly, according to the Report on the Practice of Judicial Assistance in Civil and Commercial Matters between the Mainland and the Hong Kong Special Administrative Region issued by the Supreme People’s Court on 22 January 2021 《关于内地与香港特别行政区民商事司法协助实践的报告》[1], since the implementation of Choice of Court Arrangement, there has been a relatively small number of cases. According to the statistics, the Mainland Courts have accepted a total of 28 cases only, due to the fact that the scope of application of the Choice of Court Arrangement is relatively narrow, and can only be realized if certain conditions are met.

Therefore, the implementation of this Ordinance is in general welcomed by practitioners and potential clients as the scope of application for mutual recognition and enforcement between Hong Kong and Mainland China are enhanced, in terms of less requirements and wider range of judgments to be recognized and enforced successfully. Starting from 29 January 2024, the Ordinance will supersede the Choice of Court Arrangement generally, except in situation where a choice of court arrangement is made before the commencement of the Ordinance. We will briefly discuss the key improvement of the Ordinance with the previous arrangements below.

Removal of choice of court conditions

Currently, one of the obstacles that we often face with the client is the absence of choice of court arrangements. Under the existing arrangement, parties must have a written agreement with exclusive choice of courts in Mainland China and Hong Kong to govern the dispute, in order to successfully apply to recognise and enforce the judgments. This requirement of choice of court would be fully abolished in the new Ordinance, and the Ordinance would look into the connection of applicant to Hong Kong or Mainland China (depending on the place of application).

This provides greater flexibility for parties resolving a dispute and it is anticipated that the court would also take a holistic approach to determine the connection of applicant, for example the place of residence of parties, place of business, place of performance of contract and act of infringement etc.

Expansion to scope and type of judgments

In addition, the Ordinance would also extend the type of judgment to both monetary and non-monetary in civil and commercial matters, in particular to cover the intellectual property rights dispute and also compensation or damages arising from criminal proceeding. This can reduce the need for parties to litigate the same matters in both jurisdictions, streamline the process for recovery of payment after judgment is obtained and most importantly, to better support the innovative development of the Guangdong-Hong Kong-Macao Greater Bay Area.

In the Mainland, the type of judgments includes judgments, adjudications, conciliations and orders for payment, but note that preservation measures are expressly excluded for direct recognition. For HKSAR, the type of judgments includes judgments, orders, decrees, and certificates of assessment of costs, excluding injunctions and interim relief orders for direct recognition.

Although the Ordinance has widened the scope of judgments, certain matters such as insolvency, bankruptcy, matrimonial and succession are excluded. Notwithstanding this, the Ordinance without doubt provides better protection to creditor of judgment because creditor can better assess their chance of recovery of judgment and more remedies are available under the Ordinance.

Implementation date and effect of the Ordinance

Any judgments given on or after 29 January 2024 would be applicable under the Ordinance.

Conclusion

Since the first arrangement in 2006, legal systems of Hong Kong and Mainland China have worked closely in the past two decades to facilitate the mutual recognition and enforcement of judgments. With a simpler enforcement mechanism, it is expected that parties in litigation can reduce their litigation costs in cross-border disputes in safeguarding their rights. Moreover, judicial efficiency could be improved, and compliance of civil and commercial judgments obtained from both jurisdictions could be enhanced.  We trust that this would provide more certainty to the business development of both places. We will soon see the outcome of the Ordinance to the legal development in practice, and we look forward to seeing increasing numbers of cases to fully utilise the new arrangement.

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