On 14 July 2006, the Hong Kong and PRC authorities announced the signing of 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 SAR Pursuant to Choice of Court Agreements between Parties Concerned ("the Arrangement").
The signing of the Arrangement was to have followed two earlier arrangements between the Mainland and Hong Kong which were concluded relatively quickly after the 1997 handover to China. These related to the mutual service of judicial documents in civil and commercial proceedings, and the mutual enforcement of arbitral awards. However, mired mostly in the question of which courts in the Mainland would be recognized by the Hong Kong Courts, the Arrangement took significantly longer to conclude.
Unfortunately, even after the signing of the Arrangement, the final steps to formalize the Arrangement, i.e. to be implemented after the passage of relevant legislation in Hong Kong, and the promulgation of a judicial interpretation by the Supreme People's Court of the People's Republic of China remain to be taken. In Hong Kong, the relevant Bill was introduced to the relevant House Committee of the Hong Kong legislature in February 2007 and the second reading of the Bill was passed on 7 March 2007 but nevertheless remains under consideration. In China, the Supreme People's Court is in the process of issuing new guidelines and the judicial interpretation. We hope that it will not be long before both sides pass the necessary legislation to put the Arrangement into effect
Important Aspects of the Arrangement
The main aim of the Arrangement is to provide for the reciprocal recognition and enforcement of certain judgments in Hong Kong and the Mainland. The present position is that if a party obtained a money judgment in its favour in either Hong Kong or the Mainland and wished to enforce the judgment in the other jurisdiction, it would have to spend time and money bringing a second legal action in that other jurisdiction in order to do so.
The Arrangement applies only to final money judgments made in civil and commercial cases, where the parties have, in the course of their dealings, made a written "choice of court" agreement. This is elaborated below.
Final money judgments
In relation to the question of enforcement of a foreign judgment, Hong Kong common law provides that a final money judgment is one in which the court has conclusively established the existence of the debt in question so as to make it unable to be re-litigated. Note that a judgment may still be regarded as final even if it is under appeal. However, under the Arrangement, the recognition and enforcement procedure would be suspended pending conclusion of the appeal.
Civil and commercial cases
Employment contracts and contracts where one of the parties is a "natural person acting for personal consumption, family or other non-commercial purposes" are currently excluded from the scope of the Arrangement. Aside from those exceptions, any business to business agreement should be covered by the Arrangement even if one party is an individual, provided the contract has a commercial flavor.
A "choice of court" agreement where the parties have expressly agreed and designated a people's court of the Mainland or a court of the Hong Kong SAR as the court having sole jurisdiction for dispute resolution between the parties. The case may only be heard before the chosen court, but the judgment of that court may be enforced in the Mainland or Hong Kong.
A "choice of court" agreement shall be concluded in writing or by any electronic means by which the agreement is capable of being displayed in visible form and information is accessible so as to be usable for subsequent reference.
The Arrangement also provides that the "choice of court" clause is separable from the other clauses of the contract, and its validity will not be affected by any modification or termination of the contract.
An application for recognition and enforcement of a judgment will be refused if, for instance, the "choice of court" agreement is invalid, the judgment has been fully executed, the losing party has not been given sufficient time to defend his case, the enforcement of the judgment is contrary to public policy, the judgment has been reversed or otherwise set aside pursuant to an appeal or a retrial under the law of the Mainland or the judgment has been obtained by fraud.
The time limit for making an application for recognition and enforcement is one year if one or both parties are individuals, but only six months if both parties are legal/corporate persons or other organizations. Time is calculated, for a Mainland judgment, from the last day of the period for performance specified in the judgment, and for a Hong Kong judgment, from the day of the judgment unless otherwise specified.
As well as the judgment sum, interest on the judgment sum, lawyers' fees and litigation costs that have been certified by the court will also be recoverable. Taxes and fines are not covered.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.