Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement)

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New Law - Time to strategise your dispute management and revisit your agreements involving Mainland China

On 26 October 2022, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (the “MJCCO”) was passed which effectively implements 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 (the “2019 Arrangement”).

The MJCCO introduces a mechanism for registration of judgments given by the Mainland courts in civil and commercial matters (such nature to be determined in accordance with PRC law) in Hong Kong. The MJCCO also empowers the Hong Kong courts to issue certified copies of and certificates for Hong Kong judgments in civil or commercial matters (such nature to be determined in accordance with Hong Kong law) for recognition and enforcement in the Mainland.

The Hong Kong government has indicated that the MJCCO will come into effect in about 6 to 7 months (i.e. in around April / May 2023). The MJCCO and the 2019 Arrangement will come into effect simultaneously in Hong Kong and the Mainland following the promulgation of a new judicial interpretation by the Supreme People’s Court and the completion of the necessary procedures in Hong Kong.

MJCCO only applies to judgments published after the effective date of the MJCCO.  Judgments published before the MJCCO came into force will still be governed by 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 Pursuant to Choice of Court Agreements between Parties    Concerned (the “2006 Arrangement”) and the Mainland Judgments (Reciprocal Enforcement) Ordinance Cap.597 (the “MJO”).

Limitation Period

Pursuant to Sections 10 and 11 of the MJCCO, the default in complying with the relevant Mainland judgment must have occurred within 2 years before the date of applying to the Court of First Instance for a registration order to register such judgment.

Key Differences (2006 and 2019 Arrangements Compared)

 The 2006 Arrangement / the MJOThe 2019 Arrangement / the MJCCO
The requirement of submission to exclusive jurisdiction

Yes

Only enforceable if the parties agreed to the exclusive jurisdiction of certain courts in the Mainland and Hong Kong in the underlying contract of the dispute

No

Only have to show a connection between the dispute and the Requesting Place[1] exists

The connection may be based on:

1. Defendant’s place of residence;

2. Defendant’s place of business;

3. Place of performance of underlying contract of the dispute;

4. Place of commission of the infringing act; or

5. connection between the dispute and the Requesting Place (e.g. choice of a designated court would suffice unless the place of residence of all parties was in the Requested Place[2])

Subject matters of the disputeApplies to contractual disputes onlyApplies to most civil and commercial cases except certain subject matters set out in an exclusion list are expressly excluded for registration in the MJCCO, such as corporate insolvency, debt restructuring and personal insolvency, succession and administration or distribution of the estate of a deceased person, matrimonial or family matters, certain intellectual property matters
Expanded categories of remediesMonetary relief onlyMonetary (excluding exemplary or punitive damages) and non-monetary relief
Courts being recognisedOnly judgments made by designated courts or higher courts could be mutually enforced (e.g. in the PRC, judgments by an Intermediate People’s Court or above or certain designated basic courts, and in Hong Kong, by the District Court or above)Judgments made by lower courts and other tribunals (e.g., the judgments of basic courts in the PRC under certain circumstances, and the Labour Tribunal, the Lands Tribunal, the Small Claims Tribunal and the Competition Tribunal in Hong Kong)
The scope for types of judgmentsJudgments must be “final and enforceable”

“Legally effective” judgments

In the case of the Mainland, includes any judgment, ruling, conciliatory statement and order of payment, but excludes any ruling on preservation measures

In the case of Hong Kong, includes any judgment, order, decree and allocator, but excludes anti-suit injunction and interim relief

Grounds for a Court’s refusal to recognise and enforce a judgment
  1. the choice of court agreement is invalid under the law of the place of the court chosen by agreement of the parties where the original trial was conducted, unless the chosen court has determined that the choice of court agreement is valid;
  2. the judgment has been wholly satisfied;
  3. the court of the place where enforcement of the judgment is sought has exclusive jurisdiction over the case according to the law of the same place;
  4. the party that did not appear in court and against whom a judgment was given had not been summoned or the party had been summoned according to such law but had not been given such time to defend the proceedings;
  5. the judgment has been obtained by fraud;
  6. a judgment on the same cause of action between the parties has been made by a court of the Requested Place/ an arbitral award has been made by the arbitration body concerned, and the said judgment or award has already been recognized or enforced by the court of Requested Place.
  7. when enforcement is contrary to social and public interest of the Mainland/ public policy of Hong Kong
  1. the judgment does not meet the jurisdictional requirement(s) stipulated in Article 11 of the 2019 Arrangement;
  2. the respondent was not summoned in accordance with the law of the Requesting Place, or although the respondent was duly summoned, was not given a reasonable opportunity to make representations or defend his/her case;
  3. the judgment was obtained by fraud;
  4. the judgment was rendered in an action which was accepted by the original court after a court of the Requested Place has already accepted an action on the same dispute;
  5.  a court of the Requested Place has rendered a judgment on the same cause of action, or has recognised a judgment on the same cause of action given by a court of another country or place;
  6. the Requested Place has made an arbitral award on the same dispute or has recognised an arbitral award on the same dispute made in another country or place; or
  7. when enforcement is manifestly contrary to the basic principles of law or or social and public interest of the Mainland/ the basic principles of law or public policy of Hong Kong

Points to take away

A common ground raised by parties in contesting the registration of a Mainland judgment has been the lack of an exclusive jurisdiction clause in the underlying contract. After the implementation of MJCCO, companies/businesses who are minded to structure transactions with a Mainland party will enjoy more flexibility when drafting the jurisdiction clause. Since the requirement of an exclusive jurisdiction clause over the dispute in Mainland is no longer required, an asymmetric jurisdiction clause[1] can now be adopted in the transactional documents for enforcement purposes in the Mainland or Hong Kong (as the case may be). Asymmetric jurisdiction clauses are often welcomed by companies/businesses especially when assets of the defaulting party situate in other jurisdictions which would increase the probability for the judgment creditors to recover a debt owed to it successfully.

Further, the expanded categories of remedies expansion on the scope for various types of cases will further strengthen Hong Kong as the forum for enforcement of Mainland judgements. This would be a relevant factor to be considered when revisiting dispute resolution clauses in existing contracts or drafting new commercial contracts.

YTL LLP’s dispute resolution team can help you with strategizing your dispute management or recognition and enforcement of judgments between the Mainland China and Hong Kong.  If you wish to know more about how we can help or any issues raised in this article, please contact:

James Yeung, partner (jamesyeung@hkytl.com)

Chantelle Leung, trainee solicitor (chantelleleung@hkytl.com)

Notes:

  1. Requesting Place means the place issuing the judgement.
  2. Requested Place means the place where the judgement is sought to be recognized and enforced.
  3. Asymmetric jurisdiction clauses allow parties to bring actions outside of Hong Kong or Mainland (as the case may be).
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