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Enhanced Measures on Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR in line with the GBA development

  • Market Insight 22 February 2021 22 February 2021
  • Commercial Disputes

The Hong Kong Department of Justice (“DOJ”) recently announced1 that it had entered into the “Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” ("Supplemental Arrangement")2 with the Chinese Supreme People’s Court. The DOJ says that the current Arrangement3 since February 2000 has provided a simple and effective mechanism in Hong Kong and Mainland China to enable the reciprocal enforcement of arbitral awards, but that after 20 years, the changes adopted in the Supplemental Agreement will “further refine the Arrangement”, and are “in accordance with the spirit of the New York Convention”.

Following the signing ceremony, both sides released “notable cases relating to the mutual enforcement of arbitral awards with a view to enhancing mutual understanding of each other's legal assistance system”. These cases are listed in Chinese and English on the same page (see http://www.court.gov.cn/zixun-xiangqing-275321.html). The cases, split between enforcement of Hong Kong cases in the Mainland and vice-versa are published to provide practical assistance, especially to those involved in cross-border dispute resolution.

The principal changes in the Supplemental Agreement are contained in Articles 1 to 4 as follows:

Article 1

The procedures for enforcing arbitral awards of the Mainland or the HKSAR as specified in the Arrangement shall be interpreted as including the procedures for the recognition and enforcement of the arbitral awards of the Mainland or the HKSAR.

The rationale for this interpretive amendment is because the current Arrangement only covers the situation of enforcement, which has led to uncertainty over whether recognition is a pre-requisite to enforcement of an award. The situation has now been clarified and the enforcement of arbitral awards in either jurisdiction shall be interpreted as including the procedure of the recognition and enforcement.

Article 2

The Preamble and Article 1 of the Arrangement are amended as: “In accordance with the provision of Article 95 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China and through mutual consultations between the Supreme People’s Court and the Government of the Hong Kong Special Administrative  Region  (HKSAR),  the  following arrangement is made in respect of the issue of mutual enforcement of arbitral awards:

“1. This Arrangement applies to arbitral awards rendered pursuant to the Arbitration Ordinance of the HKSAR as enforced by the People’s Courts of the Mainland, and arbitral awards rendered pursuant to the Arbitration Law of the People’s Republic of China as enforced by the Courts of the HKSAR.”

The effect of this change is to “align the definition of the scope of arbitral awards with the prevalent international approach of “seat of arbitration” under the New York Convention” and that:

  1. Whereas for enforcement in Hong Kong previously, it was a pre-condition that the Mainland award had to have been made by specified arbitral authorities in the Mainland (the list of which was supplied by the Legislative Affairs Office of the State Council), that pre-requisite is no longer a condition, and that any arbitral award made pursuant to the Arbitration Law of the People's Republic of China can be enforced in Hong Kong; and
  2. Any arbitral award rendered pursuant to the Arbitration Ordinance of the HKSAR can be enforced in the Mainland which includes ad-hoc or institutional awards rendered in Hong Kong-seated arbitrations.

Article 3

Article 2(3) of the Arrangement is amended as: “If the part against whom the application is filed is domiciled or has property in both the Mainland and the HKSAR which may be subject to enforcement, the applicant may file applications for enforcement with the courts of the two places respectively. The courts of the two places shall, at the request of the court of the other place, provide information on its status of the enforcement of the arbitral award. The total amount to be recovered from enforcing the arbitral award in the courts of the two places must not exceed the amount determined in the arbitral award.”

This change will permit the simultaneous enforcement of an arbitral award in both the Mainland and Hong Kong (the current position is that any applicant “shall not file applications with relevant courts  of  the  two  places  at  the  same  time”). This is a significant change which will allow concurrent enforcement against assets in both jurisdictions, with the proviso that the total amount recovered in both jurisdictions cannot exceed the total amount of the award itself.

Article 4

The following paragraph is added to Article 6 of the Arrangement as Article 6(2): “The relevant court may, before or after accepting the application for enforcement of an arbitral award, impose preservation or mandatory measures pursuant to an application by the party concerned and in accordance with the law of the place of enforcement.”

The effect of this change is to expressly set out that preservation or mandatory preservation measures may be imposed before or after the application for enforcement of an arbitral award. Whilst the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region (“Interim Measures Arrangement”)4 provided for the ordering of interim measures prior to an arbitral award, it appeared to leave unanswered the ordering of such interim measures, or preservation measures after an arbitral award, but before application for enforcement, thus leading to uncertainty. As a result of the changes, the potential gap is plugged and an application for interim measures can be made at any stage of the arbitration proceedings.

Whilst the current Arrangement came into force in February 2000 and was implemented in Hong Kong under Part 10 Division 3 “Enforcement of Mainland Awards” of the Arbitration Ordinance (Cap. 609), the Supplemental Arrangement sets out that “Articles 1 and 4 of this supplemental arrangement will take effect on 27 November 2020, and following the completion of the relevant procedures in the HKSAR, both sides shall announce a date on which Articles 2 and 3 shall commence.” The DOJ has said that Articles 2 and 3 will come into effect after the required amendments to the Arbitration Ordinance (Cap. 609) have been enacted and that they will proceed with the necessary legislative steps in a "timely manner".

Conclusion

The changes brought about by the Supplemental Agreement are significant amendments which clarify issues that have arisen as a result of the current Arrangement as well as the Interim Measures Arrangement, and will no doubt enhance and facilitate the enforcement of arbitral awards issued in each other's jurisdiction.

As part of a larger regional picture, the Supplemental Arrangement is also in line with the 18 February 2019 Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area ("GBA") to develop Hong Kong's legal and dispute resolution services within the GBA5 (see Chapter 3 section 2, and Chapter 10 section 1) and it is also anticipated that the Supplemental Agreement “will further enhance Hong Kong's position as an international legal hub for legal, deal-making and dispute resolution services.

If you wish to discuss any aspect of this article or arbitration in general, please get in touch with a member of our team - contact Jon Howes, Mun Yeow, Chris Short, Stephanie Lau, or Vivian Wong.

 

1 https://www.info.gov.hk/gia/general/202011/27/P2020112700696.htm 

2 https://www.doj.gov.hk/en/mainland_and_macao/pdf/supplemental_arrangementr_e.pdf

3 https://www.doj.gov.hk/en/mainland_and_macao/pdf/mainlandmutual2e.pdf

4 https://www.doj.gov.hk/en/mainland_and_macao/pdf/arbitration_interim_e.pdf

5 https://www.bayarea.gov.hk/filemanager/en/share/pdf/Outline_Development_Plan.pdf

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