Member Article

The Government of Hong Kong and the Central Government of the People’s Republic of China (“Mainland”) signed An Arrangement on Reciprocal 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 on 14 July 2006. Under the Arrangement, the two sides have agreed to recognise and enforce judgments on certain matters made in each others’ courts. Legislative changes are required to be made in Hong Kong and the Mainland in order to implement the Arrangement.

Position under the Arrangement
To date, Mainland court judgments are not enforceable in Hong Kong and Hong Kong court judgments are not enforceable on the Mainland. To enforce a judgment obtained in the courts of one side, the judgment creditor has to start a fresh action in the courts of the other side.

The Arrangement will change this position. If a commercial contract designates Hong Kong or the Mainland as the exclusive forum for resolving disputes arising from the contract, a judgment obtained in Hong Kong or the Mainland (as the case may be) will be recognised and enforced in the courts of the other side if the judgment debtor keeps his assets there.

Scope of Arrangement
The Arrangement will initially only apply to "money judgments of commercial cases given by specified courts of either the Mainland or Hong Kong made pursuant to a valid exclusive choice of court agreement in writing". Accordingly, the Arrangement will only apply to:

• money judgments – in other words, orders for specific performance or injunctions are not covered;

• commercial cases – this means cases based on contracts in which the parties are acting for the purposes of their respective trade or professions, excluding contracts relating to matrimonial matters wills and successions, bankruptcy and winding up, employment and consumer matters etc;

• judgments of specified courts – in the case of Hong Kong, it is to apply to judgments of the District Court and above; in the case of the Mainland, it is to apply to courts at the Intermediate People's Court level or above and to those Basic Level People's Courts designated to have jurisdiction over civil and commercial cases involving foreign parties;

• if the parties concerned have expressly agreed in writing to designate a Mainland or a Hong Kong court to have exclusive jurisdiction for resolving any dispute;

• "legally enforceable final judgments" – there is to be a special procedure under the Arrangement for determining whether a judgment is final.

Safeguards
Under the Arrangement, there are safeguards whereby either jurisdiction can refuse to enforce a judgment of the other based on the following grounds:

• the jurisdictional agreement (choice of court clause) is invalid in accordance with the law of the place where enforcement is sought;

• the judgment has been fully executed;

• the court of the place where enforcement is sought has exclusive jurisdiction over the case according to its law;

• the losing party has not been given sufficient time to defend his case;

• the judgment has been wholly obtained by fraud;

• the court of the place where enforcement is sought has made a prior judgment on the same cause of action;

• in the case of the People's Court of the Mainland, it considers the enforcement of the Hong Kong judgment contrary to the social and public interests of the Mainland;

• in the case of the Hong Kong court, it considers the enforcement of the Mainland judgment contrary to public policy of Hong Kong.