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Print articleReciprocal Enforcement of Judgments Between Mainland China and the Hong Kong SAR - FAQ’s
May, 2007 - Lindsay Esler
In our November 2006 Asia IP Bulletin, we reported on a ground-breaking agreement (the "Agreement") signed by the Hong Kong and Mainland Chinese Governments, under which they agreed to recognise and enforce judgments made in each others courts. The Agreement followed four years of discussion and legislative changes are now underway in Hong Kong to implement the Agreement.
The Mainland Judgments (Reciprocal Enforcement) Bill, gazetted in Hong Kong on 23 February 2007, will implement the Agreement. The first reading of the Bill took place on 7 March 2007. There is no indication of when the second and third readings will take place, but is hoped that the Ordinance will come into effect by the end of this year. In the Mainland, the Supreme People’s Court is to promulgate a judicial interpretation to set out the details for implementation of the Agreement.
Frequently Asked Questions
What is the existing position in Mainland China?
Currently, Hong Kong judgments are not enforceable in Mainland China. The Mainland does not have a rule similar to Hong Kong’s common law rule on recognition and enforcement of foreign judgments. The Mainland’s Civil Procedure Law provides that foreign judgments may be enforced in accordance with international agreements to which the Mainland is a party or in accordance with reciprocity. However, post-1997, Hong Kong, can no longer be considered a "foreign" country. A Hong Kong judgment creditor has to initiate fresh legal proceedings in the Mainland, but the Hong Kong judgment may be used as evidence in support of the claim.
How about Hong Kong?
The Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap 319) (Ordinance) provides a mechanism for enforcing foreign judgments in Hong Kong by means of a simple and quick registration procedure. However, the Ordinance does not apply to Mainland judgments. To enforce a Mainland judgment in Hong Kong, the Mainland judgment creditor has to start a fresh action in Hong Kong under the common law, based on the Mainland judgment.
What does the Agreement say?
The Agreement provides for the mutual enforcement of final judgments requiring the payment of money in civil and commercial cases. The judgments must have been given by specified courts of either the Mainland or Hong Kong and made pursuant to a valid, written, exclusive choice of court agreement.
What does "money judgment" mean?
The Agreement only provides for enforcement of judgments requiring the payment of money. Orders for specific performance or injunctions will not be covered.
What does "commercial cases" mean?
The Agreement only applies to commercial contracts. Contracts relating to matrimonial matters, wills and successions, bankruptcy and winding up, employment and consumer matters etc are excluded.
Will judgments made in any courts in Hong Kong or the Mainland be enforceable?
No. Only the judgments of specified courts. In Hong Kong, this means judgments at the District Court and above. In the Mainland, this means courts at the Intermediate People’s Court level or above and some Basic Level People’s Courts designated to have jurisdiction over civil and commercial cases involving foreign parties. The Agreement sets out a list of designated courts in various provinces and municipalities. This list may be amended by the Supreme People’s Court after notifying the Government of the Hong Kong SAR.
What is a written exclusive choice of court agreement?
The parties must have expressly agreed in writing to designate a Mainland or a Hong Kong Court to have exclusive jurisdiction for resolving any dispute.
Can the courts refuse to recognise and enforce a judgment?
Yes. In some situations, the choice of court agreement may be invalid since a contract may cover subject matter that must be subject to the exclusive jurisdiction of a particular court. For example, the Hong Kong courts have exclusive jurisdiction over the title to, or interest in, Hong Kong land. A commercial contract relating to Hong Kong real estate cannot provide for any dispute arising out of the contract to be resolved in a Mainland court. Likewise, the Mainland courts have exclusive jurisdiction over certain commercial matters under Chinese law, most notably, over disputes arising out of Sino-foreign equity joint ventures.
There are a number of other grounds upon which enforcement may be refused, including where the losing party has not been given sufficient time to defend the proceedings, the judgment was obtained by fraud, or where enforcement is considered to be against the "public policy of the HKSAR" or contrary to the "social and public interests of the Mainland".
How does the Agreement work?
An applicant for recognition and enforcement of a judgment must file an application for registration of the judgment with the relevant Mainland court or Hong Kong High Court. Once registered, the judgment shall have the same force and effect as one being made by a court of the place where enforcement is sought.
Will documents filed in the Mainland have to be in the Chinese?
Yes, any document not in the Chinese language must be translated and duly certified. Key documents will also have to be notarised.
What is the scope of the registered judgment?
In addition to the sum specified in the judgment, the registration shall include any interest that becomes due under the judgment as well as lawyers’ fees and litigation costs that have been certified by the court. However, taxes and fines are not included.
Who pays for the enforcement?
The party who applies to the relevant court for enforcement of a judgment shall pay the enforcement fees or court fees as prescribed in the place where enforcement is sought.
Can the courts impose property preservation orders?
Yes. A court may, before or after accepting an application for recognition or enforcement of a judgment, impose property preservation measures or an injunction restraining the transfer of assets in accordance with the law of the place where enforcement is sought.
Is there a deadline for application?
Yes. One year if one or both parties are natural persons and six months if both parties are legal persons. This is a relatively short time limit.
What are the practical implications?
The Agreement is of great significance to those entering into contracts with Mainland parties but careful consideration needs to be given as to whether reciprocal enforcement under the Agreement is desired or appropriate in each specific case. Selecting an exclusive jurisdiction could have undesirable results. Many foreign IPR owners may wish to take advantage of Hong Kong law and the Hong Kong legal system. However, if a foreign IPR owner, entering into an agreement with a Mainland manufacturer, chooses Hong Kong law and the exclusive jurisdiction of the Hong Kong courts, it could end up with a judgment in Hong Kong which may be enforceable in the Mainland only in relation to monetary damages, but not the injunction. Furthermore, the IPR owner will find itself precluded from taking a separate action in the Mainland for an injunction, by virtue of the exclusive jurisdiction clause.
It remains to be seen how the Agreement will be implemented in practice and legal advice should be sought before making a choice of mechanism for dispute resolution.
What are the implications for IP enforcement?
The Agreement is currently of limited assistance in this area. The Agreement requires a contractual relationship between the parties. Most infringements of IPR’s involve third parties with no contractual relationship with the IPR owner. Also, the Agreement only applies to monetary judgments. Injunctive relief and specific performance is not available. This may change in the future. In the meantime, depending on the specific facts of each case, parties may find it beneficial to take advantage of the reciprocal enforcement provisions. However, great care should be taken in making such decisions.
The Mainland Judgments (Reciprocal Enforcement) Bill, gazetted in Hong Kong on 23 February 2007, will implement the Agreement. The first reading of the Bill took place on 7 March 2007. There is no indication of when the second and third readings will take place, but is hoped that the Ordinance will come into effect by the end of this year. In the Mainland, the Supreme People’s Court is to promulgate a judicial interpretation to set out the details for implementation of the Agreement.
Frequently Asked Questions
What is the existing position in Mainland China?
Currently, Hong Kong judgments are not enforceable in Mainland China. The Mainland does not have a rule similar to Hong Kong’s common law rule on recognition and enforcement of foreign judgments. The Mainland’s Civil Procedure Law provides that foreign judgments may be enforced in accordance with international agreements to which the Mainland is a party or in accordance with reciprocity. However, post-1997, Hong Kong, can no longer be considered a "foreign" country. A Hong Kong judgment creditor has to initiate fresh legal proceedings in the Mainland, but the Hong Kong judgment may be used as evidence in support of the claim.
How about Hong Kong?
The Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap 319) (Ordinance) provides a mechanism for enforcing foreign judgments in Hong Kong by means of a simple and quick registration procedure. However, the Ordinance does not apply to Mainland judgments. To enforce a Mainland judgment in Hong Kong, the Mainland judgment creditor has to start a fresh action in Hong Kong under the common law, based on the Mainland judgment.
What does the Agreement say?
The Agreement provides for the mutual enforcement of final judgments requiring the payment of money in civil and commercial cases. The judgments must have been given by specified courts of either the Mainland or Hong Kong and made pursuant to a valid, written, exclusive choice of court agreement.
What does "money judgment" mean?
The Agreement only provides for enforcement of judgments requiring the payment of money. Orders for specific performance or injunctions will not be covered.
What does "commercial cases" mean?
The Agreement only applies to commercial contracts. Contracts relating to matrimonial matters, wills and successions, bankruptcy and winding up, employment and consumer matters etc are excluded.
Will judgments made in any courts in Hong Kong or the Mainland be enforceable?
No. Only the judgments of specified courts. In Hong Kong, this means judgments at the District Court and above. In the Mainland, this means courts at the Intermediate People’s Court level or above and some Basic Level People’s Courts designated to have jurisdiction over civil and commercial cases involving foreign parties. The Agreement sets out a list of designated courts in various provinces and municipalities. This list may be amended by the Supreme People’s Court after notifying the Government of the Hong Kong SAR.
What is a written exclusive choice of court agreement?
The parties must have expressly agreed in writing to designate a Mainland or a Hong Kong Court to have exclusive jurisdiction for resolving any dispute.
Can the courts refuse to recognise and enforce a judgment?
Yes. In some situations, the choice of court agreement may be invalid since a contract may cover subject matter that must be subject to the exclusive jurisdiction of a particular court. For example, the Hong Kong courts have exclusive jurisdiction over the title to, or interest in, Hong Kong land. A commercial contract relating to Hong Kong real estate cannot provide for any dispute arising out of the contract to be resolved in a Mainland court. Likewise, the Mainland courts have exclusive jurisdiction over certain commercial matters under Chinese law, most notably, over disputes arising out of Sino-foreign equity joint ventures.
There are a number of other grounds upon which enforcement may be refused, including where the losing party has not been given sufficient time to defend the proceedings, the judgment was obtained by fraud, or where enforcement is considered to be against the "public policy of the HKSAR" or contrary to the "social and public interests of the Mainland".
How does the Agreement work?
An applicant for recognition and enforcement of a judgment must file an application for registration of the judgment with the relevant Mainland court or Hong Kong High Court. Once registered, the judgment shall have the same force and effect as one being made by a court of the place where enforcement is sought.
Will documents filed in the Mainland have to be in the Chinese?
Yes, any document not in the Chinese language must be translated and duly certified. Key documents will also have to be notarised.
What is the scope of the registered judgment?
In addition to the sum specified in the judgment, the registration shall include any interest that becomes due under the judgment as well as lawyers’ fees and litigation costs that have been certified by the court. However, taxes and fines are not included.
Who pays for the enforcement?
The party who applies to the relevant court for enforcement of a judgment shall pay the enforcement fees or court fees as prescribed in the place where enforcement is sought.
Can the courts impose property preservation orders?
Yes. A court may, before or after accepting an application for recognition or enforcement of a judgment, impose property preservation measures or an injunction restraining the transfer of assets in accordance with the law of the place where enforcement is sought.
Is there a deadline for application?
Yes. One year if one or both parties are natural persons and six months if both parties are legal persons. This is a relatively short time limit.
What are the practical implications?
The Agreement is of great significance to those entering into contracts with Mainland parties but careful consideration needs to be given as to whether reciprocal enforcement under the Agreement is desired or appropriate in each specific case. Selecting an exclusive jurisdiction could have undesirable results. Many foreign IPR owners may wish to take advantage of Hong Kong law and the Hong Kong legal system. However, if a foreign IPR owner, entering into an agreement with a Mainland manufacturer, chooses Hong Kong law and the exclusive jurisdiction of the Hong Kong courts, it could end up with a judgment in Hong Kong which may be enforceable in the Mainland only in relation to monetary damages, but not the injunction. Furthermore, the IPR owner will find itself precluded from taking a separate action in the Mainland for an injunction, by virtue of the exclusive jurisdiction clause.
It remains to be seen how the Agreement will be implemented in practice and legal advice should be sought before making a choice of mechanism for dispute resolution.
What are the implications for IP enforcement?
The Agreement is currently of limited assistance in this area. The Agreement requires a contractual relationship between the parties. Most infringements of IPR’s involve third parties with no contractual relationship with the IPR owner. Also, the Agreement only applies to monetary judgments. Injunctive relief and specific performance is not available. This may change in the future. In the meantime, depending on the specific facts of each case, parties may find it beneficial to take advantage of the reciprocal enforcement provisions. However, great care should be taken in making such decisions.
