On Jan. 29, 2024, there will be a new regime for reciprocal enforcement of court judgments between Hong Kong and Mainland China, replacing the existing regime (which was implemented back in 2008).
Under the new regime, with the implementation of the new Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (the New REO) in Hong Kong, a fair amount of buzz has been generated within the legal and business community welcoming the implementation. The new regime aims to streamline the enforcement of court judgments and to widen the scope of reciprocal enforcement between Hong Kong and the Mainland.
With respect to the Mainland, the corresponding judicial interpretation for implementation of the new regime issued by the Supreme People’s Court in Beijing has not yet been published. According to the Hong Kong Department of Justice, the Supreme People’s Court will issue a corresponding judicial interpretation, which will take effect on Jan. 29, 2024.
In light of the above, here is an overview of the key features of the New REO.
Applicability of the New REO
The New REO will apply to Mainland judgments issued on and after Jan. 29, 2024 (being the commencement date of the New REO), except judgments based on an underlying contract containing an exclusive jurisdiction clause and entered into by the parties to that underlying contract prior to Jan. 29, 2024.
Accordingly, for the purposes of enforcement of Mainland judgments in Hong Kong under the new regime, it is irrelevant whether the underlying contract giving rise to a dispute is signed before or after Jan. 29, 2024, unless the Mainland judgment is based on an underlying contract containing an exclusive jurisdiction clause and is signed before Jan. 29, 2024, in which case the existing regime, rather than the new regime, will be applicable.
Given that the existing regime will continue to be applicable in some circumstances, some of its features remain important to note.
Key Features of the New REO
Removal of requirement for exclusive jurisdiction clause
The New REO removes the requirement for an exclusive jurisdiction clause.
Under the existing regime, for enforcement of a Mainland court judgment in Hong Kong, the parties need to have agreed that the courts in the Mainland (or any particular court in the Mainland) would have exclusive jurisdiction to hear the dispute.
This requirement for an exclusive jurisdiction clause no longer exists under the new regime, which instead requires that the Mainland courts had jurisdiction at the time the proceedings were accepted (e.g., the place of residence of the defendant to the proceedings was in the Mainland, or the defendant to the proceedings maintained an office in the Mainland).
This is a welcome change, especially given that the requirement for an exclusive jurisdiction clause had given rise to various court cases.
For example, in the judgment of Wang Qian Wei v. 郭文雨 and another  HKCFI 2253 (the Wang Judgment) decided by the Court of First Instance (CFI) in Hong Kong, one of the key issues was whether the clause “若本協議履行發生爭議，應由雙方協商解決，協商不成各方均同意交由甲方所在地人民法院管轄審理” (or, in English, “If a dispute arises in connection with the performance of this Agreement, it shall be resolved by mutual agreement, failing which each party agrees to submit it to the jurisdiction of the People's Court of the place where Party A is located.”) is an exclusive jurisdiction clause, even though the clause did not expressly state that the disputes would be submitted to the “exclusive” jurisdiction of the People's Court of the place where Party A is located.
After hearing submissions from the parties, the CFI held that:
- Irrespective of whether the word “exclusive” is used, the CFI should focus on the substance and not the form of the words.
- In a proper construction of the clause, the parties have positively agreed for the courts in the Mainland to have exclusive jurisdiction, citing factual matters such as all relevant parties resided or operated their business in the PRC, the agreement set out PRC addresses and phone numbers for contacts, etc.
With the implementation of the new regime, judgments to be issued on and after Jan. 29, 2024, will no longer need to focus on the existence or nonexistence of any exclusive jurisdiction clause.
Widening of subject-matter scope of existing regime
Another key feature of the New REO is that it widens the subject-matter scope of the existing regime. While the existing regime only covers money judgments (i.e., judgments that order the payment of a sum of money, not being a sum payable with respect to taxes or penalties), the New REO allows for a Mainland judgment (civil and commercial in nature, as well as criminal in nature) to be registered in Hong Kong if (subject to a list of excluded subject matters such as matrimonial cases and administration of estates) all the following conditions are satisfied:
- The judgment or part requires the payment of a sum of money, or the performance of an act, by a party to the original proceedings for the judgment.
- A default in complying with the requirement occurred within two years before the date of the application for registration of the judgment.
- The default has not been made good as of the date of the application of the judgment.
Importantly, unlike the existing regime, judgments from the Mainland requiring the performance of an act may also be enforced in Hong Kong under the New REO. For example, judgments from the Mainland requiring the specific performance of a contract (e.g., for the sale of shares) may be registered and enforceable in Hong Kong under the New REO.
Enforceable Mainland judgments limited to those of certain courts in the Mainland
Only judgments from the following Mainland courts may be enforced under the New REO:
- Supreme People’s Court
- High People’s Court or Intermediate People’s Court, where such judgment is given at the second instance (i.e., on appeal)
- High People’s Court, Intermediate People’s Court or Primary People’s Court, where (a) no appeal is allowed from such judgment, or (b) the time limit for an appeal with respect to the judgment has expired according to the law of the Mainland, and no appeal has been filed
Importantly, courts of special jurisdiction in the Mainland (including maritime courts, intellectual property courts, etc.) are not included under the scope of the New REO. It should also be noted that judgments on trial supervision procedures of the Mainland are within the scope of the New REO, but judgments on interim measures are not.
Provides grounds to set aside a registration of a Mainland judgment
Finally, the New REO provides the Hong Kong courts with certain grounds to set aside the registration of a Mainland judgment, providing safeguard against potential abuse. Such grounds include the following:
- The procedural and/or substantive requirements for registration of a Mainland judgment have not been complied with, or the jurisdictional requirement has not been satisfied with respect to the original proceedings for the registered judgment.
- The defendant was not summoned to give his defense in the proceedings or was otherwise not given a reasonable opportunity to defend the proceedings.
- The registered judgment was obtained by fraud.
- The original proceedings for the registered judgment were accepted by a court in the Mainland after proceedings with respect to the same cause of action between the same parties were started in a court in Hong Kong.
- A court in Hong Kong has given a judgment on the same cause of action between the same parties.
- A court in a place outside Hong Kong has given a judgment on the same cause of action between the same parties, and the judgment has already been recognized or enforced by a court in Hong Kong.
- An arbitral tribunal has made an arbitral award on the same cause of action between the same parties in an arbitration for which the place of arbitration was in Hong Kong.
- An arbitral tribunal has made an arbitral award on the same cause of action between the same parties in an arbitration for which the place of arbitration was not in Hong Kong, and the award has already been recognized or enforced by a court in Hong Kong.
- The enforcement of the registered judgment is manifestly incompatible with the public policy of Hong Kong.
The New REO is a welcome development for both Hong Kong and the Mainland and offers advantages to parties seeking to enforce judgments across the two jurisdictions.
Loeb & Loeb will continue to monitor implementation of the New REO.