|In our July 2006 legal update, we reported on a ground-breaking agreement (Agreement) signed by the Hong Kong and Mainland China Governments, under which they agreed to recognise and enforce judgments made in each others courts. Legislative changes are now underway in Hong Kong in order to implement the Agreement.
The Mainland Judgments (Reciprocal Enforcement) Bill, today gazetted in Hong Kong, is modelled on the Foreign Judgments (Reciprocal Enforcement) Ordinance (detailed in our July 2006 legal update). The Bill will implement the Agreement by providing for the registration and enforcement by the Hong Kong courts of certain money judgments given by designated Mainland courts exercising their jurisdiction pursuant to a valid exclusive choice of court clause contained in a commercial agreement. The notable provisions of the Bill are as follows:
Application for Registration in Hong Kong of Mainland Judgments
A judgment creditor under a Mainland judgment may apply to the Court of First Instance to have the judgment registered in Hong Kong. If one or more parties to the judgment are natural persons, such application must be made within 1 year and, in all other cases, within 6 months. The time starts to run from the date by which the Mainland judgment must be performed.
Pre-requisites for registration
Only judgments based on “specified contracts” can be registered. A “specified contract” is defined as a contract other than an employment contract or contract to which a natural person acting for personal consumption, family or other non-commercial purpose is a party.
The judgment creditor must prove to the Court of First Instance’s satisfaction that:
a. the Mainland judgment was given by a designated Mainland Court on or after the commencement of the Mainland Judgments (Reciprocal Enforcement) Ordinance (“the Ordinance”);
b. the Mainland judgment was given pursuant to a Choice of Mainland Court Agreement made on or after the commencement of the Ordinance. A “Choice of Mainland Court Agreement” is an agreement (in writing or evidenced in writing) made by the parties to a specified contract and designating a Mainland Court to determine a dispute which has arisen or may arise in connection with that contract, to the exclusion of other jurisdictions;
c. the Mainland judgment is final and conclusive as between the parties to the Mainland judgment. The Ordinance will set out the requirements for a judgment to be considered as “final and conclusive”;
d. the Mainland judgment is enforceable in the Mainland;
e. the Mainland judgment orders the payment of a sum of money (not being a sum of money payable in respect of taxes or other similar charges or in respect of fines or other penalties).
Effect of Registration
For the purposes of execution, a registered judgment will have the same force and effect as if it had been a judgment originally given by the Court of First Instance and entered on the day of registration. Accordingly, upon the registration of a Mainland judgment (a) proceedings may be taken on the judgment; (b) the sum for which judgment is entered carries interest; and (c) the Court of First Instance has the same control over execution of the judgment as if the judgment had originally been given by the Court of First Instance and entered on the day of registration.
Setting Aside Registration of Registered Mainland Judgments
There will be safeguards under the Ordinance whereby registration of a Mainland judgment can be set aside. When making an order to register a Mainland judgment, the Court of First Instance may specify a period (which may be extended) within which an application can be made to set aside the registration.
On an application by a party against whom the registered Mainland judgment may be enforced, the Court of First Instance shall set aside the registration if satisfied that:
a. the judgment is not a Mainland judgment which satisfies the pre-requisites for registration (as set out above);
b. the Mainland judgment has been registered in contravention of the Ordinance;
c. the Choice of Mainland Court Agreement pursuant to which judgment was given is invalid under Mainland law;
d. the Mainland judgment has been wholly satisfied;
e. the Hong Kong courts have exclusive jurisdiction over the case according to Hong Kong law;
f. the Mainland judgment was given in the absence of the judgment debtor;
g. the Mainland judgment was obtained by fraud;
h. a judgment on the same cause of action between the parties to the Mainland judgment has been given by a Hong Kong court;
i. a judgment on the same cause of action between the parties to the Mainland judgment has been given by a court in a place outside Hong Kong or an arbitral award has been made by an arbitration body, and the judgment or award has already been recognised in or enforced by the Hong Kong courts;
j. the enforcement of the Mainland judgment is contrary to public policy; or
k. the Mainland judgment has been reversed or otherwise set aside pursuant to an appeal or a retrial under Mainland law.
The Court of First Instance may also set aside registration or adjourn an application to set aside registration where an appeal against the Mainland judgment is pending or a designated Mainland Court has ordered a retrial.
Enforcement in the Mainland of Hong Kong Judgments
In the Mainland, the Supreme People’s Court is to promulgate a judicial interpretation to set out the details for implementation of the Agreement.
Where a sum of money is payable (not being a sum payable in respect of taxes or charges of a similar nature or in respect of a fine or other penalty) under a Hong Kong judgment given by the Court of Final Appeal, the High Court or District Court pursuant to a Choice of Hong Kong Court Agreement, and the judgment creditor wishes to enforce that judgment in the Mainland, s/he can apply under the Ordinance for a certified copy of the Hong Kong judgment.
A “Choice of Hong Kong Court Agreement” is an agreement (in writing or evidenced in writing) made between the parties to a specified contract (which has the same definition as above) which designates a Hong Kong court to determine a dispute that has arisen or may arise in connection with that contract, to the exclusion of courts of other jurisdictions.
Upon the issue of the certified copy of the Hong Kong judgment, the High Court or District Court, as the case may be, will issue a certificate certifying that the judgment can be enforced by execution in Hong Kong (which will be pre-requisite for enforcement in the Mainland).
The first reading of the Bill will take place on 7 March 2007. There is no indication of when the second and third readings will take place, but we are hopeful that the Ordinance will come into effect by the end of this year.
Implications for you
The Ordinance will affect everyone doing business with Mainland parties, as with suitably worded contractual clauses, it will be possible to sue in Hong Kong and enforce Hong Kong judgments in the Mainland without the need for lengthy litigation.
All standard form contracts should be reviewed and revised, as necessary. In cases where you are contracting with Mainland parties with assets in the Mainland, you will probably want to be able to enforce Hong Kong judgments in the Mainland, in which case suitably worded clauses must be included in the contract. Conversely, in any cases where reciprocal enforcement is not desired, alternatives should be considered.
23 February 2007