Reciprocal Enforcement of Money Judgments

In Commercial Matters between Hong Kong SAR and mainland China

Since the return of the sovereignty of Hong Kong to China in 1997, the relationship between Hong Kong SAR and mainland China has never been so close. Business between the two places grows rapidly and so do the commercial disputes between enterprises from the two different jurisdictions. In considering whether to go to the court to resolve these cross-border disputes, the enforceability of a judgment granted in one jurisdiction in the other jurisdiction has become an issue.

As a first step to address the concerns on enforceability of judgments in the two regions, the governments of the Hong Kong SAR and mainland China adopted an arrangement concerning mutual enforcement of arbitral awards.

It is discussed below the possibility of enforcement in Hong Kong SAR of judgments made by a court in the mainland China and vice versa.

 

1.   The recognition and enforcement of mainland China’s judgments in Hong Kong

i.    Foreign Judgments (Reciprocal Enforcement) Ordinance

To assure the possibility of enforcement of foreign judgments in Hong Kong, the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap.319) has been adopted modelled closely on the Foreign Judgments (Reciprocal Enforcement) Act 1933 (U.K.). Although the Foreign Judgments Ordinance Cap 319 is to assure the enforcement of foreign judgments, it is not applicable to China for two reasons: firstly the Ordinance is only applicable to countries designated under the Ordinance which China is not part of, and secondly China cannot be considered by the Hong Kong court as a foreign country after the handover of Hong Kong in 1997.

ii.  Common Law position

Subject to the following conditions, a judgment granted by a foreign court shall be recognized and enforced by the Hong Kong court at Common Law. At Common law there is no restriction to the countries whose judgments can be enforced in Hong Kong. It does not matter whether the judgments to be enforced were granted in Common Law countries or Civil Law countries. Further the enforcement of foreign judgments in Hong Kong in reliance of the Common Law principles does not depend on the existence of any bilateral enforcement arrangements between Hong Kong and the foreign country or principle of reciprocity.

a)      Jurisdiction of the mainland court

A mainland judgment could well be perfectly proper and valid according to Chinese law and yet be unenforceable in Hong Kong under common law because of want of jurisdiction of the mainland court in the private international law sense. A Hong Kong court would for example deny jurisdiction of a mainland court if the judgment debtor, at the time of the commencement of the proceedings was not present in the mainland. That would be the case if a Hong Kong company concluded a contract in China and the Chinese contractor sued him in the mainland for breach of contract although the Hong Kong company did not have any place of residence in the mainland. Although the proceeding was valid under the Chinese civil procedures, applying Hong Kong rules of private international law, the Chinese court did not have jurisdiction. In that case the Hong Kong court would deny enforcement of the mainland judgment on the ground that the mainland court was not the appropriate forum.

b)   Final judgment

Another requirement for the enforcement under Common Law is that the mainland judgment needs to be final and conclusive even though it may be subject to an appeal.

 c)   The foreign judgment is for a definite monetary sum.

A judgment creditor seeking to enforce a mainland judgment at common law cannot do so by direct execution of the judgment. He must bring an action on the mainland judgment but he can apply for summary judgment under Order 14 of the Rules of the High Court of Hong Kong on the ground that the defendant has no defence to the claim. If his application is successful, the defendant will not be allowed to defend at all.

 

2.      The recognition and enforcement of Hong Kong judgments on the mainland

The principle of reciprocity is a common principle in Civil Law Countries like Germany (section 328 (1) 5 of the German Civil Procedure Law), France and China. Article 286 of the Civil Procedure Law of the People’s Republic of China provides: “In the case of an application or request for recognition and enforcement of a legally effective judgment or written order of a foreign court, the people’s court shall, after examining it in accordance with the international treaties concluded or acceded to by the People’s Republic of China or with the principle of reciprocity [...] recognize the validity of the judgment or written order, and, if required, issue a writ of execution to enforce it[...].”

Due to the absence of reciprocal arrangement with the mainland, Hong Kong judgments are not enforceable in the mainland.

 

Conclusion

The above illustrates that presently money judgements granted in the courts of mainland China may be enforced in Hong Kong at common law. The much simpler procedures provided in Cap. 319 however do not apply. As to judgments granted by the Hong Kong courts, they are simply not enforceable in the mainland.

In view of this rather unsatisfactory situation and the growing volume of trade and business between the two places, negotiations are now under way to set up a scheme which allows reciprocal enforcement of money judgments of fixed amounts in contractual disputes provided that the parties have in their contract chosen Hong Kong courts or mainland courts to resolve their dispute. It is hoped that an arrangement for reciprocal enforcement of judgments between the two places can be established very soon. Working ahead of the proposed scheme, investors may now consider choosing Hong Kong courts in their contracts to resolve their contractual disputes since such Hong Kong judgments will be enforceable on the mainland once the scheme is in place.