Reciprocal recognition and enforcement of judgments in civil and commercial matters

The Hong Kong Government, through the Secretary for Justice, announced on 18 January 2019, the signing of an arrangement between the Mainland and Hong Kong on the reciprocal recognition and enforcement of judgments in civil and commercial matters (“REJ”).

This is a significant move as, prior to this, since the handover on 1 July 1997, with some limited exceptions, judgments entered in the Hong Kong courts were not enforceable in the Mainland, and vice versa. Almost 22 years after the handover, this lacuna will be remedied. It is expected that the arrangement will be implemented through local legislation in Hong Kong and is therefore not likely to be in effect for some time. It follows a Consultation Paper issued by the Department of Justice in July 2018.

The basic premise of the arrangement is, that rather than seeking to re-litigate a dispute, there will be a system whereby a Mainland judgment can be enforced through registration in Hong Kong and vice versa. So far as Hong Kong is concerned, this further strengthens Hong Kong’s attractiveness as a forum for dispute resolution in Asia where relief is sought against a Mainland party (whether State-owned enterprise or private entity or individual). Once the REJ arrangement is in effect, a party will be able to choose in their contractual agreement whether to proceed against a Mainland entity by arbitration in Hong Kong or through litigation in Hong Kong. There are pros and cons of each, notably in relation to arbitration that it is a private form for resolving a dispute and there are very limited grounds for an appeal from an arbitral award. In relation to litigation, it is commonly considered to be a somewhat cheaper process than arbitration, and it can be faster in some aspects (for example there is a summary judgment process), and there are prospects of an appeal.

It is notable that in the Consultation Paper issued by the Department of Justice in July 2018, there will exist grounds for the courts to refuse to recognise and enforce a judgment from the requesting court. For example, if the Defendant/Respondent was not summoned according to the law of the requesting place or was not given a reasonable opportunity to make representations or defend the case, or the judgment was obtained by fraud. Underlying this is, so far as Hong Kong is concerned, the right to refuse enforcement where the recognition and enforcement of the Mainland judgment is manifestly contrary to the basic legal principles of Hong Kong law or the public policy of Hong Kong.  Similarly, the Mainland courts may refuse recognition and enforcement of a Hong Kong judgment if it is manifestly contrary to the basic legal principles of Mainland law or the social and public interests of the Mainland.

Finally, it should be noted from the Secretary for Justice’s press release, and following the Consultation Paper, that the REJ arrangement will apply to all matters considered to be of a “civil and commercial” nature, but non-judicial proceedings and judicial proceedings relating to administrative law are excluded.  The arrangement, nevertheless, covers both monetary and non-monetary relief, such as interim relief.