Since 2008, a Hong Kong judgment has been directly enforceable in Mainland China by virtue of “An Arrangement on Reciprocal Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to Choice of Court Agreements between Parties Concerned” (“the Arrangement”).
In order to benefit from the Arrangement, parties have to provide in their contract that the Mainland Court has exclusive jurisdiction over any disputes arising out of the contract. Whilst we have drafted such provisions for our clients from time to time, since implementation of the Arrangement, enforcement of Hong Kong judgments in Mainland China pursuant to the Arrangement is not common. We understand that there was a successful application for enforcement of a Hong Kong judgment in a Shanghai Court early this year, but such cases appear to be rare.
In the absence of a specific provision in the contract (as mentioned above), a party would have to commence legal proceedings in Mainland China afresh, relying on the Hong Kong judgment as evidence of the defendant's liability, in order to enforce a Hong Kong Judgment in Mainland China.
The lack of popularity of the Arrangement may be due to the requirement to have a specific provision in the contract. Since 2000, arbitration awards made in Hong Kong are directly enforceable in Mainland China, pursuant to an agreement for mutual recognition of arbitration awards between Hong Kong and Mainland China. Hong Kong is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Awards, by virtue of China's accession to that treaty. By virtue of that treaty, Hong Kong arbitration awards are not only directly enforceable in Mainland China, but also in many other countries, such as the United States, United Kingdom and Japan. For this reason, rather having an exclusive jurisdiction clause, parties may choose to have an arbitration clause in their contract.
The procedure for enforcement of Hong Kong arbitration awards in Mainland China is relatively simple. The applicant applies to the Intermediate People's Court in the place where the respondent is domiciled or has property. If the Intermediate People's Court intends to dismiss the application for enforcing the Hong Kong award, it must first refer the application to the Higher Court for review. If the Higher Court is of the same view as the Intermediate People's Court, it must further refer the application to the People's Supreme Court in Beijing and no decision to dismiss the application can be made until the decision of the Supreme Court is sought. This process exists to alleviate the concern of some foreign parties that awards may not be enforced in Mainland China due to local protectionism.
From our experience, applications for enforcement of Hong Kong arbitration awards in Mainland China are reasonably successful. However, the application can take from three months to over a year, depending on whether the case has to be considered by the People's Supreme Court, as mentioned above.