Since 1 February 2000, enforcement of arbitral awards between the mainland and Hong Kong has been governed by a separate arrangement, which has successfully provided an effective mechanism of enforcing awards between the two jurisdictions.
On 27 November 2020, a supplemental arrangement was signed, amending four aspects of the original arrangement to bring it further in line with current practice in international arbitration. Some amendments became effective immediately, while others became effective on 19 May 2021. Importantly, award creditors will be able to seek enforcement of an award in both jurisdictions simultaneously, as long as the total amount to be recovered does not exceed the amount determined in the award. Simultaneous enforcement was prohibited under the original arrangement.
1. Award creditors may apply for enforcement of an award simultaneously on the mainland and in Hong Kong, subject to the principle that the total amount to be recovered from enforcement must not exceed the amount determined in the award. Accordingly, creditors no longer need to decide where to attempt enforcement first, which can be a difficult decision when a debtor has assets in both jurisdictions, and each alone is insufficient for satisfying the award.
2. An express provision has been added to the arrangement where creditors seeking enforcement on the mainland may apply for preservation or mandatory measures before or after the mainland court’s acceptance of an enforcement application.
3. All arbitral awards made on the mainland can now be enforced under the arrangement. Previously, only awards made by certain recognised mainland arbitral authorities were enforceable in Hong Kong under the arrangement.
4. It is now clear that Hong Kong awards have to be recognised before they can be enforced in mainland China. Moreover, a mainland award that is enforceable in Hong Kong can now also be recognised for other purposes (e.g., to rely on it in court proceedings by way of defence).
Upon Hong Kong’s return to China on 1 July 1997, the central government extended the territorial application of the New York Convention to Hong Kong. However, the New York Convention no longer applied to enforcement of arbitral awards between Hong Kong and the mainland.
This situation was remedied by the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, which has been in effect since 1 February 2000. The arrangement has followed the practice between the two jurisdictions before 1 July 1997, and the spirit of the New York Convention, and has successfully provided an effective enforcement mechanism.
On 27 November 2020, the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region was signed, amending four aspects of the arrangement, as follows:
(1) An award creditor may simultaneously apply for enforcement on the mainland and in Hong Kong, subject to the principle that the total amount to be recovered from enforcement must not exceed the amount determined in the award. Under the previous regime, simultaneous enforcement was prohibited, which required award creditors to decide in which jurisdiction to seek enforcement first. Where creditors had spent years trying to enforce the award in one jurisdiction without success, this prohibition put them at risk of a subsequent enforcement action in the other jurisdiction being time-barred.
(2) It brings the arrangement in line with the practice of many mainland courts by adding an express provision clarifying that an award creditor may apply for preservation or mandatory measures before or after the court’s acceptance of an enforcement application.
(3) It aligns the definition of the scope of arbitral awards with the prevalent international approach of “seat of arbitration” under the New York Convention. Under the arrangement’s original wording, only awards made pursuant to the Arbitration Law by certain recognised mainland arbitral authorities could be enforced by the Hong Kong courts. The amendment has removed the restriction of enforcement to awards made by certain recognised mainland arbitral authorities, so that all arbitral awards made on the mainland fall under the arrangement.
(4) It adds the term “recognition” to the arrangement when referring to enforcement of arbitral awards, clarifying that Hong Kong awards have to be recognised before they can be enforced on the mainland, which was previously controversial. Moreover, while Hong Kong’s Arbitration Ordinance (Cap. 609) already provided that a mainland award that is enforceable will also be recognised for other purposes, this is now also made clear in the arrangement itself.
On the mainland, the supplemental arrangement has been implemented by way of a judicial interpretation, promulgated on 27 November 2020. In Hong Kong, amendments under above-mentioned (2) and (4) came into effect on 27 November 2020, whereas amendments under (1) and (3) came into effect on 19 May 2021, as the relevant sections of the Arbitration Ordinance (Cap. 609) had to be amended first.
The supplemental arrangement was made in alignment with the spirit of the New York Convention, and seeks to bring the arrangement further in line with current practice in international arbitration. These developments will be conducive to the development of Hong Kong’s legal and dispute resolution services in the Guangdong-Hong Kong-Macau Greater Bay Area.
Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at firstname.lastname@example.org