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Sue
in Hong Kong: Enforce in China
(Recent Developments)
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).
Legislative
Timetable
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.
Karen Dicks,
Professional Support Lawyer
Litigation Department, Deacons
23 February 2007
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