Scope of mutual legal assistance between the Mainland and Hong Kong broadens as jurisdictional concerns in cross-border transactions are clarified

Given the different judicial systems in the Mainland and Hong Kong, selecting the method and location of dispute resolution in a Mainland and Hong Kong cross-border transaction has often been a contentious matter. The signing of a new arrangement between the Supreme People’s Court and the HKSAR Government on 18 January 2019 (New Arrangement) will provide for a more comprehensive mechanism for reciprocal recognition and enforcement of judgments between the two places in civil and commercial matters. This is good news for businesses with cross-border operations.

In relation to commercial disputes, the reciprocal recognition and enforcement of judgments between the courts of the Mainland and Hong Kong currently only covers monetary judgments in cases where the parties have designated in writing the relevant Mainland or Hong Kong court as having sole jurisdiction over the disputes (Current Arrangement). The Current Arrangement is not particularly helpful in situations where non-monetary remedies are required, or where the parties prefer to retain flexibility in the choice of court for bringing a claim. Such limitations will be removed under the New Arrangement.

The New Arrangement will cover both monetary and non-monetary judgments in matters considered to be “civil and commercial” in nature under both Mainland and Hong Kong law. The scope of judgments covered is therefore much broader than under the Current Arrangement. Judicial review and court cases arising from the exercise of administrative powers (e.g., applications brought by the Competition Commission before the Competition Tribunal for imposition of pecuniary penalty) are excluded. Rulings concerning preservation measures, are also not included.

It should also be noted that the New Arrangement does not apply to judgments relating to certain civil and commercial matters. These include:

  • bankruptcy or insolvency cases;
  • cases on succession, administration or distribution of estate of a deceased person;
  • judgments in matrimonial or family matters (such judgments are covered under a separate reciprocal arrangement for matrimonial and family cases);
  • decrees of judicial separation made by Hong Kong courts and certain family-related maintenance disputes heard by the Mainland courts;
  • rulings on the validity, establishment or subsistence of an intellectual property right;
  • tortious claims for infringement of invention patents and utility models in the Mainland, or standard patents or short-term patents in Hong Kong;
  • judgments on marine pollution, limitation of liability of maritime claims, maritime liens and carriage of passengers by sea; and
  • judgments on the legal incapacity of a natural person for civil acts.

Under the New Arrangement, it is no longer necessary for the contractual parties to designate a court as having sole jurisdiction for resolving disputes. However, a certain connection between the dispute and the place where the judgment is given (Requesting Place) is still required to provide a jurisdictional basis for the judgment. This can be satisfied by, for example, the defendant’s place of residence being in the Requesting Place, the place of performance of the contract being in the Requesting Place, or the parties having agreed in writing that the courts of the Requesting Place shall have jurisdiction (which need not be sole jurisdiction).

There are certain grounds on which courts may refuse to enforce a judgment from the other jurisdiction, including where a court does not meet the jurisdictional requirements; the respondent was not given reasonable opportunity to defend its case; or the judgment was obtained by fraud.

The New Arrangement will take effect on a date to be announced, after the two places have completed the necessary procedures for its implementation, and will then supersede the Current Arrangement.

The signing of the New Arrangement is a very welcome development. It should reduce the need for re-litigation of disputes in both locations and will provide greater certainty and better protection to parties involved in cross-border businesses or transactions.