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A boost for cross-border co-operation

By Alex Liu

Hong Kong, 5 January 2022: The new year begins with welcome news for Hong Kong and Mainland China’s huge cross-border business community: long-awaited legislation to enhance legal co-operation between the two jurisdictions is imminent.

The Department of Justice is currently conducting a public consultation – ending on 31 January – on its proposals for reciprocal recognition and enforcement of judgments (REJ) in civil and commercial matters. It is envisaged a bill will be put before the Legislative Council this year.

Once implemented, the measures will reduce the need for re-litigation of the same disputes in both places and offer better protection to parties’ interests. Further, they will enhance Hong Kong’s competitiveness as a regional centre for legal and dispute resolution services. Under the proposals:

  1. A person may apply to the Court of First Instance (CFI) to have a Mainland judgment in a civil or commercial matter registered with the CFI on an ex parte (meaning “by or for one party”) basis;
  2. The CFI may set aside a registration if the applicant has proved to the satisfaction of the court that any of the exhaustive grounds of refusal exists;
  3. Subject to certain restrictions, the proposed legislative scheme covers both monetary (excluding punitive or exemplary damages) and non-monetary relief; and
  4. A registered judgment may be enforced in the same way as if it were a judgment originally given by the CFI.

The scheme also empowers the courts here to issue certified copies of, and certificates for, such Hong Kong judgments.

The consultation period belatedly follows signing of the so-called REJ Arrangement, outlining the proposals, between the Supreme People’s Court and the Hong Kong Government almost three years ago. In drafting the proposals, both sides referenced the then draft version of the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters. However, the REJ Arrangement also expressly covers judgments concerning intellectual property rights, an area the Hague agreement excludes. Hong Kong is the first jurisdiction to have an accord of this nature with the Mainland that offers such wide scope.

The impending legislation is excellent news for anyone doing business with individuals or companies that have assets in both Hong Kong and the Mainland. Beneficiaries of the measures will certainly include investors in the Belt and Road Initiative and Greater Bay Area. While the close economic, trade and business ties between the two jurisdictions are well documented, it is worth highlighting some revealing statistics courtesy of our government’s Trade and Industry Department:

  • The Mainland’s share of Hong Kong’s global trade has increased from 9.3% in 1978 to 51.8% (around HK$4,248 billion) in 2020.
  • Hong Kong was the Mainland’s second largest export market, taking up 10.5% (HK$2,118 billion) of its total exports in 2020.
  • The value of Hong Kong’s total imports from the Mainland was HK$1,923 billion, accounting for 45% of the city’s total imports in 2020.
  • As of June 2020, there were 238 companies from the Mainland with regional headquarters in Hong Kong.
  • Hong Kong was the Mainland’s largest source of realised foreign direct investment, accounting for about 55% of the national total as at the end of 2019, with the cumulative value reaching HK$9,368 billion.

The DoJ’s proposals are embodied in the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Bill and the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Rules. The consultation paper is available here on the DoJ website and members of the public are invited to submit their comments before the end of this month.

In acknowledging this major progress in co-operation, it is important to recognise that the cross-border legal landscape remains crowded, competitive and complex. Hence, sound legal advice is paramount. Here at Boase Cohen & Collins, we have an accomplished litigation team, many of them fluent in Putonghua, who thrive in this challenging environment.

A Partner in BC&C since 2000, Alex Liu’s key areas of practice include commercial and corporate litigation, investigations by governmental bodies such as the SFC, ICAC and Commercial Crime Bureau, insolvency and debt restructuring, intellectual property, defamation, property and commercial contract drafting. He can be contacted at alex@boasecohencollins.com.

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