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A ‘win-win’ for two legal systems

By John Zhou

Hong Kong, 27 February 2024: A new law facilitating the reciprocal enforcement of civil and commercial judgments by Hong Kong and Mainland courts has been in place for one month. Many in the legal and business community believe it is a milestone in cross-border co-operation.

The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into operation on 29 January. It followed on the heels of an arrangement formally agreed five years ago by the Hong Kong government and Supreme People’s Court (SPC). The new regime offers three key features:

  • Establishes a more comprehensive mechanism for reciprocal recognition and enforcement of judgments in a wide range of civil and commercial matters;
  • Covers effective Mainland and Hong Kong judgments in civil and commercial matters including those given in respect of certain types of disputes over intellectual property rights;
  • Covers both monetary and non-monetary reliefs.

The benefits brought by the legislation are obvious: it reduces the need for re-litigation of the same disputes, thereby lowering the risks and saving on legal costs and time; it also offers heightened protection and predictability for parties involved in cross-border transactions.

It is worth noting that Hong Kong is the first jurisdiction to have an arrangement with the Mainland on reciprocal recognition and enforcement of judgments with such a wide coverage, reflecting the unique advantages of “one country, two systems”. Further, the Hong Kong government firmly believes the legislation enhances this city’s competitiveness as an intellectual property trading centre as well as a regional centre for international legal and dispute resolution services.

The legislation has a special benefit for Western businesses, who may elect to resolve their disputes with PRC counterparts in Hong Kong, a common law jurisdiction with an independent judiciary and predictable case law system that is familiar to them. Judgments won in Hong Kong can then be enforced in the PRC under the arrangement.

Hong Kong’s Department of Justice (DoJ) has also moved to clarify certain aspects of the legislation. Firstly, it does not mean judgments are automatically recognised or enforced mutually as there are procedural steps to be followed, including the possibility of refusal of enforcement as allowed under the law. Secondly, courts in the two jurisdictions will not exchange information about the details of cases that are subject to reciprocal enforcement.

The arrangement is the ninth judicial assistance document in effect between the two jurisdictions – highlighting the increasing levels of co-operation – and is the most extensive and significant development thus far. It is expected that around 90% of civil and commercial judgments given by courts in the two jurisdictions will be mutually recognised and enforced, according to research by the SPC. To give an idea of the scale, the mainland’s various levels of courts have collectively issued rulings for more than 55,000 first-instance civil and commercial cases involving Hong Kong in the past three years.

To coincide with the introduction of the legislation, the DoJ and SPC jointly organised a seminar at the Hong Kong Convention and Exhibition Centre. The gathering, which attracted some 300 attendees, explained the civil and commercial arrangement as well as the ordinance, including the applicable rules and specific procedures. Further, to help the business community and wider public understand the arrangement, the DoJ has built a thematic website and published a promotional leaflet on the ordinance.

While the new legislation is a landmark development, it is important to recognise that the cross-border legal landscape remains complex. Hence, sound advice is paramount, even before disputes are anticipated. Here at Boase Cohen & Collins, we have an accomplished team, many of them fluent in Putonghua, who thrive in this challenging environment.

A Consultant for BC&C, John Zhou is admitted to practice law in Hong Kong, the Mainland and the New York State. He has dedicated his career to cross-border dispute resolution and has vast experience in complex commercial arbitration, litigation and compliance matters. He can be contacted at john@boasecohencollins.com.

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