On 27 November 2020, the secretary for justice, Ms Teresa Cheng, SC, and vice-president of the Supreme People's Court (SPC), Mr Yang Wanming, signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (HKSAR) (the Supplemental Arrangement).
Background
China became a party to The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) back in 1987. Upon resumption of sovereignty over Hong Kong SAR on 1 July 1997, China extended the territorial application of the New York Convention to Hong Kong. Given that Hong Kong became part of China since then, the New York Convention has been inapplicable as between Hong Kong and China. As such, Hong Kong and Mainland China signed the 'Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region' (the Arrangement) on 21 June 1999, which has been implemented since 1 February 2000. The Arrangement has provided a relatively simple and effective mechanism in both jurisdictions to permit the reciprocal enforcement of arbitral awards for the last 20 years.
Important clarifications/changes to the Arrangement
The new Supplemental Arrangement refines the existing Arrangement by:
- expressly including the term 'recognition' when referring to enforcement of arbitral awards in the Arrangement for greater certainty, which is closer to the two-stage approach under the New York Convention (ie the recognition stage and the execution stage);
- removing the concept of 'recognised Mainland arbitral authorities' from the existing Arrangement, such that all arbitral awards rendered in Mainland China will be covered under the Arrangement;
- removing the current restriction of the Arrangement to allow parties to make simultaneous applications to both the Hong Kong court and the Mainland court for enforcement of an arbitral award (ie parallel enforcement); and
- adding an express provision to clarify that a party may apply for interim measures before or after the court's acceptance of an application to enforce an arbitral award for greater certainty.
The clarifications and changes referred to in (1) and (4) above will take effect immediately, while the effective date of (2) and (3) will be announced at a later date.
Prior to the Supplemental Arrangement, parallel enforcement was not allowed, sometimes resulting in difficult and arguably unfair outcomes. For example in CL -v- SCG [2019] HKCFI 398, the award creditor first applied to enforce the Hong Kong award in the Mainland (Shenzhen Intermediate People's Court). However, the application in the Mainland was ultimately unsuccessful (almost five years after the initial application to the Shenzhen Court) and the applicant then applied (nearly two years later) for leave to enforce the award through the Hong Kong court. However, the Hong Kong court held that the enforcement of the award in Hong Kong was time-barred because the applicable six-year statutory limitation period under the Limitation Ordinance (Cap 347) had already lapsed when the application for leave to enforce was filed in Hong Kong.
The Supplemental Arrangement has also clarified that the Mainland courts have powers to make post-award interim measures upon application by a Hong Kong award creditor.
The Supplemental Arrangement will undoubtedly assist to cure some of the deficiencies that have been come to light over the years under the current regime and give parties increased legal certainty and protection for the effective enforcement of arbitral awards in both jurisdictions.
Hill Dickinson Hong Kong has extensive experience in all aspects of dispute resolution whether through litigation, arbitration or mediation. We regularly advise clients in relation to applications for enforcement of arbitral awards and interim relief measures in aid of arbitral proceedings.
Originally Published by Hill Dickinson, December 2020
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