Enforcing Hong Kong Judgments and Arbitration Awards in China

1
Enforcing Hong Kong Judgments and Arbitration
Awards in China
Gary P. Biehn, Esq.White and Williams
LLPPhiladelphia, PA215-864-7007biehng_at_whiteandw
illiams.com
Chunsheng Lu, Esq.White and Williams
LLPPhiladelphia, PA215-864-7006luc_at_whiteandwill
iams.com
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The Mainland China and Hong Kong Enforcement
Arrangement

• On July 14, 2006, Mainland China and Hong Kong
  entered into the Arrangement on Reciprocal
  Recognition and Enforcement of Judgments in Civil
  and Commercial Matters by the Courts of the
  Mainland and of the Hong Kong Special
  Administration Region Pursuant to Choice of Court
  Agreements between Parties Concerned. (the
  Enforcement Arrangement or Arrangement).

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• As stated in the Key Features document issued
  in connection with the Enforcements Arrangement,
  The Arrangement covers money judgments given by
  a designated court of either the Mainland or the
  HKSAR exercising its jurisdiction pursuant to a
  valid exclusive choice of court clause contained
  in a business-to-business agreement.
• Money Judgments the Enforcement Arrangement only
  applies to judgments requiring the payment of
  money judgments for injunctive relief are not
  included in the Arrangement. (Arrangement Art. 1
  Key Features p.1)

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Designated Court
• China
• Supreme Peoples Court
• Higher Peoples Courts
• Intermediate Courts
• certain Basic Peoples Courts, as listed in the
  Annex to the Enforcement Arrangement, which are
  authorized to exercise jurisdiction of the first
  instance in Civil and Commercial cases involving
  foreign, Hong Kong, Macao and Taiwan parties.
• Hong Kong
• Court of Final Appeal
• Court of Appeal
• Court of First Instance of the High Court and the
  District Court.

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Valid Exclusive Choice of Court Clause the
  Enforcement Arrangement only applies to disputes
  in which the parties concerned have agreed in
  written form to designate a peoples court of the
  Mainland or a court of Hong Kong as the forum
  to have sole jurisdiction for resolving the
  dispute. (Arrangement Art. 3 Key Features p.1)

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Business-to-Business the Enforcement Arrangement
  applies only to commercial agreements and does
  not apply to employment contracts and contracts
  to which a natural person acting for personal
  consumption, family or other non-commercial
  purposes is a party. (Arrangement Art. 3 Key
  Features p.1)

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Final Judgment required In addition, the
  judgment must be final.
  
• Grounds for Refusal A court may still refuse to
  enforce the judgment based on the following
  grounds (Arrangement Art. 9 Key Features p. 2)
  
• the choice of court agreement is invalid under
  the law of the place chosen by agreement of the
  parties where the original trial was conducted,
  unless the chosen court has determined that the
  choice of court agreement is valid
• the judgment has been wholly satisfied
• the court of the place where enforcement is
  sought has exclusive jurisdiction over the case
  according to its law
  
• the losing party has not been given sufficient
  time to defend his case
  
• the judgment has been obtained by fraud or
• the court of the place where enforcement is
  sought (or another foreign court or arbitration
  panel) has made a prior judgment on the same
  cause of action.

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Public Policy Exception In addition, the court
  concerned shall refuse an application for
  recognition and enforcement of a judgment, if
  (Arrangement Art. 9 Key Features p. 2)
• in the case of the Peoples Court of the
  Mainland, it considers the enforcement of the
  Hong Kong judgment contrary to the social and
  public interests of the Mainland or
• in the case of the Hong Kong Court court, it
  considers that the enforcement of the Mainland
  judgment is contrary to the public policy of Hong
  Kong.

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The Mainland China and Hong Kong Enforcement
Arrangement (cont.)

• Time Limit Applications for recognition and
  enforcement of a judgment must be made within
  
• one (1) year of the judgment if one or both
  parties are natural persons, or
  
• six (6) months if both parties are entities.

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Enforcement of Arbitration Awards

• Because of the many conditions and limitations of
  the Enforcement Arrangement (such as with
  Sino-foreign joint ventures and situations
  involving foreign intellectual property and
  Mainland China manufacturers), arbitration often
  remains the more attractive or appropriate
  alternative.
• Arbitration award from Hong Kong or the United
  States may generally be enforced in China.

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Enforcement of Arbitration Awards (cont.)

• Arbitration cannot be utilized without the
  agreement of the parties, and for this reason,
  United States companies doing business with
  Chinese companies are strongly advised to include
  arbitration clauses in contracts.
• Contracting parties who wish to use arbitration
  must opt-in by either including an arbitration
  clause in the contract (the better practice) or
  agreeing later to submit to arbitration.
• While many arbitration centers (for example, the
  Hong Kong International Arbitration Center
  (HKIAC)) provide sample arbitration clause
  language, these sample clauses do not include
  many terms that are critical for a well-drafted
  arbitration clause, which must be specifically
  tailored to the needs of the contracting parties.

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Enforcement of Arbitration Awards (cont.)

• Additional items for Arbitration Clauses
  include
  
• the number of arbitrators and method of
  selection
  
• The language of the proceedings
• The arbitration rules that will apply
• the location of the arbitration
• the governing law and
• An exception for injunctive relief

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Enforcement of Arbitration Awards (cont.)

• Valid arbitration awards are generally enforced
  in Mainland China, but it is important to note
  that issues of enforcement can arise depending
  on
• where enforcement in China is attempted, or
• whether the other party is a state-owned
  enterprise.
  
• Also, an award based on law which is against the
  public policy of China will not be enforced.