The increase in cross-border business as a result of the Greater Bay Area initiative is providing further demand for arbitration as a way of resolving commercial disputes. Recent updates to the relevant legislation extend the scope of arbitral awards in both Hong Kong and the Mainland and provide some more clarification.
The scope and procedures in relation to the mutual enforcement of arbitral awards between the Mainland China and the HKSAR are governed by the “Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland China and the HKSAR.” This was signed as early as 1999, and has been effective since 1 February 2000. Throughout the past two decades, the Arrangement has proved to be successful.
On 27 November 2020, the Vice-president of the Supreme People’s Court and the Secretary for Justice of the HKSAR signed a Supplemental Arrangement. This was made to further improve the operation of the Arrangement, after taking into account 20 years of implementation experience and feedback from the arbitration sector.
The Supplemental Arrangement introduces four key changes to the Arrangement:
- It clarifies that the procedures for enforcing arbitral awards of the Mainland China or the HKSAR prescribed in the Arrangement shall include the procedures for “recognition.” In other words, pursuant to the Supplemental Arrangement, arbitral awards will be both recognised and enforced in Mainland China and the HKSAR.
- The relevant Court of Mainland China or the HKSAR may impose preservation measures before or after the Court’s acceptance of an application to enforce an arbitral award. This particular change is likely made to fill a gap under the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland China and of the HKSAR, which took effect on 1 October 2019. Under the Interim Measures Arrangement, a party to arbitral proceedings in Hong Kong can apply for interim measures from the Mainland Courts any time before the arbitral award is made for the purpose of protecting the enforcement of the arbitral award. However, the Interim Measures Arrangement is not applicable to the stage of enforcement of the arbitral award (i.e. after the arbitral award is published). The Supplemental Arrangement therefore clarifies that a party may apply for preservation measures at all stages in the arbitration proceedings.
- It clarifies that the Arrangement shall apply to arbitral awards made under the Arbitration Ordinance of the HKSAR as enforced by the People’s Courts of Mainland China, and arbitral awards made under the Arbitration Law of Mainland China as enforced by the Courts of the HKSAR. With this amendment, more arbitral awards will fall under the application of the Arrangement (including ad hoc arbitrations which are not covered by the Interim Measures Arrangement). This is also to align with the prevalent international approach of “seat of arbitration” under the New York Convention.
- It provides that if the party against whom the application is filed is domiciled in both Mainland China and the HKSAR, or has property in both jurisdictions that may be subject to enforcement, the applicant may file applications for enforcement with the Courts of the two jurisdictions simultaneously, provided that the total amount recovered by the applicant will not exceed the amount awarded. The removal of the restriction on making simultaneous enforcement applications in the Mainland China and Hong Kong is an important breakthrough as the amendment will minimize the risk of an award debtor hiding or transferring his properties to one jurisdiction when an enforcement application was made against him or her in another jurisdiction.
The amendments (1) and (2) above took effect in the HKSAR on 27 November 2020, whereas amendments (3) and (4) will take effect after the HKSAR has made the necessary amendments to the relevant provisions in the Arbitration Ordinance. On the other hand, the Supplemental Arrangement has already been implemented in the Mainland China by way of a judicial interpretation as promulgated on 27 November 2020.
Without doubt, the Supplemental Arrangement will facilitate the smooth operation of the Arrangement and will be conducive to the development of Hong Kong as the dispute resolution centre of the Greater Bay Area.