China-Hong Kong arbitration mutual enforcement agreement now in force

Out-Law News | 25 May 2021 | 11:06 am | 2 min. read

Further changes to the law governing mutual enforcement of arbitration awards in both China and the Hong Kong Special Administrative Region (HKSAR) are now in force.

With effect from 19 May 2021, parties granted an arbitral award can now commence enforcement proceedings in both jurisdictions simultaneously, provided that the total amount to be recovered does not exceed the amount of the award. In addition, all awards rendered under the Arbitration Law of the People’s Republic of China (PRC) may now be enforced in Hong Kong.

The changes form part of an agreement signed by the two jurisdictions on 27 November 2020. The Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards (2-page / 278KB PDF) builds on and clarifies the previous Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR (‘the Arrangement’), which came into force on 1 February 2000.

An agreement allowing companies involved in arbitration seated in either Hong Kong or the PRC to apply to the courts of the other jurisdiction for interim measures, such as evidence preservation or asset freezing orders, came into force on 1 October 2019.

Howard Karah_Dec 2019

Karah Howard

Partner

Mutual recognition and enforcement of arbitral awards will permit greater justice to parties seeking to enforce arbitral awards in either jurisdiction.

In a statement published to coincide with the November 2020 signing ceremony, representatives of Hong Kong’s Department of Justice and the Supreme People’s Court of China said that the amendments “are in accordance with the spirit of the New York Convention [on recognition and enforcement of arbitral awards] and will further refine the Arrangement”.

“The Arrangement has successfully provided a simple and effective mechanism in both places on reciprocal enforcement of arbitral awards,” they said. “It also fosters legal and judicial co-operation in civil and commercial matters.”

Hong Kong-based construction disputes expert Karah Howard of Pinsent Masons, the law firm behind Out-Law, said: “The mutual recognition and enforcement of arbitral awards in both Hong Kong and mainland China simultaneously is a welcome development, and will permit greater justice to parties seeking to enforce arbitral awards in either jurisdiction”.

Sam Boyling, Beijing-based infrastructure expert, said: "This is another step in a series of initiatives aimed at providing more judicial support to parties in arbitration proceedings in both mainland China and Hong Kong. Ultimately, that also means enhanced protection for parties’ interests in cross-border transactions and projects.  Both of these outcomes will be welcomed by Chinese companies and their counterparties".

Of the four provisions in the Supplemental Arrangement, two took immediate effect in Hong Kong. They were the express inclusion of the term ‘recognition’ as well as enforcement of arbitral awards, in line with the wording of the New York Convention; and the addition of an express provision to clarify that a party can apply for preservation measures before or after the court’s acceptance of an application to enforce an arbitral award. These provisions could be implemented within Hong Kong’s existing legislative framework.

The two additional provisions – aligning the definition of “scope” of arbitral awards in the arrangement with the New York Convention concept of ‘seat of arbitration’ and international standards, and allowing for simultaneous enforcement proceedings in both jurisdictions – required amendments to the relevant provisions of the Hong Kong Arbitration Ordinance (Cap. 609), which took effect on 19 May.

All four provisions took effect on 27 November 2020 in China, by way of judicial interpretation.