Legal update: Reciprocal Enforcement of Arbitral Awards between Hong Kong and Mainland China

Pre-1997

Pre-1997, the mutual enforcement of arbitral awards between the Mainland and Hong Kong was carried out by way of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The convention ceased to apply once Hong Kong became a Special Administrative Region in 1997 as its application is limited to the enforcement of awards between sovereign states.

Post-1997

After the transfer of sovereignty over Hong Kong in 1997, arbitral awards obtained in Hong Kong have become domestic awards for the purpose of enforcement in the Mainland. Due to the difficulties caused by the lack of mechanism to enforce awards between Hong Kong and the Mainland, the “Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR” came into effect in 1999 (the “Arrangement”).

From this Arrangement came sections 92 to 98 of the Arbitration Ordinance, (Cap. 609) allowing for the enforcement of Mainland arbitral awards in Hong Kong, and the “Announcement of Arrangement of the Supreme People’s Court on Reciprocal Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region” in the form of judicial interpretation bringing the Arrangement into effect in the Mainland on 1 February 2000.

Enforcement in Hong Kong

In Hong Kong, section 92 of the Arbitration Ordinance provides that an arbitral award obtained in the Mainland is enforceable either by action in the Courts of Hong Kong, or in the same manner as a judgment of Courts of Hong Kong with leave of the Court. To enforce a Mainland arbitral award, the relevant party must produce:

1. The duly authenticated original award or a duly certified copy of it;
    
2. The original arbitration agreement or a duly certified copy of it; and
    
3. If the award or agreement is not in either or both of the official languages, a translation of it in either official language certified by an official or sworn translator or by a diplomatic or consular agent.

Hong Kong courts may refuse to enforce a Mainland award based on the grounds set out in section 95, which basically reflects the provisions in the New York Convention. If the person against whom the award is invoked can prove that the arbitration agreement was not valid, or that he was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or if it is contrary to public policy to enforce the award, the Court may refuse to do so.

In the case of Z v Y [2018] HKCFI 2342, the High Court in Hong Kong dismissed the application to enforce an award obtained in the China Guangzhou Arbitration Commission for the following reasons:

1. Although the Court recognized that the underlying contracts in the dispute were governed by the law of the People’s Republic of China, the Court took the view that the Mainland award failed to address adequately the legality and enforceability of these contracts, which form the subject matter of the dispute. Enforcing the award would offend the Court’s notion of fairness and justice;
    
2. The question of whether there was a valid arbitration agreement was not addressed in the award; and
    
3. Pursuant to section 95(3)(b) of the Arbitration Ordinance, enforcing such award would be contrary to the public policy in Hong Kong and should therefore be refused.

The case illustrates that the Courts in Hong Kong will not simply rubber-stamp enforcement applications, but will also look into the substance of the awards. Whilst this may ensure fairness and justice which is fundamental to our public policy, this will create uncertainty and hardship to parties that have already been given favourable arbitration awards outside Hong Kong.

Enforcement in the Mainland

Pursuant to the Arrangement and the Notice of Relevant Issues on the Enforcement of Hong Kong Arbitral Awards in the Mainland issued by the Supreme People’s Court on 30 December 2009, both institutional and ad hoc arbitral awards obtained in Hong Kong can be enforced in the Mainland.

Article 3 of the Arrangement states that if a party wishes to enforce a Hong Kong arbitral award in the Mainland, the applicant needs to submit the following documents (translated to Chinese):

1. An application for enforcement;
    
2. The arbitral award; and
    
3. The arbitration agreement.

The Arrangement states that where a party has applied to the People’s Court for the enforcement of such an award, the Court will examine the application in light of the Arrangement and in the absence of any situations set out in Article 7 of the Arrangement, the arbitral award shall be enforced in the Mainland.

Article 7 of the Arrangement sets out the grounds for refusing to enforce a Hong Kong arbitral award in the Mainland and covers essentially the same conditions set out in section 95 of Hong Kong’s Arbitration Ordinance, which was designed to incorporate the Arrangement. An example is that arbitral awards obtained in Hong Kong on matrimonial and administrative matters cannot be enforced in the Mainland. Furthermore, the courts in the Mainland also have discretions to refuse to enforce an arbitral award obtained in Hong Kong if the courts are of the view that enforcing such award would be contrary to public interests of the Mainland.

We are experienced in both applying for or opposing enforcement of arbitral awards. Please contact Pamela Mak if you have any enquiries on enforcement of arbitral awards in Hong Kong.

Pamela Mak
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matter dealt with in this publication.