On 27 November 2020, the Chinese Supreme People’s Court and the Hong Kong Department of Justice signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (Supplemental Arrangement). The Supplemental Arrangement modifies and supplements the existing Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR which was signed on 21 June 1999 and came into effect on 1 February 2000 (1999 Arrangement).
The main content of the Supplemental Arrangement is as follows:
- Article 1 clarifies that the enforcement of arbitral awards specified under the 1999 Arrangement shall be interpreted to cover both procedures for the “recognition” and “enforcement” of the arbitration awards. The 1999 Arrangement does not expressly include the recognition procedure in its text. As a result, there have been debates in the Mainland courts about whether recognition is required prior to enforcing arbitral awards made in Hong Kong against the relevant award debtors’ assets. The Supplemental Arrangement clarifies this point.
- Article 2 clarifies the types of arbitral awards under the 1999 Arrangement. It specifies that all arbitral awards made pursuant to the Arbitration Ordinance of Hong Kong can be enforced in the Mainland pursuant to the Supplemental Arrangement. That includes all awards rendered in Hong Kong-seated arbitrations, whether institutional or ad hoc. This aligns with the usual international approach to the seat of arbitration under the New York Convention.
- Article 3 allows parties to apply for enforcement of arbitral awards in the Mainland and in Hong Kong at the same time. The Original Arrangement prohibited “parallel enforcement”, namely applying for enforcement of an award in Hong Kong and the Mainland simultaneously. This modification is particularly helpful for enforcement against parties who have assets in multiple jurisdictions, as it facilitates timely enforcement and helps to prevent asset dissipation.
- Article 4 recognises that before or after enforcement of an award, the courts may order preservation measures in accordance with the applicable law. This is a welcomed development with respect to interim measures in addition to the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong (see our post of 1 October 2019).
The Supplemental Arrangement is implemented in the Mainland by way of a judicial interpretation as promulgated on the same day. In Hong Kong, Articles 1 and 4 of the Supplemental Arrangement has come into force on 27 November 2020, while Articles 2 and 3 will only take effect after the necessary amendments to the Arbitration Ordinance are enacted.
In addition, ten “typical cases” (典型案例) concerning mutual enforcement of arbitral awards have been published (English and Chinese case summary available on the SPC’s website) to illustrate how rules have been implemented. Five cases are in relation to the enforcement of Hong Kong awards in the Mainland and the other five are in relation to the enforcement of Mainland awards in Hong Kong. This is the first time that the SPC has published typical cases under the 1999 Arrangement together with the DOJ. These typical cases provide practical guidance for the parties and practitioners in both Hong Kong and Mainland China in terms of enforcement of arbitral awards in the other jurisdiction.
We expect that the Supplemental Arrangement will further facilitate mutual enforcement of arbitral awards between Hong Kong and Mainland China, provide enhanced judicial support for arbitration proceedings and better protect parties’ interests in cross-border commercial dealings.
For more information, please feel free to get in touch with any of the contacts below, or your usual Herbert Smith Freehills contact.