Enforcement of Judgments 2022

Last Updated August 02, 2022

Hong Kong

Law and Practice

Authors



Georgiou Payne Stewien LLP is a leading law firm based in Hong Kong specialising in dispute resolution, transactions and projects across the Asia Pacific region. GPS Legal has a judgment/award enforcement and asset recovery group which includes lawyers who predominantly practise in this area. The firm acts for clients in asset recovery matters, including the recognition and enforcement of local and foreign judgments and international arbitral awards. It devises and manages case strategies with a particular focus on investigating, identifying, tracing, and recovering assets, as well as implementing the use of creative non-litigation techniques to create settlement leverage, with the paramount objective of maximising recovery cost-effectively and expediently. The firm’s team includes solicitor advocates with higher rights of audience who can simultaneously advise clients and appear before the Hong Kong courts. This allows it to provide streamlined and agile representation to obtain urgent judicial relief in critical situations where assets are at high risk of dissipation or removal from the jurisdiction of Hong Kong.

In Hong Kong, in general it is possible to lawfully identify the asset position of another party (a debtor) through two means, namely (i) information which is publicly available, or obtained through other non-litigation steps and (ii) legal proceedings, such as through orders made by the courts in Hong Kong or elsewhere. 

Publicly Available Information

Information which may disclose or lead to information about a party’s assets may be obtained through the following publicly available means:

  • Companies Registry search (information regarding companies and directors);
  • business registration search;
  • Land Registry search;
  • Transport Department search;
  • marine tracking searches;
  • news articles, social media accounts and internet searches;
  • other online databases.

Judgment creditors also often engage forensic and investigation firms to conduct investigations into a debtor’s asset position through a combination of accessing publicly available information (as above) as well as conducting legitimate on-the-ground investigations.

It is not uncommon for judgment debts to arise from proceedings involving contractual or other commercial disputes. Parties involved in business relationships often obtain information about other parties throughout the course of their relationship which may lead to the identification of assets. This may be though means such as pre-transaction due diligence, documents exchanged between parties (eg, purchase orders, invoices, bills of lading, banking records including remittance advice, etc), interaction with customers/clients, and so on.

Litigation Steps

Information and documents can also be obtained through legal proceedings. Often, these are specifically for the purpose of obtaining information, such as through Mareva injunctions (freezing orders), third-party discovery (Norwich Pharmacal and Bankers Trust orders, subpoenas) or Anton Piller orders. At other times, information may be obtained in legal proceedings through discovery, witness statements, affidavits, etc. 

However, care must be taken as to whether such information can be used in separate enforcement proceedings, as it may be subject to an implied undertaking not to use the information outside of the proceedings unless with the leave of the court or where the information has legitimately entered the public domain.

The following types of judgments are available in proceedings commenced before the Hong Kong courts.

Default Judgment

A plaintiff, having filed and served proceedings in Hong Kong, can apply for default judgment against a defendant where the defendant has, within the prescribed time, either (i) failed to file an acknowledgment of service; or (ii) failed to file a defence. The application for default judgment is made ex parte. Where the claim is for a liquidated sum, it is usually granted on the papers (without a hearing). Where it is for unliquidated damages, the plaintiff can apply for interlocutory damages, with a hearing to be held to assess damages.

Summary Judgment

Summary judgment is a procedure whereby a plaintiff can obtain final judgment against a defendant without proceeding to trial. It is available where the plaintiff can show that the defendant does not have a meritorious defence to the claim. In order to successfully defend a summary judgment application, the defendant would need to show that there are triable issues which can only be resolved at trial. Summary judgments (like final judgments) can be granted for most types of claims, including liquidated and unliquidated damages, declaratory relief, injunctive relief and specific performance. Whilst historically a plaintiff could not apply for summary judgment where its claim was based on allegations of fraud against the defendant, this rule has recently been overturned.

Interim Payment

The court has the power to order that a defendant make an interim payment to the plaintiff pending final determination of proceedings at trial. An order for interim payment may be made where the defendant has admitted liability, the plaintiff has obtained default judgment for unliquidated damages (with damages yet to be assessed) or the court is satisfied that at trial the plaintiff will obtain judgment with substantial compensation awarded. An interim payment order is enforceable in the same manner as a final judgment.

Final Judgment

Final judgments are those obtained following a full trial between the parties. As with summary judgments, final judgments can be obtained for all types of claims.

There are many ways to enforce domestic judgments in Hong Kong. The following are some of the most common and widely used enforcement procedures.

Charging Order and Orders for Sale

A charging order creates a charge/security in favour of the plaintiff over certain of the judgment debtor’s assets (usually real property or securities/shares). A charging order application is made ex parte, supported by affidavit, before a master of the court. If the master is satisfied that the plaintiff has shown cause for a charging order to be granted, the master will make what is known as a charging order nisi (effectively an interim charging order). 

When making the charging order nisi, the court sets the application down for an inter partes hearing at which the judgment debtor has an opportunity to be heard. At this point, the plaintiff must serve the application, including the relevant affidavits and the charging order nisi, on the judgment debtor. If the judgment debtor does not oppose the application, or is unsuccessful in opposing the application, then the court will make what is known as a charging order absolute (ie, a final charging order).

The charging order itself only creates security in favour of the plaintiff. If the judgment debtor continues to fail to make payment on its judgment debt, a plaintiff can commence separate proceedings against the judgment debtor to sell the assets secured by the charging order.

Garnishee Proceedings

In circumstances where a third party is indebted to the judgment debtor, the plaintiff can commence garnishee proceedings against the third party seeking an order that the third party pay its debt directly to the plaintiff instead. Whilst garnishee proceedings are most commonly made in relation to funds standing in a judgment debtor’s bank account(s), they can be made in relation to any debts owed by a third party who is in the jurisdiction of Hong Kong (or has submitted to the jurisdiction).

Similar to a charging order application, a garnishee application is made ex parte, supported by an affidavit, before a master. If the master is satisfied that the plaintiff has shown cause for a garnishee order to be granted, the master will make what is known as a garnishee order nisi (this creates an equitable charge over the debt in favour of the plaintiff). 

When making the garnishee order nisi, the court sets the application down for an inter partes hearing at which the judgment debtor and the third party have an opportunity to be heard. At this point, the plaintiff must serve the application, including the relevant affidavits and the garnishee order nisi, on the judgment debtor and the third party.

If the judgment debtor and third party do not oppose the application, or are unsuccessful in opposing the application, then the court will make what is known as a garnishee order absolute (ie, a final garnishee order). The garnishee order absolute, which needs to be served on the judgment debtor and the third-party garnishee, orders the third-party garnishee to pay its debt to the plaintiff instead of the judgment debtor. If the third party fails to make payment as ordered, then the garnishee order can be enforced against the third party in the same way as an enforceable judgment.

Examination Applications

An examination order requires a judgment debtor to appear before the registrar or other officer of the court to be examined as to what debts are owed by the judgment debtor to the plaintiff and what means/assets the judgment debtor has to pay such debts. The court also has the power to order that the judgment debtor produce books and documents relevant to any of the issues on which it is to be examined. 

The application for an examination order is made ex parte, supported by an affidavit. Once made, the order will provide for a date and time at which the judgment debtor is to appear before the court for examination. If the judgment debtor fails to attend the examination, then the judgment debtor may be arrested and brought before the court for examination.

Alter Ego Proceedings

It is not uncommon for judgment creditors to bring alter ego claims against parties who are either beneficially holding assets for and/or on behalf of a judgment debtor and/or are alleged to be an alter ego of the judgment debtor such that the judgment should be enforced against the third party. Sometimes it may be possible for the judgment creditor to obtain an injunction/freezing order (known as a Chabra injunction) against the third party on the basis that there are assets vested in the third party which may beneficially be the property of the judgment debtor, and which should be frozen pending determination of the claim against the third party.

Appointment of a Receiver by way of Equitable Execution

On the application of a judgment creditor, the Hong Kong court has the power to appoint receivers over a corporate judgment debtor by way of equitable execution. The role of the receiver will be to collect income from and/or liquidate the judgment debtor’s assets with a view to applying this against the judgment debt. The appointment of a receiver is particularly useful where enforcement may be difficult against certain types of assets (eg, receipts from a trust). The court will usually only appoint a receiver by way of equitable execution in circumstances where other enforcement means have been unsuccessful and/or the judgment debtor has been wilfully evading enforcement.

Insolvency/Bankruptcy Proceedings

A judgment creditor is able to commence insolvency proceedings against a judgment debtor (for example, winding-up proceedings against a corporate judgment debtor or bankruptcy proceedings against an individual judgment debtor). Such proceedings are usually preceded by the judgment creditor serving a statutory demand on the judgment debtor, which gives the debtor 21 days within which to pay the debt, failing which the debtor is deemed to be unable to pay its debts. This in turn gives the judgment creditor the basis upon which to present a winding-up/bankruptcy petition (as the case may be) against the judgment debtor. If a winding-up/bankruptcy order is made, then a liquidator/bankruptcy trustee will be appointed over the judgment debtor with a view to investigating the affairs of a judgment debtor and realising the judgment debtor’s assets for the benefit of its creditors. 

Insolvency proceedings may be of a benefit to a judgment creditor in circumstances where it wishes to take advantage of insolvency tools that are not otherwise available to the judgment debtor (eg, investigative tools, claims against directors, unfair preference claims, etc) or there are unlikely to be other substantial creditors proving in the administration (such that the majority of distributions will flow through to the judgment creditor). Insolvency proceedings may be of little benefit to the judgment creditor where there are many significant creditors such that it is unlikely to receive significant distributions from the administration.

The timing and costs of enforcement will vary from case to case. It will be dependent on factors such as the number of enforcement proceedings that the judgment creditor needs to undertake in Hong Kong, whether such proceedings are defended, the court diary and the law firm acting for the judgment creditor. 

Most of the simple uncontested enforcement steps (garnishee/charging orders, order for sale, examination, winding-up/bankruptcy orders, etc) will take three to six months to complete with a budget of USD10,000 to USD15,000 or more. 

An uncontested application for the appointment of a receiver by way of equitable execution can be concluded quite quickly (in a matter of weeks from the beginning of preparation until the order is made) but is likely to be considerably more expensive given the complexity and amount of evidence and submissions required to secure an order. Alter ego claims are likely to take longer to conclude (six months or more if uncontested and 12 to 18 months or more if contested) and are also likely to be more expensive due to their complexity.

Whilst an uncontested winding-up/bankruptcy order is likely to only take several months to obtain, the administration itself may last a number of years depending on the level of investigations and recoveries required.

Most of the procedures for determining what assets the judgment debtor holds are the same as those outlined in 1.1 Options to Identify Another Party’s Asset Position.

Of these procedures, some that are commonly brought post-judgment include:

  • examination orders;
  • ancillary discovery orders on Mareva injunctions (freezing orders);
  • insolvency proceedings, in which the liquidator/trustee uses its investigative powers to identify, locate and secure assets of the judgment debtor.

In addition, Hong Kong courts have the power to issue letters of request to the courts of foreign jurisdictions, requesting that discovery be provided by the judgment debtor or third parties in those jurisdictions in aid of the enforcement proceedings in Hong Kong.

In Hong Kong, the Rules of the High Court set out detailed procedures pursuant to which final judgments and summary judgments may be appealed. Generally, an appeal does not operate as an automatic stay of execution of the judgment. An appellant can apply for a stay of execution pending appeal, but must demonstrate that good reasons exist – otherwise it will not be ordered. Strong grounds of appeal are usually by themselves sufficient to warrant a stay. If the grounds of appeal are only arguable, then the appellant must provide additional good grounds, such as that the appeal would be rendered nugatory if a stay were not granted.

The following may be grounds, amongst others, under which the enforcement of a domestic judgment can be challenged or set aside:

  • the Hong Kong court did not have jurisdiction to determine the dispute;
  • there was an irregularity in the service of the proceedings, a failure to serve the proceedings altogether or the defendant was not in the jurisdiction when the proceedings were served at the defendant’s usual or last known address;
  • the default judgment was obtained against the defendant prematurely, namely before the time for filing an acknowledgement of service or defence had expired;
  • the judgment was obtained by fraud.

Generally, there are no unenforceable domestic judgments (other than those described in 2.5 Challenging Enforcement of Domestic Judgments which have been successfully appealed, set aside or in respect of which a stay of execution (interim or permanent) has been granted).

There is no central register of judgments in Hong Kong. There are, however, means of searching for some judgments in Hong Kong (noting that many judgments will not be found through such means).

A party can conduct a litigation search at the relevant courts; however, this will only identify whether a certain entity or individual is a party to (or has been a party to) legal proceedings in Hong Kong. Non-parties to a proceeding do not have the right to inspect the court file.

A party can also search for reported and unreported judgments/decisions on platforms such as the Hong Kong Judiciary website, the Hong Kong Legal Information Institute and legal subscription platforms, but this will only disclose judgments handed down on published written decisions. Most default judgments won’t appear through such searches. Summary judgments, interim orders and final judgments will only appear if the judge/master has issued a written decision which has been published on one or more of these platforms.

Hong Kong is not a party to any international treaties relating to the enforcement of foreign judgments. However, foreign judgments are enforceable in Hong Kong, either under certain legislation or at common law.

Legislation

The legislation under which foreign judgments can be enforced (or more accurately, registered as domestic judgments) in Hong Kong is as follows.

  • The Foreign Judgments (Reciprocal Enforcement) Ordinance (FJREO). Only Judgments from select countries (Australia, Austria, Belgium, Bermuda, Brunei, France, Germany, India, Israel, Italy, Malaysia, the Netherlands, New Zealand, Singapore, Sri Lanka) are capable of being domesticated under the FJREO.
  • The Mainland Judgments (Reciprocal Enforcement) Ordinance (MJREO), which allows for the registration of certain judgments obtained in the courts of the People’s Republic of China (PRC).

Both the FJREO and MJREO set out the grounds under which foreign judgments can be registered, as well as the grounds under which the registration can be set aside (see 3.2 Variations in Approach to Enforcement of Foreign Judgments and 3.5 Costs and Time Taken to Enforce Foreign Judgments, respectively).

Common Law

Foreign judgments which are not capable of being of being registered under the FJREO or MJREO can be domesticated under common law by commencing fresh proceedings in Hong Kong suing on the foreign judgment, and subsequently obtaining a Hong Kong judgment in those proceedings.

Hong Kong’s approach to enforcement varies for different types of judgments, as follows.

FJREO

  • Judgments from the prescribed countries (see 3.1 Legal Issues concerning Enforcement of Foreign Judgments) can be registered under the FJREO provided that the following conditions, amongst others, are met:
  • the judgment, being for a sum of money (other than a sum payable in respect of taxes), is final and conclusive between the parties;
  • the application for registration must be made within six years after the date of the original judgment;
  • the judgment has not been wholly satisfied;
  • the judgment is capable of being enforced by execution in the country of the original court;
  • if the judgment has been partially satisfied, the judgment shall not be registered in respect of the whole sum payable under the judgment, but only in respect of the balance remaining payable at that date;
  • where the judgment is registered in a currency other than Hong Kong dollars, the judgment shall be registered for a sum in Hong Kong dollars on the basis of the prevailing exchange rate as of the date of registration, equivalent to the sum payable in the judgment.

MJREO

Judgments from the PRC can be registered under the MJREO provided that the following conditions, amongst others, are met:

  • the judgment, being for a sum of money (other than a sum payable in respect of taxes), is final and conclusive between the parties and is in relation to a dispute arising out of a commercial contract between the parties;
  • the underlying contract between the parties must contain a Choice of Mainland Court agreement, meaning an agreement specifying the courts in the Mainland, or any of them, as the court to determine a dispute arising in respect of the contract to the exclusion of the courts of other jurisdictions;
  • the judgment must be from a designated court (Supreme People’s Court or a first-instance judgment given by a Higher People’s Court, an Intermediate People’s Court or a recognised Primary People’s Court);
  • the judgment is enforceable in the Mainland;
  • there is a limitation period of two years, which is calculated from the last day of the period for performance of the judgment as specified in the judgment or, in any other case, from the date on which the judgment takes effect.

In January 2019 Hong Kong and the PRC also signed 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 SAR (the “Arrangement”). The Arrangement, which has yet to come into effect, is intended to widen the scope of PRC judgments that can be registered in Hong Kong, and vice versa.

Some of the key features of the Arrangement are as follows.

  • Removal of the exclusive jurisdiction requirement in the contract.  Instead, the party seeking recognition will need to establish a jurisdictional basis in respect of the requesting court – eg, by showing that the judgment debtor has a place of residence or place of business, or that the contract was performed or the tort took place, in the requesting jurisdiction.
  • Expansion of the types of judgments that can be registered.  Monetary as well as non-monetary judgments arising from both civil and commercial contracts will covered unless expressly excluded.
  • Recognition of judgments made by lower courts in the PRC.

Common Law

Foreign judgments that are not capable of being registered under the FJREO or the MJREO are capable of being domesticated in Hong Kong under common law, provided that the judgment is a final and conclusive monetary judgment (for a fixed sum of money).

As mentioned in 3.2 Variations in Approach to Enforcement of Foreign Judgments, under the FJREO and MJREO, only final and conclusive monetary judgments are registerable. In addition, the MJREO is also limited to the registration of commercial judgments (although this will be expanded under the Arrangement when it comes into effect). Further, the Arrangement will expressly exclude judgments relating to, amongst others, insolvency (corporate insolvency, restructuring and personal bankruptcy), certain matrimonial matters and certain maritime matters.

Foreign judgments domesticated under common law must be for final and conclusive monetary judgments. Other types of judgments are not enforceable under common law.

The procedure for registering foreign judgments under the FJREO and MJREO are largely similar. Applications for registration are made ex parte by way of a supporting affidavit and draft order. The affidavit must exhibit the foreign judgment (and a certified translation if the judgment is not in English). The court will usually make an order registering the judgment on the papers, but if the court wishes to be heard it can exercise its discretion to order that a summons be issued to determine the application. 

If granted, the court will make an order granting leave to register the foreign judgment. The order, which contains a time period within which the judgment debtor can apply to set aside the order, will need to be personally served on the judgment debtor. If no set-aside application is made, the judgment creditor can proceed to enforce the domesticated judgment. 

Common law domestication takes place by the judgment creditor commencing fresh proceedings suing on the foreign judgment. If the judgment debtor fails to file an acknowledgement of service or a defence, then the judgment creditor can apply for default judgment. If the judgment debtor does file an acknowledgment of service, then the plaintiff will normally file an application seeking summary judgment.

Domesticating foreign judgments through the FJREO or MJREO can take two to four months if uncontested. At common law it will take two to three months to obtain default judgment and three to four months to obtain an uncontested summary judgment. It may take up to 12 months (or more) to obtain a summary judgment if the application is contested.

Please see 2.3 Costs and Time Taken to Enforce Domestic Judgments for timing and costs of varied enforcement steps once a foreign judgment has been registered in Hong Kong.

Each of the FJREO, the MJREO and the common law has their respective grounds upon which a domesticated foreign judgment can be set aside, although there is considerable overlap between them.

FJREO

The grounds upon which a foreign judgment registered under the FJREO can be set aside are as follows:

  • the judgment was not one which was capable of being registered under the FJREO (for example, it was not a final and conclusive monetary judgment);
  • the foreign court granting the judgment had no jurisdiction;
  • the judgment debtor did not receive notice of the foreign proceedings in sufficient time to enable it to defend the proceedings and did not appear (notwithstanding that process may have been duly served on it in accordance with the law of the original court);
  • the judgment was obtained by fraud;
  • the enforcement of the judgment is contrary to public policy in Hong Kong;
  • the rights under the judgment are not vested in the party applying for registration;
  • the limitation period for registering the foreign judgment under the FJREO has passed.

MJREO

The grounds upon which a foreign judgment registered under the MJREO can be set aside are as follows:

  • the judgment is not a Mainland judgment which satisfies the requirements of the MJREO;
  • the judgment has been registered in contravention of the MJREO;
  • the relevant Mainland court agreement is invalid under the law of the Mainland unless the original court has determined the agreement is valid;
  • the judgment has been wholly satisfied;
  • the courts in Hong Kong have exclusive jurisdiction over the case according to Hong Kong law;
  • the judgment debtor did not appear in the original court to defend the proceedings and (i) was not summoned to appear or (ii) was summoned, but was not given sufficient time to defend the proceedings, according to Mainland law;
  • the judgment was obtained by fraud;
  • a judgment has been given by a court in Hong Kong, or an arbitral award has been made by an arbitration body in Hong Kong, on the same cause of action between the parties;
  • the enforcement of the judgment is contrary to public policy in Hong Kong;
  • the judgment has been reversed or otherwise set aside pursuant to an appeal or retrain under Mainland law;
  • the limitation period for registering the Mainland judgment under the MJREO has passed.

Common Law

The grounds upon which a foreign judgment domesticated under common law in Hong Kong can be set aside are as follows:

  • the foreign proceedings in which the judgment was made offend against Hong Kong’s notions of substantial or natural justice;
  • the enforcement of the foreign judgment would be contrary to Hong Kong’s notions of public policy;
  • the foreign judgment was obtained by fraud;
  • there has been a previous conflicting Hong Kong judgment on the same subject matter as the foreign judgment;
  • the foreign court did not have jurisdiction over the proceedings;
  • the time limit (six years) for domesticating the foreign judgment under common law had passed when the proceedings in Hong Kong were commenced.

Hong Kong is considered to be a pro-arbitration and pro-arbitral award enforcement jurisdiction. 

The Hong Kong Arbitration Ordinance (HKAO) sets out the grounds upon which an arbitral award can be registered as a judgment and enforced in Hong Kong. The HKAO does not distinguish between domestic and foreign awards, but does divide arbitral awards into four different categories (jointly, “Awards”), as follows:

  • Convention awards (awards made in states or territories that are a party to the New York Convention, other than China); 
  • Mainland awards (awards made in any part of China other than Hong Kong, Macau and Taiwan);
  • Macao awards;
  • other awards (awards made in Hong Kong and Taiwan and other arbitral awards that are not Convention awards.

In general, Awards are enforceable in Hong Kong in the same manner as a judgment of the court, but only with the leave of the court. If leave is granted, the award is registered as a domestic judgment in Hong Kong in terms of the Awards and can be enforced in the usual manner. A Convention award can also be enforced by bringing an action in the court, although the preferred manner is to proceed by way of ex parte application seeking leave to enforce.

A wide body of case law has built up in relation to the enforcement of Awards in Hong Kong under the HKAO, the basic principles of which have been conveniently summarised in one case (KB v S [2016] 2 HKC 325) as follows.

  • The primary aim of the court is to facilitate the arbitral process and to assist with the enforcement of Awards.
  • Under the HKAO, the court should interfere in the arbitration of the dispute only as expressly provided for in the HKAO.
  • Subject to the observance of the safeguards that are necessary in the public interest, the parties to a dispute should be free to agree on how their dispute should be resolved.
  • Enforcement of Awards should be “almost a matter of administrative procedure” and the courts should be “as mechanistic as possible”.
  • The courts are prepared to enforce Awards except where complaints of substance can be made good. The party opposing enforcement has to show a real risk of prejudice and that its rights have been violated in a material way.
  • In dealing with applications to set aside an Award, whether on the grounds of not having been given notice of the arbitral proceedings, inability to present one’s case, or that the composition of the tribunal or the arbitral procedure was not in accordance with the parties’ agreement, the court is concerned with the structural integrity of the arbitration proceedings. In this regard, the conduct complained of “must be serious, even egregious”, before the court would find that there was an error sufficiently serious as to have undermined due process.
  • In considering whether or not to refuse enforcement of the Award, the court does not look into the merits or at the underlying transaction.
  • Failure to make prompt objection to the tribunal or the supervisory court may constitute estoppel or want of bona fide.
  • Even if sufficient grounds are made out either to refuse enforcement or to set aside an Award, the court has a residual discretion and may nevertheless enforce the Award despite the proven existence of a valid ground.
  • Parties to the arbitration have a duty of good faith, or to act bona fide.

The time limit for applying for the recognition and enforcement of an Award is six years (for standard contracts) or 12 years (for a contract executed under seal).

Notwithstanding the division of Awards into the four categories listed in 4.1 Legal Issues concerning Enforcement of Arbitral Awards, the grounds and procedures on which each category of Awards is enforceable in Hong Kong are largely the same.

There are no categories of Awards that will not be enforced in Hong Kong.  However, there are grounds upon which Awards registered as judgments in Hong Kong may be challenged/set aside (see 4.6 Challenging Enforcement of Arbitral Awards).

An application seeking leave to enforce an Award is made ex parte, supported by an affidavit. Applications are often determined on the papers, without the need for a hearing. However, the court has the discretion to direct that a summons be issued if the court considers it appropriate for the award debtor to be heard.

The affidavit in support of the application must make full and frank disclosure of all information relevant to the application (including the existence of any proceedings to set aside the Award) and must exhibit:

  • the duly authenticated original Award or a duly certified copy of it;
  • the original arbitration agreement or a duly certified copy of it; and
  • if the Award or agreement is not in both/either English and/or Chinese, a certified translation of the Award in either language.

Once leave to enforce is granted, the order granting leave must be personally served on the Award debtor. The Award may be enforced 14 days after service of the order, unless within the same period the Award debtor makes an application to set aside the order. That said, if such an application is made, the court does have the power to adjourn the proceedings for the enforcement of the Award.

The Hong Kong court normally moves quickly in granting ex parte leave to enforce an Award (this can happen even in a matter of days). Depending on the time taken to serve the order granting leave (and whether service is required to take place outside of the jurisdiction of Hong Kong), and assuming no application is made to set aside the order, the Award can become enforceable (14 days after service) in as little as three weeks but also anywhere up to several months. 

The costs of a simple uncontested application for leave to enforce will vary depending on a number of factors, but a standard application could cost in the vicinity of USD10,000 to USD15,000 depending on whether the Award is a domestic or foreign one. Foreign Awards are likely to cost more given potential translation costs and the need to serve outside of the jurisdiction of Hong Kong.

Please see 2.3 Costs and Time Taken to Enforce Domestic Judgments for timing and costs of varied enforcement steps once the Award has become enforceable in Hong Kong.

An Award granted by a Hong Kong seated arbitration tribunal under the HKAO is generally final with no automatic right of appeal. The parties to an arbitration agreement may opt in to certain provisions under the HKAO, such as the right to challenge the Award on the grounds of serious irregularity or to appeal against the Award on a question of law. However, it should be noted that the Hong Kong courts have held that the circumstances under which such challenges and appeals will be allowed are narrow.

As mentioned in 4.5 Costs and Time Taken to Enforce Arbitral Awards, if an Award debtor wishes to make an application to set aside the order granting leave to enforce, then the Award debtor has 14 days from service of the order to do so (although the court does have the power to grant an extension of time to make the application). In considering an application to set aside an order granting leave to enforce, the court will have regard to the principles outlined in 4.1 Legal Issues concerning Enforcement of Arbitral Awards.

The grounds on which the court may set aside an order granting leave to enforce include that:

  • a party to the arbitration agreement was under some incapacity;
  • the arbitration agreement was not valid (i) under the law to which the parties subjected it or (ii) (if there was no indication of the law to which the arbitration agreement was subjected) under the law of the country where the Award was made;
  • the Award debtor was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was otherwise unable to present its case;
  • the Award deals with a difference not contemplated by or falling within the terms of, or contains decisions on matters beyond the scope of, the submission to arbitration;
  • the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or (if there was no agreement) the law of the country where the arbitration took place;
  • the Award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made;
  • the Award is in respect of a matter which is not capable of settlement by arbitration in Hong Kong, or it would be contrary to public policy to enforce the Award.

There may also be means for the Crown or sovereign states to resist enforcement based upon grounds of Crown or sovereign immunity.

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Georgiou Payne Stewien LLP is a leading law firm based in Hong Kong specialising in dispute resolution, transactions and projects across the Asia Pacific region. GPS Legal has a judgment/award enforcement and asset recovery group which includes lawyers who predominantly practise in this area. The firm acts for clients in asset recovery matters, including the recognition and enforcement of local and foreign judgments and international arbitral awards. It devises and manages case strategies with a particular focus on investigating, identifying, tracing, and recovering assets, as well as implementing the use of creative non-litigation techniques to create settlement leverage, with the paramount objective of maximising recovery cost-effectively and expediently. The firm’s team includes solicitor advocates with higher rights of audience who can simultaneously advise clients and appear before the Hong Kong courts. This allows it to provide streamlined and agile representation to obtain urgent judicial relief in critical situations where assets are at high risk of dissipation or removal from the jurisdiction of Hong Kong.

Clearly one of the hot topics in Hong Kong at the moment is the reciprocal enforcement of judgments between Hong Kong and the People’s Republic of China (also known in Hong Kong as the Mainland).

The Mainland Judgments (Reciprocal Enforcement) Ordinance (MJREO) has been in force in Hong Kong for some time, but it does have its detractors. One of the major criticisms is that only limited judgments are enforceable under the MJREO, and thus the ordinance is not truly judgment creditor friendly. Whilst Mainland judgments which are not enforceable under the MJREO can still be domesticated under common law (involving the commencement of proceedings in Hong Kong in which the Mainland judgment is sued upon), common law domestication is more costly and time-consuming. If the judgment creditor is unable to obtain default judgment, then additional time and costs need to be spent on a summary judgment application.

As referenced in the Hong Kong chapter of the guide, in January 2019 Hong Kong and the PRC signed 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 SAR (the “Arrangement”). The Arrangement, which has not yet been enacted as law and thus is not yet in force, aims to address some of the issues that have arisen as a result of the MJREO.

This trends and developments article looks at a recent decision in Hong Kong relating to the MJREO (which highlights an issue in relation to the current format of the MJREO) and the pathway to the enactment of the Arrangement.

Recent Decision – Beijing Real Estate Development Group

In Beijing Real Estate Development Group Co, Ltd v Zhu Min (2022) HKCFI 1027, the plaintiff applied for and obtained registration of a Mainland judgment under the MJREO in Hong Kong. The MJREO allows for registration of a Mainland judgment in Hong Kong if the contract on which the judgment was obtained contains an agreement specifying the courts in the Mainland, or any other of them, as the court to determine a dispute relating to the contract, to the exclusion of other courts. 

The Mainland judgment was obtained on the back of a partnership agreement executed in Beijing and subsidiary guarantees provided by the defendant and another guarantor. The partnership agreement contained a dispute resolution clause (specifying the People’s Court where the contract is signed as the court to determine disputes), but the guarantee contained no dispute resolution clause at all. Nevertheless, the Intermediate People’s Court in Beijing dismissed a jurisdictional challenge, holding that the dispute resolution clause under the partnership agreement applied to the guarantee on the basis that the guarantee was a contract subordinate or subsidiary to the partnership agreement.     

The Hong Kong High Court agreed that the dispute resolution clause in the partnership agreement also applied to the dispute between the plaintiff and the defendant under the guarantee. However, it ruled that the Mainland judgment was not registrable in Hong Kong under the MJREO on the basis that the guarantee, while a written agreement between the parties, did not itself contain any provision specifying the courts in the Mainland as the courts with jurisdiction to resolve their disputes. However, the court did find that there was a good arguable case that the judgment could be enforced by the plaintiff at common law, and thus allowed an injunction previously obtained in aid of the Mainland judgment to stand on this basis.

The decision highlights the limits that are imposed by the exclusive jurisdiction clause requirement. The Foreign Judgments (Reciprocal Enforcement) Ordinance (FJREO), which also has limited use given it is only applicable to judgments obtained in 15 countries, does not require the existence of a jurisdiction clause (let alone an exclusive one). In fact, judgments registrable under the FJREO are not limited to those arising out of commercial contracts. Subject to a few requirements, any monetary judgments from the 15 countries that are final and conclusive are generally registrable under the FJREO. It was simply the failure to have the necessary exclusive jurisdiction clause in the guarantee that caused it to fall outside the MJREO (notwithstanding its being subordinate/subsidiary to an agreement which did fall within the MJREO).

This decision also highlights the importance of parties and their lawyers giving consideration to judgment enforcement well before judgment is obtained, particularly when dealing with Mainland judgments that are likely to be enforced in Hong Kong and vice versa.

Whilst the plaintiff in this case ultimately retained the protection it had obtained through the injunction, many of the issues argued in this case (and the time and costs associated with it) could have been avoided by ensuring that a proper jurisdiction clause was included in the guarantee.

Whilst parties to a transaction don’t usually contemplate what is hoped to be a profitable venture ending up in litigation and enforcement of a judgment, it is important that they do prepare for the worst and think about a recovery strategy well before any dispute arises. Some of the protective measures that can be considered are as follows.

  • Ensuring that the jurisdiction and dispute resolution clauses are tailored to the parties to the contract. Whilst it may be necessary, or preferable, to litigate in a certain jurisdiction, in many circumstances there will be a need to enforce outside that jurisdiction. The dispute resolution clause should be drafted to take this into account. Taking the time to perform due diligence on the counterparties to a contract not only helps from a commercial point of view, but may influence the dispute resolution clause itself.
  • Dispute resolution clauses do not need to be a “one size fits all” across the transaction documents. It should be considered whether it is necessary to include jurisdiction clauses in ancillary documents (such as guarantees, security documents, etc) which are different to those in the principal agreement. Guarantors and secured assets may be located in other jurisdictions, so it is worth considering whether adjustments need to be made to account for this.
  • The due diligence process undertaken when negotiating a transaction (which can be periodically updated even after the transaction documents have been signed) can help in getting a head start on any enforcement steps. It may be possible to take advantage of the intelligence gained during due diligence to apply to freeze assets pre-judgment or find leverage points (either pre or post-judgment) to bring the counterparties to the negotiating table. Some of the most successful enforcement strategies do not involve enforcing directly against assets, but rather taking aggressive steps to elicit voluntary payment from the debtor.

Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong SAR

Frustratingly, the Arrangement, despite being signed between Hong Kong and the Mainland in 2019, has not yet come into force as it still has not been enacted as law in Hong Kong. However, there is some light at the end of the tunnel in that the bill, through which the law will be enacted, was gazetted in April this year and presented to the Legislative Council on 4 May. It is hoped that the bill will become law this year.

The main features of the Agreement, which is intended to improve upon and expand the scope of the MJREO, are as follows.

  • The exclusive jurisdiction clause, which proved problematic in the Beijing Real Estate decision, will be removed. It will be enough for the judgment creditor to show that the Mainland court in which the judgment was obtained had jurisdiction over the underlying proceedings – for example, the judgment debtor resided, or had a place of business, in the jurisdiction, or that the contract was performed or the tort took place in the jurisdiction.
  • Both monetary and non-monetary judgments will be enforceable. This is actually an improvement when compared to registration under the FJREO, or enforcement at common law, both of which are limited to monetary judgments.
  • At present, the MJREO is limited to commercial judgments. Under the Arrangement, both commercial and civil judgments will be enforceable.
  • The MJREO is limited to certain higher courts in the Mainland. Under the Arrangement, judgments made by the lower courts will also be enforceable.
  • Judgments involving intellectual property rights will also be enforceable under the Arrangement.

The Arrangement also sets out mandatory grounds on which an application for recognition and enforcement will be refused, which include that:

  • the judgment debtor was not properly summoned under the law of the requesting jurisdiction, or if summoned, was not given a reasonable opportunity to make representations or defend their case;
  • the judgment was obtained by fraud;
  • the Hong Kong court considers that the recognition and enforcement of the Mainland judgment is manifestly contrary to the basic legal principles of Hong Kong law or the public policy of Hong Kong.

On any multi-jurisdictional judgment enforcement matter, it is important that a judgment creditor is able to enforce simultaneously in multiple jurisdictions. The Arrangement allows for simultaneous enforcement in Hong Kong and the Mainland, provided the judgment debtor has assets in both jurisdictions. 

The legal community in Hong Kong is looking forward to the Arrangement becoming law. With Hong Kong having become a part of the developing Greater Bay Area in southern China, enhanced co-operation on the judgment enforcement front is being welcomed.

Georgiou Payne Stewien LLP

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Law and Practice

Authors



Georgiou Payne Stewien LLP is a leading law firm based in Hong Kong specialising in dispute resolution, transactions and projects across the Asia Pacific region. GPS Legal has a judgment/award enforcement and asset recovery group which includes lawyers who predominantly practise in this area. The firm acts for clients in asset recovery matters, including the recognition and enforcement of local and foreign judgments and international arbitral awards. It devises and manages case strategies with a particular focus on investigating, identifying, tracing, and recovering assets, as well as implementing the use of creative non-litigation techniques to create settlement leverage, with the paramount objective of maximising recovery cost-effectively and expediently. The firm’s team includes solicitor advocates with higher rights of audience who can simultaneously advise clients and appear before the Hong Kong courts. This allows it to provide streamlined and agile representation to obtain urgent judicial relief in critical situations where assets are at high risk of dissipation or removal from the jurisdiction of Hong Kong.

Trends and Development

Authors



Georgiou Payne Stewien LLP is a leading law firm based in Hong Kong specialising in dispute resolution, transactions and projects across the Asia Pacific region. GPS Legal has a judgment/award enforcement and asset recovery group which includes lawyers who predominantly practise in this area. The firm acts for clients in asset recovery matters, including the recognition and enforcement of local and foreign judgments and international arbitral awards. It devises and manages case strategies with a particular focus on investigating, identifying, tracing, and recovering assets, as well as implementing the use of creative non-litigation techniques to create settlement leverage, with the paramount objective of maximising recovery cost-effectively and expediently. The firm’s team includes solicitor advocates with higher rights of audience who can simultaneously advise clients and appear before the Hong Kong courts. This allows it to provide streamlined and agile representation to obtain urgent judicial relief in critical situations where assets are at high risk of dissipation or removal from the jurisdiction of Hong Kong.

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