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Hong Kong and Mainland China Will Start Implementing the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards
On 27 November 2020, the Supreme People’s Court of the People’s Republic of China (PRC) and the Department of Justice of the government of the Hong Kong Special Administrative Region (HKSAR) signed the “Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (the Supplemental Arrangement). The Supplemental Arrangement is the additional and supportive amendment of existing arrangement regarding the mutual enforcement of arbitral award between PRC and HKSAR called The Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (the 1999 Arrangement).
The 1999 Arrangement was signed in June 1999 and came into force in February 2000. This agreement is a framework to enforce the arbitral awards made in Hong Kong in PRC, and vice versa, the arbitral awards made in PRC will be able to enforce in Hong Kong. The Supplemental Arrangement introduced only 4 provisions, but they were made to clarify important issues, including the updated mechanism on mutual enforcement of arbitral awards between PRC and Hong Kong.
There are 4 important updates including:
Article 1 clarifies that the enforcement of arbitral awards under the 1999 Arrangement shall be interpreted to cover both recognition and enforcement of arbitral awards, as the 1999 Arrangement did not include the recognition procedures expressly in writing. Therefore, the clarification on the enforcement of the arbitral awards in this Supplement Agreement will be consistent with Article 3 of the New York Convention that reads, “Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon”.
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This amendment came into immediate effect on 27 November 2020.
Article 2 is the extension of the arbitral award enforcement regime in PRC that the award will be enforceable in Hong Kong. This amendment was made because, under the 1999 Arrangement, the arbitral awards that were made in PRC would only be enforceable by Hong Kong court if the arbitral authorities that delivered the awards were listed as recognized Mainland arbitral authorities by the prescribed list of the Legislative Affairs Office of the State Council. The article made under the Supplemental Arrangement now stated that as long as the arbitral award is rendered according to the PRC Arbitration Law, it can be recognized and enforced in Hong Kong under the laws.
Therefore, pursuant to this Supplement Arrangement, all Hong Kong arbitral awards (whether it is an intuitional or Ad Hoc arbitration) will be enforceable within PRC. On the other hand, the PRC arbitral awards will also be enforceable in Hong Kong, which will align with the New York Convention.
Article 3 is an amendment to Article 2 (3) of the 1999 Arrangement; thus, the parties will be able to file for award enforcement to both Hong Kong and PRC courts simultaneously. Moreover, the amendment also prescribed the procedures for the courts from both countries to exchange the status of the enforcement of an arbitral award because Article 2 (3) of the 1999 Arrangement did not allow the parties to file for the application on both courts at the same time. Thus, the creditor of the award had to choose only one place to enforce the award even though the debtor had the properties within both court jurisdictions. Had the award enforcement was prolonged or unsuccessful, the debtor would not be able to apply for enforcement in the other court because of the expiry of the limitation periods for award enforcement (2 years in PRC and 6 years in Hong Kong). The elimination of this restriction is crucial and will facilitate the creditors greatly now that they no longer have to choose between PRC or Hong Kong court to enforce the awards.
Article 4 of the Supplemental Arrangement confirms the power of both countries’ courts to impose preservation or mandatory measures before or after accepting the application for enforcement of an arbitral award. This article came into immediate effect on 27 November 2020. This amendment is a development relevant to the interim measures in the previous arrangement called the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings, which were made by the Courts of the Mainland and the HKSAR. This is an assurance that there will always be interim measures available throughout the entire lifespan of arbitration, including prior to the commencement of the proceedings.
The Supplement Arrangement came into immediate effect within PRC. In Hong Kong, the Article 1 and 4 also came into immediate effect, while the Article 2 and 3 will come into effect once there is an amendment to Arbitration Ordinance.
Reference:
- https://www.allenovery.com/en-gb/global/news-and-insights/publications/supplemental-arrangement-concerning-mutual-enforcement-of-arbitral-awards-between-hong-kong-and-the-mainland
- https://www.sidley.com/en/insights/newsupdates/2020/12/supplemental-arrangement-to-mutual-enforcement-of-arbitral-awards-between-the-mainland-and-hksar
- https://www.mayerbrown.com/en/perspectives-events/publications/2020/12/mainland-china-and-hong-kong-sar-enhance-arrangement-concerning-mutual-enforcement-of-arbitral-awardshttps://www.info.gov.hk/gia/general/202011/27/P2020112700696.htm
- [1] New York Convention 1958. Article III “Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon”
