Supplemental Arrangement to Mutual Enforcement of Arbitral Awards Between the Mainland and Hong Kong Special Administrative Region

On November 27, 2020, the Supreme People’s Court of China (SPC) and the Hong Kong Special Administrative Region (Hong Kong SAR) government signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR (the Supplemental Arrangement). The Supplemental Arrangement contains only four substantive provisions. Nevertheless, these provisions offer important clarifications and improvements to the current mechanism for mutual enforcement of arbitral awards between Mainland China and Hong Kong. 

Brief overview of the current regime

Following the resumption of sovereignty over Hong Kong in July 1997, China extended the territorial application of the New York Convention¹ to Hong Kong so that Hong Kong arbitral awards continue to be enforceable in other New York Convention states (as had been the case before July 1997). However, given that Hong Kong is now part of China, the New York Convention does not apply as between the Mainland and Hong Kong.

To address this lacuna, the SPC and the Hong Kong SAR government entered into the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong SAR, which came into effect on February 1, 2000 (the 2000 Arrangement) and provides for mutual enforcement of arbitral awards between the two jurisdictions on terms largely replicating the New York Convention.

A further milestone in the cross-border enforcement mechanism was achieved more recently with 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 SAR (Interim Measures Arrangement) coming into effect on October 1, 2019. Whereas Hong Kong courts have long had powers under the Arbitration Ordinance (Cap 609) to grant interim relief in aid of arbitral proceedings outside Hong Kong, Mainland courts did not have similar power to grant interim relief in aid of arbitrations seated outside the Mainland. Pursuant to the Interim Measures Arrangement, parties to arbitral proceedings in Hong Kong administered by recognized arbitral institutions² may apply for interim measures before Mainland courts. The interim measures obtainable include orders for property preservation, evidence preservation, and conduct preservation.

The Supplemental Arrangement

The Supplemental Arrangement brings about four significant clarifications or improvements to the preexisting regime.

Article 1 clarifies that “enforcement” of Hong Kong or Mainland arbitral awards under the 2000 Arrangement shall be interpreted to include both “recognition and enforcement” of such awards. Unlike the New York Convention which provides that “[e]ach 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” (emphasis added), the 2000 Arrangement did not expressly refer to “recognition” of arbitral awards. This gave rise to uncertainty as to whether a separate “recognition” step was required before an award could be enforced under the 2000 Arrangement. The Supplemental Arrangement provides welcome clarification in this regard.

Article 2 broadens the scope of Mainland arbitral awards that can be enforced in Hong Kong. Under the 2000 Arrangement, an arbitral award made in Mainland China would be enforceable by Hong Kong courts only if the administering arbitral authority were listed by the Legislative Affairs Office of the State Council as a recognized arbitral authority. Pursuant to the Supplemental Arrangement, as long as the arbitral award is rendered pursuant to the PRC Arbitration Law, it can be recognized and enforced in Hong Kong under the existing arrangements.

Under Article 3, parties to a Hong Kong or Mainland arbitration can simultaneously apply for enforcement of the arbitral award in both Hong Kong and Mainland courts. By contrast, the 2000 Arrangement did not permit simultaneous enforcement actions. This presented challenges to award creditors, who had to choose where to bring an enforcement action, even if the award debtor had assets in both jurisdictions. In one extreme case, an award creditor fought a protracted fight before the Mainland courts to enforce the award, but to no avail. When the applicant finally abandoned those efforts and brought fresh enforcement action in Hong Kong after over six years, the action was by then time-barred.³ The Supplemental Arrangement alleviates the harshness of the either-or approach under the 2000 Arrangement.

Article 4 clarifies that courts in both jurisdictions may grant preservation or mandatory measures postaward. Whereas Hong Kong courts already have the power to do so under the Arbitration Ordinance (Cap. 609), this amendment strengthens the Interim Measure Arrangements by enabling Mainland courts to similarly order interim measures after an award is made in Hong Kong. In other words, a Hong Kong award creditor may apply to the competent Mainland court⁴ for preservation measures before an enforcement action is formally instituted. This will no doubt enhance the prospects of successful enforcement of a Hong Kong award in Mainland China.

Articles 1 and 4 came into effect immediately following execution of the Supplemental Arrangement, while Articles 2 and 3 will become effective only upon the Hong Kong SAR’s completion of the requisite local legislative procedure.

The Supplemental Arrangement is a timely and welcome development that strengthens the mutual legal assistance regime between Mainland China and Hong Kong. It is poised also to further bolster Hong Kong’s status as an international arbitration hub and preferred seat of arbitration for resolving China-related disputes.

¹ The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention. 

²There are currently six such institutions according to the Hong Kong Department of Justice’s gazette list, including the Hong Kong International Arbitration Centre, China International Economic and Trade Arbitration Commission, Hong Kong Arbitration Center, and the International Court of Arbitration of the International Chamber of Commerce – Asia Office.

³CL v. SCG [2019] 2 HKLRD 144.

⁴This is usually the intermediate people’s court of the place of residence of the party against whom the  application is made or the place where the property is situated.