As a Hong Kong Arbitration lawyer, we deal with a lot of cases about application for enforcement of Mainland Arbitration Awards in Hong Kong. This Article will introduce briefly about the practice of enforcing Mainland Arbitration Awards in Hong Kong.
After Hong Kong reunification, the economic tie between Hong Kong and Mainland China becomes more closer and stronger, the need for enforcement of cross border Arbitration Awards is more frequent. Then, how can an AA issued by Mainland Arbitration Authority be enforced in Hong Kong?
Legal principle for enforcing MainlandArbitration Awards in Hong Kong
Before Hong Kong reunification, China and the United Kingdom (Hong Kong was British colony and a part of the UK back then) are the contract parties of the New York Convention, and therefore the principle of recognizing the other side’s Arbitration Awards is based on the New York Convention. After Hong Kong reunification, due to the change of Hong Kong’s sovereignty, New York Convention no longer applies in Hong Kong. The replacement is the “Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (“Arrangement”) signed between Mainland China and Hong Kong, it becomes the base of mutual enforcement of Arbitration Awards between Mainland China and Hong Kong.
However, under the Hong Kong legal system, any treaty signed with foreign body (including judicial arrangement signed with Mainland China) does not have direct legal authority and can only become applicable law after passing the relevant local legislation in Hong Kong. In this aspect, the Hong Kong local law, Arbitration Ordinance (Chapter 609), is the local legislation adopting the Arrangement. Section 92 – 98 of Division 3 of Part 10 of the Arbitration Ordinance regulates the enforcement of the Mainland Arbitration Awards in Hong Kong.
As such, the legal basis for enforcing Mainland AA in Hong Kong is the Division 3 of Part 10 of the Arbitration Ordinance, and the protocol is set by the Arrangement. In practice, the relevant provisions in Arbitration Ordinance should be read together with the Arrangement.
Prerequisites for enforcing Mainland AA in Hong Kong: applying and obtaining the approval of Hong Kong Courts
According to the relevant provisions of the Arbitration Ordinance, Mainland Arbitration Awards is enforceable after obtaining approval from the Court of First Instance of High Court in Hong Kong. Once such approval is obtained, the Mainland Arbitration Awards is to be treated as if a judgment of Court of First Instance in Hong Kong and is enforceable.
Therefore, for enforcement of Mainland AA in Hong Kong, the first step is to make an application to the Court of First Instance to obtain approval, then if granted, the Court will issue an Order demanding the respondent (debtor) to pay the debt arbitrated in the Arbitration Awards to the applicant (creditor).
When issuing such Order, the Court will also order that the respondent has right to apply for setting aside the Order within a specified period of time (e.g. 14 days). If the respondent applies for setting aside the Order within the specified period, then such Order will be stayed until the determination of the respondent’s application by the Court. On the other hand, if the respondent does not make such application within the specified period, then the Order will become effective after the deadline, its effect is the same as the local judgment.
Procedure to enforce Mainland Arbitration Awards in Hong Kong
Once approved by the Court of First Instance, the Mainland AA can be enforced just like the local judgment. Then, How can it be enforced?
Firstly, Hong Kong Courts do not have an “Enforcement Court”, the Court and the Judge are not responsible for locating nor investigating the debtor’s assets. This is the applicant’s (or his lawyers) duty. The Court is only responsible for considering the applications made in accordance with the law, and make Order subject to the case’s circumstances, the Court will never help the applicant to trace the debtor’s assets.
Under the Hong Kong legal system, different kinds of assets are enforced by different methods, i.e. land properties, bank deposits, shares and debentures are enforced by different ways.
For bank deposits under the debtor’s name, or other debentures held by the debtor, the enforcement method is to apply to the Court by way of Writ of Fieri Facias, i.e. applying to the Court for an order to compel a third party (the bank holding the bank account, or the third party owing debt to the debtor) to pay directly to the applicant, in order to satisfy the judgment debt. The Court may need to fix a date to try the case, hearing submissions from all concerned parties (applicant, respondent and the third party), and then make an Order it deems fit. Once the Court has made an order, it is legally binding on the third party.
For the land properties under the debtor’s name, the application method is to apply to the Court for a Charge Order, i.e. make an application to charge on the property, in order to secure the judgment debt. The Court also needs to fix a hearing date to hear the submissions from all concerned parties, and then decides whether to make such Order. Once such Order is made, the applicant can register the Charge Order to the Land Registry, thereby creating a charge on the property. The debtor cannot dispose the property after the charge has been registered, and if the creditor would like to sell the debtor’s property to repay the judgment debt, then an application for an Order for Sale can be made to the Court, the Court may then order the debtor’s property to be sold in order to repay the judgment debt.
How to check whether the respondent has any asset that can be enforced?
The Hong Kong Courts do not have an Enforcement Court like one in Mainland China where it will actively assist the applicant to investigate the respondent’s financial information. Asset investigation is the applicant’s (his solicitors) duty in Hong Kong.
Hong Kong has strict privacy protection law, obtaining financial information of a third party is not an easy task. Although lawyers may be able to collect some information or to do so with the help of professional asset tracing institutions (e.g. whether the respondent has any land properties, whether he has been appointed as a director), but a lot of information (e.g. whether the respondent has opened any bank account, whether the respondent holds any deposit, shares or cars, etc.) are very difficult to obtain. Usually, the applicant may be able to provide some hints as to the respondent’s assets (e.g. bank account details, car license number) and then further enquiries can be made after obtaining a Court Order.
If during the enforcement proceedings, it is discovered that the respondent is transferring his asset or dodging his liabilities, the applicant can apply to the Court for urgent Mareva Injunction to freeze the respondent’s assets.
For questions relating to enforcement of Mainland AA in Hong Kong, kindly contact our Mr. Yan.