Mutual Enforcement System of Arbitration Awards and Court Judgments for Resolving China-Hong Kong Disputes

Mainland China and Hong Kong coexist under the principle of One Country, Two Systems, each maintaining distinct political and legal systems. Accordingly, Hong Kong and China are classified under different jurisdictions. Mainland China follows the civil law system, while Hong Kong adheres to the common law system, marking a clear distinction. In other words, litigation between China and Hong Kong is cross-border litigation, and even if one wins the lawsuit, there are practical challenges unique to cross-border litigation in enforcing judgments. For example, a debtor notified of enforcement litigation could respond by transferring assets or delaying the enforcement process to buy time needed to move assets.

[Photo by Beopryul Newspaper]

As trade between China and Hong Kong increased, cross-border disputes also rose proportionally, prompting China and Hong Kong to make significant efforts to establish systems for dispute resolution. Notably, through legal amendments, they implemented mutual enforcement systems for arbitration awards, court judgments, and interim measures, creating a unique system where arbitration awards, interim measures by arbitral tribunals, and court judgments can be enforced by courts on both sides, despite being different jurisdictions. This system is expected to have a significant impact not only on China-Hong Kong relations but also on international business involving China.

1. Cross-border Arbitration and Dispute Resolution between China and Hong Kong

After Hong Kong's handover to China in 1997, there were discussions on handling many international agreements made during Hong Kong’s time as a British colony. In particular, the 1980 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) was difficult to apply between China and Hong Kong as they are part of the same country. Consequently, from 2000, through legal amendments, China and Hong Kong implemented an agreement on mutual enforcement of arbitration awards, clarifying that Hong Kong arbitration awards can be enforced in Chinese courts (and vice versa). This also signifies respect for the separate jurisdictions of Hong Kong and China when resolving cross-border disputes through arbitration after Hong Kong’s return to China.

Additionally, since 2019, an agreement on mutual court enforcement of interim measures to assist arbitration procedures between China and Hong Kong has been implemented. This is the first such system worldwide where interim measures ordered by an arbitral tribunal in Hong Kong, an external jurisdiction, can be enforced by Chinese courts in mainland China.

Only arbitrations conducted at the following seven arbitration institutions in Hong Kong are included in the agreement. The seven recognized arbitration institutions in Hong Kong are:

1. Hong Kong International Arbitration Centre (HKIAC)


2. China International Economic and Trade Arbitration Commission Hong Kong Sub-Commission (CIETAC-Hong Kong Arbitration Center)


3. eBRAM (eBRAM International Online Dispute Resolution Centre)


4. Hong Kong Maritime Arbitration Group


5. The International Court of Arbitration of the International Chamber of Commerce - Asia Office


6. South China International Arbitration Centre (HK)


7. Asian-African Legal Consultative Organization Hong Kong Regional Arbitration Centre

Since disputes frequently arise against companies and individuals with evidence and assets located in mainland China, whether interim measures can effectively freeze assets and prevent evidence destruction is practically very important. This is a distinguishing factor for Hong Kong as a gateway to China and a center for international arbitration, offering a significant advantage to consider arbitration clauses specifying Hong Kong arbitration when negotiating business contracts with Chinese companies and individuals.

2. Mutual Enforcement of Civil and Commercial Judgments

From January 29, 2024, an agreement on mutual enforcement of civil and commercial judgments between China and Hong Kong will be implemented through legal amendments. This amendment covers only civil and commercial litigation, excluding administrative litigation, divorce cases, bankruptcy-related cases, and certain intellectual property-related cases. While patent-related cases are excluded, cases involving trademarks, copyrights, and design patents are included. It is predicted that approximately 90% of judgments will become mutually enforceable between China and Hong Kong.

This legal amendment is also significant for overseas investors. If Hong Kong law is used as the governing law in commercial contracts from the negotiation stage, even if disputes arise later, orders and judgments obtained from Hong Kong courts can be directly enforced in mainland China. Since the official languages of Hong Kong courts are English and Chinese, lawsuits can be conducted in Hong Kong courts without separate translation even if contracts are drafted in English and Chinese. The Hong Kong judiciary, experienced in international disputes, independently adjudicates cases, ensuring reliability.

However, this amendment excludes provisional injunctions such as asset freezing orders. If there is concern about asset dissipation or evidence destruction and a provisional injunction is considered, one can either initiate litigation in the court where the assets are located from the outset or include an arbitration clause in the contract to start dispute resolution through arbitration at one of the seven arbitration institutions introduced above and apply for interim measures.

In practice, to apply for enforcement in Chinese local courts, it is necessary to retain a local Chinese law firm. Hong Kong law firms have already established cooperative relationships with Chinese law firms and are preparing one-stop services for mutual enforcement between China and Hong Kong. Whether a network with Chinese law firms located in the Chinese provinces where assets are situated is established, and the role of Hong Kong law firms skilled in immediately implementing asset recovery plans and enforcement procedures covering both Chinese and Hong Kong jurisdictions from the early stages of disputes, will become increasingly important.

This legal amendment is expected to enhance Hong Kong’s role as a bridge connecting China and the world and will have a significant impact on overseas investors and entrepreneurs conducting business with China. It is hoped that this introduction will be helpful to Korean investors and lawyers.

Kim Sang-yeop, Hong Kong Lawyer (Stevenson, Wong & Co.)

※This article is based on content supplied by Law Times.

This content was produced with the assistance of AI translation services.