Mainland China and Hong Kong SAR Enhance Arrangement Concerning Mutual Enforcement of Arbitral Awards

On 27 November 2020, the Supreme People’s Court of the People's Republic of China and the government of the Hong Kong SAR signed the “Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region” (the Supplemental Arrangement).

This document clarifies and modifies the existing arrangement between the Mainland and the Hong Kong SAR concerning mutual enforcement of arbitral awards (the 1999 Arrangement) in four important aspects:-

1. Article 1 provides that the procedures for enforcing arbitral awards under the 1999 Arrangement shall be interpreted to cover not only the “execution stage” but also the “recognition stage” of a Hong Kong SAR or Mainland award;
2. Article 2 expands the scope of arbitral awards covered by the 1999 Arrangement in that previously under the 1999 Arrangement, only arbitral awards issued by certain recognised arbitral institutions in the Mainland could be enforced in the Hong Kong SAR. Now under the Supplemental Arrangement, all arbitral awards rendered pursuant to the Arbitration Ordinance of the Hong Kong SAR (whether institutional or ad hoc) can be enforced in the Mainland, and all arbitral awards rendered pursuant to the PRC Arbitration Law can be enforced in the Hong Kong SAR;
3. Article 3 removes the current restriction of the 1999 Arrangement to allow the parties to make simultaneous applications to both the courts of the Mainland and the Hong Kong SAR for enforcement of an arbitral award;
4. Article 4 clarifies that the courts in both jurisdictions may order preservation measures before or after the court’s acceptance of an application for enforcement of an arbitral award.

In the Mainland, the Supplemental Arrangement is implemented by way of a Judicial Interpretation as promulgated by the Supreme People’s Court on the same day. In Hong Kong, only Articles 1 and 4 have come into force. Articles 2 and 3 will only come into effect after the necessary amendments to the relevant provisions under the Arbitration Ordinance (Cap. 609) have been enacted locally.

The amendments made through the Supplemental Arrangement are in accordance with the spirit of the New York Convention. With the signing of the “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR”, which took effect in October 2019, the Supplemental Arrangement adds further strength and confidence to Hong Kong as an international legal hub and one of the prime dispute resolution centres in the Asia Pacific region:

1. The New York Convention sets out a detailed legal framework for the recognition and enforcement of arbitral awards. As Hong Kong is a party to the New York Convention, Hong Kong courts have all along adopted a “two-stage approach” (i.e., the recognition stage and the execution stage) upon the determination of an application for enforcement of a New York Convention award. The express recognition of the two-stage approach by the Supplemental Arrangement draws the 1999 Arrangement closer to the spirit of the New York Convention and removes doubts as to whether recognition is required prior to enforcing a Hong Kong SAR arbitral award in the Mainland.
2. Article 2 of the Supplemental Arrangement removes the concept of “recognized Mainland arbitral institutions”, thus expanding the scope of arbitral awards that may be enforced under the 1999 Arrangement. It makes clear that all arbitral awards made pursuant to the Arbitration Ordinance (Cap. 609) can be enforced in the Mainland and all arbitral awards made pursuant to the PRC Arbitration Law can be enforced in Hong Kong.
3. Very often, enforcement is the key reason for selecting arbitration in China-related commercial agreements. It is therefore of paramount importance for the parties in a commercial deal to make sure that any future arbitral award rendered offshore may be successfully enforced in China. The Supplemental Arrangement authorises the Mainland courts to make post-award interim measures for awards made in the Hong Kong SAR. It also permits an award winner in the Hong Kong SAR to apply for parallel enforcement in China when enforcement proceedings in the Hong Kong SAR are not particularly successful. This places Hong Kong in a unique position in the choice of seat of arbitration in China-related commercial transactions.