China - How Mainland Recognizes And Enforces The Hong Kong Arbitration Awards.
Legal News & Analysis - Asia Pacific - Hong Kong - China - Dispute Resolution
11 December 2020
The Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and HKSAR came into effect on 1 February 2000 (“Arrangement”). The Arrangement replaced the New York Convention 1959 and serves as the basis for recognizing and enforcing arbitration awards of Hong Kong in Mainland China.
The application of the Arrangement is retroactive – all applications made after 1 July 1997 and prior to the coming in force of the Arrangement are governed by the Arrangement. Parties also have the freedom to reapply under the Arrangement in case any application was rejected during such period.
Sections 92 to 98 of the Arbitration Ordinance of Hong Kong, (Cap. 609) (the “Arbitration Ordinance”) that provide the enforcement of arbitral awards of Mainland in Hong Kong stemmed from the Arrangement. In Mainland, the Arrangement came into being as a judicial interpretation by the Supreme People’s Court through the “Announcement of Arrangement of the Supreme People’s Court on Reciprocal Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region”.
Hong Kong Arbitral Awards
Among Hong Kong and the Mainland, the arbitration structures vary greatly. A majority of the international arbitrations in Mainland are administered through the Chinese arbitration institutions. Once a Mainland seated ICC arbitration caused a substantial debate about whether a foreign institution on the Mainland could administer international arbitrations in the Mainland. Eventually, the Supreme People’s Court had to settle this case.
It is extremely rare that institutions outside Mainland that administer international arbitration choose Mainland China as the seat of arbitration and makes awards as per the applicable arbitrations law in the People’s Republic of China.
On the other hand, Hong Kong arbitration proceedings vary. They can be either institutional or ad hoc. Either a Hong Kong arbitration institution or even an overseas institution may administer them. Consequently, it is imperative that the identity of the Hong Kong arbitral award under the Arrangement should first be inferred.
As per the preface of the Arrangement, a Hong Kong award means an award made in Hong Kong in accordance with the Arbitration Ordinance. This means that for an award to qualify as a Hong Kong award:
Hong Kong should be the seat of arbitration; and
the award should be made in compliance with the Arbitration Ordinance.
With regard to the first criterion, as per the rules of the main institutions and common principles, notwithstanding whether the hearing actually took place or the award was signed, the award is always be deemed to be made at its seat. Consequently, only such awards are enforceable under the Arrangement when the seat is in Hong Kong. These awards may be given by a tribunal constituted by a local institution in Hong Kong such as HKIAC or an overseas institution or by an ad hoc tribunal.
As per the Supreme People’s Court [Fajing(1999) No.143, the Supreme People’s Court], instead of the law applicable in the Mainland, the law of the seat will determine the effectiveness of ad-hoc arbitration agreements.
Enforcement in Mainland China
In order to enforce an Hong Kong arbitral award, an application should be filed to the Intermediate People’s Court where the respondent is domiciled or where the property of the respondent is situated. In the case of the jurisdiction of different courts due to domicile and the property being in different places, the application should be made only with one of the courts.
In the event the enforcement is required in both Mainland and Hong Kong, applications should not be filed simultaneously. If the enforcement by the court of one place is not sufficient for satisfying the liabilities, then the applicant may apply to the court of the other place for the balance liabilities.
As per the Arrangement, applications should be made according to the provisions of the Civil Procedural Law of PRC within two years from the expiry of the period that the liabilities must be discharged, or, in the absence of that period, from the effectiveness of the legal instrument.
The respondents or any other interested parties can raise written oppositions to the enforcement. During the enforcement proceedings, a settlement can be reached by the parties, and the court may seize, freeze, transfer, or sell off the assets of the respondent.
Can the enforcement be refused?
The Arrangement has explicit grounds to justify the refusal of any enforcement of the award. Any enforcement refusal is subject to the review of the Supreme People’s Court.
The grounds for refusal are as per the New York Convention and include: (a) one of the parties to the arbitration agreement suffers from some incapacity; (b) as per the applicable law, the arbitration agreement is invalid; (c) one of the parties did not receive proper notice of the appointment of the arbitrator or did not present his case; (d) the award lies outside terms of submission to arbitration or has decisions that lie outside the scope of the submissions to arbitration; (e) The tribunal has not been composed, or the arbitral procedure has not been carried out following the agreement of the parties, or (f) the award is not binding or has been set aside or suspended by the court or as per the law of the seat.
Also, if the court considers that the dispute in question cannot be settled through arbitration or enforcing the award will be against public interest, enforcement can be refused.