Hong Kong’s Growing Arbitrational Power

On November 27, 2020, the Department of Justice of Hong Kong and the Supreme People’s Court of China signed the Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (the supplemental arrangement).

The supplemental agreement amends and clarifies an arrangement that was put in place back in 1999, namely the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR (the 1999 arrangement).

In broad terms, the clarifications and amendments that have been made by way of the supplemental arrangement are as follows:

1. Article 1 clarifies that the procedures under the existing arrangement cover the “recognition,” in addition to the “enforcement,” of arbitral awards made in Hong Kong or the Mainland. The 1999 arrangement did not refer expressly to the “recognition” of arbitral awards, which had caused debate as to whether an arbitral award needs to be “recognised” before it can be enforced under the existing arrangement. The 1999 arrangement removes this ambiguity.
2. Article 2 removes the requirement in the 1999 arrangement that only Mainland awards that have been issued under the auspices of one of the (listed) recognised arbitral authorities prescribed by the Legislative Affairs Office of the State Council may be recognised and enforced. Therefore, under the supplemental arrangement as long as a Mainland arbitral award is made pursuant to the PRC Arbitration Law, it can be recognised and enforced in Hong Kong.
3. Article 3 allows parties to apply for enforcement of an arbitral award in both Hong Kong and the Mainland at the same time. Such dual enforcement was not allowed under the 1999 arrangement. This amendment allows timely enforcements against award debtors who have assets in both jurisdictions. It also overcomes a very real practical problem that was faced in the past, namely an enforcement application becoming time barred in one jurisdiction because of the enforcement application in the other jurisdiction taking too long.
4. Article 4 provides that a party may apply for court-ordered preservation measures both before and after the court's acceptance of an application to enforce an arbitral award. Previously, preservation measures only could be ordered before the issuance of an arbitral award. This amendment ensures that preservation measures can be applied for during every stage of an arbitration.

Articles 1 and 4 came into effect on November 27, 2020. Articles 2 and 3 will take effect on a date to be announced after the completion of the relevant legislative procedures in Hong Kong.

The supplemental arrangement is a welcome and well considered development, which will facilitate further the mutual enforcement of arbitral awards between Hong Kong and the Mainland. It also will enhance and further confirm Hong Kong’s position as the preferred seat of arbitration in cross-border disputes involving assets on the Mainland or involving parties with assets on the Mainland.

Glenn Haley is the owner of Haley & Co in Hong Kong.

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