1、 Why should mainland arbitration awards be enforced in Hong Kong?

With the increasingly close economic and trade exchanges between mainland China and Hong Kong, cross-border disputes have also increased. The company has worked hard to win the arbitration, but if the debtor has assets in Hong Kong, how can the ruling be implemented and the money really be obtained?

At present, Hong Kong's recognition and enforcement mechanism for mainland arbitration awards has become very mature. On January 29, 2024, the "Arrangement of the Supreme People's Court on Mutual Recognition and Enforcement of Civil and Commercial Case Judgments between Mainland and Hong Kong Special Administrative Region Courts" was implemented, which has been passed for about 5 years. Previously, Hong Kong's recognition and enforcement of mainland arbitration awards were mainly based on the "Arrangement between the Mainland and Hong Kong on Mutual Enforcement of Arbitration Awards" (referred to as the "Arrangement"), the "Supplementary Arrangement on Mutual Enforcement of Arbitration Awards between the Mainland and the Hong Kong Special Administrative Region" (referred to as the "Supplementary Arrangement"), and the "Hong Kong Arbitration Ordinance".

The author happened to handle a case of applying for recognition and enforcement of a mainland arbitration award in Hong Kong last year. Therefore, this article will update the enforcement path of mainland arbitration awards in Hong Kong based on the current legal framework, and merge the two procedures of recognition application and enforcement application to help enterprises and legal practitioners better cope with cross-border dispute resolution challenges.

2、 Full process analysis: from recognition to property execution

（1） Apply for recognition in the High Court of Hong Kong (to ensure that the award has legal effect in Hong Kong)

What is the role of recognition

Within 6 years after the effectiveness of the arbitration award in mainland China, mainland applicants can apply for recognition to the Court of First Instance of the High Court of Hong Kong, the jurisdiction for enforcement, under the Hong Kong Chapter 347 Limitation Ordinance. According to Article 3 of the Arrangement, mainland arbitration awards recognized by the Hong Kong High Court have the same legal effect as judgments made by Hong Kong courts. This means that the award has res judicata and the person subject to enforcement may not bring a new lawsuit in Hong Kong courts regarding the same dispute; Meanwhile, recognition is a prerequisite for applying for compulsory enforcement by Hong Kong courts; If the debtor is unable to perform, they can also apply to the Hong Kong court for bankruptcy or liquidation.

The advantageous point for the applicant is that the recognition procedure is unilateral, meaning that the applicant does not need to notify the debtor in advance, and the court can conduct an examination and make a recognition order without the other party appearing in court. After the approval order is issued, the executed person has only 14 days to raise objections, which will take effect upon expiration and enter the process of applying for execution.

What materials are required for applying for recognition

The applicant first needs to submit the following application materials to the High Court of Hong Kong:

The court generally takes 2-3 weeks to review documents, mainly examining whether the application materials are complete, whether the arbitration award meets the requirements of the Arrangement or Supplementary Arrangement, and whether the application is within the statutory statute of limitations (6 years). In general, if the conditions are met, the court will issue a recognition order directly without the need for a court hearing.

Certification Text - Award

Non religious oath

Unilateral original summons

Can the respondent raise objections

The respondent may raise objections within 14 days of receiving the recognition order based on the invalidity of the arbitration agreement, defects in the arbitration procedure, or the content of the award exceeding the scope of arbitration. When the respondent raises the above objection, they need to provide sufficient evidence to support their claim. "Note: If an objection is raised, it will be transferred to the barrister's litigation procedure. Hong Kong courts will decide whether to recognize and enforce mainland arbitration awards based on specific circumstances, taking into account issues such as the validity of the arbitration agreement.

（2） Apply for compulsory enforcement (freezing assets, seizing deposits, or even liquidation)

After the mainland arbitration award is recognized by the Court of First Instance of the High Court of Hong Kong, the award has the same legal effect as the judgment of the Hong Kong court. The applicant can use this as a basis to formally apply for compulsory enforcement to the Court of First Instance of the High Court of Hong Kong.

1. What assets can be executed

(1) Bank deposit: Apply for bank account freeze and seize the bank deposit of the executed person.

(2) Real estate (property, land): Seize the real estate of the debtor through a charging order.

(3) Company equity: Apply for equity realization and forcibly sell the equity of the executed party.

(4) Movable property (vehicles, equipment, etc.): Through a detention order, movable property is seized and auctioned off.

(5) Accounts receivable: Apply for a third-party payment order, requiring the debtor's customers or partners to directly pay the debt to the applicant.

(6) Salary or other income: Apply for a withholding order to withhold the salary income of the executed person.

(7) Intellectual property rights, such as trademarks, patents, etc., can be enforced through sale or licensing.

Before applying for enforcement, it is recommended that the applicant first investigate the property status of the person subject to enforcement to ensure the effectiveness of the enforcement measures. If it cannot be confirmed that the respondent has any identifiable executable assets, a third-party independent investigation company may be appointed to conduct an asset search on the respondent. If there are other property clues, such as knowing that the respondent has bank deposits, real estate, stocks, etc., enforcement can be applied for (provided that such assets have no other collateral). If there is no asset clue, the applicant can only file a liquidation petition against them. After the liquidation order is issued, a court appointed or creditor nominated liquidator will realize the company's identifiable assets (if any) to repay all creditors' debts.

2. What materials are required for application execution

When applying for enforcement to the court, the following documents must be submitted (as shown in the diagram above):

3. What if the other party doesn't have money

In Hong Kong, if the debtor (respondent) of a company has no enforceable property, the applicant may consider applying to the Hong Kong court for liquidation. Liquidation is the ultimate remedy applicable to situations where the debtor is unable to repay debts or refuses to fulfill their arbitration obligations.

Liquidation applications are usually submitted by creditors (i.e. applicants) to the Court of First Instance of the High Court of Hong Kong. Firstly, it is necessary to issue a 'Statutory Request for Payment' to the respondent; Subsequently, submit a liquidation petition to the High Court of Hong Kong; Finally, the court will conduct hearings and rulings, which typically take weeks to months. The debtor may submit objections before the hearing, and if the objections are not substantiated, the court will issue a liquidation order. After the issuance of the liquidation order, all assets of the company (including bank accounts, real estate, accounts receivable, etc.) will be frozen and liquidated by the liquidator. The court will distribute repayment to creditors according to priority based on the assets obtained from liquidation.

Although liquidation has some enforcement power, it takes a long time and cannot guarantee full debt recovery. Therefore, before deciding to initiate liquidation proceedings, the applicant needs to carefully evaluate the debtor's asset status and comprehensively consider other enforcement measures (such as property freezing and compulsory enforcement) to achieve more efficient debt recovery.

3、 Summary: Three key factors for cross-border execution

1. Complete materials

The document materials must be fully prepared. If notarization is required, please do so in advance, otherwise the process may be delayed.

2. Timeliness control

Apply for recognition within 6 years, with a 14 day objection period. Time is money.

3. Flexible strategy

Combining property investigation, enforcement, and liquidation procedures, we will take multiple measures.

With the deepening of legal cooperation in the Guangdong Hong Kong Macao Greater Bay Area, cross-border dispute resolution is becoming increasingly convenient. But even with legal support, there are still certain challenges in the actual implementation process. Both enterprises and individuals need to plan ahead and plan reasonably in order to smoothly achieve debt recovery.