Implementation of REJ arrangement enhances Hong Kong’s competitiveness

A judgment creditor in civil or commercial matters will want to enforce the judgment in the place where the assets of the other party is situated. Sometimes, this action not only involves a large amount of time and money, but also brings uncertainty over the enforceability of the judgment. Therefore, a convenient mechanism for the reciprocal enforcement of judgments made by courts of different places is the key to protect the interest of contracting parties. At the moment, there is no simple mechanism by which a civil or commercial judgment from Hong Kong can be enforced in the Mainland, and vice versa, without the need of going through proceedings that may involve extra time, money and of course agony of having to re-litigate the matter. With a view to addressing this issue, the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region (HKSAR) (REJ Arrangement) was signed between the Supreme People’s Court and the Department of Justice (DoJ) in January 2019.

With increasingly closer ties and cooperation between the Mainland and Hong Kong in terms of economic activities and social interactions, the REJ Arrangement establishes a more comprehensive mechanism for reciprocal recognition and enforcement of judgments in civil and commercial matters between the two jurisdictions and serves to complement the arrangement on reciprocal recognition and enforcement of civil judgments in matrimonial and family cases which will come into force on February 15.

The REJ once in place will greatly reduce the need to re-litigate the disputes in the enforcing jurisdiction and avoid the complicated litigation procedures in the other jurisdiction for the judgment creditor to recover his judgment debt. It provides a simple pro-enforcement mechanism whilst ensuring that due process has been observed in the place of the trial. This arrangement will better protect the interests of the parties ensuring that justice is served.

In formulating the REJ Arrangement, we had drawn reference to the then draft version of the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (Hague Judgments Convention). The Hague Judgments Convention was concluded in July 2019 but still not yet in force. In the REJ, taking into account the practical needs and circumstances of the Mainland and the HKSAR, and utilising the “one country two systems” policy, we have expanded the scope of application. The REJ covers a wider range of judgments beyond contractual and tortious disputes as in the case under the Hague Judgments Convention, but expressly covers judgments given in respect of certain types of disputes over intellectual property rights. This major breakthrough makes Hong Kong the first jurisdiction to have an arrangement with the Mainland on reciprocal recognition and enforcement of judgments with such a wide coverage, reflecting the unique advantages of “one country, two systems”.

One of the DoJ’s major tasks this year is to implement the REJ Arrangement. We have prepared a bill and are conducting a public consultation.

In addition to the implementation of the REJ Arrangement, the DoJ has also introduced a number of measures that will enhance our status as an international legal, deal making and dispute resolution hub.

(1) Outcome Related Fee Structures for Arbitration

The Law Reform Commission published a report on the Outcome Related Fee Structures for Arbitration (ORFSA) in December last year. The relevant recommendations are only applicable to arbitration, but not other Hong Kong court proceedings. Similar arrangements are in place in other jurisdictions, hence the introduction of ORFSA in Hong Kong can actively respond to the expectations of arbitration parties for flexible fee arrangements, enhance access to justice and enable Hong Kong’s arbitration services to advance with the times. This will help attract more parties to choose Hong Kong as a seat of arbitration as well as use the legal services in Hong Kong. The Advisory Committee on Promotion of Arbitration has already expressed its support to the recommendations. The DoJ is fully aware of the importance of ORFSA in enhancing Hong Kong’s competitive advantages and will be committed to taking forward the legislative amendments as soon as possible.

(2) AALCO Hong Kong Regional Arbitration Centre

The announcement of the establishment of the AALCO (Asian African Legal Consultative Organization) Hong Kong Regional Arbitration Centre at the 59th AALCO Annual Session in Hong Kong in 2021 evidences the Central People’s Government’s support of the 14th Five-Year Plan to reinforce Hong Kong as the international legal and dispute resolution hub. Steps are undertaken to put that into operation. Other areas of international dispute resolution will also be explored.

(3) Implementation of the CISG

The United Nations Convention on Contracts for the International Sale of Goods (CISG) provides for a harmonious and uniform set of rules for international sale of goods. It has 94 contracting states at present, including more than half of Hong Kong’s top 20 trading partners by total trade value. About 45% of the countries and regions participating in the Belt and Road Initiative are also contracting parties. The Sale of Goods (United Nations Convention) Ordinance was passed last year to implement the CISG. We will organise seminars and workshops to promote its application and understanding. Subject to the completion of the relevant process under Article 153 of the Basic Law as well as the requisite declaration and notification by the Central People’s Government under the Convention, the CISG is expected to apply to Hong Kong with effect in the third quarter. This measure complements the national 14th Five-Year Plan of making Hong Kong an international trading hub.

To celebrate the 25th anniversary of the establishment of the HKSAR, the DoJ will organise the Basic Law Legal Summit “Stability to Prosperity” and the National Security Law Legal Forum “Thrive with Security” on April 4 and May 28 respectively.

In the year ahead, I hope that the legal sector will focus on legal matters and work together to uphold the rule of law, protect judicial independence and realise the benefits and opportunities afforded to Hong Kong under our national policies and in pursuance of the “one country, two systems” policy. By integrating the needs of the country with the strengths of Hong Kong, we will further enhance our inherent advantages and prospering whilst contributing to the development of the country.

January 23, 2022