A new law that will allow reciprocal enforcement of court judgments in Hong Kong and mainland China in civil and commercial cases will not damage the interests of businesses based in the city, but will reduce costs involved in re-litigation, legal experts have said.
The city lawyers defended the new system on Sunday after Paul Lam Ting-kwok, the justice secretary, acted to clear up confusion over the change.
Tony Au Siu-hong, a Hong Kong lawyer also qualified to practice in the mainland, dismissed claims that the new arrangement would harm the interests of Hong Kong residents and overseas investors and insisted it would offer better safeguards for cross-border deals.
“For example, if the mainland side breaches a contract and attempts to delay its responsibility, what the Hong Kong side can do now could be limited even though it had won lawsuits in a mainland court,” he said. “The new regime will change the scene when the relevant judgments can be enforced in Hong Kong.
“Vice versa, it will facilitate those who win in Hong Kong courts to have the judgment enforced in the mainland, if the judgment fulfils the requirements in the registration process.”
Au also emphasised that the changes only covered designated mainland courts, not “any local-level courts where their impartiality could be questioned” and that the safeguards were in line with international practices.
The new cross-border law will come into force on January 29 next year, five years after a consultation paper was issued.
It will widen the scope of existing legislation to cover civil and commercial matters for reciprocal recognition and enforcement of judgments by courts across the border.
The two present legal mechanisms only apply to some monetary judgments and matrimonial or family cases.
Lam acted after rumours circulated that the assets and legal rights of businesses would be unprotected under the new regime.
He wrote a detailed defence on his Facebook page on Saturday to dispel two misconceptions created by what he called false and misleading commentaries”.
The post came three days after the announcement of the start date for the new arrangements and at a time when city authorities have been working to attract new investment and talent to boost the economy amid a muted post-pandemic recovery.
The first misconception Lam tackled was that mainland judgments would not become “automatically applicable in Hong Kong” and that city courts would not directly freeze the assets of a party in line with mainland judgments without a hearing.
He added no “sharing of judicial information” would take place between the separate courts.
The new ordinance says a cross-border enforcement could be refused if the relevant party was not given a reasonable opportunity to defend the case, the mainland judgment was obtained by fraud, or the parties had started legal proceedings in Hong Kong before the mainland court took on the case.
Under the Foreign Judgments (Reciprocal Enforcement) Ordinance, judgments from about 15 jurisdictions are enforceable in Hong Kong.
These include court decisions from Australia, Singapore and France.
Common law applies as the legal framework for recognition and enforcement of foreign judgments in the city for other jurisdictions.
Nick Chan Hiu-fung, a lawyer and the chairman of the Hong Kong General Chamber of Commerce’s legal committee, said the rumours were a “misinformation campaign” designed to trick the international business community in Hong Kong.
“Some people who had lost lawsuits in the mainland or elsewhere might choose to launch new lawsuits here in Hong Kong,” he said. “By doing this, they buy time to move assets away from home but this could result in the delay of justice.
“This arrangement could reduce these legal tricks, in turn benefiting the legal system and the economy.”
He added that, with increased cross-border trade economic activities, the regime would instead help businesses slash the costs required for re-litigation of cases and achieve justice.
Lam’s post underlined that the legal change would provide sufficient protection, as well as fair balance between the legal interests of parties engaged in cross-border business.
He said the city’s Department of Justice and the Supreme People’s Court in the mainland would organise a seminar on the day when the new arrangement came into force.
Lau Siu-kai, a consultant for Beijing’s semi-official think tank, the Chinese Association of Hong Kong and Macau Studies, said authorities of both sides should act fast to further ease investors’ concerns, especially when Hong Kong, a global financial hub, had set ambitious investment targets.
“Hong Kong’s role as an international legal and dispute resolution hub has been valued by the central government,” Lau said. “The arrangement will allow Hong Kong’s independent judiciary to maintain its reputation while enforcing mainland court judgments.
“But more should be done to prevent misinformation from snowballing into a crisis that would hurt investors’ faith.”
Some lawmakers said when the bill was scrutinised in the Legislative Council in 2017 that they had doubts about the compatibility of the two legal jurisdictions, the independence of the mainland’s judicial system and the effectiveness of the proposed safeguards.
The Hong Kong Bar Association backed the change, but added that the details in some areas, such as level of court for dealing with the registration application and the arrangements for specific areas of law needed further examination.