11 March 2024 – Tamara Liu, Senior Associate
A landmark agreement signed in 2019 – The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (MJREO) – to allow for wide- ranging reciprocal enforcement of judgments between Hong Kong and mainland China finally came into force on 29 January 2024.
Hong Kong is a special administrative region of China and has its own separate legal regime. Therefore, special arrangements have been necessary to allow for cross-border enforcement of judgments between Hong Kong and mainland China. Previous arrangements were limited in scope and only applied to commercial contracts and monetary judgments. The long-waited MJREO will broaden the scope of applicable judgments and cover, not only a wide range of judgments relating to contractual and tortious disputes, but expressly includes judgments in respect of specified intellectual property right cases, in effect, will reduce the need for re- litigation of identical disputes in the courts of Hong Kong and the Chinese Mainland. The new regime will also cover both monetary and non-monetary relief.
However, it’s important to note that the MJREO excludes judgments in a series of civil and commercial matters, such as those pertaining to personal relations, succession, bankruptcy, voter qualification, validity of arbitration agreements, and the recognition of arbitration awards. The recognition and enforcement of judgments on these matters are regulated by other pertinent guiding documents.
The mechanism for mutual recognition and enforcement of judgments relating to intellectual property is an important and positive development. Intellectual property owners will now be able to seek enforcement against the assets of a defendant across the border without the need to start a fresh action. Overseas parties will have the option of suing in English, in a common law jurisdiction, and enforcing against assets held in mainland China.
- Removal of the exclusive jurisdiction agreement: The recent regulations have eliminated the requirement to establish a written “choice of court agreement”. In its place, a jurisdictional test has been introduced. According to this test, to enforce a Mainland judgment in Hong Kong or vice versa, applicants must show a connection with the “specific territory of the same country” (Mainland or Hong Kong) at the time the proceedings were accepted. This connection can be established through various means, including the defendant’s domicile, the defendant’s place of business, and the location where the contract or infringement occurred.
- Specific intellectual property rights: The specified intellectual property rights set out in the MJREO cover trademarks, geographical indications, patents, industrial designs, copyright, plant varieties, integrated circuit designs, and the right to “protect undisclosed information” or “trade secrets”.
- Judgments: The MJREO specifically covers judgments ruling on contractual disputes involving intellectual property rights. Judgments relating to infringement of intellectual property rights are also covered.
- Relief and damages: The MJREO will cover punitive and exemplary damages in relation to intellectual property infringement disputes, apart from trade secrets, where both punitive damages and specific performance are enforceable.
- Judgment on the validity of an intellectual property right as a preliminary issue: Judgments on the validity of intellectual property rights are excluded. However, a judgment based on a ruling on the validity of an intellectual property right as a preliminary issue shall be recognised and enforced under the MJREO. For example, a plaintiff may enforce a contractual claim for licence fees where the defendant challenged the validity of the trade mark and the court ruled as a preliminary issue, that the trade mark was valid and, therefore, the defendant was liable for the fees.
- Competent courts: Validation of rulings from subordinate courts: The scope of courts that can exert a “legally effective judgment” has broadened. In Hong Kong, this includes the Court of Final Appeal, The Court of Appeal and the Court of First Instance of the High Court, the District Court, the Labor Tribunal, the Lands Tribunal, the Small Claims Tribunal, and the Competition Tribunal. As for the Mainland, the coverage now includes any judgment of the second instance, any judgments of the primary instance that cannot be appealed or has not yet reached the time limit for appeal, and any judgment falling under the previous criteria made in accordance with the procedure for trial supervision.
Potential impact on businesses
The MJREO makes Hong Kong the first jurisdiction to have such an arrangement with China, strengthening its position as Asia’s leading resolution centre, especially in disputes involving cross-border transactions. It is important to note that the intellectual property provisions are complex, especially with regard to available relief, and there are significant exclusions which need to be considered carefully. However, the removal of exclusive jurisdiction agreements not only enhances flexibility in selecting legal venues but also streamlines the registration process for legal proceedings. Moreover, the expanded scope of the new regime prevents parties from undergoing re-litigation of the same disputes in the courts of both Hong Kong and the Chinese Mainland, offering heightened protection and predictability in cross-border transactions.
