Hong Kong Court examines "choice of Mainland court agreement" under previous statutory regime of Mainland-Hong Kong reciprocal enforcement of judgments

Following our recent blogpost, the Hong Kong Court has considered another case under the previous statutory regime of Mainland-Hong Kong reciprocal enforcement of judgments, under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (the "2008 MJREO").

In Beijing Renji Real Estate Development Group Co., Ltd v Zhu Min [2024] HKCA 878, the Court of Appeal examined the question of whether a "choice of Mainland court agreement" within the meaning of the 2008 MJREO exists if the exclusive jurisdiction clause in favour of Mainland courts is not expressly found in the parties' agreement but instead incorporated into the agreement under the operation of Mainland law. 

Background

The Plaintiff (P) entered into a partnership agreement and supplemental agreement with Hainan Zhongtou in respect of P's investment in a fishery centre.  The Defendant (D), a director of Hainan Zhongtou, issued a guarantee in favour of P to guarantee Hainan Zhongtou's performance under the supplemental agreement. 

There was an exclusive jurisdiction clause in favour of Mainland courts in the partnership agreement, but not in the guarantee.  P sued D in respect of the guarantee and obtained a judgment against D from the Beijing Higher People's Court (the "BHPC Judgment"). 

The Hong Kong Court of First Instance set aside the registration of the BHPC Judgment on the basis that there was no "choice of Mainland court agreement" between P and D in the guarantee.  The Court of Appeal upheld this decision.

Decision

In opposing the set aside application, P relied on clause 90 of the partnership agreement which was a choice of Mainland court clause.  P argued that clause 90 was incorporated into the guarantee under the operation of Mainland law. 

The Court of Appeal rejected P's arguments, and set aside the registration on the following grounds:  

• Whether the facts of a particular case satisfy the requirement of a "choice of Mainland court agreement" is a matter of interpreting the 2008 MJREO applying Hong Kong law.

• The "choice of Mainland court agreement" under section 3(2) of the 2008 MJREO is defined as "an agreement concluded by the parties to a specified contract and specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdictions".  The natural and ordinary reading of this definition is that the choice of court must be expressly agreed or designated in an agreement between the parties.

• The above interpretation is consistent with the context and purpose of the 2008 MJREO as explained in the 2006 Arrangement between the Supreme People's Court of Mainland China and the Hong Kong Government.  The 2008 MJREO provides a simplified procedure for reciprocal enforcement and, according to the Arrangement, was not intended to be without restriction – one such restriction being that a Mainland court should be "expressly designated as the court having sole jurisdiction for resolving any dispute which has arisen or may arise in respect of a particular legal relationship".

• As for the choice of Mainland court clause in the partnership agreement between P and D, this was applicable to P and D's dispute arising from the guarantee only because of the effect of Mainland law.  As the guarantee itself did not specify or expressly designate any Mainland court to be the court with exclusive jurisdiction, the BHPC Judgment was not registrable under the 2008 MJREO.

Comments

While the new regime under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (the "2024 MJREO") has been in operation since 29 January this year, judgments that are obtained before 29 January 2024 (and judgments obtained after 29 January 2024 but relate to a dispute concerning an exclusive jurisdiction agreement dated before 29 January 2024) still fall under the previous regime.

It will come as good news to judgment creditors that the 2024 MJREO has removed the requirement for parties to have an exclusive jurisdiction agreement in favour of the Mainland courts, as well as widening the scope of registrable judgments and recognised courts.  The 2024 MJREO further simplifies the reciprocal enforcement mechanism, making it easier and more certain for judgment creditors who need to enforce Mainland or Hong Kong judgments against assets across the border. 

This case likely represents one of the last few judgments under the 2008 MJREO, and we await to see how case law in respect of the 2024 MJREO will develop in the Hong Kong Courts.

For more information, please contact Jojo Fan, Managing Partner, Rachael Shek, Partner, Sara Troughton, Professional Support Lawyer or your usual Herbert Smith Freehills contact.