Enforcement of Arbitral Awards

Hong Kong is a pro-arbitration jurisdiction. Hong Kong courts generally tend to grant orders for enforcement of arbitral awards, thus paving the way for the winning party (“creditor”) under these awards to take further action through the Hong Kong courts to seize the assets of the losing party (“debtor”) under these awards.

What Laws Govern the Enforcement of an Arbitral Award?

The Arbitration Ordinance governs the enforcement of arbitral awards in Hong Kong. It reflects the international arrangements in place for the enforcement of arbitral awards including:

• The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, June 10, 1958) (“New York Convention”);

• The Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administration Region; and

• The Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards Between the Hong Kong Special Administrative Region and the Macao Special Administrative Region.

Hong Kong is not a signatory to the New York Convention. However, the People’s Republic of China (“PRC”), of which Hong Kong is a Special Administrative Region, applies the New York Convention on the basis of reciprocity to the recognition and enforcement of arbitral awards made in the territory of another contracting state and to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the law of the PRC.

Though the Arbitration Ordinance is silent on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (“ICSID Convention”), the PRC ratified this convention in January, 1993 and designated Hong Kong as a constituent subdivision.

What Types of Arbitral Awards Can be Enforced?

Arbitral awards may be enforced either under the common law or through the statutory procedure under the Arbitration Ordinance. This statutory procedure enables the enforcement of all types of arbitral awards based on a written arbitration agreement, including:

• Hong Kong Awards - awards made in Hong Kong;

• Convention Awards - awards made in a state which is a party of the New York Convention other than the PRC;

• Non-Convention Awards – awards made in a state which is NOT a party to the New York Convention; and

• Mainland China and Macao Awards - awards made in the mainland (“Mainland Awards”) of the PRC and awards (“Macao Awards”) made in the Macao Special Administrative Region (“Macao SAR”) of the PRC.

Given this breadth, the Arbitration Ordinance has no need to (and does not recognize) Articles 35 (Recognition and Enforcement) and 36 (Grounds for Refusing Recognition or Enforcement) of the UNCITRAL Model Law.

What is the Procedure to Enforce an Arbitral Award?

To enforce an arbitral award under the Arbitration Ordinance procedure, a creditor should make an application for leave. Once leave is given, an arbitral award is enforceable in the same manner as a judgment of a Hong Kong court. Where leave is granted, the court may enter judgment in terms of the award and the award may then be enforced in the same manner as a judgment of a Hong Kong court.

There may be special cases the award cannot be enforced under the Arbitration Ordinance. This may occur where, for example, the arbitration agreement is an oral agreement or where the award cannot be enforced strictly in accordance with its terms. In this case, enforcement may take place under the common law by an action to enforce an implied promise inherent in every arbitration agreement that the parties will perform the award. In a common law action, the creditor may not only seek judgment for the amount of the award but also a declaration that the award is binding, specific performance in appropriate cases or an injunction restraining disobedience of the award. In Xiamen Xinjingdi Group Co Ltd v Eton Properties Limited and Others, the Court of Final Appeal held that in a common law enforcement action of an arbitral award, the court is not limited to mechanistically enforcing the award and has the power to grant relief that goes beyond the relief stated in the award.

In the absence of special circumstances which deny eligibility to enforce under the statutory procedure under the Arbitration Ordinance, creditors will invariably seek to enforce under the statutory procedure. In a common law action, the creditor bears the burden of proving on an inter partes basis the existence and terms of the arbitration agreement, the fact that the arbitration agreement covers the dispute, the fact that the arbitral tribunal was properly constituted and so forth. As the debtor is normally present in an inter partes hearing, it may dispute these facts and adduce evidence for that purpose.

In contrast, under the statutory procedure, the creditor normally proceeds on an ex parte basis. Unlike an inter partes hearing, in an ex parte hearing, the debtor need not be served and thus, will normally be absent from the initial hearing of the application for leave. As a result, unless the court directs the application to be heard inter partes, the debtor is unable to dispute the facts and evidence adduced by the creditor at the initial hearing of the application. However, the creditor must make full and frank disclosure in an ex parte application, including by making disclosure of all facts which may give rise to grounds for a court to refuse leave.

An application for leave under the statutory procedure should state the name of each of the creditor and the debtor and their usual or last known place of abode or business as well as the extent to which the debtor has failed to comply with the award.

What are the Requirements as to Form of Award for Enforcement?

Where enforcement is to take place under the statutory procedure, the Arbitration Ordinance requires both the arbitration agreement and the award to be in writing. Either the original of those documents or duly certified copies of them must be exhibited to the court in the affidavit to support the application for leave. If either or both is in a language other than English or Chinese, translation is required. The translation must be certified by an official or sworn translator or by a diplomatic or consular agent.

What are the Grounds for Refusal of Enforcement?

Under the statutory procedure under the Arbitration Ordinance, the court may refuse to grant leave to enforce an arbitral award on a number of grounds:

• Party - incapacity of a party to arbitration under the law applicable to that party;

• Arbitration Agreement - either (i) the arbitration agreement is invalid under the law to which the parties subjected it or, if not such law was expressed, under the law of the state where the award was made, or (ii) the arbitral award deals with a difference not contemplated by the terms of submission to arbitration or contains decisions on matters beyond the scope of submission to arbitration;

• Procedural – (i) the debtor against whom the award is invoked was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was unable to present its case, or (ii) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the arbitration agreement or, if there was no agreement, the law of the state where the arbitration took place;

• Award - the award (i) has not yet become binding on the parties, has been set aside or suspended by a competent authority of the state in which, or under which, the award was made, or (ii) is in respect of a matter which is not capable of settlement by arbitration under the law of Hong Kong; or

• Public Policy - it would be contrary to public policy to enforce the award.

Under the Arbitration Ordinance, New York Convention awards, Mainland Awards and Macao Awards may not be refused except on the grounds set out above. As a result, unless one of the grounds for refusal is made out, enforcement can be presumed.

In comparison, for awards which are not New York Convention awards, Mainland Awards or Macao Awards, the Arbitration Ordinance provides for a further right of the court to refuse enforcement “for any other reason the court considers it just to do so”.

Generally, where an award contains decisions on matters submitted to arbitration as well as decisions on matters which were not submitted to arbitration, the award may be enforced only insofar as it relates to the arbitral decisions that can be separated from the decisions on matters not submitted to arbitration.

What Happens After the Court Grants Leave?

Where the court grants leave to enforce an arbitral award, the court will require the order to be served on the debtor. Unless the court otherwise directs, service on the debtor may take place by delivering a copy of the order to the debtor personally or by sending a copy to the debtor at his usual or last known place of abode or business. Where the debtor is located outside Hong Kong, the order giving leave may be served on the debtor without leave of the court but otherwise consistent with customary practices for service of process out of jurisdiction.

Can a Debtor Dispute Leave to Enforce an Arbitral Award?

Judgment should not be enforced until 14 days after service of the order granting leave. Where service is out of Hong Kong, the court may direct a longer period. During this time, the debtor may apply to set aside the order giving leave. If the debtor makes such an application, the judgment cannot be enforced pending the disposal of the application.

Creditors may apply for security for costs against a debtor who seeks to set aside an order granting leave to enforce an arbitral award. The potential costs consequences against the debtor for making unmeritorious applications against enforcement may deter debtors from making such applications.

Can a Debtor Stay Recognition Proceedings Pending Challenges to an Award?

A debtor may challenge an award at the same time as a creditor undertakes recognition and enforcement proceedings. Except in the case of a Mainland Award, the Arbitration Ordinance gives the court the discretion to determine whether to adjourn the recognition proceedings and may order the debtor to give security in relation to such adjournment, which may comprise security for satisfaction of the whole or part of the award. The court has wide discretion to determine the amount of security payable after considering all relevant circumstances.

In the case of a Mainland Award, whilst the relevant provisions in the Arbitration Ordinance on enforcement of Mainland Awards do not expressly provide for any discretion of the court to adjourn recognition and enforcement proceedings where an application for setting aside or suspending the subject Mainland Award has been made, the court may, in exercise of its inherent jurisdiction, adjourn applications for enforcement or stay a court’s order for enforcement of a Mainland Award pending the outcome of an application to set aside such Mainland Award in the appropriate court in Mainland China.

Note that whilst a court may refuse to enforce an award which has been set aside or suspended, it has no obligation to do so. Its power of refusal is discretionary and a court may nevertheless enforce an award pending an application to set aside or even after a set aside application has completed.

Can a Creditor Pursue Enforcement in Multiple Jurisdictions?

Creditors may take proceedings in multiple jurisdictions simultaneously to enforce an arbitral award as long as the general rule against double recovery is complied with. However, as noted above, in an application for leave, a creditor must disclose the extent of debtor compliance with the award at the time of application.

A previous rule prohibiting parallel proceedings in Hong Kong and Mainland China for enforcement of arbitral awards was abolished in 2021 with the repeal of s.93 of the Arbitration Ordinance.

Limitation Period for Enforcement

The limitation period for enforcing an arbitral award generally starts to run from the date the cause of action accrues, which is when the debtor fails to honour the award within a reasonable time after the award is made and payment is demanded. Courts will look at the terms of the award (e.g. whether the award specifies any time for compliance or payment or requires compliance “forthwith”) and other relevant circumstances to determine what is a reasonable period.

The length of the limitation period depends on the nature of the arbitration agreement – the Hong Kong court of first instance has commented that for usual agreements not under seal, the limitation period would be six years, while if the submission to arbitration by the parties was made under seal, the limitation period would be 12 years.

Attempts at enforcement in other jurisdictions would not lead to a suspension of the running of the limitation period, which is also a factor for creditors to consider.

Confidentiality and Anonymity

Generally, arbitral awards are confidential and no party may publish, disclose or communicate any information relating to the arbitral proceedings or an award made in those proceedings. However, a party may disclose such information either to protect or pursue a legal right or interest or to enforce the award. Thus, a creditor may disclose the award in recognition proceedings but it remains doubtful whether a creditor may disclose the award for other purposes such as announce that it has prevailed in arbitration.

Proceedings under the Arbitration Ordinance, including applications for recognition and enforcement, are generally heard in closed court unless the court orders otherwise. A creditor may wish to remain anonymous in the court proceedings for recognition and enforcement, and may apply for a direction as to what information relating to proceedings in closed court may be published.