Major news for the crypto industry?

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On the 10th, the Hong Kong SAR Government published in the Gazette:Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) RulesandMainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Commencement Date) NoticeMainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645)and the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Rules (hereinafter referred to as"the Hong Kong SAR Government's Rules and Ordinance"), which will come into effect on January 29, 2024.

While it may appear to be major news, its significance is arguably less profound than it seems.

 

01

Historical Context of Mutual Recognition and Enforcement of Civil and Commercial Judgments between Hong Kong and Mainland China

Civil and commercial judgments between Hong Kong and Mainland China have long been subject to mutualenforcement。

. The cross-jurisdictional enforcement of court judgments typically relies on international judicial assistance treaties. Between Hong Kong and Mainland China, this is achieved through various arrangements negotiated and signed by both sides. Article 95 of theBasic Law of the Hong Kong Special Administrative Region of the People's Republic of Chinastipulates that the Hong Kong Special Administrative Region may, through consultations, maintain judicial contacts and provide mutual assistance with judicial organs in other parts of the country in accordance with the law.

Currently, the agreements signed between the two regions regarding mutual assistance in court proceedings are as follows:

  1. The Arrangement on Reciprocal Service of Judicial Documents in Civil and Commercial Cases between Courts of the Mainland and the Hong Kong Special Administrative Region, which came into effect on March 30, 1999;

  2. The Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Cases under Choice of Court Agreements between Courts of the Mainland and the Hong Kong Special Administrative Region, signed on July 14, 2006, amended on February 29, 2008, and effective from August 1, 2008;

  3. The Arrangement on Reciprocal Taking of Evidence in Civil and Commercial Cases between Courts of the Mainland and the Hong Kong Special Administrative Region, which came into effect on March 1, 2017;

  4. The Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Cases between Courts of the Mainland and the Hong Kong Special Administrative Region (the "2019 Arrangement"), signed on January 18, 2019, but not yet in effect.

 

02

What Does the Implementation of the Hong Kong SAR Government's Rules and Ordinance Signify?

The implementation of the Hong Kong SAR Government's Rules and Ordinance represents a concrete step by Hong Kong to further implement the 2019 Arrangement. Concurrently, the Supreme People's Court of Mainland China will issue judicial interpretations regarding the implementation of the 2019 Arrangement.。In other words, it is foreseeable that the 2019 Arrangement will come into effect within a reasonably short period. Furthermore, Mainland China will issue supporting judicial interpretations to facilitate parties seeking recognition andenforcementof civil and commercial judgments in Hong Kong.

Although civil and commercial judgments between Hong Kong and Mainland China have historically been subject to mutual enforcement,the anticipated entry into force of the 2019 Arrangement and the implementation of supporting regulations and policies by Hong Kong and Mainland China regarding the 2019 Arrangement will significantly promote the mutual recognition and enforcement of civil and commercial judgments between the two regions. This will make the cross-border enforceability of such judgments clearer and more predictable, thereby reducing risks, legal costs, and time.。

 

03

Is This a Boon or Bane for Crypto-Related Disputes?

Regular readers familiar with Mankun Law Firm's publications are aware that our lawyers have authored several articles on this topic. Currently, within Mainland China, crypto-related disputes are often deemed invalid by courts on the grounds of violating public order and good morals.As mutual enforcement of civil and commercial judgments between the two regions becomes more convenient, parties may strategically designate Hong Kong as the jurisdiction for crypto-related disputes. After obtaining a favorable judgment in Hong Kong, they can seekenforcementin Mainland Chinese courts under the 2019 Arrangement and relevant judicial interpretations, thereby circumventing Mainland China's unfavorable policy stance towards virtual currencies.。

Conversely, for parties heavily involved in litigation in Mainland China who have transferred their assets to Hong Kong, the facilitated enforcement of Mainland civil and commercial judgments in Hong Kong may not be welcome news.

 

04

Summary by Mankun Lawyers

Once mutual recognition and enforcement across legal jurisdictions are effectively implemented, the most significant impact will be on policy-related issues differing between jurisdictions. Such policy discrepancies can be easily circumvented through forum shopping, while still benefiting from the institutional protection of mutual recognition and enforcement mechanisms.。

In recent years, Hong Kong has demonstrated a Web3.0-friendly and open policy posture, which stands in stark contrast to Mainland China's approach. Attorney Jin of Mankun Law Firm believes that precisely this divergent policy stance creates opportunities for jurisdictional arbitrage for Mainland Web3 practitioners following the promulgation of the Hong Kong SAR Government's Rules and Ordinance. Shouldn't this new possibility for legal recourse be a cause for optimism?

 

 

Recommended Reading

First Major Revision of China's Anti-Money Laundering Law: Virtual Currencies in Focus 

Web3.0 Global Expansion: An Overview of Japan's Blockchain Industry Regulatory Policies

 

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