Problems of Judicial Recognition and Enforcement in Cross-Border Insolvency Matters between Hong Kong and Mainland China

Abstract

This Article first explores whether it is legally possible to extend the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned to cover cross-border insolvency matters between Hong Kong and mainland China and, if so, the advantages and disadvantages of so doing.It then examines other alternatives for facilitating judicial recognition and enforcement of judgments between the courts in Hong Kong and mainland China that focus specifically on cross-border insolvency judgments (including court orders) that concern both Hong Kong and mainland China, such as signing a new arrangement, a special treaty, or a Memorandum of Understanding. It seeks to highlight the deficiencies of the Arrangement as well as discuss the options to remedy those deficiencies. The situation for Hong Kong-China cross-border insolvency cases is opaque due to the lack of local cross-border insolvency legislation in Hong Kong. In China, there is only one article (article 5) of the 2006 Enterprise Bankruptcy Law that concerns cross-border insolvency, but that article is inapplicable to Hong Kong-China cross-border insolvency cases. That article is inapplicable because it applies only to cross-border insolvency cases involving a foreign state. Since Hong Kong is not a foreign state, it is precluded from the article’s application. Also, Hong Kong and China have not adopted the UNCITRAL Model Law on Cross-Border Insolvency. Although internationally accepted soft law standards such as the Model Law can provide institutional guidance to cross-border insolvency matters, it is compatible with Hong Kong-China cross-border insolvency cases only when a third jurisdiction is involved. The lack of a formal judicial recognition mechanism for Hong Kong-China cross-border insolvency judgments creates problems such as legal uncertainty and forum shopping. This Article aims to raise awareness of the difficulties facing practitioners involved in Hong Kong-China cross-border insolvency cases and to share academic perspectives on the issue.