Legislative Council

LC Paper No. LS 226/98-99

Objects of the Bill

The purposes of the Bill are to amend the Arbitration Ordinance (Cap. 341) (the Ordinance) -

1. to give effect to what Hong Kong has agreed in the "Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region" (the Arrangement); and
   
   
2. to adapt the Ordinance to bring it into conformity with the Basic Law and with the status of Hong Kong as a Special Administrative Region of the People's Republic of China.

LegCo Brief Reference

2. CSO/ADM CR 1/3221/87(99) issued by the Administration Wing, Chief Secretary for Administration's Office in June 1999.

Date of First Reading

3. 7 July 1999.

Comments

4. Before 1 July 1997, reciprocal enforcement of arbitral awards between the Mainland and Hong Kong was governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards done at New York in 1958 (the New York Convention). After reunification, the New York Convention is no longer applicable to the enforcement of arbitral awards between the Mainland and HKSAR. Courts in the Mainland and Hong Kong had refused to enforce any arbitral awards. Trade disputes resolution between the Mainland and Hong Kong has been greatly affected.

5. Article 95 of the Basic Law states that the HKSAR may, through consultations and in accordance with law, maintain juridical relations with the judicial organs of other parts of China, and they may render assistance to each other.

6. On 21 June 1999, the Arrangement has been reached and was signed by the Secretary for Justice and the Vice President of the Supreme People's Court (see Annex A to the LegCo Brief).

7. By this Arrangement, awards made on the Mainland in accordance with the Arbitration Law of the PRC by Mainland arbitration centres recognised by the State Council will be enforceable in HKSAR. The list of arbitration centres comprising 148 bodies is at Annex B to the LegCo Brief. Members may note that prior to reunification, only awards made by the China International Economic and Trade Arbitration Commission (CIETAC) and the China Maritime Arbitration Commission (CMAC) were recognised for enforcement in Hong Kong.

8. To reflect the Arrangement on the enforcement of Mainland award in Hong Kong, the Ordinance needs to be amended. Clause 3 adds some new definitions to the Ordinance such as "the Mainland", "Mainland award" and "recognised Mainland arbitral authority". "The Mainland" means "any part of China other than Hong Kong, Macau and Taiwan".

9. Clause 5 adds a new Part IIIA which provides detailed procedures to seek to enforce a Mainland award in Hong Kong and the conditions under which enforcement will be refused. The proposed sections 40B, 40D and 40E are similar to sections 42, 43 and 44 of the Ordinance, i.e. provisions on the enforcement of New York Convention awards. The procedural requirements for the enforcement of Mainland arbitral awards prior to the reunification is thus preserved. The new section 40A provides that the new Part IIIA will not apply to a Mainland award which was at any time before 1 July 1997 a Convention Award and the enforcement of which had been refused. New section 40F is a saving provision which provides that the enforcement of a Mainland award which had been refused in Hong Kong between 1 July 1997 to the time of commencement of this Ordinance may be enforceable under this new Part IIIA as if enforcement had not been previously refused. New section 40C prohibits the concurrent enforcement of arbitral awards in both the Mainland and Hong Kong.

10. Clauses 3(a) and (b), 4, 6, 7, 8, 10, 11, 13 and 14 are provisions on adaptation. Terms such as "Governor" and "Governor in Council" are adapted to "the Chief Executive" and "the Chief Executive in Council" respectively. Clauses 3(a), 8, 10, 13 and 14 when passed into law shall be deemed to have come into effect on 1 July 1997 (Clause 2).

11. Clause 9 amends the applicability of the Ordinance. Before amendment, the Ordinance (other than Parts III and IV) binds the Government. The proposed section 47 provides that "this Ordinance applies to and in relation to any arbitration agreement, irrespective of whether a party to the agreement is an individual, public body, public authority, private body, organ or any other class of person". Clauses 12 and 15 contain transitional provisions and consequential amendments.

Public Consultation

12. The LegCo Brief states that the Administration understands that the local arbitration community's concern is that any arrangement should ensure that the awards that will be recognised for enforcement in Hong Kong should be made in accordance with the procedural requirements of the New York Convention. It has not stated whether any specific organization has been consulted.

Consultation with the LegCo Panel

13. The LegCo Panel on Administration of Justice and Legal Services had discussed the proposed arrangement on 15 December 1998 and 15 June 1999. Members had expressed various concerns. This item will be further discussed at the Panel's next meeting to be held on 20 July 1999.

Conclusion

14. Since the refusal of enforcement of Mainland arbitral awards in Hong Kong and vice versa after 1 July 1997, business and arbitration communities have expressed grave concerns. Given the great impact on the commercial world, this Bill warrants detailed scrutiny urgently. Members are recommended to set up a Bills Committee to study this Bill from both the policy and legal points of view.


Prepared by


HO Ying-chu, Anita
Assistant Legal Adviser
Legislative Council Secretariat
5 July 1999