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Dispute Resolution
Importance of Proper Arbitration Clauses in Contracts
By Richard Healy & Yan Chu
Arbitration is a common form of alternative dispute resolution, and it is the process by which the parties to a dispute submit their difference to a neutral third party appointed by agreement of the parties. Given the process is confidential in nature as there is no public hearing, an arbitration clause is commonly found in all kind of contracts nowadays.
However, it is frequently complained that arbitration is becoming as time consuming and expensive as litigation, especially when there is a dispute over the interpretation of the arbitration clause and the arbitrator or the arbitral tribunal are invited by the parties to decide on their jurisdiction before the determination of the substantive issues in dispute.
Accordingly, a well-drafted arbitration clause being able to dictate and limit the rights and obligations of the parties and the arbitrators not only can save enormous costs in arbitration, but also can ensure that all disputes between the parties are arbitrated, enhance the prospects for enforcement and ensure the qualifications and selection process of the arbitrators etc.
When negotiating an arbitration clause, the following should be considered:
1. What disputes should be subject to arbitration?
Various potential disputes that may arise under a specific agreement should be considered and which disputes should be subject to arbitration should also be decided. However, an arbitration clause covering all disputes “arising from or related to” the contract is appropriate in most cases.
2. Whether one or more alternative dispute resolution mechanisms are appropriate?
A pre-arbitration mediation requirement is commonly found in commercial contracts nowadays. It may increase the likelihood of settlement and save the arbitration costs.
3. What is the number and qualification of the arbitrator(s)?
The parties are free to determine the number of arbitrator. It would be faster and less expensive in appointing sole arbitrator as opposed to a panel, but it will put the arbitration in the control of the hands of a single individual and there is a risk of abnormal arbitration result being made by the chosen arbitrator.
Some disputes may require expertise in specialized fields, such as construction and shipping, and it is important to specify the minimum qualifications of the candidates from among whom the arbitrator will be selected.
4. Which substantive law will be applied in Arbitration?
The parties are free to choose which law is to be applied in deciding the substantive disputes.
5. What is the seat of arbitration?
The seat determines the law governing the arbitration procedures and the process and rights concerning the enforcement of the arbitration award. It does not have to be the place of the arbitration but there are advantages to them being located in the same place, as there may be circumstances the judicial support is required. The procedural law chosen by the parties for the arbitration does not necessarily follow the substantive law.
Care should be taken to select a jurisdiction that is a party to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) so that an award can be enforced in the jurisdiction it will need to be enforced.
The following paragraphs will give you some ideas as to why Hong Kong is frequently chosen as the seat of arbitrations and becoming an international arbitration centre for the Asia Pacific.
a. The New Arbitration Ordinance in Hong Kong
Arbitrations in Hong Kong are governed by the new Arbitration Ordinance (Cap 609), which came into force on 1 June 2011 to replace the old Arbitration Ordinance (Cap 341).
Under the old Arbitration Ordinance, there were two separate regimes for the conduct of domestic arbitrations and international arbitrations in Hong Kong.
The new Arbitration Ordinance unifies the two regimes and by and large adopts the UNCITRAL Model Law, making the law of arbitration more user-friendly to arbitration users both in and outside Hong Kong. Arbitrations commenced before 1 June 2011 however are still governed by the Old Arbitration Ordinance.
b. Enforcement of Awards
The new Arbitration Ordinance provides that an arbitral award, whether made in or outside Hong Kong, with the leave of the court, is enforceable in the same manner as a judgment of the court. An application for leave to enforce the award is made by issuing an ex parte originating summons with the court together with a supporting affidavit.
Since Hong Kong is a party to the New York Convention, an award obtained in Hong Kong is enforceable in other states which are signatories to the New York Convention and Convention awards are enforceable in Hong Kong.
It is important to note that, upon the Mainland China's resumption of sovereignty over Hong Kong on 1 July 1997, the New York Convention ceased to apply to the enforcement of Hong Kong arbitral awards in Mainland China or vice versa.
On 21 June 1999, the authorities in Mainland China and Hong Kong signed the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region (the Mutual Enforcement “Arrangement”), which reflects the provisions in the New York Convention and restores the enforcement procedures that were in place prior to the handover.
Under the Mutual Enforcement Arrangement, an application for the enforcement of a Hong Kong arbitral award should be made to the intermediate people's court of the place where the party against whom the application is made is domiciled or in the place where the property of the said party is situated.
It is often the case that when foreign parties negotiate contract terms with Mainland Chinese parties that such an agreement will often provide for enforcement by means of arbitration in Hong Kong. This has a number of advantages. From the Chinese party's point of view the contract is of course governed by the law of a part of China. From the foreign party's point of view contract is governed by essentially common law and of course has the advantage that arbitral awards can be enforced in Mainland China.
6. What is the place of arbitration?
When deciding the location, the parties should consider whether it is convenient for the parties, arbitrators, witnesses and experts to attend the arbitration, the likely costs and time involved and the availability of the legal and judicial support for the arbitration.
7. Which arbitration rules will apply to the arbitration?
The arbitration rules govern the arbitration procedures.
The arbitrator would not be required to reinvent the rules for the parties by adopting institutional rules, such as Hong Kong International Arbitration Centre (HKIAC).
The HKIAC is an institution totally independent and free from governmental interference. It is advisable to conduct an arbitration governed by the HKIAC, which can ensure that the arbitration proceedings are administered in an orderly and regular manner and exercise a degree of quality control over arbitrators and their awards.
If the parties agree to conduct an arbitration governed by the HKIAC, they may consider adopting the following model arbitration clauses suggested by the HKIAC:
Arbitration Administered by the HKIAC
"Any dispute, controversy or claim arising out of or relating to this contract, including the validity, invalidity, breach or termination thereof, shall be settled by arbitration in Hong Kong under the Hong Kong International Arbitration Centre Administered Arbitration Rules in force when the Notice of Arbitration is submitted in accordance with these Rules.
The number of arbitrators shall be ... (one or three). The arbitration proceedings shall be conducted in .... (insert language)."
Arbitration under UNCITRAL Rules
"Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force and as may be amended by the rest of this clause.
The appointing authority shall be Hong Kong International Arbitration Centre.
The place of arbitration shall be in Hong Kong at Hong Kong International Arbitration Centre (HKIAC).
There shall only be one arbitrator."
Conclusion
There is no ideal arbitration clause suitable for all contracts. It is always advisable to consult an experienced litigator who frequently litigates contract disputes when negotiating an arbitration clause. They would be in the best position to anticipate what types of disputes are most likely to arise under a given contract, and which dispute resolution provisions would be the most appropriate.
Additional Info
- Title Alias Arbitration Clauses in Contracts
- Optional Description An interesting read on the Importance of Proper Arbitration Clauses in Contracts
How to tackle email scam
By Richard Healy and Anna Chan
With technological advances in the electronic world and the increasingly handy gadgets accessible to us, cyber crime is gaining popularity causing a real concern for all internet-users, including you and me. One of the mostly found cyber crime in recent years is by way of email scam whereby fraudsters would either hack email accounts or compromise computers to deceive the email recipients into paying them.
Common Scheme of Email Scam
In many cases that we came across, the victims are mostly those trading company having transaction with suppliers worldwide. The diagram below would illustrate how the scheme operates.
1. There had been genuine sale of goods by SUPPLIER to VICTIM.
2. SUPPIER then sent payment invoice (sometimes together with the bill of lading, the purchase order etc.) to the VICTIM via email.
3. FRAUDSTER, having hacked the email of the SUPPIER, pretended to be the SUPPLIER and emailed to the VICTIM forged payment invoice, bill of lading and purchase order by changing the bank account details and the document letterheads. The forged email would normally come from a fraudulent account bearing striking similarity from the SUPPLIER’s genuine email account (e.g. from abcde@supplier.com to abccde@supplier.com) misleading the VICTIM to believe that the email was from the real SUPPLIER.
4. The VICTIM, failing to notice the subtle difference in the forged email, remitted money to the FRAUDSTER’s bank.
5. The VICTIM would realize the cyber fraud administered by the FRAUDSTER upon the SUPPLIER’s notice that money was never received by their side.
What you should do after discovering the email scam
1. A complaint should be filed to the HK Police or the HK Joint Financial Intelligence Unit (JFIU) or the police in other countries if other jurisdictions are involved.
2. A letter to banks (including the sending and recipient banks) should be sent alerting the cyber fraud and demanding return of the defrauded fund and/ or preservation of the fund in the banks.
3. Depending on the circumstances, an application for Court’s injunction should be made to freeze the bank accounts involved so as to prevent dissipation of assets.
4. If the money is still retained in the bank account, the Court’s judgment is needed to recover the money.
5. If the money has already been transferred to some other bank accounts, discovery order should be applied for to trace the flow of fund.
6. Civil action should then be taken to trace and recover the stolen money.
Obviously, depending on the particular scam, circumstances and actions will vary from case to case.
Prevention is better than cure
It is always better to take preventative measures rather than looking out for remedies. You may check out some practical preemptive measures from the Police’s article “Tips for Smart Netizens” which is summarized below:-
1. Change your passwords frequently
2. Check that your personal firewall is configured correctly
3. Apply the latest software security patches
4. Regularly update your anti-virus and malware signature files
5. Run frequent anti-virus and malware scans on your computer
6. Back up data and files regularly
7. Keep passwords safe
8. Check the information of the merchants and the goods before transaction
9. Never leave receipts around, and be sure to destroy any paperwork you no longer need
10. Never download software from unknown sources
What OLN can do for you
OLN has acted for the victims in many cyber fraud cases. On most occasions, OLN has successfully obtained an injunction and recovered substantially the defrauded money. With extensive experience in civil litigation, we will be able to assist you in a swift and efficient manner.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
Additional Info
- Title Alias Email Scams
- Optional Description How to identify and protect yourself from email scams
Litigation in Hong Kong – Frequently Asked Questions- Part 2
by Olivia Kung, Associate
This is the second part of a 4 part series on frequently asked questions on litigation. We hope that this series can provide some basic information on this area of law which most people find to be a minefield.
Can I bring a claim if it happened years ago?
This depends on the limitation period (i.e. deadline to bring a claim). The limitation period varies depending on the type of case.
Types of cases
Action for contract cases: 6 years from the date of breach.
Action for contract under seal cases: 12 years from the date of breach.
Action for personal injury cases: 3 years from the date of the accident, or the date of knowledge of the injury by the Plaintiff, whichever is the latter.
For fatal accident claims: limitation period is 3 years from the date of death or the date of knowledge of the death by the deceased's dependent, whichever is the latter.
For personal injury cases only, the court has discretion to override any time limit where it thinks fit.
Action for employees' compensation/work-related injuries claims, they must be brought within 2 years from the date of accident that causes the injury.
Action for other tort cases (including nuisance, trespass to land and conversion) – 6 years from the date of tort.
Where the plaintiff is a minor (i.e. under the age of 18), time does not start to run until he/she reaches 18 years old.
I have a judgment in my favour, will the court enforce the judgment for me?
Unfortunately obtaining a judgment in your favour (judgment creditor) does not automatically mean that you will obtain the remedy you sought as the court will not enforce any judgments for the winning party on its own initiative. It is up to the judgment creditor to decide when and how to enforce the judgment.
Methods to enforce judgment
There are several methods to enforce a judgment. For example:
1. Examination of judgment debtor before a Master by cross-examination on oath about debts owing to him/her and what other properties or means the judgment debtor has to satisfy the judgment;
2. Prohibition order – prohibits the judgment debtor from leaving Hong Kong to escape liability for payment of judgment debts;
3. Issue a writ of execution (also known as writ of “fieri facias”) for money judgment directing the bailiff to seize and sell the judgment debtor’s goods, chattels, and other properties to satisfy the judgment debt;
4. Issue a writ of sequestration by directing the bailiff to take possession of the judgment debtor’s land and personal estate until the contempt is cleared;
5. Garnishee proceedings i.e. where the judgment debtor is himself the creditor of a third party. Through garnishee proceedings, the obligation of the third party to pay money to the judgment debtor is transformed into an obligation to pay the money directly to the judgment creditor;
6. Petition to wind up a judgment debtor (in the case of a company) or petition to declare a judgment debtor bankrupt (in the case of individual);
7. Charging order - a charging order can be imposed upon land/real estate, securities, or funds in court. A charging order is an indirect form of enforcement as it provides the judgment creditor with security only. If the judgment debtor fails to pay, the judgment creditor will need to take further action; and
8. Appointment of a receiver over the judgment debtor’s interest.
Can I recover my costs if I win?
What is meant by costs?
Costs refer to the legal expenses a party incurs pursuing/defending a claim.
Costs include the following:
1. Fees;
2. Charges;
3. Disbursements (e.g. a barrister’s fees);
4. Expenses (e.g. photocopying charges, court fees); and
5. Remuneration (e.g. to expert witnesses).
Generally speaking, costs are normally awarded at the end of the case. However, the court has discretion to award costs at any stage of the action.
General principles
The starting point is that the winning party should be entitled to recover his/her costs from the losing party. However, the court may deprive a winning party some or all of his/her costs in the following circumstances:
1. Where the winning party recovers substantially below what he/she claims for;
2. The winning party’s conduct has substantially and unnecessarily prolonged the action;
3. The plaintiff wins the claim and the defendant wins the counterclaim. If this happens, the court will take into account the length of the claim and the counterclaim and their respective size. The court may also keep the costs order to the claim and the counterclaim separate;
4. The winning party has committed any misconduct in the action (e.g. fraud, delay, default);
5. The costs of and occasioned by any amendment to any pleadings made without leave must be borne by the amending party;
6. The costs of and occasioned by an application to extend time; and
7. The party request for discovery against a non-party.
The court will only award costs that are necessary and properly incurred.
How much can I recover if I win?
Unfortunately the successful party rarely recovers the full amount of his/her costs – generally speaking, he/she can recover approximately 2/3 of the actual costs incurred.
Where parties have reached a settlement but failed to agree on costs, this can be decided by a procedure called “taxing”. This is an assessment of the actual bill by a Taxing Master of the court.
The court also has the power to order summary assessments of interlocutory applications. This means that a party that is subjected to a costs order may be required to make immediate payment rather than wait until the end of the case.
Can we arrange payment of legal fees on a contingency fee/”no win no fee” basis?
What is a contingency fee arrangement?
A contingency fee arrangement refers to payment for legal services which depends on or is contingent upon recovery or award of damages. The payment of legal fees depends on a percentage of the amount of damages recovered.
What is a “no win no fee” arrangement?
A “no win no fee” arrangement is a common term for a Conditional Fee Agreement (CFA). It is a fee arrangement whereby the solicitors will not be paid unless the client wins the case. If the client does win the case, his/her legal fees together with a success fee (uplift) will also be paid by the opposing party.
Although the above fee arrangements are common in some jurisdictions, it is prohibited in Hong Kong.
Therefore, we cannot accept payment of legal fees on a contingency fee or “no win no fee” basis.
The plaintiff ordinarily resides outside Hong Kong. I am concerned that he/she may not be able to pay my costs if I succeed in defending the case.
Normally liability to pay costs only arises at the conclusion of a case. In other words, once the winning party receives a court order in their favour, they can seek reimbursement/indemnity from the losing party. However, where the plaintiff ordinarily resides out of Hong Kong, the defendant may apply to court to require the plaintiff to provide security for costs.
What is security for costs?
Security for costs means that a party will need to pay into court funds which reflect the amount of costs reasonably incurred and to be incurred by the defendant. The court has the power to order security for costs to ensure that the winning party will not be deprived of any favourable costs order awarded.
What if the plaintiff is a limited company?
If the plaintiff is a limited company, is formed and registered in Hong Kong and it appears that there is reason to believe that the company will not be able to pay for the defendant’s costs, the defendant can apply to court for security of costs from the company. However, an order for security for costs may not be made against an overseas company registered under Part XI of the Companies Ordinance.
Factors the court will take into account
In determining whether to grant such an order, the court will take into account the difficulty of enforcing a judgment of costs in the jurisdiction where the plaintiff ordinarily resides. The court is unlikely to make such an order where the plaintiff has substantial assets in Hong Kong.
Can security of costs be made against a Defendant?
Apart from counterclaiming defendants, a defendant cannot be ordered to give security for costs.
Security for costs on appeal
The Court of Appeal may only order security for costs on appeal if, having regard to all the circumstances of the case, it thinks it is just to do so.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
Additional Info
- Title Alias Litigation in Hong Kong
- Optional Description Frequently Asked Questions- Part 2
Litigation in Hong Kong – Frequently Asked Questions- Part 1
By Olivia Kung, Associate
Many people find litigation a daunting experience, especially the first timers. This series of Questions & Answers can hopefully provide litigants with some basic understanding of this area of law.
Q1. Can I settle the dispute without going to trial?
First of all, the majority of cases settle before trial. Further, under the Civil Justice Reform, parties are encouraged to explore alternatives to litigation e.g. mediation. If a party unreasonably refuses to attempt mediation, the court can make adverse costs order against that party irrespective of the outcome after trial.
What is mediation?
Mediation is a voluntary, informal, flexible and confidential dispute resolution process conducted by a trained and impartial person. The mediator assists and encourages the parties to reach a settlement. He/she has no power over the parties to compel a settlement and he/she does not give any opinion on the relative legal merits of the case. The parties retain control of the process and decisions. Once settlement has been reached, it will be reduced into writing and will be legally binding and enforceable. Mediation is the most common alternative to litigation.
Advantages of mediation
• Time and cost efficient;
• Parties can make their own decisions and reach agreements with which the parties may be more willing and ready to comply;
• Settlement terms can be kept private and confidential;
• Mediation can result in terms of settlement of greater flexibility and in more practical ways going beyond the legal remedies that the court is empowered to grant. The solutions developed by the parties can be unique to the dispute and are ones that the court cannot provide; and
• Mediation is conducted in a more relaxed and informal manner which parties tend to be more open to compromise.
Q2. Which court will my case be assigned to?
This depends on the type and value of your claim.
Civil Courts
Civil courts in Hong Kong consist of the following:-
1) District Court;
2) The High Court; and
3) The Court of Final Appeal.
The District Court
District Court has limited jurisdiction over both criminal and civil matters. For criminal matters, the District Court deals with indictable offences transferred to it from the Magistrates' Court. The District Court may try all serious criminal cases except murder, manslaughter and rape. The maximum term of imprisonment it can impose is 7 years.
For civil matters, the District Court hears claims in respect of the following:
1) Contract , quasi-contract or tort claim (including personal injuries claims) over HK$50,000 but no more than HK$1 million;
2) Recovery of land or premises where the annual rent or rateable value or the annual value does not exceed HK$240,000;
3) Tenancy cases;
4) Under equity e.g. administration of estate, trust, mortgage, specific performance, maintenance of infant, dissolution of partnership, relief against fraud or mistake. Where proceedings do not relate to land, the maximum value involved shall not exceed HK$1 million. Where proceedings do relate to land, the maximum value involved shall not exceed HK$3 million. For proceedings in relation to the recovery of land or title to land, the ratable value of the land must not exceed HK$240,000;
5) Recovery of less than 12 months of rental arrears only;
6) Employees' compensation cases (there is no limit on the amount claimed);
7) Sex discrimination, disability and family status discrimination cases; and
8) Matrimonial cases including divorce, maintenance, custody and adoption of children (the court which handles these types of cases is also known as the Family Court).
The High Court
The High Court comprises of two divisions - the Court of First Instance of the High Court and the Court of Appeal. The Court of First Instance is the principal court for civil matters in Hong Kong. It has jurisdiction over the following claims:
1) Money claims HK$1 million or above;
2) All other claims falling outside District Court jurisdiction;
3) Claims to be exclusively started in the Court of First Instance of the High Court (including judicial review, winding up, bankruptcy, certain statutory appeals);
4) Appeals from the Small Claims Tribunal on a point of law; and
5) Serious criminal offences
The Court of Appeal hears both civil and criminal appeals from the District Court and the Court of First Instance.
The Court of Final Appeal
The Court of Final Appeal is the highest appellate court in Hong Kong. It hears civil appeals from any final judgment of the Court of Appeal if the matter in dispute is in relation to an amount HK$1,000,000 or above. It also hears other civil and criminal appeals with leave if the matter is of great general or public importance or otherwise ought to be submitted to the Court of Final Appeal for decision.
Tribunals in Hong Kong:
a) The Small Claims Tribunal;
b) The Labour Tribunal;
c) The Lands Tribunal; and
d) The Market Misconduct Tribunal.
Small Claims Tribunal
The Small Claims Tribunal handles civil claims up to HK$50,000 for contract, quasi contract and tort claims.
Labour Tribunal
The Labour Tribunal has exclusive jurisdiction over claims arising under the Employment Ordinance.
The Lands Tribunal
The Lands Tribunal has jurisdiction over miscellaneous claims relating to land. (It Tribunal) has a discretion to transfer matters to the District Court or to the Court of First Instance.
The Market Misconduct Tribunal
The Market Misconduct Tribunal handles disciplinary matters in relation to market misconduct e.g. insider dealing, false trading, price ragging, stock market manipulation etc.
Criminal Court in Hong Kong:
The Magistrates Court only handles criminal matters. The Magistrate Court’s power of punishment is generally restricted to a maximum of two years' imprisonment or a fine of HK$100,000.
Q3. What can I do if the defendant ignores my claim?
If the defendant fails to file an acknowledgment of service or a defence within the time frame, the plaintiff can apply for a default judgment i.e. a judgment in favour of his/her claim.
If the claim is related to a debt or liquidated damages where the amount of the claim is fixed and ascertainable, the plaintiff may enter judgment for the amount claimed together with his/her legal costs.
Where the claim is for “unliquidated damages”, in other words, where the amount of damages needs to be assessed by the court, an interlocutory judgment will be entered into instead. In such circumstance, the plaintiff will still have to appear in court to assess the amount of damages he/she will be entitled to.
Q4. Does “speed trial” exist in Hong Kong?
Provided that the facts of the case are straightforward, and there is no credible defence, the length of the case can be “shortened” by applying for a summary judgment.
What is a summary judgment?
A summary judgment is where a case is commenced at the Court of First Instance at the High Court without a full trial. It normally takes 3-4 months to obtain a summary judgment.
The benefit of a summary judgment is that it can shorten the length of the case and reduce the legal costs incurred. However, it is only applicable where there is no credible defence to the claim, and the facts of the case are straightforward.
What if the defendant contests the summary judgment?
On the assumption that the defendant’s contest of the summary judgment is successful, the case has to follow the normal procedure to trial. Subject to the diary of the court, and on the assumption that the trial would not take more than 4 days, it should take approximately 1.5 years to obtain judgment.
What if the case is appealed?
In the event that the case is appealed, subject to leave being granted, it will take approximately 3-4 months. Further time will be incurred if the case is further appealed, but unless there is a good reason, enforcement of judgment will not be hampered by any appeal.
Speedy trial
Apart from summary judgment, the court has also got the power to order speedy trial where it considers the matter to be of urgency and will be better dealt with this way. Where the court makes such an order, the court will determine the mode of the trial.
Q5. Can I enforce a Hong Kong judgment overseas and vice versa?
Foreign judgments (excluding PRC judgments)
Judgments of the Hong Kong High Court and above may be enforced in most common law jurisdictions or as a result of international agreements and arrangements in a number of foreign countries including Belgium, France, Germany, Italy, Austria, Netherlands and Israel.
Equally, if a foreign judgment for the payment of debt is obtained in the superior court of a country listed under the Foreign Judgments (Reciprocal Enforcement) Ordinance (the “Ordinance”), an application can be made to the Hong Kong Court to register the foreign judgment. Once leave is granted to register, the foreign judgment can be enforced in the same way as a Hong Kong judgment.
What if the foreign judgment is not from a country listed under the Ordinance?
If the foreign judgment cannot be registered under the Ordinance, it can only be enforced at common law. This means that the foreign judgment itself will form the basis of a cause of action as the judgment will be treated as a debt between the parties.
To be enforceable at common law, the Hong Kong court will need to be satisfied that:
1. The foreign judgment was for a debt or a definite sum of money;
2. It was final and conclusive;
3. It was not obtained by fraud;
4. It was not contrary to Hong Kong rules of public policy or notions of natural justice; and
5. The foreign court had jurisdiction over the defendant according to Hong Kong rules.
What about PRC judgments?
In respect of enforcement of PRC judgments in civil and commercial matters, it is governed by a separate regime, known as the “Arrangement on Reciprocal Enforcement of Judgments in Civil and Commercial Matters” and the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (the “MJREO”). The MJREO makes provision for mutual enforcement in Hong Kong and the PRC judgments in civil or commercial matters.
The Ordinance only applies to enforcement of money judgments on disputes arising out of commercial contracts. Therefore, non-commercial contracts such as matrimonial matters, employment contracts, bankruptcy and insolvency matters, injunctions, orders for specific performance etc will be excluded.
In order to register a PRC judgment in Hong Kong, the judgment must satisfy the following:
1. The judgment is given on or after the date of the commencement of the Ordinance;
2. It is from a court which is a designated court under the MJREO;
3. It is final and conclusive;
4. It is enforceable in the PRC;
5. Judgment orders the payment of a sum; and
6. Application is made within 2 years from the date of the judgment.
In order to register a Hong Kong judgment for enforcement in the PRC, the judgment creditor will have to register both the Hong Kong judgment together with a certificate that the judgment is enforceable in Hong Kong.
Additional Info
- Title Alias Litigation in Hong Kong
- Optional Description Frequently Asked Questions- Part 1
Privacy Versus Transparency: The New Companies Ordinance on Disclosure of Residential Addresses and Identification Numbers of Company Directors and Secretaries
By William Lee, Associate
On 12 July 2012, the Legislative Council passed the Companies Bill, which was gazetted on 10 August 2012 as the new Companies Ordinance (Ordinance No. 28 of 2012) (the “New Companies Ordinance”). Currently, the Financial Services and the Treasury Bureau and the Companies Registry are considering the views of the public on the proposed subsidiary legislation to be put in place for implementation of the New Companies Ordinance. It is expected that the New Companies Ordinance will come into force once the subsidiary legislation is finalized.
The New Companies Ordinance has introduced various amendments to the existing regime with a view to reforming the company law in Hong Kong. Among other things, certain personal information concerning individual directors and secretaries of a company will not be generally available for public inspection under the New Companies Ordinance. This Articles aims to summarize the changes introduced by the New Companies Ordinance in this particular aspect and discuss some of the implications arising out from these changes.
Existing Regime on Inspection of Director’s Information
At present, directors and company secretaries who are natural persons are required to state their residential addresses and Hong Kong Identity Card Numbers or Passport Numbers in documents delivered to the Companies Registry for registration, e.g. annual returns filed by a company (Form AR1). These documents containing the residential addresses and personal identification numbers are generally available for inspection by the public upon the payment of a prescribed fee.
The Changes under the New Companies Ordinance
Under the New Companies Ordinance, residential addresses and personal identification numbers of directors and company secretaries which appear on the documents delivered to the Companies Registry for registration (the “Protected Information”) will no longer be made available for public inspection generally. In relation to documents that have been delivered to the Companies Registry before the commencement of the new Companies Ordinance, applications can be made to the Companies Registry for withholding the residential addresses and personal identification numbers in such documents (the “Withheld Information”) from public inspection.
If the residential address of an individual is withheld or protected from public inspection, the correspondence address provided by the individual will be made available for public inspection instead. According to the proposed subsidiary legislation, such correspondence address must not be a post office box number.
Apparently, the changes brought by the New Companies Ordinance has enhanced the protection of the privacy of personal information of individuals relating to the company. However, the unavailability of these information for public inspection will inevitably make the personnel of a company less transparent.
Permitted Use or Disclosure of Withheld and Protected Information in Specified Circumstances
The New Companies Ordinance provides for a number of cases where the Withheld Information and the Protected Information may be used or disclosed by the Companies Registrar. For example, the Companies Registrar may use the Withheld information or Protected information for communicating with the director, reserve director or company secretary in question and for the purpose of or in connection with performing its functions.
In addition, the Companies Registrar may also disclose the Withheld information or Protected Information to any person specified in the relevant subsidiary legislation. According to the proposed subsidiary legislation, the following persons may make an application to the Companies Registrar for disclosure of the Withheld Information/ Protected Information:
(1) A data subject, i.e. a person whose address or other personal particulars are withheld or protected from public inspection under the New Companies Ordinance;
(2) A person who is authorised in writing by a data subject to obtain the Withheld Information/ Protected Information;
(3) A member of the company;
(4) A liquidator;
(5) A trustee, i.e. a person who is a provisional trustee or trustee of the property of a bankrupt under the Bankruptcy Ordinance;
(6) A public officer or public body, including the Executive Council, the Legislative Council, the District Council, any board, commission, committee or other body that has power to act in a pubic capacity under or for the purposes of any enactment; and
(7) A “scheduled person”, which means a person specified in the Schedule to the subsidiary legislation, including a recognized clearing house/ a recognized exchange company/ a recognized exchange controller within the meaning of section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance.
Disclosure under Order of Court
Under the New Companies Ordinance, the Court may order disclosure of a residential address which has been withheld or protected upon the application of a creditor of the company or any other person appearing to the Court to have a sufficient interest if it is satisfied that it is appropriate to do so. The applicant has to show either:
(1) (in the case of a residential address) the service of documents at the correspondence address provided is not effective to bring them to the notice of the director, reserve director or company secretary in question; or
(2) (in the case of a residential address and an identification number) it is necessary or expedient for the relevant withheld or protected address/ personal identification number to be disclosed in connection with the enforcement of an order or decree of a court.
Right of Companies Registrar to make protected address available for inspection
The Companies Registrar reserves his right to make a protected address available for public inspection in the following circumstances:
(1) Communications sent by the Registrar to the director, and requiring a response with a specified period, remain unanswered;
(2) There is evidence that the service of documents by the Registrar at the relevant correspondence address of the director is not effective to bring them to the notice of the director.
The New Companies Ordinance requires advance notice to be given by the Registrar to the director before making the decision to make available the protected address for public inspection.
Implications
It is common for clients to conduct company searches to find out personal information of directors and other individuals relating to a company. Such personal information is a good starting point for further investigations to be carried out for the purpose of commencing legal proceedings or enforcing judgments against the company and/ or its directors. With the new changes to the public inspection of personal information of company directors and secretaries, information available to creditors of a company who wish to pursue any remedy against the company and/ or its directors will be less readily available. They are now required to take extra steps and incur additional time and costs to obtain the information.
On the other hand, whilst directors may benefit from the new inspection regime, they should act diligently when providing their correspondence address to the Companies Registrar. Failing to provide an effective correspondence address not only risks having their protected address made available to the public but may also attracts criminal liability of providing false or misleading information to the Companies Registrar.
OLN advises on a broad ranges of company related matters and disputes resolutions involving companies and their directors on a regular basis. Our practice groups are committed to the highest professional standards and offer practical and tailor-made solutions in a cost effective manner.
This Article is for information purpose only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances. If you have any questions in relation to the matters contained in this Article, please do not hesitate to contact our Partners of the Dispute Resolution Practice Group of OLN.
Additional Info
- Title Alias Privacy Versus Transparency
- Optional Description On 12 July 2012, the Legislative Council passed the Companies Bill,