HKCFI held that an asymmetric jurisdiction clause was not an exclusive choice of court agreement for enforcement purposes in Mainland China

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28 September 2020 | by LexisNexis Hong Kong

In Industrial and Commercial Bank of China (Asia) Limited v Wisdom Top International Limited [2020] HKCU 405, the court looked at whether an asymmetric jurisdiction clause (“AJC”) would constitute an exclusive jurisdiction clause under the Mainland Judgments (Reciprocal Enforcement) Ordinance (“Ordinance”) for enforcement purposes in the Mainland.

Facts

On 1 April 2019, the plaintiff (“ICBC”) obtained a default judgment against the defendant (“Wisdom Top”) under a facility agreement. ICBC made an ex parte application to the Registrar for issuance of a certified copy of the judgment and a certificate from the High Court for enforcement purposes in Mainland China.

For the ex parte application to succeed, the facility agreement should include a “choice of Hong Kong court agreement” pursuant to section 3(1) of the Ordinance.

The facility agreement here had an AJC. AJCs are common, a long-established and practical feature in international financial documents, which normally provides that a party must sue the other party in courts of a specified jurisdiction while the other party could choose to sue in the jurisdiction of its choice. In the present case, the AJC provided that:

1. if Wisdom Top wished to sue ICBC, it could solely do so in Hong Kong, on which exclusive jurisdiction was conferred. ICBC would be unable to challenge that jurisdiction as it had submitted to the jurisdiction of Hong Kong under the facility agreement;
2. if ICBC wished to sue Wisdom Top, it may bring claims not only in Hong Kong but also overseas in a court of competent jurisdiction;
3. if ICBC chose to sue Wisdom Top in overseas instead of Hong Kong (i.e. because Wisdom Top had assets located overseas), it had to justify why the claim should be brought there, because one of the sub-clauses under AJC conclusively decided that the Hong Kong court was the most appropriate and convenient forum.

With regards to 3), ICBC may therefore be attracted to bring actions outside of Hong Kong. Further, it tends to increase the probability for ICBC successfully recovering a debt owed to it by preserving its right to bring proceedings where the Wisdom Top’s assets may be located at the time a dispute arises.

Subsequently, the Registrar refused ICBC’s ex parte application as the AJC did not meet the definition of “choice of Hong Kong court agreement” under section 3(1) of the Ordinance. ICBC appealed against this decision.

Judgment

The court took a purposive construction approach and held that the AJC was not an exclusive jurisdiction clause as it was inconsistent with the purpose of section 3(1) of the Ordinance. It also went against the spirit of the 2006 Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and the HKSAR (“2006 Arrangement”).

According to section 3(1) of the Ordinance, a “choice of Hong Kong court agreement” is defined that the agreement must specify “the courts in Hong Kong or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdictions”. The purpose of this requirement was to minimise the risk of parallel proceedings and to facilitate enforcement by a summary procedure.

So, in the event where ICBC was the plaintiff, the jurisdiction was at large because ICBC could choose to bring the claim in a foreign jurisdiction and it also went against the spirit of the 2006 Arrangement. Besides, it would also bring uncertainty as to the choice of court or jurisdiction in such situation. Therefore, the court dismissed ICBC’s appeal after having considered the nature of the jurisdiction clause, the statutory scheme under the Ordinance, parts of the Hague Convention and related English authorities.

Recent Updates

A new arrangement was signed between the Hong Kong Government and the Supreme People’s Court of China in early 2019. For more details on the new arrangement, please see another Lexis Insights’ post here.

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