Cross-border Insolvency between Mainland China and HKSAR【Part3】

Recently the Hong Kong Court has granted recognition and assistance to Mainland China liquidators for the first time in Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167.This article aims to review the status quo of the Cross-border Insolvency between Mainland China and HKSAR before this case and offer a practical proposal regarding the arrangement between Mainland and HKSAR on this area of judicial assistance. After reviewing the real-life cases, the author attempts to point out that though there is no bilateral arrangement, both Mainland and HKSAR has recognized other’s insolvency judgments in different forms. Furthermore, on the basis of recent development with respect of mutual judicial assistance, the author take a conservatively optimist view towards reaching a bilateral agreement for recognizing and enforcing other’s insolvency judgments in near future. 

近日，香港法院在Joint and Several Liquidators of CEFC Shanghai International Group Ltd中首次承认和协助内地破产管理人（案号：[2020] HKCFI 167）。本文旨在通过回顾此案之前内地与香港之间的跨境破产现状，就内地与香港在司法协助领域的安排提供实用建议。在研究了实践案例之后，笔者在此指出，尽管内地和香港之间暂未进行双边安排，但两地均以不同方式承认了对方的破产判决。在司法互助最新发展的基础上，笔者抱着保守的乐观态度，期待在不久的将来，两地出台关于承认并执行破产判决的双边安排。

According to Article 95 of the Basic Law of the Hong Kong, Mainland and Hong Kong can negotiate and provide judicial assistance based on negotiation, which has laid down the legal foundation for the Mainland and Hong Kong to reach cross-border insolvency cooperation arrangements through negotiation. Achieving cross-border bankruptcy cooperation arrangements is a perfect way to improve the plight of cross-border bankruptcy cooperation between Mainland and Hong Kong. At the same time, it is also an ideal approach for cross-border bankruptcy cooperation between Mainland and Hong Kong.

With regard to the specific design of cooperative arrangements, the academic community has put forward different views at present. Among them, the first option is to design a cross-border bankruptcy cooperation arrangement between Mainland and Hong Kong in accordance with the cooperation model in the EU Bankruptcy Regulations (hereinafter referred to as the "EU model"), that is, the main-secondary procedure and automatic recognition mechanism. The second option is to expand the Arrangement of Mutual Recognition and Enforcement of Judgments in Civil and Commercial Cases under the Agreement of the Parties between Mainland and Hong Kong Special Administrative Region signed by Mainland of China and Hong Kong in 2006 to apply to cross-border bankruptcy issues. The third option is to draw on the "Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA), especially the design of the dispute settlement mechanism to establish a cross-border bankruptcy dispute settlement mechanism between the Mainland and Hong Kong.

From the perspective of promoting cross-border bankruptcy cooperation between the Mainland and Hong Kong, there are certain problems with the three schemes mentioned above. 

First, the EU model is built and operated on the basis of a high degree of integration among member states, a similar legal system and social culture. There are obvious differences in legal traditions and social systems between Hong Kong and Mainland. This has affected the mutual trust and exchanges between Mainland and Hong Kong at the judicial level to a certain extent. Therefore, the EU model represented by the automatic recognition mechanism is not practical to cross-border bankruptcy cooperation between Mainland and Hong Kong at this stage. 

Secondly, the recognition and assistance in the field of bankruptcy are obviously different from ordinary civil and commercial judicial assistance. Bankruptcy procedures are collective procedures that have both the procedural and substantial requirements of the entity. The bankruptcy procedures will have an irreversible impact on the interests of all creditors. Therefore, there are many policy requirements in the bankruptcy process, which makes the principle of autonomy in the field of civil and commercial affairs not fully applicable in bankruptcy process. The proposal of direct extension of the existing civil and commercial arrangements between Mainland and Hong Kong is not appropriate.

Regarding the third option, CEPA aims to promote closer economic and trade arrangements between the Mainland and Hong Kong. It covers the economic relations between different customs zones under the WTO framework and the trade relations between different WTO members. It has the characteristics of public international law. The attempt to draw on its dispute settlement mechanism to promote cross-border bankruptcy cooperation between the Mainland and Hong Kong ignores the private law nature of cross-border bankruptcy legal issues, so this solution is not feasible.

Mainland courts have previously adopted the standard of factual reciprocity in judicial practice, which requires the applicant country to have precedent for the recognition and enforcement of court judgments in the receiving country, thereby rejecting the recognition and enforcement of judgments in foreign jurisdictions. This has led to the formation of a "reciprocal circle of reciprocity" in the recognition and enforcement of judgments between China and certain countries. This is a possible and practical way out. If any side take the proactive step first, that is recognition of other’s bankruptcy order, the reciprocity relationship is feasible. In this sense, Joint and Several Liquidators of CEFC Shanghai International Group Ltd [2020] HKCFI 167 has broken the ice.

【End】

注意：本文内容涉及专门和复杂的法律知识及法律程序，本文仅是对有关内容的一般性概述，只作参考，不构成针对任何个案的法律意见。如需进一步的法律咨询或协助，请联系我们的律师。

前文回顾：

Cross-border Insolvency between Mainland China and HKSAR【Part 1】

Cross-border Insolvency between Mainland China and HKSAR【Part 2】

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