Protecting your labour contract during cross-border disputes between the People’s Republic of China and Hong Kong Special Administrative Region

Disputes in labour matters involving cross-border elements can add an extra layer of complexity to your business. Specifically, court judgements awarded in one place but requested to be enforced in another place often require re-litigation in the court of the requested place. Customarily, the length of time and costs involved in pursuing multiple litigations could discourage the concerned parties to proceed with litigation in related jurisdictions. In the end, where litigation is pursued in one place, the court judgement may not be recognised and enforced in the requested place, as the dispute was not litigated in said place.

Between the Hong Kong Special Administration Region (HKSAR) and People’s Republic of China (PRC), several arrangements have been signed to develop mutual legal assistance on the enforcement of civil and commercial judgements in the two jurisdictions. However, only the latest Arrangement on Reciprocal Recognition and Enforcement of Judgements on Civil and Commercial Matters by the Courts of the PRC and HKSAR (2019 Arrangement) signed between the Supreme People’s Court and the HSAR government on 18 January 2019, stipulates the inclusion of employment matters.

The previous arrangement, The Choice of Court Arrangement, signed in 2017 established the precondition of a choice of court agreement in writing for any party proceeding to enforce a court judgement issued in the PRC in the jurisdiction of HKSAR or vice versa. Parties concerned in the court judgement were required beforehand to expressly designate a court of the Mainland or a court of the HKSAR as the court with sole jurisdiction to resolve any disputes arising out of civil and commercial contracts between the related parties, excluding employment contracts. Since the precondition and the exclusion of employment contracts is removed in the latest arrangement, employees in either PRC or HKSAR may advance court judgements without the need to re-litigate.

Case study

An employer in HKSAR dispatches an employee to work in PRC. The HKSAR entity does not establish an entity in the PRC, and since the employee is an HKSAR resident, no work permit is required. Having understood the employee is exposed to legal and tax liabilities without an employing unit in China, the employee proceeds legal proceedings against the HKSAR employer and obtains a judgement in China. Under the latest reciprocal arrangement, the employee may seek to enforce the court judgement in the HKSAR. In this manner, even if no court was designated to have exclusive jurisdiction over disputes in the labour contract, the employee may still apply for recognition and enforcement of the judgement in an HKSAR court.

Qualifying conditions

Court Judgements

Court judgments in commercial and civil matters are referred to in an Arrangement as the following:

  • Judgements in the case of the PRC is any judgement, ruling, conciliatory statement and order of payment, but does not include a ruling concerning preservation measures.
  • Judgement in the case of the HKSAR includes any judgement, order, decree and allocator excluding an anti-suit injunction or an order for interim relief.

Civil and commercial matters

Civil and commercial matters are required to consider a case as civil and commercial in nature under both PRC law and HKSAR law, as well as for civil damages awarded in criminal cases. Although, judicial review cases and any other cases heard by the courts of the HKSAR arising directly out of the exercise of administrative powers are excluded.

Relationship between requesting jurisdiction and dispute

Parties pursuing enforcement in the requested place are required to establish that there is a relationship between the requesting place and the dispute by satisfying one of the following conditions:

  • At the time the original court (the court who issued the judgement) accepted the case, the place of residence of the defendant is within the requesting place;

  • At the time of which the originating court accepted the case, the defendant maintained in that place a representative office, branch, office, place of business or such other establishment without separate legal personality, and the action arose out of activities of the establishment;

  • The action was brought on a tortious dispute and the infringing act was committed in the requesting place;

  • The parties concerned in the contractual dispute or property-related dispute had expressly agreed in writing that the courts of the requesting place shall have jurisdiction over the relevant proceeding; or

  • The defendant appeared before the originating court and defended in the proceedings without raising an objection to the original court.

In the case of the last two points, where all parties to the judgement reside in the requested place, the requested place shall have an actual connection with the dispute, such as where the contract was performed or signed.  

For employees working in PRC and employed by an HKSAR company or vice versa, the arrangement allows more potential for employees to bring any violation of contractual obligations against employers in either place, without the need to re-litigate the same dispute in the other place, thus offering greater protection for labour contracts. Although, the employers may also pursue employee in violation of contractual obligations. The 2019 Arrangement shall be effective after the two jurisdictions complete all necessary procedures to enable implementation, and will apply to judgements made on or after the commencement date.

If you have labour law concerns in either the PRC or HKSAR, please contact Horizons at talktous@horizons-advisory to schedule a consultation session. From RMB 1,500 per session, Horizons can provide insight, expertise and the right solutions for you. 

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