In 2007, the Arrangement on Mutual Recognition and Enforcement of Arbitral Awards Made in the Mainland and Macau SAR came into force. However, there has been no special arrangement between the Hong Kong SAR and the Macau SAR for mutual recognition and enforcement of arbitral awards.

At present, awards made in Macau are enforceable in Hong Kong only with the leave of the Hong Kong courts. Section 86 of the Arbitration Ordinance (Cap. 609) sets out the grounds for refusal of enforcement of arbitral awards (such as invalidity of the arbitration agreement, lack of legal capacity to enter into the arbitration agreement, lack of proper notice of the appointment of the tribunal etc.). Enforcement may also be refused for any other reason the Hong Kong courts consider to be justified. This raises uncertainties about the enforceability in Hong Kong of awards made in Macau. However, this position will soon change.

On 7 January 2013, the Department of Justice of the Hong Kong SAR Government concluded an arrangement with the Macau SAR on reciprocal recognition and enforcement of arbitral awards (the "Arrangement").

Under the Arrangement, the courts of Hong Kong and the courts of Macau will mutually recognise and enforce arbitral awards made in the Macau SAR and the Hong Kong SAR. When a party fails to comply with an arbitral award, the other party may apply for recognition and enforcement of the award to the appropriate court in the other special administrative region where the defaulting party is domiciled, or where the property of the defaulting party is situated.

The Department of Justice has indicated that amendments to the Arbitration Ordinance will be introduced in the 2013 legislative session to implement the Arrangement. The Department of Justice will also take the opportunity to work in collaboration with the arbitration sector to make further improvement to the Arbitration Ordinance.

The Arrangement will provide a more straightforward and effective mechanism for the enforcement of arbitral awards between the two special administrative regions. It will also provide a higher degree of certainty with regard to the enforcement of the arbitral awards in commercial transactions involving Hong Kong and Macau and further enhance Hong Kong as the arbitration centre of choice in Asia.

For inquiries related to this Legal Update, please contact David BoyleVenna Cheng or your usual contacts with our firm.