It’s always preferable to match the court with the governing law – it alleviates the expensive and time consuming requirement to have expert evidence adduced.
Notwithstanding that, we face a difficult hurdle using our courts in Australia (as well as other jurisdictions like England). The PRC courts will not generally recognise the decisions of foreign courts like those of Australia. However, if your counterparty has assets in Australia and the ability to enforce in the PRC is not critical, it may still be preferable to submit to the Australian courts to maximise recovery against those assets in the event of litigation. PRC courts will, however, recognise Hong Kong court judgments.
Hong Kong courts look ideal for us to use – being common law, they closely follow English law. Hong Kong has close cultural and political ties with the mainland, so it’s easier to have Chinese counterparties agree to submit to the jurisdiction of those courts. To top it off, Hong Kong court decisions are directly enforceable in the PRC.
Sounds perfect? Not quite. Firstly, immunity is an issue when using Hong Kong courts – we’ll look at this below. Secondly, Chinese counterparties, in particular state owned enterprises, are reluctant to have their disputes heard in public.
Thirdly, notwithstanding that Hong Kong court judgments are enforceable in the PRC, there are traps for the unwary. Firstly, it is important that the agreement provides for exclusive jurisdiction for the Hong Kong courts – otherwise it won’t be directly enforceable in the PRC. Secondly, it only applies to commercial contract disputes and for monetary judgments.
Finally, as mentioned above, having your counterparty appear before a Hong Kong court runs the risk that they will claim immunity and therefore leave you with very few alternative remedies.
This leaves arbitration as the preferred alternative. As a bonus, while PRC courts do not recognise judgments of many foreign courts, they are signatories to the New York Convention, so arbitration decisions from any Convention country, such as
Australia, will be enforceable directly in the PRC in accordance with the Convention.