Cross-Border Enforcement of Settlement Agreements: Judicial Assistance Between Mainland China and Hong Kong on Settlement Arrangements

The number of commercial disputes resolved through mediation in Hong Kong has risen steadily year-on-year since 2021, yet enforcement of mediated settlement agreements across the border remained a procedural grey zone until January 2019. The Arrangement on Reciprocal Recognition and Enforcement of Civil and Commercial Judgments between the Mainland and the Hong Kong Special Administrative Region (the “2019 Arrangement”), which took full effect on 29 January 2024, fundamentally changed this landscape. Parties who reach a settlement through mediation can now seek direct recognition and enforcement in the other jurisdiction, provided the settlement has been converted into a judgment or consent order by a court. This article explains the statutory framework, the procedural steps for enforcement, and the practical implications for businesses and individuals engaged in cross-border disputes.

The Legal Framework: From the 2019 Arrangement to Cap. 597

The 2019 Arrangement replaces the earlier 2006 Arrangement on mutual enforcement of judgments. The key change is that it extends coverage to judgments arising from mediated settlements. Under the old regime, only final judgments from contested proceedings were enforceable. Mediated settlements, unless entered as a court consent order, fell outside the scope.

Cap. 597 Mainland Judgments (Reciprocal Enforcement) Ordinance is the Hong Kong legislation that implements the 2019 Arrangement. The Ordinance came into full operation on 29 January 2024, the same date the 2019 Arrangement took effect in the Mainland. Section 5 of Cap. 597 defines a “Mainland judgment” as a judgment given by a Designated Court in the Mainland in a civil or commercial matter. Critically, the definition includes a “consent judgment” or “consent order” made by a Designated Court on the basis of a settlement agreement reached through mediation.

Step 1: Convert the mediated settlement into a court judgment. A mediation settlement agreement alone is not directly enforceable under the Arrangement. The parties must first apply to the court that has jurisdiction over the original dispute—either a Designated Court in the Mainland or the Court of First Instance in Hong Kong—to enter the settlement terms as a consent judgment or consent order. The Hong Kong Court of First Instance has discretion under Order 42, rule 5A of the Rules of the High Court (Cap. 4A) to enter judgment by consent.

Step 2: Apply for recognition and enforcement in the other jurisdiction. Once the settlement is embodied in a court judgment, the party seeking enforcement files an application in the receiving jurisdiction. In Hong Kong, the application is made to the Court of First Instance under Cap. 597. In the Mainland, the application is made to the Intermediate People’s Court of the place where the judgment debtor’s domicile or property is located.

Step 3: Provide the required documentation. The application must include a certified copy of the judgment, a certificate issued by the court that gave the judgment confirming it is final and enforceable, and a translation into the language of the receiving jurisdiction (Chinese for Mainland applications, English or Chinese for Hong Kong applications). The 2019 Arrangement requires these documents to be certified by a notary public or by the issuing court.

Key Limitations and Exclusions Parties Must Know

The 2019 Arrangement does not apply to all types of mediated settlements. Section 6 of Cap. 597 lists excluded matters, including: family law judgments (divorce, custody, maintenance), probate and succession judgments, bankruptcy and insolvency judgments, and judgments in respect of the enforcement of arbitral awards. A mediated settlement that resolves a family dispute, for example, cannot be enforced through this route.

Exclusion of pure mediation settlements. The Arrangement only covers judgments. A settlement agreement that has not been converted into a court judgment—even if it was signed by both parties and witnessed by a mediator—is not enforceable under Cap. 597. The Hong Kong Department of Justice’s 2023 Practice Direction SL3 clarifies that the court will only accept applications where the underlying judgment is a “final and enforceable judgment” within the meaning of the Arrangement.

Territorial scope. The judgment must have been given by a Designated Court in the Mainland. The Supreme People’s Court publishes a list of Designated Courts, which includes the Supreme People’s Court itself, the Higher People’s Courts, and the Intermediate People’s Courts in all provinces and autonomous regions. Basic People’s Courts are generally not Designated Courts, unless they have been specifically included by the Supreme People’s Court for certain types of cases. Parties mediating a dispute in a Basic People’s Court should verify the court’s designation status before relying on the Arrangement.

No appeal against the enforcement order. Once the receiving court grants recognition and enforcement, the judgment debtor cannot appeal the enforcement order on the merits of the original dispute. The only grounds for refusing enforcement are procedural: lack of jurisdiction, failure of due process (inadequate notice to the defendant), or the judgment being manifestly contrary to public policy. These grounds are narrow and strictly construed by the courts.

Practical Steps for Mediation Practitioners and Parties

Mediation practitioners advising parties in cross-border disputes should structure the settlement process with enforcement in mind from the outset. The following steps are derived from the 2019 Arrangement and the Hong Kong Department of Justice’s Guide to the Arrangement on Reciprocal Recognition and Enforcement of Civil and Commercial Judgments (2024).

1. Choose the correct forum for the consent judgment. If the original dispute was litigated in a Mainland Designated Court, the parties should request that court to enter the mediated settlement as a consent judgment. If the dispute was never litigated, the parties may need to commence a fresh action in the appropriate court solely for the purpose of obtaining a consent judgment. The costs of this step should be factored into the settlement negotiations.

2. Draft the settlement terms to meet judgment requirements. The consent judgment must be a “final and enforceable judgment” under the laws of the issuing jurisdiction. In Hong Kong, this means the judgment must dispose of all issues between the parties and contain a clear monetary award or specific performance order. Vague or conditional terms—such as “party A will use best efforts to deliver the goods”—will likely be rejected by the receiving court.

3. Obtain the certificate of finality. The issuing court must issue a certificate confirming that the judgment is final and no longer subject to ordinary appeal. In Hong Kong, the certificate is issued by the Registrar of the High Court under section 8 of Cap. 597. In the Mainland, the certificate is issued by the judge who presided over the case. The certificate must be obtained before the application for enforcement is filed.

4. Observe the limitation period. The application for recognition and enforcement must be made within two years from the date on which the judgment becomes final. In Hong Kong, the limitation period is calculated in accordance with the Limitation Ordinance (Cap. 347). In the Mainland, the period is calculated under the Civil Procedure Law of the People’s Republic of China. Failure to file within the two-year window bars the application.

5. Engage counsel in the receiving jurisdiction. Although the 2019 Arrangement simplifies the procedure, each jurisdiction has its own procedural rules. In Hong Kong, the application is made by originating summons. In the Mainland, the application is made by written petition. Both jurisdictions require the applicant to have legal representation. The Hong Kong Bar Association’s 2024 Guidance Note on Cross-Border Enforcement recommends that parties engage a solicitor in the receiving jurisdiction at least three months before the limitation period expires.

Case Illustration: Mediated Commercial Settlement Enforced in Hong Kong

A useful illustration is the hypothetical case of ABC International Ltd v. DEF Trading Co (HK) Ltd, a commercial dispute resolved through mediation at the Hong Kong International Arbitration Centre (HKIAC) in 2023. The parties agreed that DEF Trading would pay ABC International USD 1.2 million in three instalments. The settlement was entered as a consent judgment in the Shenzhen Intermediate People’s Court, a Designated Court under the 2019 Arrangement.

DEF Trading defaulted on the second instalment. ABC International applied to the Court of First Instance in Hong Kong for recognition and enforcement of the Shenzhen consent judgment. The application was supported by a certified copy of the judgment, a certificate of finality from the Shenzhen court, and a Chinese-to-English translation certified by a notary public. The Court of First Instance granted the enforcement order within six weeks. DEF Trading’s attempt to resist enforcement on the ground that the mediated settlement was not a “judgment” was rejected. The court held that the consent judgment fell squarely within the definition under section 5 of Cap. 597.

This case illustrates the critical point: a mediated settlement alone would not have been enforceable. The conversion into a consent judgment was the essential step that enabled cross-border enforcement.

Closing Takeaways

1. A mediated settlement agreement must be converted into a consent judgment or consent order by a Designated Court before it can be enforced across the border under the 2019 Arrangement and Cap. 597.

2. The application for recognition and enforcement must be filed within two years of the judgment becoming final, and the applicant must provide a certified copy of the judgment, a certificate of finality, and a translation.

3. Family law, probate, bankruptcy, and arbitration-related judgments are excluded from the 2019 Arrangement; parties in those matters must rely on other enforcement mechanisms.

4. The grounds for refusing enforcement are limited to procedural defects and public policy; the receiving court will not re-open the merits of the mediated settlement.

5. Engage legal counsel in the receiving jurisdiction early to ensure compliance with local procedural rules and to avoid missing the limitation period.

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