Limitation of use of PRC Enforceable Notarisation in Hong Kong

INTRODUCTION

Under Article 235 of the PRC Civil Procedure Law (2023 revision), an obligation under a qualifying instrument (such as a guarantee contract) may be made enforceable via notarisation instead of proceeding through litigation ("Enforceable Notarisation" or "强制執行公證"). In China Minsheng Trust Co., Ltd v Fu Kwan [2025] HKCA 462 (the "Judgment"), the Court of Appeal decided that an instrument enforceable by notarisation in the Mainland cannot be enforced by registration under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (MJREO) in Hong Kong.

However, for judgments issued after 29 January 2024, the MJREO has been replaced by the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (MJCCMO). To what extent does China Minsheng continue to apply to the MJCCMO? What options do Mainland lenders have if they hope to benefit from the convenience of notarisation but may also need to enforce against assets in Hong Kong?

 

ENFORCEABLE NOTARISATION

The actual procedure involved in enforceable notarisation is recorded between §§26-31 of the Judgment. In essence, it involves three stages. First, the parties entering into a qualifying instrument must specify in the instrument their agreement to submit to the enforceable notarisation system and then procure the instrument to be notarized. The notary office, before notarising the instrument, is required to examine and verify that the parties understand and are agreeable to the legal effect of the instrument and the notarisation enforcement system (Art. 39 of the Rules of Notarisation Procedures (公證程序規則)).

Second, when the debtor fails to perform their obligations under the notarized instrument, the creditor can apply to the notary office which notarized the instrument for an "execution certificate". The notary office is required to examine and verify that the creditor's allegation of the debtor's failure is correct in fact (Art. 55 of the Rules of Notarisation Procedures).

Third, the creditor applies to the Mainland court for enforcement of the notarized debt instrument. The Regulations on Several Issues Concerning the Execution of Notarized Debt Instruments (最高人民法院關於公證債權文書執行若干問題的規定) (2018 Regulations) sets out the enforcement procedure. If the Mainland court is satisfied that the procedure for enforceable notarisation has been met, they will issue a notice of execution against the debtor. At §31 of the Judgment, Lam JA observes that "the rights and liabilities of the parties are in effect determined by the notary office and thereafter enforced by the courts, and the courts do not engage in any adjudication of those rights and liabilities unless there is an application or litigation brought by a party to oppose enforcement on specified grounds".

After Enforcement Notices are issued, the Mainland court may make orders for the impounding of assets and rulings for the termination or resumption of enforcement procedures against the debtor.

 

BACKGROUND

In China Minsheng, there were 4 guarantee agreements (Guarantee Agreements) entered into between China Minsheng Trust Co., Ltd (Minsheng) and the defendant, Mr Fu Kwan (Fu) in relation to loan disbursed to Xinhualian Holdings Co Ltd. Each of these were made enforceable through notarisation with the Beijing Chang'an Notary Public Office (Beijing Notary Office).

Following Xinhualian Holdings Co Ltd. defaulting on the loan, the Beijing Notary Office issued Execution Certificates (the "Execution Certificates"). Minsheng then obtained notices of execution from by the Beijing No. 3 Intermediate People's Court (Beijing Court). On 1 December 2020, the Beijing Court issued a ruling (執行裁定書) in each of the 4 cases (the "Rulings") terminating the enforcement procedures as the bank accounts of Fu were found to have no money. Each Ruling stated in the final sentence that whilst the enforcement procedures were terminated, "[t]he persons subject to enforcement have the obligation to continue to fulfil the debt obligation to the applicant for enforcement" (the "Final Sentence").

Minsheng sought to have the Rulings registered and enforced against Fu in Hong Kong under the MJREO. This was initially granted at the Master level, then overturned by DHCJ Au-Yeung. DHCJ Au-Yeung held that the Rulings were not "judgment[s] order[ing] the payment of a sum of money" (s.5(2) MJREO) and therefore could not be registered under the MJREO. Minsheng appealed to the Court of Appeal.

 

THE JUDGMENT

The Court of Appeal agreed with DHCJ Au-Yeung and held that the Rulings were not judgments which order the payment of a sum of money (§32). Fu's obligation to pay rose out of the notarisation and not the Rulings (§35). The Final Sentence, whilst recording Fu's obligation, was "simply a description or recitation of the existing state of affairs" instead of a judgment or order "which itself made money payable" (§33). The root of the obligation to pay was the Execution Certificates and not the Rulings (§34). This was the primary basis of the Judgment and might be termed the "No Judgment Debt" ground.

In addition to the No Judgment Debt ground, two further grounds were raised by Fu in opposition to registration under MJREO.

In the "Not Summoned to Appear" ground, Fu attempted to rely on s.18(1)(f)(i) of the MJREO, which provides that the registration of the judgment would be set aside if the judgment debtor who did not appear in the original court to defend the proceedings was not summoned to appear "according to the law of the Mainland". However, the Court of Appeal found that "according to the law of the Mainland" meant where Mainland law required the judgment debtor to be summoned to appear. This did not apply because there was no requirement under Mainland law to summon Fu to appear before the Beijing Court under the procedures for enforcing notarized debt instruments (§44).

In the "No Chosen Court" ground, Fu argued that the Mainland judgment sought to be registered had to be issued by a court "chosen" by the Parties in that there was no agreement "specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the specified contract to the exclusion of courts of other jurisdiction" (s.3(2) MJREO). The Court of Appeal decided it was unnecessary to deal with this issue (§41).

Notwithstanding Fu's argument on the other two grounds, based on the No Judgment Debt ground, the effect of the Judgment is that instruments enforced via notarisation in the Mainland cannot be registered under the MJREO and enforced in Hong Kong.

 

THE MJCCMO

But what of notarised instruments which obtain enforcement rulings from a Mainland court after 29 January 2024? From the requirements of the MJCCMO, the reason given by the Court of Appeal for why enforceable notarisations cannot be enforced under the MJREO is likely to apply equally to the MJCCMO.

S.10(1) of the MJCCMO still requires that the creditor is a "judgment creditor under a Mainland Judgment" and the judgment sought to be registered "requires the payment of a sum of money, or the performance of an act, by a party to the original proceedings for the Judgment". In other words, since the Judgment decides that instruments which are enforced through notarisation and later executed by a Mainland Court do not create any judgment debt or judgment creditor, the No Judgment Debt ground would continue to apply to bar instruments enforceable by notarisation from being registered and enforced in Hong Kong under the MJCCMO.

As to the other two grounds advanced by Fu, the Court of Appeal's decision as to the Not Summoned to Appear ground should also apply. S.22(1) of the MJCCMO materially replicates s.18(1) of the MJREO, stating that a registration can be set aside if "the defendant to the original proceedings for the registered judgment was not summoned to appear in the original Mainland court according to the law of the Mainland". Consequently, the Court of Appeal's interpretation of "according to the law of the Mainland" should still be authoritative in interpreting s.22(1) of the MJCCMO. However, the No Chosen Court ground no longer has any relevance under the MJCCMO since there is no longer a requirement that the Judgment be given by a chosen court under the MJCCMO (s.3(1) MJCCMO).

 

OPTIONS FOR ENFORCEMENT AGAINST HONG KONG ASSETS

The advantage of enforceable notarisation is the low-costs and speed of enforcement. However, the downside is that once an instrument is agreed to be subjected to enforceable notarisation, it cannot be sued or arbitrated over.¹ Pursuant to the Judgment, it also means that the instrument cannot be enforced under MJREO or MJCCMO in Hong Kong. As such, if Mainland financial institutions are looking to rely on Hong Kong assets for debt recovery, they should be cautious about subjecting their instruments to enforceable notarisation.

The decision and strategy around choosing the proper enforcement mechanism involved a multi-faceted analysis, considering cross-jurisdictional considerations as seen above. Clients should reach out to us to discuss possible alternatives or strategy around the utilisation of enforceable notarisation given the benefits and limits as discussed above.

The full Judgment can be viewed here.

Note: This article concerns judgments of the Hong Kong courts. Any references to the relevant laws and regulations of the People's Republic of China (PRC) are solely for the purposes of citing the relevant content or explaining Hong Kong judgments, and do not constitute any advice, opinion or recommendation from the perspective of PRC laws and regulations.

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¹ Notwithstanding this, where the notarized debt instrument is judged by the notary office to be unenforceable, the parties may bring proceedings before the Mainland Court in respect of their rights and obligations arising from such instrument (Art. 20 of the 2018 Regulations).