***********************************

Following is the speech by the Secretary for Justice, Ms Elsie Leung, at the 1998 International Dispute Resolution Conference today (Wednesday):

Ladies and gentlemen,

I am honoured to address such a distinguished audience of experts from around the world. To those of you who are visiting the Hong Kong Special Administrative Region, I offer my warm welcome. To all of you, I hope that this will be a rewarding and thought-provoking conference.

In my talk to you today, I hope to achieve two important objectives. The first is to place on record that Hong Kong's legal system, rule of law and independent judiciary are continuing to flourish as strongly as ever. The second is to address the concern that exists about the enforcement of Mainland arbitral awards in Hong Kong, and the enforcement of Hong Kong arbitral awards in the Mainland.

Continuity of the legal system

First, the continuity of the legal system. A central theme of the Joint Declaration and Basic Law is one of continuity. Article 160 of the Basic Law provides that, upon the establishment of the Hong Kong SAR, the laws previously in force in Hong Kong shall be adopted as laws of the Region, except for those which the Standing Committee of the National People's Congress declares to be in contravention of the Basic Law. This means that the common law principles, and nearly all the 600-odd Ordinances, that were previously in force, continue to apply in the Hong Kong SAR.

Ordinances now in force

All the Ordinances now in force are bilingual, and their Chinese and English texts are equally authentic. This system means that our legislation is equally accessible to the local and international communities.

Following reunification, our Ordinances needed to be adapted to bring them into line with the Basic Law. This is being done in two stages. The first stage was initiated by the Standing Committee of the National People's Congress which, in February 1997, laid down certain general principles for interpreting the Ordinances that it had adopted as laws of the SAR. Those general principles provided, for example, that all references to the Governor shall be construed as references to the Chief Executive. The principles of interpretation were incorporated into the SAR's domestic law by means of the Hong Kong Reunification Ordinance, which was enacted on July 1, 1997.

The second stage of the adaptation process is now in progress, as the government introduces a series of Bills that will make the necessary textual amendments to Ordinances to bring them into line with the Basic Law.

The courts and judges

Article 81 of the Basic Law provides that the judicial system previously practised in Hong Kong shall be maintained except for those changes consequent upon the establishment of the Court of Final Appeal of the Hong Kong SAR. The legislation to establish that court came into force on July 1, 1997. The judges of the Court of Final Appeal were appointed by the Chief Executive, in accordance with the recommendations of an independent commission, and those appointments were endorsed by the legislature.

The other courts and tribunals that were previously in existence were re-established on July 1, 1997. The only changes that took place were the re-naming of certain of those courts.

The Basic Law provides that the courts of the SAR shall exercise judicial power independently, free from interference. This provision is underpinned by other articles in the Basic Law which provide that judges are to be appointed in accordance with the recommendations of an independent commission, and are to have security of tenure.

The continuity of the judiciary was achieved on July 1, 1997 when the Chief Executive, acting in accordance with the recommendations of the Judicial Officers Recommendation Commission, re-appointed all judges who were in service on the previous day.

The continuity of judicial proceedings was achieved by provisions in the Hong Kong Reunification Ordinance. These provisions ensured that court proceedings which had previously been instituted would not need to be started again after July 1.

Issues of concern

The fundamentals of Hong Kong's legal and judicial system therefore continue to be firmly in place. Nevertheless, concern has been expressed about certain developments since Reunification. I propose to mention these developments briefly and to demonstrate that they do not justify such concern.

The first relates to the adaptation of laws programme that I mentioned a moment ago. Those of you from common law jurisdictions will be familiar with the principle that a piece of legislation does not bind the Crown, unless it contains an express provision, or a necessary implication, that the Crown is bound. Before reunification, that principle was set out in a local Ordinance. That Ordinance was adopted as one of the laws of the Hong Kong SAR, since it was not considered to contravene the Basic Law.

It was clearly necessary to adapt the reference to the 'Crown'. This was done by substituting the expression the 'State', which is defined as encompassing PRC organs that are the equivalent of the British Crown. The effect is that those State organs are not bound by any local legislation unless it contains an express provision, or a necessary implication, that they are bound.

I hope that this brief explanation is sufficient to demonstrate that there is no basis for allegations that the State is above Hong Kong law, or that the adaptation of this principle is inconsistent with the Basic Law.

Concern was also expressed, earlier this year, about two prosecution decisions. In both cases, I decided not to institute proceedings against particular individuals. As it happened, the individuals involved had strong Mainland connections. This led to speculation - and it was no more than that - that the decisions not to prosecute them were based on favouritism. This was not the case, as I have made clear on numerous occasions.

My department has a Prosecution Policy booklet, which sets out the criteria to be applied when making prosecution decisions. Those criteria were scrupulously applied in the two cases I have mentioned, as they are in all cases referred to us.

The latest matters of concern are criminal trials brought in the Mainland that are based, wholly or partly, on activities that occurred in Hong Kong. Some people have expressed worries that Hong Kong residents might be tried in the Mainland for offences committed in Hong Kong, or even for acts which constitute offences in the Mainland but are not unlawful in Hong Kong. Such worries reflect confused thinking.

Article 18 of the Basic Law provides that national laws are not applied in the HKSAR except for those listed in Annex III. The PRC Criminal Law is not in Annex III and, thus, is not applied in Hong Kong. However, the Mainland courts may have jurisdiction over cases with a Hong Kong element by virtue of Articles 6 and 7 of the Criminal Law of the PRC.

Article 6 provides that the Criminal Law is applicable to all who commit crimes in the territory of the People's Republic of China, unless otherwise specified, and that the occurrence of either an act or a consequence of a crime in the territory of the People's Republic of China is deemed to constitute the commission of a crime in the territory of the People's Republic of China. Article 7 provides that -

"the law is applicable to PRC citizens who commit the crimes specified in this law outside the territory of the PRC; but those who commit the crimes, for which this law stipulates a maximum sentence of less than a three-year fixed-term imprisonment, may not be dealt with."

As a result of these provisions, there are situations in which both the Hong Kong courts and the Mainland courts have jurisdiction over a case. It is by no means uncommon for two jurisdictions to have jurisdiction over the same case. The best way to deal with such a situation is under the terms of a mutual legal assistance agreement. Unfortunately, at present, no formal agreement exists between Hong Kong and the Mainland for the rendition of fugitives. The Government of the SAR hopes that such a formal agreement can be made soon, and that this will help to allay the concerns that exist over this issue.

Enforcement of arbitral awards

I now turn to my second topic: the reciprocal enforcement of arbitral awards.

Before Reunification, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention) applied to Hong Kong. As a result of an agreement reached in the Sino-British Joint Liaison Group, that Convention continues to apply in the Hong Kong SAR. Therefore, as a general rule, arbitral awards obtained in a Contracting State to the New York Convention continue to be enforceable directly in the SAR.

I say 'as a general rule', since there is one important exception - the Mainland of the People's Republic of China. Since Hong Kong and the Mainland are part of one country, it is generally accepted that arbitral awards made in the Mainland cannot be directly enforced in Hong Kong as a Convention award. Those awards can, however, be enforced by action in the courts of the SAR on the basis that the award constitutes a debt due, by the party against whom the award was made, to the party in whose favour the award was made.

As I am sure you know, this common law remedy is less satisfactory than the direct enforcement of arbitral awards. The inability to enforce Mainland awards directly has caused concern amongst the business sector, the legal profession and arbitral bodies. In order to maintain confidence in Hong Kong as a financial, trade and arbitration centre, the administration would like to put in place arrangements between the Mainland and the Hong Kong SAR for the mutual direct enforcement of arbitral awards.

With this in mind, the Department of Justice has entered into discussions with relevant Mainland authorities, with the assistance of the Mainland's Hong Kong and Macau Affairs Office. The authorities concerned are the Supreme People's Court, the China International Economic and Trade Arbitration Centre ('CIETAC'), and the Legislative Affairs Commission of the Standing Committee of the National People's Congress.

Although the New York Convention does not apply as between the Hong Kong SAR and the Mainland, the approach adopted in these discussions is that the enforcement of arbitral awards should be based on the provisions in that Convention. Given the widespread acceptance of those provisions, it is considered that this approach should be widely welcomed. When implemented, the proposed new scheme for enforcing Mainland awards would involve few, if any, changes of the scheme that existed before Reunification.

The domestic arbitration law of each jurisdiction will govern the enforcement of awards in that jurisdiction. There may be minor differences in this respect between Hong Kong's Arbitration Ordinance and the Arbitration Law in the Mainland. This will, however, mean that the procedures and safeguards that are built into Hong Kong's law will apply not only to the enforcement of arbitral awards in other Convention countries, but also to the enforcement of Mainland awards.

There is some concern as to the arbitral bodies and the quality and quantity of awards issued by them. There is no provision in the New York Convention in this respect. It is hoped that the same practice as before the handover would continue so that awards of CIETAC and China Maritime Arbitration Commission (CMAC) of the Mainland and awards made pursuant to the Arbitration Ordinance in Hong Kong will continue to be enforced.

What progress has been made in these discussions? I am pleased to announce that a draft agreement is being discussed, and that a few minor issues are still outstanding. We hope to be able to sign the agreement by the end of this year.

After the agreement is signed, it will need to be implemented in both jurisdictions. Here in Hong Kong, this will be done by amending the Arbitration Ordinance to enable Mainland awards to be enforced in the same way as Convention awards. In the Mainland, the Supreme People's Court will issue a directive on the enforcement of Hong Kong awards.

I hope that these developments will help to address the concern that has arisen about this issue. The progress that has been made is most encouraging. It is further evidence that the differences between Hong Kong's legal system and that of the Mainland do not make mutual legal assistance impossible, and that the concept of 'one country, two systems' is working well.

Conclusion

Ladies and gentlemen, I hope I have said enough to assure you of two things. First that the Hong Kong legal system is as strong and independent as ever, and that concerns that have been expressed over certain developments are misplaced. Secondly, that arrangements for the enforcement in Hong Kong of Mainland arbitral awards will soon be in place.

With these assurances, I believe that Hong Kong's status as a leading centre for the resolution of international disputes remains secure. Thank you.

End/Wednesday, November 11, 1998

NNNN