Update: debt recovery and enforcement against the CIS debtor

Recovering a debt from a counterparty whose assets sit in the Commonwealth of Independent States – Russia, Kazakhstan, Azerbaijan, Uzbekistan and their neighbours – requires a sequenced approach that begins long before the award or judgment is final. The structural shift worth noting now is the progressive narrowing of the conventional enforcement corridors: several CIS jurisdictions have restricted or suspended treaty-based recognition procedures for judgments and awards issued in certain Western seats, while Hong Kong's position as a neutral, common-law enforcement hub has correspondingly grown in practical weight. Creditors holding arbitral awards seated in Hong Kong, or able to route enforcement through Hong Kong, retain access to a well-tested statutory mechanism under the Arbitration Ordinance (Cap. 609) and the New York Convention.

What has changed – and why the sequencing now matters more

The enforcement environment across the CIS has become markedly more fractured since 2022. Treaty relationships between certain CIS states and Western jurisdictions have frayed at the operational level: recognition applications that previously moved on standard timelines have stalled in domestic courts, and asset-tracing orders that depended on cross-border judicial co-operation have become harder to obtain. This is not a change in statute in any single jurisdiction; it is a structural deterioration in the practical functioning of enforcement corridors that practitioners have relied upon for the past two decades.

For a creditor whose award or judgment was issued in a seat outside the CIS, the consequence is direct. The assumption that an award from a major European or North American seat would be recognised as a matter of course in, say, a Russian or Kazakhstani court no longer holds reliably. Where Hong Kong was previously one of several viable enforcement routes, it is now frequently the primary route – particularly for creditors with any connection to the Greater China corridor, or whose debtor holds assets in or through Hong Kong-registered or offshore-registered entities.

The structural point for our desk is this: enforcement strategy must be built around the asset map, not around the seat of arbitration alone. An award creditor who secures a favourable award in Stockholm or London but whose debtor's reachable assets sit in Hong Kong, the BVI, or through a Cayman-registered holding structure needs to run a parallel Hong Kong enforcement track from the outset – not as an afterthought once the primary route stalls.

Who is affected and what to do now

The structural complexity affects three categories of creditor in particular. First, trade creditors with receivables owed by CIS counterparties operating through offshore holding structures – BVI or Cayman entities are common – where the operating cash and liquid assets may flow through Hong Kong accounts. Second, project-finance and loan creditors whose security package was taken over CIS-situated assets but whose loan documentation and governing law are tied to a common-law seat. Third, award creditors who obtained an arbitral award in a non-CIS seat and are now finding that enforcement in the CIS has stalled or produced a recognition refusal.

In each case, the immediate step is to map the debtor's asset footprint with precision. That means identifying not only where the debtor holds assets directly, but also where the beneficial interest in those assets can be traced – whether through a holding chain, a related-party arrangement, or a pledge or charge that was taken in the creditor's favour but never perfected in the relevant offshore registry. We regularly advise on this sequencing and in our cross-border practice we see the same structural error repeated: enforcement action is commenced where the award was issued, rather than where the assets actually sit.

The governing instruments for Hong Kong-based enforcement of arbitral awards are clear. An award made in a New York Convention jurisdiction may be enforced in Hong Kong under the Arbitration Ordinance (Cap. 609) by leave of the Court of First Instance. Awards made in Mainland China run through the separate Mainland–Hong Kong Arrangements, which have operated since 1999 and were supplemented in 2020 to permit simultaneous applications in both directions. For creditors with assets on both sides of the boundary, the 2020 Supplemental Arrangement, which has been in effect since 27 November 2020, allows concurrent enforcement filings – a meaningful procedural advantage where the debtor's asset picture is mixed.

For creditors seeking interim protection ahead of a final award, the Interim Measures Arrangement (the bilateral mechanism between Hong Kong-seated arbitrations and the Mainland courts) has been in force since 1 October 2019. It allows parties to HK-seated arbitrations to apply to Mainland people's courts for preservation orders against assets situated in the Mainland. That avenue is not available for CIS-seated arbitrations seeking Mainland relief – which is one reason why re-routing a dispute through a Hong Kong seat, where the contractual relationship permits, can materially improve the enforcement endgame.

The immediate action for a creditor with a CIS exposure is to conduct a structured review of three things: the asset map, the governing instruments available in each jurisdiction where those assets sit, and the sequencing of enforcement steps across those jurisdictions. Where enforcement has already stalled, a second read on the procedural history often identifies the strategic error and the routes still open. For a structured assessment of your enforcement position across the relevant jurisdictions, write to us at info@lockhartyip.com.

Our Disputes & Arbitration practice is built around cross-border enforcement, with a particular focus on the Greater China and CIS corridors. Detailed guidance on the mechanics of the New York Convention route through Hong Kong is available in our guide to New York Convention enforcement through Hong Kong. For creditors with a UAE-origin award, our guide on enforcing a UAE arbitral award in Hong Kong addresses the parallel procedural steps.

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.