It's not possible to tell you which is the most efficient algorithm without knowing anything about the distribution of points in the two solutions. However, for a first guess...
First algorithm doesn't work — for two reasons: (1) a wrong assumption - I assume the bounding hulls are disjoint, and (2) a misreading of the question - it doesn't find the shortest edge for every pair of points.
...compute the convex hull of the two sets: the closest points must be on the hyperface on the two hulls through which the line between the two centres of gravity passes.
You can compute the convex hull by computing the centre points, the centre of gravity assuming all points have equal mass, and ordering the lists from furthest from the centre to least far. Then take the furthest away point in the list, add this to the convex hull, and then remove all points that are within the so-far computed convex hull (you will need to compute lots of 10d hypertriangles to do this). Repeat unil there is nothing left in the list that is not on the convex hull.
Second algorithm: partial
Compute the convex hull for List2. For each point of List1, if the point is outside the convex hull, then find the hyperface as for first algorithm: the nearest point must be on this face. If it is on the face, likewise. If it is inside, you can still find the hyperface by extending the line past the point from List1: the nearest point must be inside the ball that includes the hyperface to List2's centre of gravity: here, though, you need a new algorithm to get the nearest point, perhaps the kd-tree approach.
Perfomance
When List2 is something like evenly distributed, or normally distributed, through some fairly oblique shape, this will do a good job of reducing the number of points under consideration, and it should be compatible with the kd-tree suggestion.
There are some horrible worts cases, though: if List2 contains only points on the surface of a torus whose geometric centre is the centre of gravity of the list, then the convex hull will be very expensive to calculate, and will not help much in reducing the number of points under consideration.
My evaluation
These kinds of geometric techniques may be a useful complement to the kd-trees approach of other posters, but you need to know a little about the distribution of points before you can determine whether they are worth applying.