On October 1, 2019, the “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region” (“Arrangement”) entered into between the Hong Kong Government and China’s Supreme People’s Court came into force. This Arrangement allows, for the first time, parties to arbitrations[1] seated outside of Mainland China to obtain interim relief protection[2] from Chinese Courts. The Arrangement is reciprocal and allows parties to China-seated arbitrations to obtain similar protection from courts in Hong Kong too.
The Arrangement has significant implications for the local and international business communities. Previously, such protection was only available if the contracting parties opted for an arbitral seat in Mainland China. However, given the well-established legal and arbitration system in Hong Kong, many international parties have preferred to adopt Hong Kong arbitration, foregoing reluctantly their ability to obtain interim relief in China.
Now, for the first time, the Arrangement allows parties to opt for Hong Kong arbitration, while at the same time, allowing them, if needed, to obtain interim relief protection in China.
On a macro-level, this development comes at an important juncture. It is closely tied to the myriad of positive steps that China has taken in recent years to amend and bring its arbitration and related laws, judiciary and legal framework into alignment with mainstream international practice. The Arrangement will be important to the implementation of key policy initiatives such as the Greater Bay Area Initiative and the Belt and Road Initiative. The Arrangement also consolidates and enhances Hong Kong’s role as a key legal services and disputes resolution hub for the region.
How it will work
The Arrangement will apply to Hong Kong-seated arbitrations that are administered by certain qualified arbitral institutions or permanent offices of international intergovernmental organisations of which China is a member[3]. After mutually confirmed by the Hong Kong Government and the Supreme People’s Court, the Hong Kong Department of Justice has published the first list of qualified institutions and permanent offices[4]:
- Hong Kong International Arbitration Centre
- China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center
- International Court of Arbitration of the International Chamber of Commerce – Asia Office
- Hong Kong Maritime Arbitration Group
- South China International Arbitration Center (HK)
- eBRAM International Online Dispute Resolution Centre
There is a two-step process for securing interim relief:
- A party to a Hong Kong arbitration may bring an application for interim relief (accompanied by relevant supporting information and material) to the relevant arbitral institution or permanent office; and
- The institution or permanent office will then forward the application to the relevant Mainland Chinese Court.
The Arrangement mentions three types of interim measures available in Mainland China, namely preservation of (i) property (e.g., freezing orders), (ii) evidence (e.g., not to destroy a document) and (iii) conduct (e.g., not to use a trademark). However, it remains to be seen whether in practice Chinese courts will grant measures preserving evidence and conduct as the PRC Arbitration Law appears to provide only for property preservation.
In practice, only several days after the Arrangement came into force, on 8 October 2019, the Shanghai Maritime Court granted the first interim measure in the form of an asset preservation order under the new Arrangement. Then, in November 2019, Xiamen Intermediate People’s Court issued the second asset preservation order under the Arrangement, and as reported by media, the value of assets under preservation is over RMB 500 million (approx. USD 71.1 million). The trend illustrates that the Arrangement will have significant implication to the landscape of Hong Kong arbitration.
The Arrangement also has retrospective effect and applies to arbitrations commenced before the Arrangement entered into force.
What this means for businesses
If interim relief protection is of key importance in an investment or project, at the negotiation stage, investors will now be able to opt for Hong Kong-seated institutional arbitration in the safe knowledge that not only will any potential disputes be handled and finally resolved according to a well-established arbitration and legal framework and best practices, they will also be able to obtain interim relief protection from the Courts in Mainland China as and when needed.
Options for non-Hong Kong-seated arbitrations remain unchanged.
To ensure benefit from the Arrangement, the arbitration clause should clearly and unequivocally:
- Designate Hong Kong as the seat (legal place) of arbitration; and
- Specify that the arbitration shall be administered by one of the confirmed qualified institutions and permanent offices.
Conclusion
Hong Kong has long been regarded as the
preferred seat for China-related arbitrations. The Arrangement will enhance the
role and status of Hong Kong and make it more attractive now for parties to opt
for Hong Kong arbitration.
In addition, it is worth
noting that the Arrangement is not the only arrangement newly signed by Hong
Kong and mainland China in the field of dispute resolution. On 18 January 2019,
Hong Kong and mainland China signed a new Arrangement on Reciprocal Recognition
and Enforcement of Judgments in Civil and Commercial Matters[5]. This arrangement will
supersede the previous arrangement signed between mainland China and Hong Kong
in respect of choice of forum, and applies to civil judgments and covers both
monetary and non-monetary relief. Parties seeking to enforce Hong Kong or PRC
judgments covered by this arrangement will not need to re-litigate their cases
when seeking to recover assets in Hong Kong or the PRC.
[1] Institutional only. The Arrangement does not apply to non-Hong Kong-seated or ad hoc arbitrations.
[2] Including orders for the preservation of assets and/or evidence.
[3] These will comprise: (i) arbitral institutions established or having their headquarters established in Hong Kong, and with their principal place of management in here; (ii) dispute resolution institutions or permanent offices that are set up in Hong Kong by international intergovernmental organisations of which the PRC is a member; or (iii) dispute resolution institutions or permanent offices that are set up in Hong Kong by other arbitral institutions which satisfy certain criteria prescribed by the Hong Kong Government.
[4] Link to the Hong Kong Department of Justice for the list of qualified institutions: https://www.doj.gov.hk/mobile/eng/public/pr/20190926_pr1.html
[5] The Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters has not yet come into force and the effective date will be announced after the promulgation of a judicial interpretation by the Supreme People’s Court and the completion of the relevant procedures in the Hong Kong.
