Introduction

The “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR” (the “Arrangement”), signed by the HKSAR Government and the Supreme People’s Court of the People’s Republic of China (“SPC”) on 2 April 2019, has come into force starting from 1 October 2019. The Arrangement is ground-breaking in that interim measures from the Mainland Chinese Courts are now available to parties in Hong Kong-seated institutional arbitrations. In this article, we will discuss the regime introduced by the Arrangement and provide recent updates on the execution of the Arrangement.

The Arrangement

Mutual recognition of interim measures application

A party to an arbitral proceeding seated in the HKSAR and administered by any of the prescribed list of institutions or permanent offices which are established or set up in Hong Kong is now eligible to apply for interim measures before the arbitral award is made according to Article 3 of the Arrangement. Such party may make the application to the Intermediate People’s Court of the place of residence of the party against whom the application is made or the place where the property or evidence is situated. If the place of residence of the respondent or the place where the property or evidence is situated fall within the jurisdiction of different People’s Courts, the applicant shall make an application to any one of those People’s Courts but shall not make separate applications to two or more people’s courts.

According to Article 2, the HKSAR Government and the SPC have confirmed the prescribed list of institutions or permanent offices as follows:-

·          Hong Kong International Arbitration Centre (“HKIAC”);

·          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); and

·          eBRAM International Online Dispute Resolution Centre. 

The Department of Justice may update the aforesaid list from time to time depending on the circumstances and operational considerations. Therefore, ad hoc arbitration that is not administered by any institution, or arbitration (even if seated in Hong Kong) which is administered by arbitral institution which is not one of the prescribed list of institutions and does not currently have an office in Hong Kong, is not subject to the Arrangement.

Reciprocally, a party to arbitral proceedings administered by a Mainland arbitral institution may, pursuant to the Arbitration Ordinance and the High Court Ordinance, apply to the High Court of the HKSAR for interim measures according to Article 6 of the Arrangement.

Interim measures

According to Article 1 of the Arrangement, the interim measures available under the Arrangement include:-

·      in the case of the Mainland:

o    property preservation which prohibits counterparty from dealing with specified asset(s) and/or property(ies);

o    evidence preservation which compels a counterparty to preserve and produce evidence which may be at risk of being destroyed or may be difficult to be obtained in a later stage; and

o    conduct preservation which prohibits a counterparty from doing a certain act which may upset the status quo of the case or compels a counterparty to do a certain act to maintain the status quo of the case; and

·     in the case of the HKSAR, injunction and other interim measure for the purpose of maintaining or restoring the status quo pending determination of the dispute, taking action that would prevent, or refraining from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral proceedings; preserving assets; or preserving evidence that may be relevant and material to the resolution of the dispute.

Procedures

Articles 4 to 5 and 7 of the Arrangement clearly specify the relevant procedures for applying for interim measures in Mainland and in Hong Kong respectively.

For an application for interim measures to be lodged in the Mainland China, it is noted from Article 3 of the Arrangement that such application can be made before or after the relevant institution or permanent office has accepted the arbitration case. However, if a party makes such application before the arbitration case is accepted by the relevant institution or permanent office and the People’s Court of the Mainland has not received a letter from the said institution or permanent office certifying its acceptance of the arbitration case within 30 days after the interim measures are taken, the interim measures shall be discharged.

In addition, for application lodged in Mainland Chinese Court, a People’s Court of the Mainland may require the applicant to provide security while for application lodged before a HKSAR court, the Court may require the applicant to provide an undertaking and/or security for costs according to Article 8 of the Arrangement.

The Arrangement also retrospectively applies to arbitrations commenced before the commencement date of the Arrangement.

Latest updates

Up to mid-October 2019, HKIAC announced that it has received five applications for interim measures which were made in ongoing arbitrations seated in Hong Kong and administered by HKIAC. In each of these cases, the applicant sought an ex parte order from the relevant Mainland Chinese Court to preserve assets located in the Mainland. Out of the five applications, one application was approved by the Shanghai Maritime Court with the order granted on 8 October 2019. As of 11 October 2019, the remaining four applications remain pending.

Implications

In view of the increasing business cooperation and potential disputes between parties located in Hong Kong and China, the Arrangement is absolutely advantageous to the parties in Hong Kong-seated institutional arbitrations as they would now be able to seek interim measures in Mainland China.  The Arrangement also attracts party who would like to seek an interim measure in Mainland China to choose Hong Kong as a seat of arbitration and further enhances Hong Kong’s status as the centre for international dispute resolution in the Asia-Pacific Region.