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5 Apr 2019

Mainland China and Hong Kong Courts Empowered to Grant Interim Measures for Each Other’s Arbitrations

On 2 April 2019, the Supreme People’s Court (“SPC”) of the People’s Republic of China (“PRC”) and the Department of Justice of the Government of the Hong Kong Special Administrative Region signed 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”). While the effective date is still to be determined, any party who may now or in the future be involved in dispute resolution related to mainland China or Hong Kong should appreciate this ground-breaking development: in short, parties to institutional arbitrations seated in Hong Kong may for the first time apply to courts in mainland China to obtain interim measures, and vice versa. This newsletter expounds on this development.

Interim Measures for “Offshore” Arbitrations

While PRC courts have long granted interim measures for arbitrations seated in mainland China, PRC law has not provided for the same to be available for arbitrations abroad. It has been held that parties in arbitrations seated outside mainland China had no explicit legal basis to request PRC courts to preserve assets, evidence, etc. And, unsurprisingly, cases of such interim relief being granted were generally unheard of—until recently.

On 14 October 2016, the Wuhan Maritime Court granted a property preservation measure requested by a claimant in an arbitration before the Hong Kong International Arbitration Centre. Although it cited legal provisions in making its decision, commentators agreed those legal provisions were inapplicable. Now, mainland Courts have clear legal provisions for granting such requests. In addition, parties to arbitrations in China may unequivocally seek interim relief in Hong Kong courts.

Hong Kong’s New Arbitration Edge

The Arrangement will render Hong Kong the first and only jurisdiction in which parties may, during and even prior to an arbitration seated in the jurisdiction, apply to PRC courts for interim relief. This landmark development will change the landscape of China-related arbitration.

The unavailability of interim measures has generally been deemed unfavorable in the international arbitration society. In the case of China, this represented a shortcoming of “offshore” arbitration. For example, parties in arbitrations abroad had to hurry through to an award in hope of still finding assets in mainland China when they came to enforce it there. At the same time, parties considering where to arbitrate disputes might avoid mainland China on account of the risk that local parties may put assets away in Hong Kong.

Now, arbitration institutions domiciled or operating in Hong Kong will likely see a surge in the number of China-related arbitrations brought to them and lawyers on both sides will handle more interim relief matters. Arbitrating in Hong Kong has an added benefit available nowhere else. The benefit, of course, is not without conditions and limitations.

The Specifics of the PRC Interim Measures

First, mainland China courts will only accept applications for preservation measures in connection with arbitrations administered by a list of Hong Kong–based arbitration institutions still to be determined. Parties to ad hoc arbitrations in Hong Kong may not avail themselves of PRC interim relief. Preservation measures may be requested both after the institution accepts the arbitration case (in which case it will pass on the application for interim relief) and up to 30 days before case acceptance (in which case the party submits the application directly to the relevant court).[1]

Second, it will be interesting to see how PRC courts react to applications for conduct preservation, as such “injunction”-like orders are generally rare in the PRC as compared to common law jurisdictions. This may reflect a difference in legal culture and the ultimate significance of the Arrangement: to further foster cooperation between the two judicial systems. On the other hand, the Arrangement did not touch on interim relief applications made after the award is rendered,[2] which in recent years have nonetheless been granted by PRC courts and even endorsed by the SPC.[3]

The Arrangement sets out further requirements in applying for interim relief, including the documents to be submitted, certifications to be obtained and additional information to be provided, e.g., to identify the property or evidence to be preserved. The list of such requirements is neither short nor simple, so those interested in obtaining interim relief should plan well ahead. Moreover, and given that the Arrangement did not expressly alter local procedural requirements, taking advantage of interim relief’s availability as between Hong Kong and mainland China will call for closer collaboration between Hong Kong and mainland China lawyers.

[1] The relevant court is 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.

[2] Such arrangements exist for Macao SAR and the Taiwan Region: Arrangement between the Mainland and the Macau SAR on Reciprocal Recognition and Enforcement of Arbitration Awards (2008) and Provisions of the Supreme People's Court on Recognition and Enforcement of the Arbitral Awards of the Taiwan Region (2015).

[3] See, for example, Civil Ruling regarding Guangdong Yuehua International Trade Group Co., Ltd. v. Sinotide Holdings Limited & Ke Junxiang, Guangzhou Intermediate People’s Court, (2014) Sui Zhong Fa Min Si Chu Zi No. 42.

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