On 1 October 2019, the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region (the “Arrangement”) came into force. This means parties to arbitral proceedings in Hong Kong can now seek interim measures in aid of arbitration from the Mainland courts to protect the enforcement of arbitral award.
The Supreme People’s Court of the People’s Republic of China has also published an explanatory guidance providing the interpretation and application of the Arrangement (the “Guidance”).
Under the Arrangement, a party to arbitral proceedings in Hong Kong can apply for interim measures from the Mainland courts any time before the arbitral award is made. This includes before the arbitration institution has accepted the arbitration case.
The Arrangement does not apply to interim measures sought after an award is published, ie at the stage of the enforcement of the arbitral award. However, the judicial practice in Mainland China is not entirely consistent in this regard. In 2016, the Haikou Maritime Court granted an order for the asset preservation during the process of enforcing a London maritime arbitration award but the order was subsequently discharged by the court upon the challenge by the respondent. On the other hand, in 2018 the Guangzhou Maritime Court granted an order for asset preservation for the purpose of enforcing a Hong Kong arbitral award, upon receipt of the sufficient counter-security provided by the applicant.
Under Article 2 of the Arrangement, the “arbitral proceedings in Hong Kong” is defined as (1) an arbitration is seated in Hong Kong and (2) administered by the recognised institutions. On 25 September 2019, the Department of Justice announced 6 qualified arbitration institutions which are eligible for applying to the Mainland courts for interim measures.
The Guidance clarifies that arbitral proceedings in Hong Kong limit to commercial arbitrations between the parties that are equal subjects and exclude investment arbitrations between an investor and a state. In addition, ad hoc arbitration is not covered by the Arrangement.
According to the Guidance, in order to ensure the finality of enforcement of arbitral awards, the party should apply to the same court which hears the application for interim measures and the application for enforcement of the award.
Pursuant to Article 3 of the Arrangement, where the application is made after the relevant arbitration institution accepted the arbitration case, the application shall be passed on by that institution. However, as a matter of convenience, the Guidance expressly confirms that the application for interim measures together with the letter issued by the relevant institution can be directly passed by the applicant to the Mainland court. The HKIAC has recently issued a guideline on how to obtain such letter.
Hill Dickinson Hong Kong was the first law firm in Hong Kong to successfully obtain an interim measures order from the Shanghai Maritime Court in aid of an arbitration administered by the HKIAC. On 1 October 2019, the application was made to the HKIAC. On 2 October 2019, the HKIAC issued its letter and requested the applicant to directly pass the letter to the Court as per the Guidance. On 8 October 2019, the Court issued the first order under the Arrangement. It should be noted that 1 October was a public holiday in Hong Kong and 1 to 7 October were public holidays in Mainland China. This first successful application demonstrates not only the efficiency of the HKIAC to deal with the application, but also the Mainland courts’ willingness to deal with these applications for assistance under the Arrangement so as to safeguard the legitimate rights and interests of the parties and facilitate the enforcement of an arbitral award.
In accordance with the provisions of the Civil Procedure Law of the People’s Republic of China, an application for pre-arbitration preservation shall be decided within 48 hours. In our case, the Court granted its order within a day.
If the applicant applies for preservation to the Mainland courts, the applicant should provide counter security, which can be in a form of cash or bond. In our case, a bond issued by insurance company was accepted by the Court.
As the first jurisdiction outside the Mainland China can seek interim measures in aid of arbitration from the Mainland courts, the Arrangement is a practical measure taken by the Chinese central government to support the development of Hong Kong’s legal services and its position as an international legal and dispute resolution services hub in Asia Pacific region. The Arrangement no doubts increases the attractiveness of Hong Kong as an international dispute resolution hub for cases involving contracts for business in the Mainland China or with Mainland parties in international transactions such as Belt and Road projects.