Connecting HK arbitrations to mainland interim measures

By Nick Gall and Chris Wong, Gall

The date 1 October 2019 was an important milestone for the Hong Kong dispute resolution community because on that day, 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 SAR” officially came into force. Under the arrangement, parties to arbitrations seated in Hong Kong may now seek interim measures from the mainland courts.

The arrangement, signed between the Hong Kong SAR and the Supreme People’s Court in April 2019, is hugely beneficial to both local and international business parties for a number of reasons.

(1) It allows an arbitration party to seek three types of interim measures from a mainland court, including: (a) preservation of assets; (b) preservation of evidence; and (c) preservation of conduct in accordance with PRC laws. This is particularly crucial for cases involving risk of dissipation of assets and/or destruction of evidence located on the mainland.

(2) Previously, China’s mainland courts had no power to grant such interim measures in aid of arbitral proceedings unless the proceedings were seated in the mainland. For that reason, commercial parties conducting mainland-related business transactions might have felt that they had no choice but to designate the mainland as the seat of arbitration, even if that was not their preferred option from a strategic or logistical perspective.

(3) With its internationally well-recognized legal framework and large pool of legal talent, Hong Kong has been a top choice as a destination for dispute resolution. With the arrangement in place, the option of designating Hong Kong as the seat of arbitration is open to business parties, through which they can enjoy the benefits of resolving mainland-related disputes in the city.

Application mechanism

Broadly speaking, there are two ways of seeking mainland China’s interim measures under the arrangement, depending on the timing of the application:

(1) Where the arbitral proceeding has already been commenced, the party seeking the mainland court’s interim measures may file an application with the arbitral institution that is administering the arbitration process, which will then pass on the application to the mainland court; and

(2) Where the arbitration has not been commenced yet, the claimant may file the application for interim measures directly with the mainland court (which may be the Intermediate People’s Court of the place of residence of the respondent, or the place where the property or evidence concerned is situated).

It should be noted that in the latter scenario, if the mainland court has not received a letter from the arbitral institution certifying its acceptance of the arbitration case within 30 days after the interim measure is taken, the interim measure will be discharged by the mainland court.

Arbitration clause

To take advantage of the arrangement, it should be ensured that in the arbitration clause of the concerned agreement:

(1) Hong Kong should be designated as the seat of arbitration;

(2) It should be specified that the arbitration shall be administered by one of the following six qualifying institutions: (i) Hong Kong International Arbitration Centre; (ii) China International Economic and Trade Arbitration Commission Hong Kong Arbitration Centre; (iii) International Court of Arbitration of the International Chamber of Commerce, Asia Office; (iv) Hong Kong Maritime Arbitration Group; (v) South China International Arbitration Centre (HK); and (vi) eBRAM International Online Dispute Resolution Centre.

It should further be noted that the arrangement does not apply to ad hoc arbitrations (a form of arbitration where the parties and the arbitrators independently determine the procedure without the involvement of an arbitral institution). In light of the arrangement, the decision as to whether to refer disputes to an ad hoc arbitration or institutional arbitration has become even more important.

The arrangement no doubt strengthens the position of Hong Kong as a premier destination for dispute resolution. With the city being the first and only jurisdiction that enjoys such an arrangement with the mainland, it is foreseeable that Hong Kong will continue to be an increasingly popular choice as the arbitration seat for resolving the mainland-related disputes.

Nick Gall is a senior partner and Chris Wong is an executive partner at Gall. Stan Cheung, an associate at the firm, also contributed to the article