Arbitration interim measures: Mainland-HK co-ordination (part 2)

By China International Economic and Trade Arbitration Commission
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On 2 April 2019, the Supreme People’s Court and the Department of Justice of the Government of the Hong Kong Special Administrative Region executed 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. In the previous issue, the author discussed such issues as the scope of the interim measures, the definition of “Hong Kong arbitral proceedings”, and which mainland courts have jurisdiction. This article focuses on the materials and security required when applying for interim measures in actual practice, and the relief in respect of such interim measures.

Applying to a mainland court

Article 4 of the arrangement specifies that an applicant applying to a people’s court of the mainland for interim measures shall submit the following materials:

(1) The application for interim measure;

(2) The arbitration agreement;

(3) Documents of identity. Where the applicant is a natural person, a copy of his/her identity card is to be submitted; where the applicant is a legal person or an organization that is not a legal person, copies of its certificate of incorporation or registration and the identity card of its legal representative or responsible person are to be submitted;

(4) Where a party makes an application for interim measures after the relevant institution or permanent office has accepted the arbitration case, the request for arbitration should set out the main claim of the arbitration and the facts and justifications on which the claim is based, together with the relevant evidential materials, as well as a letter from the relevant institution or permanent office certifying its acceptance of the relevant arbitration case; and

(5) Any other materials required by the people’s court of the mainland.

Where a document of identity is issued outside the mainland, it shall be certified in accordance with the provisions of the relevant laws of the mainland. Where a document submitted to a people’s court of the mainland is not in the Chinese language, the applicant shall submit an accurate Chinese translation.

Article 5 of the arrangement specifies that the application for interim measures shall specify the following:

(1) Particulars of the parties. These include: Where the party is a natural person, his/her name, address, particulars of identity document(s), means of contact, etc.; and where the party is a legal person or an organization that is not a legal person, its name, address as well as the name, position, address, particulars of identity document, means of contact, etc., of its legal representative or principal responsible person;

(2) Details of the application, including the amount applied to be preserved, the particulars of the conduct applied to be preserved, and the time period, etc.;

(3) The facts and justifications on which the application is based, together with the relevant evidence, including an explanation of the urgency of the circumstances, so that if interim measures are not taken immediately the legitimate rights and interests of the applicant may suffer irreparable damage, or the enforcement of the arbitral award may become difficult;

(4) Clear particulars of the property and evidence to be preserved, or concrete threads that may lead to a train of inquiry;

(5) Information about the property on the mainland to be used as security or certification of financial standing;

(6) Whether any application under this arrangement has been made in any other court, relevant institution or permanent office, and the status of such application; and

(7) Any other matters as may be required to be specified.

The requirements of the arrangement in respect of the materials required to apply to a mainland court for interim measures and the contents of such application are essentially identical to the related requirements in the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Property Preservation Cases by People’s Courts. Particular attention needs to be paid to whether the applicant’s explanation of the necessity of the interim measures is reasonable and also be supported by basic evidence. Additionally, the clues to the property and evidence need to be concrete and specific, and avoid ambiguity.

Applying to a Hong Kong court

Article 6 of the arrangement specifies that, before the arbitral award is made, 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.

Article 7 of the arrangement specifies that a party applying to the court of the HKSAR for interim measures shall submit the application, an affidavit supporting the application, any relating exhibit(s), a skeleton argument and a draft court order in accordance with the requirements of the relevant laws of the HKSAR, and shall specify the following:

(1) Particulars of the parties. Where the party is a natural person, his or her name and address; where the party is a legal person or an organization that is not a legal person, its name and address as well as the name, position, means of contact, etc., of its legal representative or principal responsible person;

(2) Details of the request and justifications for the application;

(3) The location and status of the subject matter of the application;

(4) The answer asserted or likely to be asserted by the party against whom the application is made;

(5) Any facts that might lead the court not to grant the interim measures being sought, or not to grant such interim measures ex parte;

(6) The applicant’s undertaking to the court of the HKSAR; and

(7) Any other matters as may be required to be specified.

The author does not practise in Hong Kong, and does not wish to express too many opinions on this, but would recommend that a party to mainland arbitration shall retain a Hong Kong lawyer when applying to the Hong Kong court for interim measures.

Security for interim measures

Article 8 of the arrangement specifies that a requested court shall examine a party’s application for interim measures expeditiously. A people’s court of the mainland may require the applicant to provide security, while a court of the HKSAR may require the applicant to give an undertaking and provide security for costs. After examination and being satisfied that the party’s application for interim measures is in accordance with the law of the requested place, the court of the requested place shall make a decision/order for interim measures.

Mainland courts now generally accept litigation preservation liability insurance as a means of providing security, greatly reducing the economic burden on applicants. Numerous well-known mainland insurance companies offer such services at comparable insurance premiums. One thing that should be noted is that it is a good idea to communicate with the interim measures court in advance to ensure if it accepts the insurance policies of a certain insurance company, and also to find out about the special requirements in respect of the format of insurance policies and other insurance materials so as to save time.

Relief in the event of dissatisfaction with the interim measures

Article 9 of the arrangement specifies that where a party is aggrieved by a decision or order of the requested court, the matter shall be dealt with in accordance with the provisions of the relevant laws of the requested place.

If a party is aggrieved by a mainland court’s decision to grant or deny the interim measures, a party can only apply for reconsideration to the court that rendered the decision once, and shall not appeal against the decision. Accordingly, communicating with the court is of great importance, with the applicant needing to fully demonstrate the necessity of the interim measures and the respondent to explain that such interim measures are not necessary.

Conclusion

The arrangement will enhance the international competitiveness of Hong Kong arbitral institutions, while also being conducive to enhancing the rule of law on the mainland. Of course, the greatest beneficiaries will be the parties to cases, giving them one additional preventive relief measure. In sum, the arrangement is positive and beneficial, and now we are looking forward to seeing its implementation and effect.

Chen Fu is a partner of Commerce & Finance Law Offices, and the arbitrator of the China International Economic and Trade Arbitration Commission.