Interim relief protection allowed on mainland for HK arbitrations

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Hong Kong’s local government and the national Supreme People’s Court on 2 April 2019 entered into 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 – a landmark arrangement that will allow, for the first time, parties to arbitrations (institutional only) seated outside mainland China to obtain interim relief protection (including orders for the preservation of assets and/or evidence) from the mainland courts that will be enforceable on the mainland. The Arrangement is reciprocal and allows parties to mainland-seated arbitrations to obtain similar protection from the courts in Hong Kong. The arrangement will come into effect on a date to be announced.

The Arrangement has significant implications for the local and international business communities. Previously, such protection was only available if the contracting parties opted for an arbitral seat in mainland China. However, many international parties have preferred to adopt Hong Kong arbitration, foregoing their ability to obtain interim relief on the mainland. Now, for the first time, the Arrangement will allow parties to opt for Hong Kong arbitration, while at the same time allowing them, if needed, to obtain interim relief protection in mainland China.

On a macro-level, this development comes at an important juncture. It is closely tied to the myriad positive steps China has taken in recent years to amend and bring its arbitration and related laws, judiciary and legal framework into the modern era. The Arrangement will be important to the implementation of key policy initiatives such as the Greater Bay Area Initiative (GBA) and the Belt and Road Initiative (BRI). The Arrangement also consolidates and enhances Hong Kong’s role as a key legal services and disputes hub for the region.

HOW IT WILL WORK

The Arrangement will apply to Hong Kong-seated arbitrations that are administered by relevant arbitral institutions or permanent offices of international inter-governmental organizations of which China is a member. The list of relevant institutions and permanent offices is being prepared and will be mutually confirmed by the Hong Kong local government and the Supreme People’s Court. These will include the Hong Kong International Arbitration Centre and possibly the International Chamber of Commerce (ICC) and CIETAC Hong Kong Arbitration Centre.

There is a two-step process for securing interim relief: (1) A party to a Hong Kong arbitration may bring an application for interim relief (accompanied by relevant supporting information and material) to the relevant arbitral institution or permanent office; and (2) The institution or permanent office will then forward the application to the relevant mainland Chinese court.

The Arrangement will have retrospective effect and will apply to arbitrations commenced before the Arrangement enters into force.

WHAT THIS MEANS

If interim relief protection is of key importance in your investment or project, at the negotiation stage, you will now be able to opt for Hong Kong-seated institutional arbitration in the safe knowledge that not only will your dispute be handled and finally resolved according to a well-established arbitration and legal framework and best practices, you will also be able to obtain interim relief protection from the courts in mainland China as and when needed. Your options for non-Hong Kong-seated arbitrations remain unchanged.

To ensure that you are able to benefit from the Arrangement, please seek appropriate legal advice. It would be prudent to ensure that your arbitration clause clearly and unequivocally: designates Hong Kong as the seat (legal place) of arbitration; and specifies that the arbitration shall be administered under one of the confirmed relevant institutions and permanent offices.

Hong Kong has long been regarded as the preferred seat for mainland-related arbitrations. The Arrangement will enhance the role and status of Hong Kong and make it more attractive now for parties to opt for Hong Kong arbitration.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at [email protected]