“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 (HKSAR)” (“Interim Measures Arrangement”) signed on 2nd April 2019 marks a new milestone in the Governments’ effort in safeguarding interests of arbitration parties by allowing them to apply for interim measures of protection before an arbitral award is granted via HK-seated arbitration.
Background
From 1st July 1997, holders of arbitral awards made in Hong Kong can apply for enforcement in the Mainland under “the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and Hong Kong” (“Award Enforcement Arrangement”).
The Intermediate People’s Court at the place of domicile of the respondent, or the place where the respondent’s property is located, has jurisdiction over the enforcement application, and the enforcement application will be governed by the relevant Mainland laws, including the Award Enforcement Arrangement. The Court shall refuse to enforce an award if situations set out under Article 7 of the Award Enforcement Arrangement are found.
Unlike judgments in civil and commercial matters handed down by Mainland and HKSAR Courts in which the Courts in PRC and HKSAR have power to impose property preservation or mandatory measures before accepting application for recognition and enforcement of a judgment pursuant to “the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the HKSAR”, there was no specific rule in relation to asset preservation pending enforcement of an arbitral award obtained through a foreign-seated arbitration before the Interim Measures Arrangement was signed. If arbitration parties had no way to avoid the respondents in Mainland from dissipating their assets before an award via a Hong Kong seated arbitration was obtained, this would matter-of-factly render the award meaningless when the respondents had no property worldwide except Mainland China. For the purpose of preserving their rights to seek injunctive orders, parties might thus end up including Mainland-seated arbitration in the contracts and rely on Mainland arbitral institutions despite the fact that they were unlikely to place their trust in them as transparency of the institutions’ operation was much of an issue.
Interim Measures Arrangement
The Interim Measures Arrangement now offers parties with more options when they are strategizing litigation impact and considering appropriate dispute resolution forum. Under the new arrangement, a party to “arbitral proceedings in Hong Kong” may apply for interim measures, including property preservation, evidence preservation and conduct preservation, from the Intermediate Peoples’ Court in Mainland by reference to the Civil Procedure Law of PRC, the Arbitration Law of PRC and relevant judicial interpretations. The said arrangement aims at preventing parties to arbitral proceedings from deliberately destroying the evidence or transferring the property and also ensuring that the arbitral proceedings can be carried out effectively.
“Arbitral proceedings in Hong Kong” includes arbitral proceedings which (i) are seated in Hong Kong; and (ii) administrated by a prescribed list of institutions or permanent offices which are established or set up in Hong Kong. The said list referred to above is to be provided by the HKSAR Government to the Supreme People’s Court and be subject to confirmation by both sides. We expect the following institutions will be included: the Hong Kong International Arbitration Centre (HKIAC), the International Chamber of Commerce (ICC) – Hong Kong, and the China International Economic and Trade Arbitration Commission (CIETAC) – Hong Kong.
However, ad hoc arbitration, i.e. arbitration which is not administered by an institution and all aspects of arbitration are determined by parties themselves (e.g. number of arbitrators, their appointment, procedure for conducting arbitration), or arbitrations administered by arbitral institutions which do not currently have an office in Hong Kong are not covered under this new arrangement.
In relation to an application for interim measure to the Mainland courts, it is foreseeable that Article 100 of the Civil Procedure Law of PRC will be adopted with necessary modifications. It is stipulated under Article 100 of the Civil Procedure Law of PRC that if it becomes impossible or difficult to execute a judgment because of the acts of one of the parties or for other reasons, the People’s Court may, at the application of the other party, make a ruling to preserve the assets of the other party or order the other party to perform certain acts or to prohibit the other party from committing certain acts.
It is further provided under the Interim Measures Arrangement that where a party makes an application for court-ordered interim measure in aid of arbitration proceedings, the applicant shall submit the following materials to the People’s Court for consideration:
- the Application for Interim Measure;
- the Arbitration Agreement;
- Documents of Identity;
- Where a party makes an application for interim measure after the relevant institution or permanent office has accepted the arbitration case, the request for arbitration setting 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
- Any other materials required by the People’s court of the Mainland.
The commencement date of the Interim Measure Arrangement is to be announced following the promulgation of a judicial interpretation by the Supreme People’s Court of PRC and the completion of all procedures to enable the implementation.
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This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
