Enhancing Hong Kong’s Status as a Preferred Arbitral Seat: P.R.C. Courts Will Be Empowered to Order Interim Measures in Aid of Hong Kong Arbitrations

Pursuant to 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” (the Arrangement), parties to qualified institutional arbitrations seated in Hong Kong can apply through those institutions for interim measures from the P.R.C. courts, which will be able to grant such interim measures upon certain conditions being satisfied (see further below). Hong Kong is the first and only seat outside of mainland China to benefit from such support.

Whereas Hong Kong courts have long been empowered under the Hong Kong Arbitration Ordinance (Cap. 609) to grant an interim measure in aid of an arbitration outside of Hong Kong so long as the measure sought is of a type recognized in Hong Kong, the P.R.C. civil procedure framework does not generally permit the P.R.C. courts to grant a similar measure in aid of a Hong Kong or foreign arbitration. The Arrangement now levels the playing field between mainland China and Hong Kong, giving parties in a Hong Kong-seated institutional arbitration another potentially powerful weapon against counterparties who have assets or presence in mainland China.

Details of the Arrangement

Under the Arrangement, the “interim measures” obtainable from the P.R.C. courts include property preservation, evidence preservation and conduct preservation orders. This is akin to the “preservatory measures” available to parties in domestic litigation in mainland China. 

The right to seek interim measures under the Arrangement will be limited to three distinct categories:

• arbitral institutions established or headquartered in Hong Kong, with their principal place of management located in Hong Kong  
• dispute resolution institutions or permanent offices set up in Hong Kong by international, intergovernmental organizations of which the P.R.C. is a member
• dispute resolution institutions or permanent offices set up in Hong Kong by other arbitral institutions, which satisfy the relevant criteria set by the Hong Kong government 

The Hong Kong SAR government will provide a list of institutions or permanent offices to which the Arrangement applies, but arbitrations administered by the Hong Kong International Arbitration Centre (the HKIAC), the China International Economic and Trade Arbitration Commission (CIETAC) Hong Kong Arbitration Center and ICC International Court of Arbitration (which has established a secretariat breach in Hong Kong) are expected to benefit from the Arrangement. However, the Arrangement will not apply to arbitrations administered by overseas arbitral institutions without any establishment in Hong Kong or to ad hoc arbitrations.

Procedurally, a party will first have to apply to the relevant arbitral institution, which will then pass on the application to the competent P.R.C. court for determination. The P.R.C. court is expected to deal with the application “expeditiously.” Such application may be made at any time before the arbitral tribunal makes its award and even before the institution accepts a notice of arbitration. The P.R.C. court may require the applicant to provide security.

The Arrangement will come into effect on a date to be announced.

Comments

Prior to the Arrangement, parties to any arbitration seated outside of mainland China often faced obstacles in preserving assets and evidence in mainland China as the P.R.C. courts would grant such preservation orders only to parties in domestic litigation or arbitral proceedings in mainland China. The P.R.C. courts will also not enforce any interim measures granted by an arbitral tribunal or a court outside of mainland China, as such measures are not considered as having final effect. Accordingly, it is not uncommon to find P.R.C.-related transactions stipulating a P.R.C. court as the seat of arbitration where the availability and enforceability of interim measures against entities based in mainland China are of critical importance. 

With the Arrangement, Hong Kong’s standing as the premier offshore seat for P.R.C.-related arbitrations will be enhanced as it broadly places Hong Kong-seated arbitrations on equal footing vis-à-vis P.R.C.-seated arbitrations in relation to the availability of interim measures from the P.R.C. courts. Hong Kong will therefore enjoy a clear edge over other offshore arbitral seats insofar as resolving P.R.C.-related disputes is concerned. 

That said, parties to ad hoc arbitrations seated in Hong Kong cannot benefit from the Arrangement. Parties are therefore advised to opt for administered arbitrations if they wish to take advantage of the Arrangement. 

Further, the success of the Arrangement will depend in no small part on how effectively and efficiently the interim measure applications are handled by both the requesting institution and requested court. Further clarification, whether by way of practice notes, directions or judicial guidance, will no doubt give much needed clarity and confidence to parties that their application will be dealt with “expeditiously” as demanded by the Arrangement. 

Conclusion

The Arrangement marks an important milestone in the area of mutual legal assistance between the Hong Kong SAR and mainland China and the development of arbitration in Hong Kong. Crucially, it is the first legal document signed by the SPC to enable the P.R.C. courts to grant interim measures in aid of arbitral proceedings outside of mainland China. It is certainly the most significant development since the “Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region” in 1999. This will reinforce Hong Kong’s position as the premier offshore seat of arbitration in P.R.C.-related transactions and bolster Hong Kong’s reputation as an international arbitration hub.