Background
Under the Hong Kong’s existing Arbitration Ordinance (Cap. 609), the parties to arbitral proceedings in other places, including Mainland China, may apply to the courts of Hong Kong for interim measures. However, under the Arbitration Law and Civil Procedure Law of Mainland China, only parties to arbitrations seated in Mainland China and administered by Mainland arbitration commissions could apply to the Mainland courts for interim measures. Although Hong Kong and Mainland China have entered into a mutual arrangement on enforcing arbitral awards since 1999, it does not apply to interim measures.
The latest arrangement between Hong Kong and Mainland China
On 2 April 2019, the Secretary for Justice of Hong Kong and the Vice-president of the Supreme People’s Court of Mainland China signed 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)(the “Arrangement”). After the commencement of the Arrangement, parties to arbitral proceedings in Hong Kong can make an application for interim measures to the Mainland courts before the arbitral award is made.
The aims of the Arrangement are to prevent one of the parties from deliberately destroying the evidence or transferring the property, and to ensure that the arbitral proceedings can be carried out effectively. Therefore, the interim measures covered by the Arrangement include (1) property preservation, (2) evidence preservation and (3) conduct preservation in the Mainland.
The commencement date of the Arrangement will be decided after the promulgation of a judicial interpretation by the Supreme People’s Court of Mainland China and completion of relevant procedures in Hong Kong.
Eligible arbitral proceedings
Parties to arbitral proceedings seated in the HKSAR and administered by eligible arbitral institutions which have been designated would be able to apply to the Mainland courts for interim measures. The eligible institutions include:
- arbitral institutions established in the HKSAR or having their headquarters established in the HKSAR, and with their principal place of management located in the HKSAR;
- dispute resolution institutions or permanent offices set up in the HKSAR by international intergovernmental organisations of which the People’s Republic of China is a member; or
- dispute resolution institutions or permanent offices set up in the HKSAR by other arbitral institutions and which satisfy the criteria prescribed by the HKSAR Government (such as the number of arbitration cases and the amount in dispute, etc.)
The list of eligible institutions is to be provided by the Hong Kong Government to the Supreme People’s Court of Mainland China and be subject to confirmation by both sides.
Implications
The Arrangement makes Hong Kong the first and only seat of arbitration outside Mainland China where parties to arbitral proceedings administered by its arbitral institutions would be able to apply to the Mainland courts for interim measures. It boosts Hong Kong’s reputation as the leading seat for China-related international arbitrations, and enhances Hong Kong’s status as an international arbitration centre.
When drafting commercial agreements, when a party to the agreement is a Mainland Chinese entity having assets in Mainland China, there is now a stronger reason why an arbitration clause is preferred to a litigation clause. Also, as only parties to arbitral proceedings in eligible institutions in Hong Kong could apply for interim measures to the Mainland courts, there is now a stronger reason why institutional arbitration is preferred to ad hoc arbitration.
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This article was originally published on ONC Ke Wu Chen Law Firm’s website.
This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of Interstellar Group Pte. Ltd. accepts or assumes responsibility, or has any liability, to any person in respect of this article.