Hong Kong: PRC Supreme People's Court Announces That Arrangement Between The Mainland And Hong Kong On Interim Measures In Aid Of Arbitration Will Go Into Effect On October 1, 2019

On September 26, 2019, the Supreme People’s Court announced that a previously announced arrangement between Hong Kong and Mainland China on interim measures in aid of arbitration will take effect from October 1, 2019 (the “Arrangement1). At present, the Chinese courts typically do not grant interim measures in aid of arbitration unless the arbitration is seated in Mainland China. Under the Arrangement, the Chinese courts will now be empowered to grant interim measures in aid of Hong Kong seated arbitrations administered by qualified institutions. This is a further development aimed at encouraging greater cooperation between the judicial systems of Hong Kong and Mainland China under the “One Country, Two Systems” constitutional philosophy. The move gives Hong Kong a unique advantage over other arbitral seats outside Mainland China and is likely to further consolidate the territory’s position as the preferred arbitral seat for disputes with Chinese parties.

How Does the Arrangement Work?

The Arrangement provides for the grant of interim measures by the courts of Hong Kong and Mainland China in support of arbitrations seated in the other jurisdiction. Although termed an arrangement on “mutual assistance,” the change implemented by the Arrangement is that the Chinese courts are now obliged to implement interim measures in aid of Hong Kong arbitral proceedings. While the Hong Kong authorities have given a reciprocal undertaking, the Hong Kong Arbitration Ordinance has long empowered the Hong Kong courts to grant interim measures in relation to any arbitral proceedings commenced in or outside Hong Kong, including in Mainland China. Thus, the development effected by the Arrangement is that parties to qualifying Hong Kong seated arbitrations will now be able to apply to the Chinese courts for interim measures.

The Arrangement provides that the Chinese courts will be empowered to order attachments, injunctions, and the preservation of evidence in the PRC.

What Types of Arbitration Qualify?

For parties to take advantage of the Arrangement, their arbitration must be seated in Hong Kong and be administered by either:

(1) an arbitral institution that is established or headquartered in Hong Kong and has its principal place of management in Hong Kong (Article 2(1) of the Arrangement);

(2) a dispute resolution institution or permanent office set up in Hong Kong by international intergovernmental organizations of which the Mainland is a member (Article 2(2) of the Arrangement); or

(3) dispute resolution institutions or permanent offices in Hong Kong set up by other arbitral institutions that satisfy certain criteria prescribed by the Hong Kong government (Article 2(3) of the Arrangement).

The September 26, 2019 announcement (the “Announcement”) lists as qualifying institutions the Hong Kong International Arbitration Centre, the International Court of Arbitration of the International Chamber of Commerce – Asia Office, the Hong Kong Maritime Arbitration Group, China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center, South China International Arbitration Centre (Hong Kong), and eBRAM International Online Dispute Resolution Centre. The Hong Kong Department of Justice and the Supreme People’s Court of China have indicated that further applications may be considered and the list updated in the future.

As such, parties to ad hoc arbitrations will not be able to take advantage of the Arrangement.

This Arrangement will apply to arbitrations commenced both before and after October 1, 2019.

How Do You Apply for Interim Measures?

Under the Arrangement, the applicant is required to submit its application for interim measures to the relevant arbitral institution. The arbitral institution is responsible for forwarding the application to the appropriate Chinese court, which is the Intermediate People’s Court in the respondent’s place of residence or the place where the property or evidence is situated. Because referral to the institution may cause some delay in practice, the Announcement clarifies that the applicant is permitted to deliver its application directly to the relevant Chinese court in the PRC. Upon receiving the application, the court will contact the institution directly to ascertain the existence of an arbitration.

The Arrangement permits an application for interim measures prior to acceptance of the arbitration by a qualifying institution. In such circumstances, the applicant must furnish the court with proof of acceptance of the arbitration within thirty (30) days of the interim measure being taken; otherwise, the court will discharge the interim measure. This is consistent with requirements under the PRC Arbitration Law.

Conclusion

The implementation of the Arrangement is a welcome development that plugs a lacuna in the arbitration toolkit for parties arbitrating disputes in Hong Kong with Chinese parties. Although Hong Kong has typically been the favored seat in arbitration agreements with Chinese parties, this new development – which makes Hong Kong the only seat outside Mainland China offering interim measures in Mainland China – gives Hong Kong a unique advantage and is likely to put even greater distance between Hong Kong and its competitors.

* The authors are grateful to Daniel Steel for his assistance in preparing an earlier draft of this alert.

Footnotes

1 The full title of the Arrangement is 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.” It was signed on April 2, 2019, by the Hong Kong Secretary for Justice, Ms. Teresa Cheng, SC, and the Vice-President of the Supreme People’s Court, Mr. Yang Wanming.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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