Legal Update: China and Hong Kong: Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitration Proceedings

Hong Kong and China have agreed new measures to allow parties to an arbitration seated in one jurisdiction to attach assets in the other jurisdiction pending an award. This is an important extension to arbitration proceedings of measures previously restricted to litigants before Hong Kong and Chinese courts. It also reflects the increasing use of Hong Kong as a forum for arbitration.

The Arrangement

On 2nd April, 2019, the Hong Kong Government and the Supreme People's Court of 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" ("Arrangement"). The effective date of the Arrangement is expected to be announced shortly.

There are already a number of reciprocal agreements between Hong Kong and the People's Republic of China ("PRC") but this is the first time PRC courts are empowered to grant interim measures for disputes being arbitrated in Hong Kong.  Similarly, participants to arbitration proceedings seated in the PRC can apply to the Hong Kong courts for the equivalent measures.

Previously, parties could only obtain interim relief from the PRC courts by launching arbitration or litigation proceedings in that jurisdiction. However, the new Arrangement allows parties to Hong Kong proceedings to apply for interim relief from a PRC court enjoying jurisdiction over the property or evidence of a respondent.

Under the Arrangement, three forms of interim support are available from the PRC courts:

• property preservation,
• evidence preservation; and
• conduct preservation.

The first two forms of relief are similar to Mareva injunctions and Anton Piller orders under English law, with some important differences. Mareva injunctions restrain a respondent from disposing of, or dissipating, assets, whereas a property preservation order issued by the PRC courts applies directly to the asset itself. Anton Piller orders permit a claimant to enter the respondent's premises to search for and seize documents as evidence, whereas the PRC courts use their own staff for this purpose. The third form of relief, conduct preservation, acts as a form of injunction and is more relevant to intellectual property disputes, rather than maritime claims. In contrast to the English courts' rather restrictive approach to property preservation orders the PRC courts have tended to be more flexible in allowing interim relief.

Any application requires the approval of the Hong Kong tribunal and HKIAC will shortly publish guidelines for such requests.

Although the list of Hong Kong arbitration institutions to which the Arrangement applies has not yet been published, it is likely to include the Hong Kong International Arbitration Centre (HKIAC), the International Chamber of Commerce, Hong Kong (ICCHK) and the China International Economic and Trade Arbitration Commission (CIETAC). The Arrangement will not apply to 'ad hoc' arbitrations.

A valuable anti-dissipation tool

Although the new Arrangement does not change the practice for the enforcement of a final award or judgement in China, which is dealt with by the 1999 "Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the Hong Kong Special Administrative Region, it does ensure that assets can be preserved pending recognition of the foreign award.

The new Arrangement therefore provides a new path to obtaining security in the PRC as interim relief. It may prove a valuable tool in securing assets in the PRC in anticipation of a favourable award by a Hong Kong tribunal. It should be noted that the Arrangement remains untested under PRC law but its implementation will be closely monitored.