New arrangement with Mainland adds to advantages of Hong Kong arbitration

This article is produced by Lau, Horton & Wise LLP, a Hong Kong law firm in association with CMS Hasche Sigle, Hong Kong LLP

Hot on the heels of the extension of an arrangement for reciprocal enforcement of judgments between Hong Kong and Mainland China, a new arrangement has been signed which will allow parties to Hong Kong arbitrations to seek interim measures of protection from the Mainland courts.

Added to the arrangement with the Mainland for the mutual enforcement of arbitration awards, this makes Hong Kong the natural venue for China-related arbitrations.

Under Hong Kong law, parties to arbitrations outside Hong Kong (including the Mainland) can already apply for injunctions and other interim measures in support of such arbitrations under section 45 of the Arbitration Ordinance (Cap. 609).

This new arrangement will give parties to many (but not all) Hong Kong arbitrations the ability to seek orders from the Mainland courts for property preservation, evidence preservation and conduct preservation.

The arrangement is likely to be most useful when one of the parties to the Hong Kong arbitration is a Mainland company or individual. However, that does not appear to be a requirement, and it may well be sufficient if the respondent has assets in the Mainland or relevant evidence is located there.

The key features of the arrangement are as follows.

1. Only parties to institutional administered arbitrations will be able to take advantage of the arrangement. The final list of qualifying institutions will be provided by the Hong Kong SAR Government for confirmation by the PRC Supreme People's Court. Ad hoc arbitrations (which are more common in industries such as shipping) are not covered.
2. If arbitration has already been commenced (and accepted), the application for interim measures must be passed on by the arbitral institution to the Mainland court. Institutions such as the HKIAC will therefore need to develop procedures to assist parties in making applications under this arrangement. It is to be hoped that such procedures will not unduly add to the time or cost of applications.
3. An application can also be made before the arbitration has been accepted, but in that case the arbitral institution must certify within 30 days that it has accepted the case, failing which the interim measure will be discharged.
4. An application may be made to the Mainland court where the respondent is located or where the property or evidence is situated, but not both.
5. The arrangement sets out various requirements for the application. Of particular note, the applicant must provide: (a) an explanation of the urgency of the application, for example what harm will be suffered by the applicant if the interim measure is not granted; and(b) clear particulars of the property or evidence to be preserved "or concrete threads which may lead to a train of enquiry".
6. In addition to paying court fees, the Mainland court may require the applicant to provide security as a condition of granting the interim measure.

As a general rule, it must be remembered that the application for interim measures is made under PRC law to a Mainland court. Accordingly, local lawyers will need to be engaged to ensure the application complies with PRC law and procedure.

While it is disappointing that ad hoc arbitrations fall outside the scope of the arrangement, this is another step forward in judicial relations between the Mainland and Hong Kong SAR which will undoubtedly enhance Hong Kong's attraction as a dispute resolution venue.

Full details of all the arrangements on mutual legal assistance between the Mainland and Hong Kong SAR can be found on the Hong Kong Department of Justice website.