Mainland and HK arbitral arrangement

China dispute resolution: New ways of seizing assets

From now on, anyone who has chosen Hong Kong arbitration as the dispute mechanism for contracts with Chinese counterparties will find it easier to get interim measures. These include the Chinese equivalents of Anton Piller orders and Mareva injunctions.

The change has come about with the coming into force of 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) 《关于内地与香港特别行政区法院就仲裁程序相互协助保全的安排》.

The Arrangement was signed in April this year by the Supreme People’s Court (SPC) and the Department of Justice (DOJ) of the Hong Kong Special Administrative Region (HK SAR) and came into force in October.

Background

Enforcement of judgments and arbitration awards has always been difficult in China, and this may give another weapon to the foreign dispute resolution lawyer.

The “One Country, Two Systems” policy and the Hong Kong Basic Law provide the fundamental basis for mutual judicial assistance between mainland China and HK. The SPC has signed six arrangements on mutual judicial assistance in civil and commercial matters, including the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region(2019) and the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region (2000).

With the construction of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), mutual judicial assistance in respect of interim measures in arbitrations will play a significant role in facilitating the economic development in that area.

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Breakthroughs

This is the first time that mainland China has agreed to provide mutual assistance in court-ordered interim measures for extra-jurisdictional arbitral proceedings.

Under the Arrangement, it is now possible to apply for pre-arbitration interim measures in mainland China. In this case, if the mainland court has not received a letter from the said arbitration centre certifying its acceptance of the arbitration case within 30 days after the interim measure is taken, the mainland court will discharge the interim measure.

Scope of Preservation/Interim Measures

In mainland China (preservation)         

• Property preservation
• Evidence preservation
• Conduct preservation (Instruct the parties to take certain actions or prohibit them from taking certain actions.)

In HK SAR (interim measures)

• Property preservation: including Mareva Injunction
• Evidence preservation: including Anton Piller Order
• Conduct preservation: including Mandatory/ Prohibitory Injunction

Advantages of Applying the Arrangement (for parties to HK arbitral proceedings)

• Fees: can launch proceedings for interim measures/ preservation in mainland China with a relatively low price. (eg. application fee of $HK8,000 for launching an arbitral proceeding in the HKIAC.)
• Successful rates: compared to the strict review criteria of interim injunctions in HK courts, that of applications of interim measures/ preservation may be much looser in the mainland.
• Application procedure: one party to a HK arbitral proceeding is responsible for the delivery of a notice to the other party, so the applicant may be able to match the delivery time with the timescale to complete interim measures in the mainland court.

What is needed for an application

• The application for the interim measure
• The arbitration agreement
• Identity documents
• Where a party makes an application for the interim measure after the relevant institution or permanent office has accepted the arbitration case,
  1. the request for arbitration setting out the main claim of the arbitration and the facts and justifications on which the claim is based
  2. relevant evidential materials;
  3. a letter from the relevant institution or permanent office certifying its acceptance of the relevant arbitration case
• Any other materials required by the people’s court of the mainland.
  Please note – accurate Chinese translations must be submitted when the original documents are not in the Chinese language.

Specific periods for the review of Interim Measures Applications

No rules are specified in the Arrangement, but according to the PRC Civil Procedure Law and other relevant regulations:

• For pre-arbitration interim measures applications – the court must determine within 48 hours after accepting the application
• For interim measures applications submitted in arbitration – after accepting the application, the court must determine within five days after the applicant provides the guarantee.

Exclusions

• Ad hoc arbitration – the Arrangement only applies to institutional arbitrations in HK SAR.
• Investment arbitration – the Arrangement only applies to commercial arbitrations between equal subjects.
  Note – it is widely accepted that ad hoc arbitration in the mainland has been allowed by the SPC, provided that the two enterprises registered in the Free Trade Zones to a dispute agree to submit arbitral application at a particular place in the mainland, pursuant to Article 9(3) of the “Opinions of the SPC on Providing Judicial Guarantee for the Building of Pilot Free Trade Zones (2016).”

Problems to be solved

It is not clear whether the intermediate people’s courts of China accepting the applications of court-ordered interim measures shall have jurisdiction over foreign-related issues, because not every intermediate people’s court of China has jurisdiction over foreign-related matters, as only major civil cases involving a foreign element can be heard in the intermediate people’s courts of first instance (pursuant to Article 19(1) of the CPL).

For instance, Hebei Tangshan Intermediate People’s Court has no jurisdiction over cases involving foreign elements. Therefore, if the courts do need such jurisdiction, applicants for interim measures, such as property preservation (assets in Tangshan) will need to submit the application to the Hebei Langfang Intermediate People’s Court which does have jurisdiction over foreign-related matters.

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