On 1 October 2019, Hong Kong became the first jurisdiction to have an arrangement with Mainland China on interim measures in aid of arbitral proceedings. 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 (the “Arrangement”) was signed on 2 April 2019 and came into force on 1 October 2019.
Prior to the Arrangement, parties to foreign-seated arbitrations could not apply to the Mainland courts to grant interim measures. The new Arrangement has now given the green light to do so.
In a gist, the Arrangement has empowered parties to Hong Kong-seated arbitral proceedings to seek interim measures in Mainland courts in aid of the arbitral proceedings and vice versa. To better understand the benefits of this, one must first understand the pre-Arrangement scenario.
Before the Arrangement came into force, parties to an arbitration in Hong Kong could only seek interim measures from the Hong Kong courts such as injunctions against Hong Kong properties. That meant that if a party had assets in the Mainland, there was nothing the other party could do in Hong Kong to restrain asset dissipation. Likewise, no such assistance was available from Hong Kong to parties conducting arbitration in the Mainland.
After the Arrangement, interim measures, including property preservation, evidence preservation and conduct preservation can now be applied for by Hong Kong arbitral parties to the Mainland courts. This Arrangement, however, is only available to parties engaging in administered arbitrations as opposed to ad hoc arbitrations.
Pursuant to Article 3 of the Arrangement, an application for such interim measures should be made to the Mainland court where the other party is resident or where the asset or the evidence is located. An application can only be made prior to an arbitral award being made.
It should be noted that however, the requested court in the Mainland may require the applicant to provide security among other things pursuant to Article 8 and that once an application has been made, the applicant cannot make a separate application to another Mainland court.
In view of the benefits of preventing the deliberate destruction of evidence or dissipation of properties which may not be undone or tracked down, we believe the Arrangement will now attract more parties to choose Hong Kong as the seat for arbitration (particularly where the other party has Mainland assets), as opposed to other jurisdictions which do not have such an arrangement in place.
Hong Kong will no doubt benefit from this and further cement its position as an arbitration hub particularly in the Asia-Pacific region.
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