Arbitration Interim Measures Arrangement Brought into Force and Put to Use

On 1 October 2019 Hong Kong and Mainland China brought into force an arrangement allowing the courts of each jurisdiction to award interim measures in support of arbitration seated in the other territory.  The new arrangement is a significant development in the region, and arbitration-users have been quick to employ it.  Parties to Hong Kong-seated arbitration have already made a number of applications to the PRC courts, with at least one having been granted.  

The Arrangement

Historically, no formal mechanism has existed empowering PRC courts to grant interim relief in support of foreign-seated arbitration. Parties anticipating applying for interim relief in China have often chosen to arbitrate on the Chinese Mainland.

On 2 April 2019 this position changed when the Chinese Supreme People’s Court (“SPC”) and Hong Kong Department of Justice (“DOJ”) entered into 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 Arrangement provides inter alia that PRC courts will issue measures in aid of institutional arbitration administered by qualifying Hong Kong arbitral institutions and with its seat in Hong Kong.  

On 26 September the SPC and DOJ issued further instruments including the following:

  1. A Public Announcement of the SPC (《2019 年9 月26 日中华人民共和国最高人民法院公告》)
  2. An SPC Judicial Interpretation: 《最高人民法院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》(法释〔2019〕14 号);
  3. SPC Guidance on the Arrangement: 《〈最高人民法院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〉的理解与适用》.
  4. A DOJ Press Release.

(together the “Announcements”).

The Announcements

The Announcements bring the Arrangement in to effect from 1 October 2019, and set out further information regarding its application.

Only Hong Kong arbitrations administered by certain institutions will have the benefit of the Arrangement (Arrangement, Article 2).  These “institutions or permanent offices” are listed in the Announcements. Qualifying bodies include the Hong Kong International Arbitration Centre (HKIAC); the China International Economic and Trade Arbitration Commission Hong Kong Arbitration Center (CIETAC HKAC); the ICC International Court of Arbitration Secretariat - Asia Office, and others.

The Arrangement does not apply to ad hoc (un-administered) arbitration or Investor State Dispute Settlement (ISDS). 

Party takeaways

From 1 October, parties to Hong Kong arbitration will now benefit from a formal mechanism entitling them to apply to PRC courts for interim measures.  Hong Kong becomes the only jurisdiction other than Mainland China where this is the case.  Parties entering into contracts concerning Chinese parties or assets will therefore have a new compelling reason to consider Hong Kong-seated arbitration.

Arbitration-users seeking to benefit from this arrangement should ensure their arbitration clauses specify arbitration administered by one of the institutions listed in the Announcement.

Of course, parties should also bear in mind important differences when it comes to the remedies available, as well as the processes and legal tests employed, in the two jurisdictions.  Mainland China and Hong Kong have distinct legal traditions. Hong Kong operates as a separate common law jurisdiction pursuant to the “One Country Two Systems” formula.  As such, the Hong Kong courts are accustomed to ordering a diverse range of relief in support of arbitration, including mandatory and prohibitory injunctions.  By contrast, the Mainland Chinese courts are reluctant, outside of certain specific categories of dispute, to order relief extending beyond preservation measures against assets or property.

The mechanism contained in the Arrangement reflects this divergence, as well as that between procedures and review standards in the two jurisdictions. However, it is also worth noting that the Arrangement has also prompted an increase in judicial communication, including a number of training and exchange initiatives between Hong Kong and Mainland bodies and judges.

Recent implementation and conclusion

Commentators expected the Arrangement to be swiftly put into use, particularly as it applies to arbitrations already on foot at the time it came into force.  This has indeed proved to be the case.  For instance, on 11 October 2019, the HKIAC announced that it had already received five applications for PRC interim measures.  Under the Arrangement the Hong Kong institution has a role accepting applications for interim relief in the PRC and transferring them to the relevant court (Arrangement, Article 3).

Indeed, on 8 October 2019, the Shanghai Maritime Court granted one of these orders, in doing so reportedly making the first such order under the Arrangement.

It is no surprise that parties to disputes involving Chinese assets, operations or counterparties are swiftly adopting the Arrangement, given the new proposition on offer.  The Arrangement also comes at a significant time for the region. The Belt and Road Initiative (BRI) and Greater Bay Area (GBA) region look to be two of the key drivers of Asian economic growth and commercial activity. The coming into force of the Arrangement therefore looks to be a move to bolster Hong Kong’s attractiveness as a seat of arbitration for disputes arising from these initiatives. Sophisticated arbitration users will no doubt look to revamp their precedent arbitration clauses in order to benefit from the new tools available.

Partner, Fangda Partners

Peter is head of the firm’s dispute resolution practise in Hong Kong. His practice spans a number of areas including international and regional arbitration, having acted for clients in a number of high pro­file China-related commercial arbitrations.

Peter has been ranked a Leading Individual for International Arbitration in Chambers Asia since 2010. He is qualified to practise Hong Kong law and English law.

Peter’s experience in arbitration covers both institutional (mainly, ICC, SCC, LCIA and HKIAC) and ad hoc (mainly UNCITRAL) arbitrations in both English and Chinese languages. 

Although Peter’s professional career to date has focused on counsel work, he also accepts arbitral appointments.   He is listed as arbitrator on the HKIAC list of arbitrators, and on the SHIAC and BAC panels of arbitrators.

Registered Foreign Lawyer, Fangda Partners 

Matthew Townsend is an arbitration lawyer based in Hong Kong.  His practice is primarily focused on international arbitration and dispute resolution, often (but not always) involving Chinese parties.

Townsend has experience of arbitration in a number of jurisdictions under a number of different arbitration rules.  His practice focuses on the energy, infrastructure, construction, technology and international trade sectors.  He has experience acting as advocate at all stages of an arbitration hearing

Registered Foreign Lawyer, Fangda Partners 

John Zhou is part of Fangda’s dispute resolution and investment protection practice. Before joining Fangda Partners, John was part of China’s diplomatic service in Beijing, Hong Kong and Jakarta, focusing on proceedings involving Chinese government and cross-border legal cooperation.