On the eve of the finals of the VIS East Moot, with much of the World’s arbitration community focusing on Hong Kong, the Region’s government signed an arrangement with the Chinese Supreme People’s Court which will further increase Hong Kong’s attractiveness as an arbitral centre.
Under this arrangement, parties to arbitral proceedings in Hong Kong can make an application for interim measures to the Mainland courts, including property preservation, evidence preservation and conduct preservation, in support of the arbitral proceedings. This makes the Hong Kong SAR the only jurisdiction other than Mainland China itself which parties may select as an arbitral ‘seat’ whilst also safely keeping open the option of obtaining interim relief from the PRC courts.
Fittingly, the topic was also the subject of the Hong Kong VIS East Moot Annual Lecture, delivered by the HKSAR Secretary for Justice the Honourable Teresa Cheng SC, who addressed the importance of interim measures in arbitration.
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”) was signed by the Secretary for Justice and the Vice-president of the Supreme People's Court, Mr Yang Wanming at a ceremony in Hong Kong on 2 April 2019.
Consistent with Mainland Chinese procedures, an applicant for interim relief in support of a Hong Kong arbitration shall apply to the relevant arbitral institution or, if the arbitral case has not yet been accepted, to the PRC courts directly (Article 3). Reciprocal rights apply with respect to Hong Kong courts and PRC-seated arbitrations (Article 6) in accordance with the existing Hong Kong law.
The Arrangement identifies the interim measures available in the Mainland to be “property preservation, evidence preservation and conduct preservation” (the latter being similar to mandatory or prohibitory injunctions) (Article 1).
The Arrangement will come into force on a date to be announced (Article 13). The only Hong Kong-seated arbitrations to which the mechanism will apply will be those administered by certain institutions, of which a full list will be published in due course (Article 2).
Prior to this development, there existed no formal mechanism by which the Mainland Courts could grant interim measures in support of ‘offshore’-seated arbitrations in any other jurisdiction (including Hong Kong). Once the Arrangement has entered into force, however, parties will no longer be bound to arbitrate in Mainland China if they wish to have recourse to such measures. They will also have the alternative option of a Hong Kong seat. Accordingly, the Arrangement strengthens Hong Kong’s claim to be the premier jurisdiction for the resolution of China-related disputes through arbitration.
Interim relief and the VIS East Moot Annual Lecture
Applications for interim relief, like those for interlocutory applications generally, can be a powerful tool. If a party successfully secures goods or freezes assets, for example, this can sometimes itself bring the matter to a conclusion by providing a significant driver to settlement.
At the inaugural Hong Kong VIS East Moot Annual Lecture on 31 March 2019 (co-organised by VIS East Moot Foundation and the HKSAR Department of Justice, which was attended by around 500 academics, arbitrators, lawyers and students worldwide), the Secretary for Justice delivered a speech entitled “Interim Measures in Arbitration: Surprise Attack or Offensive Defence?”. It is observed that court-ordered interim relief is often sought, in addition to or as an alternative to tribunal ordered measures. It should be noted that the court, unlike the tribunal, could have the power to bind third parties such as banks, and would often be more accustomed to granting relief on an ex parte basis. Both of these factors can be important for a party seeking (for example) to prevent a counterparty from dissipating assets. Security for costs is also another measure that a party may like to apply for, as a “pre-emptive self-defence”. During the panel discussion, renowned practitioners from Hong Kong also shared the importance of interim measures as valuable tools for parties to arbitration but noted some difficulties in practice. The Arrangement is therefore a timely relief to address some of the difficulties discussed.
Hong Kong has long been a favoured seat for international arbitrations with a Chinese element. In the words of the Secretary for Justice: “the Arrangement creates a new area for judicial cooperation between Hong Kong and Mainland China which benefits parties to arbitral proceedings in both jurisdictions”. With this new area of cooperation, Hong Kong’s role as a neutral seat for the resolution of Sino-international disputes is certainly further enhanced. This will further strengthen Hong Kong as an international legal and dispute resolution services centre under both the Greater Bay Development Plan and the Belt and Road Initiative.