A new arrangement between the Hong Kong Government and the PRC Supreme People’s Court makes Hong Kong the first jurisdiction outside of Mainland China in which parties to institutional arbitration will have a clear procedural route to apply to the PRC courts for interim measures. The new arrangement is likely to encourage parties involved in cross border transactions involving China to choose Hong Kong as a seat of arbitration.
A perennial problem, for arbitration practitioners dealing with arbitrations involving Mainland Chinese parties, has been the difficulty in securing timely interim measures orders from PRC courts against Mainland Chinese parties, in support of the foreign arbitration. On 2 April 2019, the Hong Kong Government and the PRC Supreme People’s Court signed 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 will come into force following the Supreme People’s Court’s promulgation of a judicial interpretation and the Hong Kong Government’s completion of relevant procedures. Hong Kong, as a result, will become the first jurisdiction outside of Mainland China where parties to institutional arbitral proceedings are given an express legal basis and a clear procedural route to apply to the PRC courts for interim measures. This new Arrangement is expected to encourage parties involved in cross-border disputes and in cross-border transactions to choose Hong Kong as the seat of arbitration.
It has long been established in Hong Kong, under section 45 of the Arbitration Ordinance (Cap. 609), that parties to foreign-seated arbitrations may apply to the Hong Kong courts for interim measures in support of foreign arbitral proceedings. The new Arrangement between the Hong Kong Government and the Supreme People’s Court now allows applications for interim measures to be made to the PRC courts. From the PRC perspective, the Arrangement opens a new gateway in that parties to certain institutional arbitral proceedings in Hong Kong may apply to the PRC courts for interim measures including: (i) property preservation; (ii) evidence preservation; and (iii) conduct preservation.
This is an important move in the development of PRC’s arbitration law regime and indicates a marked change in attitude of the PRC judiciary to non-domestic arbitration. Before this Arrangement was entered into, the availability of interim measures to non-Mainland-China-seated arbitral proceedings was unclear. While parties to PRC domestic arbitral proceedings were (and still are) able to apply to the PRC courts for interim measures, under Articles 28, 46 and 68 of the PRC Arbitration Law and Articles 81, 101 and 272 of the PRC Civil Procedure Law, these provisions did not expressly provide that the same applied to non-domestic arbitrations. Furthermore, PRC courts (which have the exclusive power to grant interim measures) have, in the past, shown a tendency to dismiss interim measure applications made by parties to non-domestic arbitrations.
Parties to arbitral proceedings in Hong Kong may apply to the PRC courts for interim measures provided that: (1) the arbitral proceedings are seated in Hong Kong; and (2) administered by certain identified arbitral institutions in Hong Kong.
This second requirement distinguishes between institutional and ad hoc arbitrations in Hong Kong. Parties to ad hoc arbitration will not benefit from the new Arrangement and, are, therefore, still unable to apply to PRC courts for interim measures.
When it comes to institutional arbitrations, only the following arbitral institutions will be covered by the new Arrangement:
While a defined list of eligible arbitral institutions/permanent offices is yet to be provided by the Hong Kong Government to the Supreme People’s Court, it is expected that institutions such as HKIAC, ICC Hong Kong and CIETAC will be included.
The procedure is set out in Article 3 of the Arrangement and the procedure varies depending on the timing of the application: a distinction is drawn between applications for interim measures made before and after the relevant institution/permanent office has accepted the arbitration case.
If the application is made before the arbitration case has been accepted by the relevant institution/permanent office, the party seeking the interim measure may apply directly to the Intermediate People’s Court where the respondent is resident or the property/evidence is located (Article 3). Such an application should not be made to more than one Intermediate People’s Court, even if multiple courts have jurisdiction. Importantly, a letter certifying the institutional acceptance of the arbitration case must be submitted to the PRC court within 30 days after the interim measure is granted, failing which the interim measure will be discharged.
If the application is made after the arbitration case has been accepted by the relevant institution/permanent office, then the application must be forwarded by the institution/permanent office to the relevant Intermediate People’s Court. However, it is unclear at this stage whether or in what ways the institution/permanent office, acting as an “agent”, in this way, will prolong or accelerate the application cycle.
The procedural arrangements allowing applications to be made at different stages of an arbitration will prompt the parties involved in cross-border arbitral proceedings to think ahead and consider seeking interim measures even before an arbitration case is officially accepted by an institution. If used appropriately, this route potentially can allow a party to secure the grant of interim measures with an PRC court directly and also earlier in the case lifecycle. However, in order to retain the benefit, it is vital to consider carefully the timings of such an application and how this interacts with the timetable of the arbitration and the relevant institution so as not to fall foul of the 30 day restriction mentioned above.
Articles 4 and 5 of the Arrangement specify the documentary requirements for an interim measure application to the PRC court, which are summarised below:-
It is worth mentioning that the PRC court may also require “any other materials” (Article 4(5)) to be submitted and “any other matters as may be required to be specified” in the application (Article 5(7)). It is also requirement for the applicant to submit “an accurate Chinese translation” for documents that are not in Chinese (Article 4). Therefore, parties seeking interim measures should be prepared that the application process may not end up being straightforward, as (i) the PRC court has a wide discretion to order further documents/information to be submitted that could be more stringent than the express requirements in the Arrangement; and (ii) it is unclear whether “an accurate Chinese translation” means official translation which require notarisation, apostilisation and/or legalisation.
Pursuant to Articles 8, after the interim measure application has been made, the PRC court will deal with it “expeditiously” and the applicant may be required to provide security. Article 10 provides that the applicant should pay litigation fees “in accordance with the laws and regulations…of the requested place”. It is also provided that the PRC court will order the interim measure to be granted when it is satisfied that the application “is in accordance with the law of the requested place”. This element of complying with “the law of the requested place” may be another complicating factor for a party seeking interim measures since it is ambiguous what further procedures may be required under the local law.
While the Arrangement will provide a long-awaited gateway for parties to institutional arbitral proceedings in Hong Kong to apply for interim measures in the PRC, it is not yet clear how such applications will play out in practice. Given the uncertainty around the application process, including the broad documentary requirements referred to above, the vague requirement for the application to be “in accordance with the law of the requested place” as well as the unknown impact of the two stage application involving an arbitral institution, there may be significant time and cost expended before a party is able to secure the grant of an interim measure in the PRC. The Supreme People’s Court’s promulgation of the judicial interpretation may provide more detailed guidance on the practical implementation of the Arrangement. What is clear at this stage is that the implementation of this procedure is a welcome development, and gives Hong Kong an advantage as the chosen seat of arbitration.