2019.04.05 HU, Nan
On April 02, 2019, the Supreme People’s Court of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region (HKSAR) signed an 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”).1 The Arrangement confirms the high degree of cooperation between the dispute resolution systems of the two places and follows on from 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. Such legal basis for courts of both places to mutually assist one another in property preservation, evidence preservation and conduct preservation will significantly strengthen the advantages of undertaking arbitration in Hong Kong and/or mainland China.
With the legislative processes still to be completed, it has not as yet been determined when the Arrangement will become effective. The authors are nevertheless eager to share the key features thereof.
The Arrangement comprises 13 articles stipulating the scope of the interim measures, the arbitration proceedings in Hong Kong, the procedures for applying for preservation, and the court’s examination of such applications.
The authors, from the perspective of practitioners in mainland China, hereby present a brief commentary on the key features of the Arrangement.
Article 1 “Interim measure” referred to in this Arrangement includes, in the case of the Mainland, property preservation, evidence preservation and conduct preservation; and, in the case of the HKSAR, injunction and other interim measure for the purpose of maintaining or restoring the status quo pending determination of the dispute; taking action that would prevent, or refraining from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral proceedings; preserving assets; or preserving evidence that may be relevant and material to the resolution of the dispute.
The clause provides for the various types of interim measures currently available to mainland or Hong Kong courts. Regardless of the different wordings adopted, the interim measures aim to secure the enforcement proper of a future arbitral award, the finding of facts by the arbitral tribunals, and the prevention of any imminent harm.
The arbitration institution has no decision-making power with respect to interim measures under Chinese law, but is merely the intermediary between the parties and the court. (In contrast, the arbitration tribunal plays no role and has no power to make any such orders.)
While it is already routine practice for parties to apply for interim measures during mainland arbitrations, prior to the Arrangement coming into effect, parties in an arbitration seated in Hong Kong have not been entitled to apply for interim measures before a Chinese court until they seek to enforce the award.
In practice, it can take years before a party obtains an arbitral award and is able to complete recognition and enforcement proceedings before a Chinese court. There is, moreover, no legal basis for property preservation during the recognition phase. While there have been instances where property preservation has been granted during the recognition phase (ref. SPC Reply Civil Others  No. 2192), in practice, most judges refuse to grant property preservation during the recognition phase. Applicants are therefore invariably required to wait until the award is recognized and moved to the enforcement proceeding.
In the face of these difficulties, potential claimants in a Hong Kong arbitration where the respondent’s property is located in the mainland have tended to be wary of initiating arbitration. However, once the Arrangement comes into force, the opportunity to do so will be based upon a firmer legal footing.
With regard to evidence preservation, there are fewer precedents than for property preservation. The mainland courts have been generally reluctant to approve any such application due to the high threshold for the parties, who are required to prove (i) the existence of the evidence, and (ii) that the evidence in concern faces the imminent danger of being lost or destroyed.3
Conduct preservation is most commonly seen in IP disputes, and only rarely eventuates in other types of commercial disputes.
Article 2 “Arbitral proceedings in Hong Kong” referred to in this Arrangement shall be seated in the HKSAR and be administered by the following institutions or permanent offices:
(1)arbitral institutions established in the HKSAR or having their headquarters established in the HKSAR, and with their principal place of management located in the HKSAR;
(2)dispute resolution institutions or permanent offices set up in the HKSAR by international intergovernmental organisations of which the People’s Republic of China is a member; or
(3)dispute resolution institutions or permanent offices set up in the HKSAR by other arbitral institutions and which satisfy the criteria prescribed by the HKSAR Government (such as the number of arbitration cases and the amount in dispute, etc.).
The list of such institutions or permanent offices referred to above is to be provided by the HKSAR Government to the Supreme People’s Court and be subject to confirmation by both sides.
Article 2 limits the “arbitration in Hong Kong” to arbitration administered by “approved” institutions. Evidently, if any user of Hong Kong-based arbitration wishes to enjoy the benefits introduced by the Arrangement, it is less advisable to use ad hoc arbitrations or arbitrations administered by non-approved institutions.
Article 3 Before the arbitral award is made, a party to arbitral proceedings in Hong Kong may, by reference to the provisions of the Civil Procedure Law of the People’s Republic of China, the Arbitration Law of the People’s Republic of China and relevant judicial interpretations, make an application for interim measure to the Intermediate People’s Court of the place of residence of the party against whom the application is made (“respondent”) or the place where the property or evidence is situated. If the place of residence of the respondent or the place where the property or evidence is situated fall within the jurisdiction of different people’s courts, the applicant shall make an application to any one of those people’s courts but shall not make separate applications to two or more people’s courts.
Where an application for interim measure is made after the relevant institution or permanent office has accepted the arbitration case, the party’s application shall be passed on by the said institution or permanent office.
Where a party makes an application for interim measure before the relevant institution or permanent office has accepted the arbitration case, but the people’s court of the Mainland has not received a letter from the said institution or permanent office certifying its acceptance of the arbitration case within 30 days after the interim measure is taken, the people’s court of the Mainland shall discharge the interim measure.
Article 3 sets out the rules to identify the competent court, taking into consideration territorial jurisdiction and jurisdiction by level. Concurrent applications before different courts are not allowed, whereas such prohibition does not currently exist when applying for interim measures in a mainland arbitration.
The application for interim measures during an arbitration proceeding should be forwarded to the court by the arbitration institution. Prior to an arbitration proceeding, a party may apply directly to the court and is required to file the request for arbitration within thirty days. Both these conditions are in accordance procedures applicable to mainland arbitration.
In practice, mainland courts are somewhat reluctant to grant an interim measure application made prior to the initiation of an arbitration proceeding. They may either refuse the application or increase the threshold for application, thereby making it difficult for an applicant.
Article 4 An applicant applying to a people’s court of the Mainland for interim measure shall submit the following materials:
(1)the application for interim measure;
(2)the arbitration agreement;
(3)documents of identity: where the applicant is a natural person, a copy of his/her identity card is to be submitted; where the applicant is a legal person or an organisation which is not a legal person, copies of its certificate of incorporation or registration and the identity card(s) of its legal representative(s) or responsible person(s) are to be submitted;
(4)where a party makes an application for interim measure after the relevant institution or permanent office has accepted the arbitration case, the request for arbitration setting out the main claim of the arbitration and the facts and justifications on which the claim is based, together with the relevant evidential materials, as well as a letter from the relevant institution or permanent office certifying its acceptance of the relevant arbitration case;
(5)any other materials required by the people’s court of the Mainland.
Where a document of identity is issued outside the Mainland, such document of identity shall be certified in accordance with the provisions of the relevant laws of the Mainland.
Where a document submitted to a people’s court of the Mainland is not in the Chinese language, the applicant shall submit an accurate Chinese translation.
These clauses clarify the formal requirements for application documents, and mirror mainland practice in similar situations. If the applicant is a foreigner or a foreign company, their identity documents, as well as any relevant Power of Attorney will be required to be notarized, attested and/or legalized. Chinese translations of documents in a foreign language should be prepared, and it is always advised to do so through translators recognized and/or designated by the court in concern.
Article 8 A requested court shall examine a party’s application for interim measure expeditiously. A people’s court of the Mainland may require the applicant to provide security, etc., while a court of the HKSAR may require the applicant to give an undertaking and provide security for costs, etc.
After examination and being satisfied that the party’s application for interim measure is in accordance with the law of the requested place, the court of the requested place shall make a decision, order etc. for interim measure.
Article 10 A party who makes an application for interim measure shall pay the fees in accordance with the laws and regulations on litigation fees of the requested place.
Mainland courts are becoming increasingly flexible in terms of the types of acceptable security, and will accept cash, real estate, a bank guarantee, a guarantee letter from a guarantee/insurance company. Parties often use letters of guarantee from a guarantee/insurance company, which are usually available for a reasonable fee, though some courts may require an applicant to provide security in cash in addition to the guarantee letters.
With regard to the court fees for handling interim measures, unless otherwise provided, they are capped at CNY 5,000 per application (as provided in Article 14 of the Measures on the Payment of Court Fees).
Article 6 Before the arbitral award is made, a party to arbitral proceedings administered by a Mainland arbitral institution may, pursuant to the Arbitration Ordinance and the High Court Ordinance, apply to the High Court of the HKSAR for interim measure.
Article 11 This Arrangement does not prejudice any rights enjoyed by the arbitral institutions, arbitral tribunals or parties of the Mainland and the HKSAR under the laws of the other place.
The Hong Kong Arbitration Ordinance (Cap. 609) already allows any parties to arbitration seated outside Hong Kong, including those seated on the mainland, to apply for interim measures before the Hong Kong courts. Article 6 of the Arrangement clarifies that parties to a mainland arbitration shall apply to the High Court of the HKSAR. Article 11 of the Arrangement further clarifies that such rights shall not detract from the provisions of the Arrangement itself.
That being said, for the sake of prudence, any party wishing to apply for an interim measure before the Hong Kong court should first seek the advice of a Hong Kong lawyer.
In practice, the opportunity to apply for interim measures abroad plays an important role in preserving clients’ rights and interests in the resolution of any cross-border dispute. As indicated by the Research Office of the Supreme People’s Court during a media briefing, “The Arrangement is the first legal instrument signed between the mainland and another jurisdiction concerning mutual assistance for interim measures to assist in arbitration. This shows that the scope and content of the mutual legal assistance between the mainland and Hong Kong exceeds that between the mainland and other countries and areas.” The Agreement is particularly helpful in relation to property preservation, and will greatly simplify arbitration conducted in Hong Kong and will go some way to assist with some of the “difficulties in enforcement” faced during proceedings conducted on the mainland. While still awaiting the details of when it will be formally introduced, the arbitration community has welcomed the Arrangement, since it provides the legal basis for parties involved in Hong Kong arbitration proceedings to apply for interim measures before a mainland court prior to and during such arbitration.
1. The English translation of the Arrangement is courtesy of the Hong Kong Department of Justice and is available at http://gia.info.gov.hk/general/201904/02/P2019040200782_307637_1_1554256987961.pdf. Last accessed April 04, 2019.
2.《关于湖北省高级人民法院就盖特汽车公司在申请认可和执行香港特别行政区仲裁裁决案中申请财产保全问题的请示一案的复函》（（2017）最高法民他129号）, on file with the authors.
3. Ref. Article 46 of the PRC Arbitration Law (1994)