Hong Kong Consolidates Its Position As The Preferred Forum For Chinese Disputes.

Hong Kong consolidates its position as the preferred forum for Chinese disputes via an agreement with the PRC which will see Mainland courts given the power to award interim relief in support of Hong Kong seated arbitrations.

 

On 2 April, the Hong Kong government and the Supreme People’s Court of the People’s Republic of China signed an agreement designed to ensure further reciprocity between the two legal jurisdictions. While the date on which 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") will come into force has not yet been confirmed, it has received a great deal of attention in the international arbitration community. This is because the Arrangement will for the first time allow Mainland China's courts to grant interim relief in support of Hong Kong-seated arbitrations. The types of interim relief which will be able to be granted by the Mainland Chinese courts will be orders to preserve property or evidence or to ensure 'conduct preservation'. 

 

A mutual arrangement for the enforcement of arbitral awards between Hong Kong and Mainland China has existed since 1999, but the existing structure did not cover interim relief.  Historically, Mainland courts (which do not operate a system of precedent) have generally not been willing to grant interim relief to parties in support of arbitrations seated outside Mainland China. This has compelled international parties to arbitrate in the Mainland if the availability of interim relief was important to them. 

 

The Arrangement will change the position, allowing parties to arbitrate in Hong Kong without losing the possibility of applying for interim relief in the Mainland courts. A party to a Hong Kong arbitration seeking interim relief in in the Mainland courts will have to follow a two-step process: first applying to the relevant arbitral institution in Hong Kong, which will then forward the application to the appropriate Mainland court. The court will then consider whether the relief should be granted under Mainland law.  

 

The Agreement will also allow parties to apply for interim relief even before the relevant administering institution has accepted the arbitration case, provided that the Mainland court receives a letter from the said institution certifying its acceptance of the arbitration case within 30 days after the interim measure is taken. If no letter is provided, the court will discharge the relief that had been granted.

 

Some practical difficulties may be anticipated with the process, not least the requirements under the Agreement for all documents submitted to the Mainland court by the applicant to be submitted with an 'accurate Chinese translation' and for identity documents of the applicant to be certified in keeping with the 'provisions of the relevant laws of the Mainland'. However, the move reflects a trend of growing recognition and co-operation between the legal systems of Hong Kong and Mainland China, cementing Hong Kong's position as the preferred jurisdiction for China-related international disputes.

 

Importantly, the Arrangement will only grant these rights to Hong Kong-seated arbitrations which are administered by recognised arbitral institutions established in Hong Kong, or which satisfy other criteria set out in the Arrangement. A list of the recognised institutions is to be published in due course, but is likely to include HKIAC and ICC Hong Kong. So-called 'ad hoc arbitration' is not recognised in the PRC.

 

Contracting parties whose ventures are likely to involve China-related elements should consider whether Hong Kong institutional arbitration may now be a preferred option for their dispute resolution clause. Further, those parties whose contracts are already subject to Hong Kong arbitration may wish to consider whether the change will have any impact on their Chinese assets should a dispute arise.