Hong Kong-Mainland China interim relief arrangements boost cooperation

On 2^nd April 2019, the Hong Kong Government and the Mainland Supreme People’s Court signed the landmark Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings (Arrangement). This will allow parties to arbitral proceedings seated in Hong Kong to apply, at any time before an arbitral award is made, to the Mainland China courts for interim relief measures. Matters of contention in these cases often include the preservation of property, evidence and/or conduct. The Arrangement is reciprocal in nature, as parties to Mainland China-seated arbitration may obtain similar protection from Hong Kong courts. Shane Farrelly and Veronica Gianola of D’Andrea & Partners tells us what this will mean for international arbitration moving forward, and how China’s standing in the global business community has been slowly evolving.

International arbitration and China

A great number of factors influence a party’s choice of arbitral institution, such as the transparency and fairness of arbitration rules, the location of the institution and the possibility of enforcing arbitral awards. With regard to international arbitration, Mainland China has traditionally been a less popular choice than the Special Autonomous Region of Hong Kong. However, the Chinese international arbitration system has matured in many aspects in recent years: the China International Economic and Trade Arbitration Commission (CIETAC), Shanghai International Arbitration Centre (SHIAC) and Shenzhen Court of International Arbitration (SCIA)—as a result of the recent split between CIETAC and its former Shanghai and Shenzhen sub-commissions—are now additional independent arbitral institutions available to parties on the Mainland.

However, even in commercial contracts concluded in Mainland China, the arbitration clauses inserted would generally nominate the Hong Kong International Arbitration Center (HKIAC) or the Singapore International Arbitration Center (SIAC) as the preferred venue of arbitration. If the arbitration occurred outside the Mainland, Chinese courts would regularly decline to grant interim measures. Consequently, parties opting for arbitration in Hong Kong were not offered this kind of protection – only where the arbitration seat was on Mainland China might such interim measures be available.

The Arrangement will therefore eliminate this burden on parties and allow them to opt for Hong Kong arbitration, while still being able to obtain interim relief protection in China.

In practice

The Arrangement will apply to Hong Kong-seated arbitrations administered by relevant institutions or permanent offices of international intergovernmental organisations of which China is a member. (The list of relevant institutions and permanent offices was still being prepared at the time of writing.)

Previously, in matters where parties sought interim orders in the relevant arbitration institutions in Hong Kong in aid of ongoing or prospective arbitrations seated in Mainland China, under Section 45 of the Hong Kong Arbitration Ordinance (Cap. 609), applications had to be made to the relevant People’s Court in the Mainland. However, permission was rarely granted.

Once the Arrangement comes into force, parties to a Hong Kong-seated arbitration may submit the interim relief application to the relevant arbitration institutions in Hong Kong, which would then forward the application to the relevant People’s Court in Mainland China.

The Arrangement will make it possible to apply for pre-arbitration interim measures in Mainland China in the same way, but the People’s Court must receive proof of acceptance of the arbitration within 30 days after the interim measures are granted.

Developments In China’s international legal framework

The Arrangement will allow parties to opt for Hong Kong-seated institutional arbitration—relying on the region’s well-established arbitration and legal framework—while also obtaining interim relief protection from the courts in Mainland China as and when needed. The Arrangement marks a continuing trend in China’s international commercial law arena that has been steadily garnering attention from foreign parties, especially in relation to the Belt and Road Initiative (BRI).[1]

In order to settle disputes with international parties involved in the BRI, the Chinese Supreme Court sought to establish the International Commercial Court of China (CICC) in 2018. The CICC, at the time of writing, currently consists of three international commercial courts, hosted in Xi’an, Shaanxi—to deal with disputes along the ‘belt’ or land route—in Shenzhen, Guangdong—for disputes along the ‘road’ or sea route of the initiative—and a central court in Beijing.

Two main observations about the jurisdiction of the CICC are of note: the dispute resolution methods are not exclusively intended for cases stemming from the BRI; and the CICC is not a mandatory court of dispute resolution for BRI deals. The court is rather another option amongst an increasingly competitive field of dispute resolution forums in Asia, the most notable options being the aforementioned HKIAC and SIAC.

Conclusion

An uphill struggle is envisioned for international arbitration courts in Mainland China attempting to increase foreign parties’ awareness of domestic legal institutions, especially in lieu of the benefits of Hong Kong arbitration upon the enforcement of the Arrangement. However, it is perhaps still too early to judge the true effect the International Commercial Court of China will have on the international arbitration environment. Whether it can truly compete with the well-established arbitral institutions around Asia, only time will tell.

D’Andrea & Partners Legal Counsel, DP Group, was founded in 2013 by Carlo Diego D’Andrea and Matteo Hanbin Zhi, both of whom have extensive backgrounds in Chinese and EU law. DP Group currently has four service entities: D’Andrea & Partners Legal Counsel, PHC Tax & Accounting Advisory, Eastant Communication and Events, and Chance & Better Education Consulting. DP Group has a variety of branches around the world, with locations in several major developing economies.

[1] The Belt and Road Initiative is China’s multi-trillion dollar project designed to promote economic integration across Eurasia, through infrastructure and energy projects as well as digital connectivity.