Articles

In an increasingly interconnected global economy, international commercial arbitration has emerged as the preferred mechanism for resolving cross-border disputes. Its advantages — neutrality, enforceability, and procedural flexibility — make it indispensable for businesses navigating complex commercial relationships.

 

For businesses engaged in transactions with Mainland Chinese entities and designating arbitration as the dispute resolution mechanism, choosing the seat of arbitration (i.e., the jurisdiction in which an arbitration is deemed legally to take place and the award issued) is critical. Among international arbitration hubs, Hong Kong stands apart, offering a unique advantage: the ability to obtain interim relief directly through Mainland courts under the “Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and the Hong Kong Special Administrative Region” (“Interim Measures Arrangement”) which came into force on 1 October 2019.

 

What are “interim measures”?

 

Interim measures (or interim relief) are provisional orders issued by the court prior to the final determination of a dispute, with the aim to preserve the status quo, protect evidence, or prevent dissipation of assets during ongoing proceedings. In the case of Mainland China, interim measures include asset preservation, evidence preservation, and conduct preservation.

 

The availability of interim measures is essential to an effective dispute resolution process. These measures help preserve the value at stake in a dispute and ensure that the subsequent arbitral award remains enforceable and meaningful.

 

How the Interim Measures Arrangement works

 

Before the Interim Measures Arrangement came into force, it was practically very difficult for a party to apply to the Mainland courts for interim measures in support of arbitral proceedings seated outside Mainland China. The groundbreaking Interim Measures Arrangement allows parties in Hong Kong-seated arbitration administered by qualified arbitral institutions [1] to seek interim measures from designated Mainland courts [2], whether before the commencement of the arbitration or during the arbitration proceedings.

 

By way of illustration, any party to the arbitral proceedings seated in Hong Kong and administered by the Hong Kong International Arbitration Centre (HKIAC) under the relevant administration rules may apply to the designated Mainland court for interim measures under the Interim Measures Arrangement against a Mainland Chinese counterparty as follows:

 

• before HKIAC accepts the arbitration, the requesting party shall submit its application to the designated Mainland court directly. If the court grants the application, the requesting party must commence an arbitration at HKIAC and submit a “Letter of Acceptance” to the court within 30 days after the interim measure is issued.
• After HKIAC accepts the arbitration, the requesting party shall request a “Letter of Acceptance” from HKIAC together with all relevant documents, such as a draft application for interim measures to the designated Mainland court.
   

The “Letter of Acceptance” refers to a formal letter issued by HKIAC addressed to the designated Mainland court certifying HKIAC’s acceptance of an arbitration for the purposes of the Interim Measures Arrangement. 
 

HKIAC: Key Statistics of the Interim Measures Arrangement
 

Since the Interim Measures Arrangement came into force:
 

• HKIAC issues Letters of Acceptance within 24 hours of receipt of a complete application;
• HKIAC has issued Letters of Acceptance in respect of 144 applications. All applications were made in arbitration proceedings that had already been commenced;
• Over 70% of the parties applying for interim measures are non-Mainland parties;
• Applications for interim measures were made to 44 different Mainland courts;
• Based on the information available, the average time taken by Mainland courts to issue a decision was 26 days from receipt of an application (the median time was 17 days);
• HKIAC is aware of 101 decisions issued by Mainland courts. In 96 of these decisions, the applications for preservation of assets were granted upon the applicant’s provision of security;
• The total value of assets requested to be preserved amounted to RMB 35 billion (approximately USD 4.7 billion).
   

Practical Advantages for Businesses
 

By virtue of the Interim Measures Arrangement, Hong Kong is the only international arbitration hub and one of the two jurisdictions (the other being Macau SAR) where parties can obtain interim measures directly through the Mainland courts. Coupled with the “Supplemental Arrangement Concerning Mutual Enforcement of Arbitral Awards between China Mainland and Hong Kong” which came into force on 19 May 2021 (“Supplemental Arrangement”), Hong Kong-seated arbitration proceedings offer unique advantages to parties in ensuring effective enforcement of the arbitral award. By virtue of the Supplemental Arrangement:
 

• simultaneous enforcement: parties may enforce the arbitral award simultaneously in Hong Kong and Mainland China, avoiding delays and time-bar risks (the time limit for enforcing an arbitral award is 2 years under Mainland Chinese law and 6 years under Hong Kong law); 
• post-award preservation measures: since preservation orders granted under the Interim Measures Arrangement are not applicable after the arbitral award is issued, the Supplemental Arrangement fills in the gap by empowering the Mainland courts to grant post-award preservation measures upon application.
   

To fully utilise the advantages above, businesses are advised to designate Hong Kong as the seat of arbitration and one of the qualified arbitral institutions to administer the arbitration proceedings in the relevant arbitration clause.

 

Conclusion

 

Under the Interim Measures Arrangement, Hong Kong-seated arbitration offers unique advantages to Claimants to swiftly secure interim measures in Mainland China — a jurisdiction historically challenging for foreign parties to navigate.

 

As economic activities between other countries and Mainland China continue to grow, integrating Hong Kong-seated arbitration clauses into contracts would be beneficial to businesses to secure assets before or during the arbitral proceedings and to ensure effective enforcement upon issuance of the arbitral award.

 

CFN Lawyers LLP, with its expertise in international arbitration and a proven track record of helping clients navigate the complex cross-border legal landscape, is well equipped to assist you in international arbitration proceedings involving Mainland Chinese counterparties and securing your interests through interim measures and enforcement of arbitral awards, as well as advising you on the choice of a suitable arbitration clause and its legal implications.