Obtaining asset preservation in mainland China and Hong Kong

Hong Kong’s integration into mainland China within the context of the Greater Bay Area (GBA) has seen the number of cross-jurisdictional disputes increase year by year. Encapsulated by the idea of “One Country, Two Systems, Three Jurisdictions”, this rapid development raises the practical challenge of how parties can preserve assets in both the mainland and the Hong Kong Special Administrative Region (SAR) and so ensure the protection and realisation of their rights.

Obtaining asset preservation in both places is based on the relevant regulations in mainland China, the 2019 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, Hong Kong’s High Court Ordinance and Practice Directions, among others. Guidance can also be found in past examples from both court systems.

Preservation of assets in mainland China

The mainland’s judicial preservation system had never been open to other jurisdictions. The above-mentioned arrangement for the first time opened up mainland judicial preservation, with some restrictions. Two years on, there have been some successes. As of 27 September 2021, the Hong Kong International Arbitration Centre alone has preserved RMB10.9 billion (USD1.7 billion) of assets through 23 mainland courts.

The arrangement is open only to Hong Kong arbitration proceedings and is subject to the two conditions – that the seat of arbitration be Hong Kong, and that the case is administered by a qualified arbitration institution. There are six qualified arbitration institutions: the Hong Kong International Arbitration Centre; the China International Economic and Trade Arbitration Commission’s Hong Kong arbitration centre; the Asia Office of the ICC International Court of Arbitration; the Hong Kong Maritime Arbitration Group; the South China International Arbitration Centre (HK); and eBRAM.

The arrangement also requires that a party apply to a mainland court before the rendering of the arbitration award. If the need for preservation is urgent, a party may apply to a mainland court for preservation before applying for arbitration, but is required to initiate the arbitration proceedings promptly and deliver the Proof of Acceptance of Arbitration to the mainland court within 30 days after the preservation ruling is rendered.

In limiting the submission of applications to before the rendering of an award, no consideration was given to the need for preservation when a party applies to a mainland court for enforcement after obtaining the award, a shortcoming of the arrangement. However, in practice, there are mainland courts that support applications for asset preservation submitted by parties before applying for enforcement of the award, such as the ruling in the case of Yue 72 Cai Bao No. 78 (2018) by the Guangzhou Maritime Court, where Farenco Shipping applied for asset preservation regarding Eastern Ocean Transportation.

Based on this, article 4 of the Supplementary Arrangement, which was implemented on…