First Order issued under Interim Measures Arrangement between China Mainland and Hong Kong SAR

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Authors:  Paul Starr, Hana Doumal, Suraj Sajnani and Dong Long

On 8 October 2019, the Shanghai Maritime Court issued the first order granted under the brand new Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of China Mainland and of the Hong Kong Special Administrative Region (the "Arrangement") between the PRC Supreme Court and the Hong Kong Department of Justice. The Arrangement gives parties to Hong Kong* and China Mainland seated arbitrations a unique advantage by allowing them to seek interim measures directly from the other jurisdiction's Courts. The Arrangement came into effect very recently on 1 October 2019. See our Full Report on the advantages of the Arrangement here and our Recent Supplement here.

In the Shanghai Maritime Court case, the Applicant, a Hong Kong shipping company, had started an ad hoc arbitration seated in Hong Kong in May 2018, arising out of a charterparty, against a Respondent Shanghai company. The substantive dispute related to a coal shipment from Indonesia to Shanghai. During the course of the arbitration, the parties reached a settlement, pursuant to which the Respondent was required to pay US$180,000 to the Applicant. However, the Respondent did not pay. The Applicant thus started a second arbitration on 16 July 2019, this time in accordance with the dispute resolution provisions of the settlement agreement. This second arbitration too was commenced prior to the Arrangement coming into effect. The second arbitration is being administered by the Hong Kong International Arbitration Centre (the "HKIAC"), which is one of the six institutions confirmed by the Government of Hong Kong as a qualified arbitral institution for the purposes of Article 2(1) of the Arrangement.

While details of the arbitration are confidential, it appears that an application for property preservation was made to the Shanghai Maritime Court pursuant to the Arrangement, and the Court was required to determine the application in accordance with the Civil Procedure Law of the People's Republic of China (and other relevant laws and regulations). By order dated 8 October 2019, the Shanghai Maritime Court granted the application and ordered interim measures against the Respondent. In an article published by the Court (link here), the Court stated that its ruling safeguards the legitimate rights and interests of the parties and facilitates ultimate enforcement of any arbitral award.

As we presaged in our first alert on this topic back in April 2019, this groundbreaking Arrangement is one to watch. From the time it was signed, the Arrangement came into effect in record time, on 1 October 2019 (contrasting this with a new Arrangement for cross border enforcement of judgments, signed in January 2019 but not yet in effect (see our client alert on that Arrangement here)). The first order under the Arrangement was made a mere 7 days after it first came into effect. This first ruling confirms that the Arrangement applies to arbitrations commenced before the Arrangement came into effect, giving the Arrangement even more impact than it would have had otherwise. The Shanghai Maritime Court handed down its decision on the same day as it received the application, showing that Courts are likely to handle applications under the Arrangement in an expeditious manner. It also confirms our earlier view that parties wishing to take advantage of the Arrangement need to act with urgency, as delay can be fatal to an application. All in all, the ruling bodes well for the future of the Arrangement, and Hong Kong and China Mainland seated arbitrations, particularly as commerce increases in the Greater Bay Area and along the Belt and Road.

*Any reference to "Hong Kong" or "Hong Kong SAR" shall be construed as reference to "Hong Kong Special Administrative Region of the People's Republic of China".

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