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Article: January 2021: Asia-Pacific Litigation Update

January 27, 2021

Promising Results Shown in First Year in Which Hong Kong-Seated Arbitrations Granted the Power to Seek Interim Measures in Mainland China Shows Promising Results

Last year, the Hong Kong SAR’s local government and China’s Supreme Court agreed to an arrangement which makes it possible for parties to arbitral proceedings in Hong Kong to obtain interim orders (akin to interim injunctions) from courts in Mainland China. The formal name of the policy is “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.”

This arrangement makes Hong Kong the only foreign seat of arbitration where parties can seek interim relief directly from Mainland Chinese courts. As such, it gives Hong Kong a unique competitive edge over other arbitral seats where one party is based in Mainland China. Before the arrangement was implemented, no formal mechanism existed to allow Mainland Chinese courts to grant interim relief in support of a foreignseated arbitration. The reverse situation—a party to an arbitral proceeding in mainland China applying to the Hong Kong courts for interim relief—has been allowed for some time.

For Mainland Chinese courts to grant an interim measure, there are two requirements: (1) the arbitration must be administered by a qualified Hong Kong arbitral institution, which at present includes HKIAC, ICC, CIETAC, and three other bodies; and (2) the seat of the arbitration must be Hong Kong.

Recent statistics suggest that the arrangement is working well. The HKIAC has reported that, since its adoption on October 1, 2019, there have been 17 decisions by Mainland Chinese courts granting HKIAC-processed applications, which on average have been issued within 14 days of receipt of the application. These decisions have preserved approximately USD 1.3 billion in assets.

Mainland Chinese Courts Are Becoming More Receptive to Arbitrations Administered by Foreign Institutions
A quirk of Mainland Chinese arbitration law has long been that parties should not agree to a Mainland China-seated arbitration administered by a foreign arbitration institution. The reason for this is that “arbitration commission” in Chinese Arbitration Law was considered to only include Chinese arbitration institutions. Four recent decisions, however, are seen as positive developments for foreign arbitration institutions hoping to pick up China-seated disputes.

In June, a Shanghai court held that an arbitration clause providing for a Shanghai-seated arbitration administered by the Singapore International Arbitration Centre was valid, based on 2013 authority from Mainland China’s highest court. In August, the Guangzhou Intermediate People’s Court ruled that an ICC arbitral award in a Guangzhou-seated arbitration was enforceable. And in September, the State Council of China published a policy paper announcing that foreign arbitration institutions will be permitted to establish themselves in Beijing. This decision followed a similar announcement made in 2019 to allow such institutions to conduct arbitration business in the Shanghai free trade zone.

While these developments show that Mainland China is becoming more receptive to foreign arbitration institutions, more development is necessary before parties should agree to China-seated arbitrations administered by foreign institutions.

Video Conferencing in International Arbitrations in Korea
The Seoul Protocol on Video Conferencing in International Arbitration, released in March 2020, provides new guidance for addressing the conduct of remote hearings in Korean-based international arbitrations. Remote hearings, by video or other electronic means, can raise interesting legal issues in the arbitration context, such as whether it is consistent with the parties’ arbitration agreement to conduct the hearing remotely. Such issues also invariably raise a host of logistical issues, such as the location and time zone of the parties and their witnesses, introduction of evidence, and technology used for the hearing. To address these issues, the Seoul Protocol covers topics such as the venue for video conferencing, the regulation of observers of witnesses’ testimony, standards for documentary evidence presentation, technical requirements and testing, and remote interpretation services. It is widely referenced in international arbitration in the region, and is contributing to the development of standardised practices for video hearings.

Although the protocol was developed to address issues existing long before the outbreak of COVID-19, its guidance has taken on special significance in the wake of the pandemic. Restrictions on international travel and in-personal gatherings have made it made it difficult for live international arbitration hearings to take place in many Asian countries. Parties have therefore moved to conduct hearings by video conference, which has rendered the guidance in the Seoul Protocol all the more important.