Arbitration in China (1): How to Enforce Arbitral Interim Orders in China
When you’re signing the contract with your Chinese counterpart, you may set down arbitration as the means of dispute resolution; however, you might not have preference over the seat of arbitration, and decide to set your country as the seat of arbitration, and one arbitral institution located in your country as the arbitral committee; this could have a detrimental impact upon the securing your assets or properties efficiently via interim orders.
It would be best for you to bring an interim measures application, and to enforce it in China. There are usually three situations where there is a arbitration clause in a contract made between a Chinese company and a foreign company: the arbitration institution located in (i) Mainland China (ii) Hong Kong (iii) located outside of China.
In the event where a foreign company enters into contract with a Chinese company, the seat of arbitration, as well as the arbitration institution would either be Mainland China, Hong Kong or anywhere else in the world. Despite the locational differences, the arbitration institutions usually have some similar traits: they have the power to order interim measures, including asset preservation orders; they all have expedited/summary or emergency arbitration procedure; once the arbitral tribunal has rendered its award, parties of the arbitration shall apply for enforcement of the order to the People’s Court of China. however, where the seat of arbitration is outside of China, there may be an extra impediment for applicants to enforce the interim measures order.
* If you set the location of arbitration anywhere else in the world (other than Mainland China and Hong Kong), the interim orders granted before or during the arbitral proceedings are deemed not enforceable in Mainland China. however, at present there are no existing laws or regulations regarding interim measures ordered during or before arbitral proceedings outside of China. There is also no precedent that supports the enforcement of such interim measures. We could only apply to the Intermediate People’s Court of the place of residence of the counterpart for the enforcement of the final award, that is, after the completion of the whole process of arbitration.
* If you set the location of arbitration in Hong Kong, the interim orders granted before or during the arbitral proceedings are deemed enforceable in Mainland China. Pursuant to the relevant arbitration rules (e.g. 2018 HKIAC Administered Arbitration Rules), the arbitral party before HKIAC may apply for interim reliefs during or before the arbitral proceeding; with the newly effective ‘The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland China and of the Hong Kong Special Administrative Region’, parties to arbitral proceedings in Hong Kong may make an application for interim measures to the Intermediate People’s Court of the place of residence of the party against whom the application is made, or the place where the property or evidence is situated. And if we successfully preserved the asset of the Chinese counterpart, the enforcement of the final award would be guaranteed. As observed from the first case of People’s Courts granting interim measures for an ongoing arbitration seated in Hong Kong, the duration from the date of application for arbitration to the grant of interim measures is 4 months.
* If you set arbitration institution in Mainland China, such as CIETAC (China International Economic and Trade Arbitration Commission), the procedural laws of the application of interim orders involving foreign elements would be the PRC law: The CIETAC Arbitration Rules, in compliance with the Arbitration Law of the People’s Republic of China, set down that, where a applies for interim measures pursuant to PRC law, CIETAC shall forward the party’s application to the competent court designated by the party in accordance with the law. We could apply to the Intermediate People’s Court of the place of residence of the counterpart for the asset preservation application, and such application (around 3-5 weeks) would be much faster than the application from Hong Kong arbitration (around 4 months). And if we successfully preserved the asset of the Chinese counterpart, enforcement of the final award would be guaranteed.
We understand that there may be factors that are more perferable than the enforceability of asset preservation orders, and some of our clients would prefer arbitration outside China. If you are uncertain which dispute resolution institutiom would be more suited to your business, please feel free to contact us.
Larry Zhou, Partner
Landing Law Offices China
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