One of the key challenges in the course of an international arbitration with a Mainland China based counterparty is the enforcement of interim measures granted by the tribunal. As a general rule, a Mainland court will not grant any interim relief or provide any assistance to parties to an arbitration outside of Mainland China. This was an issue in Hong Kong until 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 came into force on 1 October 2019 and enabled recognized institutional arbitration institutions in Hong Kong to apply for relief in Mainland China and vice versa.
The arrangement has given Hong Kong the edge when choosing an arbitration seat for a contract with a Chinese counterparty. Macau, China’s other special administrative region, has not had the same advantages, meaning that whilst Hong Kong is one of Asia’s major arbitration hubs international arbitration in Macau is relatively uncommon.
This could now begin to change. On 25 February 2022, the Supreme People’s Court of the People’s Republic of China signed an agreement with the Macau Special Administrative Region on mutual assistance in interim measures to aid arbitration proceedings (the “Mutual Assistance Arrangement”). This came into force on 25 March 2022. Before then, parties to institutional arbitrations seated in Macau could rely only upon the 2019 Macau Arbitration Law, which provides Macau-seated arbitral tribunals with the power to order interim measures and the enforcement of such measures in Macau alone. This meant that parties in Macau had to rely on the interim relief offered under the laws of Mainland China and initiate arbitration proceedings in Mainland China. This was inevitably time-consuming and any assets in China could likely be dispersed before an interim measure could be obtained and enforced.
The Mutual Assistance Arrangement gives rise to two mechanisms. On one hand, applicants of arbitrations which are seated in Macau and administered by a recognized arbitral institution can now apply to the Second Instance People’s Court of Mainland China of the domicile of the party against whom the application is made or the location of the assets or evidence for interim measures before arbitral awards are made. On the other hand, parties to arbitrations seated in Mainland China and administered by a recognized arbitral institution can also benefit from the mutual assistance in interim measures offered by the First Instance Court of Macau to protect their arbitral awards.
Types of Interim Measures
The Mutual Assistance Arrangement entails all types of interim measures, including those for the preservation of property and evidence in Mainland China and measures to conserve or anticipate certain effects to protect the rights of the applicant in Macau, an expression intended to cover all types of interim measures under the laws of Macau.
Timing of Applications
The Mutual Assistance Arrangement allows parties in either Macau or Mainland China to apply for interim measures before and throughout the arbitral proceedings. Where the request for interim measures is filed with the courts of Macau prior to commencing arbitration, evidence of having initiated proceedings within 30 days after interim measures have been taken by a mainland court must be produced, failing which the granted measures will expire. In parallel, the same applies in the case of an applicant in Macau seeking for interim measures from the courts of Mainland China.
Parties seeking interim measures from Mainland China courts must provide the arbitration agreement, documents related to the arbitration request, and proof of admission of the case in Chinese, failing which Chinese translations of the documents must be produced. Information can also be provided on any assets located in Mainland China for proof of financial standing. Similarly, parties seeking interim relief from the courts of Macau are required to submit the aforementioned documents in Portuguese or Chinese or a translation in either of the two official languages. Specifically, proof will also be required to substantiate the threat to the legitimate rights of the party and fear of harm of such rights under the laws of Macau.
Relief and Unique Features of the Arrangement
Applications for court-ordered interim measures under the Mutual Assistance Arrangement must be processed on an expedited basis and the relevant court, subject to the applicable local legal requirements in each jurisdiction, (i) may request that parties to provide securities and guarantees; and (ii) adjudicate applications for appeals where a party believes that the competent court should not grant measures or files a defense claiming that the interim measures taken by the court were inappropriate.
Does the Mutual Assistance Arrangement mean that Macau could now become a major arbitration hub? This is unlikely given Macau’s size and the preeminence of Hong Kong and Singapore. It does however constitute a promising first step in modernizing the arbitration framework in Macau and bringing it on par with other favored arbitral seats in Asia.
What is perhaps more interesting is the importance of making it easier for parties involved in arbitrations in Hong Kong, Macau and Mainland China to obtain and enforce interim measures when set in the context of China’s goal to build and promote the Guangdong-Hong Kong-Macau Greater Bay Area as a leading global financial, technological and commercial hub. Streamlining and making arbitration within the entire Greater Bay Area jurisdictions easier is key to the Chinese government’s plan to entice investment into the region and should give investors greater confidence that grievances they may suffer can be properly resolved.