Hong Kong Court Ordered Interim Measures to Support Arbitration

Hong Kong courts support arbitration, repeatedly stressing that the courts will respect the choice the parties have made to resolve their disputes through arbitration. One area where Hong Kong courts support the arbitral process lies in the granting of interim measures.

Such interim measures may include orders to:

• maintain or restore the status quo pending determination of the dispute;

• take action that would prevent or refrain from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process itself;

• provide a means of preserving assets from which a subsequent award may be satisfied; or

• preserve evidence that may be relevant and material to the resolution of the dispute.

Interim measures can play a critical role in resolving disputes, protecting a claimant’s rights before their case has been finally determined. In the absence of effective and enforceable interim measures, a claimant may face the risk of a respondent dissipating assets, destroying evidence or otherwise taking action to prejudice the value of any award which an arbitral tribunal may grant.

Jurisdiction to Grant Interim Measures

The jurisdiction of the Hong Kong courts to grant interim measures to support arbitral proceedings lies exclusively in the Arbitration Ordinance (“AO”). The courts have no inherent jurisdiction to grant such measures except as set out in the AO. The AO provides that a “court should interfere in the arbitration of a dispute only as expressly provided for” in the AO.

Concurrent Jurisdiction of Court and Arbitral Tribunal

Under the AO, the Hong Kong courts exercise jurisdiction to grant interim measures concurrently with any arbitral tribunal which has been constituted. The AO provides:

“It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such a measure.”

Similarly, the AO provides:

“The powers [to grant interim measures] may be exercised by the court irrespective of whether or not similar powers may be exercised by an arbitral tribunal…”

General Approach of Courts to Interim Measures

Although Hong Kong courts possess concurrent jurisdiction with an arbitral tribunal to grant interim measures, as a general principle, courts exercise their jurisdiction to grant interim measures sparingly. Under the AO, Hong Kong courts may decline to grant an interim measure if the interim measure sought is currently the subject of arbitral proceedings (whether in Hong Kong or outside Hong Kong), and the court considers it more appropriate for the interim measure sought to be dealt with by the arbitral tribunal.

It is more appropriate for a court to grant interim measures when there are special reasons requiring the court to exercise its concurrent jurisdiction. Such special reasons include for example:

• where the arbitral tribunal has not been appointed although the arbitral proceedings are deemed to have commenced when a request for a particular dispute to be referred to arbitration is received by the respondent;

• where an order is intended to bind a third party; or

• where the order is one which only a judge can make.

As a result, for instance, a Hong Kong court may grant an interim measure in an urgent case where an applicant’s position may be irreparably harmed in the absence of such a measure and neither an arbitral tribunal has been constituted nor an emergency arbitrator has been appointed which may be in a position to grant such a measure.

Threshold for Court Support in Non-Hong Kong Arbitrations

In cases of arbitrations which have been or are to be commenced outside Hong Kong, the Hong Kong courts may grant an interim measure only if 2 conditions are satisfied.

• Arbitral Award Enforceable in Hong Kong - The arbitral proceedings must be capable of giving rise to an arbitral award (whether interim or final) that may be enforced in Hong Kong. In this regard, an applicant for interim relief in aid of arbitral proceedings which are or are to be commenced outside Hong Kong must show a good arguable case that the arbitral proceedings outside Hong Kong are capable of giving rise to an award that may be enforced in Hong Kong.

• Interim Measure of a Type Available in Hong Kong - The interim measure sought must belong to a type or description of interim measure that may be granted in Hong Kong in relation to arbitral proceedings by the court. An applicant for interim relief in aid of foreign arbitral proceedings must satisfy a 2-part test, demonstrating first that the facts of the case warrant interim relief if substantive proceedings were brought in Hong Kong and then showing that it is not unjust or inconvenient for the court to grant relief. In the latter regard, the court may consider whether the grant of interim relief will interfere with the management of the case by the foreign arbitral tribunal or the court exercising supervisory oversight of the foreign arbitration.

The court’s power to grant an interim measure in relation to a foreign arbitration is intended to be ancillary to, and for the purpose of facilitating a foreign arbitration process. It is not appropriate for a Hong Kong court to grant interim measures which will pre‑empt the decision which will ultimately be made by the arbitral tribunal. The court should not usurp the functions of the arbitrator.

The power of a Hong Kong court to grant interim relief in support of foreign arbitration will not be fettered even if the court has no jurisdiction over the subject matter of the foreign arbitration, or the order sought is not ancillary to any arbitration proceedings in Hong Kong. In other words, a Hong Kong court may grant interim measures in support of a foreign arbitration in which there is no substantive cause of action in Hong Kong.

Possible Court Ordered Interim Measures

Preservation of Assets

One common type of interim measure sought through the courts to support arbitral proceedings is a Mareva injunction. Under this type of order, a party to an arbitration is restrained from dissipating or disposing of assets until the arbitral award or a further order is issued.

Mareva injunctions are invariably sought on an ex parte basis, meaning that they are sought without notifying the other party that the order will be sought. If notice were given, the respondent might seek to dissipate those assets to be frozen under the order before the order is given. Where orders are sought without notice to other parties, the applicant is under an obligation to make full and frank disclosure to the court of all relevant matters in his knowledge.

To grant a domestic Mareva injunction, the court should be satisfied that:

• the applicant has a good arguable case on a substantive claim over which the arbitral tribunal has jurisdiction;

• there are assets within the jurisdiction;

• the balance of convenience is in favor of granting the injunction; and

• there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the applicant’s award of no effect.

Nowadays, the court has extended jurisdiction to grant worldwide Mareva injunctions to freeze the assets of the respondent held both in Hong Kong and around the world. In addition to satisfying the requirements for a domestic Mareva, the applicant for a worldwide Mareva should demonstrate to the court that the respondent has no or insufficient assets in Hong Kong to satisfy the arbitral award and the respondent has assets outside the jurisdiction.

Case law suggests that when the court considers whether it would be unjust or inconvenient to grant a worldwide Mareva in aid of foreign arbitral proceedings, the following factors should be taken into account:

• whether the making of the order will interfere with the management of the case by the arbitral tribunal or the court supervising the arbitration;

• whether it is the policy in the jurisdiction where the arbitration is seated not to make worldwide freezing orders;

• whether there is a danger that the order made will give rise to disharmony or confusion or risk of conflicting, inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located;

• whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order; and

• whether, in a case where jurisdiction is resisted and disobedience to be expected, the court will be making an order which it cannot enforce.

Preservation of Evidence

Another common type of interim measure that may be sought through the courts to support arbitral proceedings is an Anton Piller order. An Anton Piller order requires a party to permit certain persons to enter his premises to search for documents or other moveable property and to seize them for the time being. Like a Mareva injunction, an Anton Piller order is always made without notice on an ex parte basis, and thus, full and frank disclosure of all material facts to the court by the applicant is required.

An Anton Piller order is considered a powerful weapon against fraud and dishonesty. To grant an Anton Piller order, the court should be satisfied of the following:

• the applicant should demonstrate an extremely strong prima facie case;

• the damage, potential or actual, must be very serious for the applicant;

• there must be clear evidence that the respondent has, in his possession, incriminating documents or things, and that there is a real possibility that he may dispose of or destroy such material before any inter partes application can be made; and

• there must be proportionality between the perceived threat to the applicant’s rights and the remedy grant (in other words, the perceived threat of destruction of evidence must be sufficiently serious to justify the very drastic nature of the Anton Piller order).

Interim Relief Granted by Foreign Arbitral Tribunals

Hong Kong courts have the jurisdiction to enforce interim measures ordered by an arbitral tribunal in proceedings both in and outside Hong Kong. However, leave of court is required. If leave is granted, the court may enter judgment in terms of the arbitral tribunal’s order or direction.

Leave to enforce an order or direction made outside Hong Kong is not to be granted, unless the party seeking to enforce it can demonstrate that it belongs to a type or description of order or direction that may be made in Hong Kong in relation to arbitral proceedings by an arbitral tribunal.

In enforcing an interim relief order from an arbitral tribunal in a jurisdiction outside Hong Kong, there is no requirement that such jurisdiction accord reciprocal enforcement to Hong Kong arbitral awards.

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 (“Mutual Assistance for Interim Measures Arrangement”) provides a specific procedure for parties to arbitral proceedings administered by a Mainland arbitral institution apply to a Hong Kong court for interim measures.