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Court ordered interim measures to support arbitration – Arbitration & Dispute Resolution

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Hong Kong courts are empowered by legislation to grant interim
measures in support of arbitral proceedings which have been or are
to be commenced in or outside Hong Kong. In this article, we
explore the scope of these powers and discuss two common types of
interim measures which the court may grant. Should you wish to find
out more about this topic, please contact one of our

dispute resolution
lawyers.

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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