Yes, a court in mainland China can freeze a Chinese company's bank accounts to support a Hong Kong arbitration. Under the Mainland–Hong Kong Interim Measures Arrangement, in force since 1 October 2019, the Shanghai Maritime Court granted the first such order on 8 October 2019, on the same day it received the application.
- A Hong Kong company had started arbitration at the Hong Kong International Arbitration Centre (HKIAC) against a Shanghai company for breach of a settlement agreement.
- On 1 October 2019 it applied through HKIAC for an order, without notice to the respondent, to preserve and freeze the respondent's bank accounts in mainland China.
- By 11 October 2019 HKIAC had received five such applications, all seeking to preserve assets in mainland China.
- The route is open to qualifying Hong Kong-seated institutional arbitrations, so the seat and the institution are decisions to take when the contract is drafted.
What happened
A company from the Hong Kong Special Administrative Region commenced arbitration at HKIAC against a company based in Shanghai, alleging breach of a settlement agreement. On 1 October 2019, the day the Arrangement took effect, it applied through HKIAC for an order, without notice to the other side, to preserve, seize and freeze the respondent's bank accounts in mainland China.
What the court decided
HKIAC issued a letter of acceptance supporting the application. On 8 October 2019 the Shanghai Maritime Court received the letter and the application documents and granted the measures the same day. It was the first order made under the Arrangement. Within days HKIAC reported that it had received five applications of this kind, all concerning assets in mainland China.
Why the Arrangement matters
The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings was the first arrangement of its kind entered into by mainland China. It allows a party to a qualifying Hong Kong-seated institutional arbitration to ask a mainland court to preserve assets, evidence or conduct while the arbitration runs, which is often what decides whether an eventual award can be collected.
Using it in a contract with a Chinese counterparty
- Choose the clause with this in mind. The Arrangement applies to Hong Kong-seated arbitrations administered by qualifying institutions, of which HKIAC is one. See the China arbitration clause.
- Know where the money is. Chinese courts freeze what the applicant identifies, so bank and account details, receivables and property records matter; see freezing a Chinese company's assets.
- Move while the assets are still there. The first order was granted within a week of the application; its value lies in acting before funds leave the account.
Preservation is usually the step that turns a claim against a Chinese company into a payment. China debt recovery covers the rest of the route.
Frequently asked questions
Yes. Since 1 October 2019 the Mainland–Hong Kong Interim Measures Arrangement allows a party to a qualifying Hong Kong-seated institutional arbitration to apply to mainland courts for preservation. The first order was granted by the Shanghai Maritime Court on 8 October 2019.
In the first case the Shanghai Maritime Court granted the order on the same day it received the arbitral institution's letter and the application documents.
A Hong Kong-seated arbitration clause under a qualifying institution, an application made through that institution, and specific information about the assets to be preserved, such as the bank holding the account. Chinese courts freeze what the applicant identifies.
Sources
- Hong Kong Lawyer: Implementation of the Interim Measures Arrangement between Hong Kong SAR and Mainland China (facts and dates of the first order).
- Kluwer Arbitration Blog: Mainland China–Hong Kong Interim Measures Arrangement Swiftly Put into Use (the 8 October 2019 order and the first applications).
- HKIAC: Interim Measures Arrangement FAQs.
- Internal: freezing assets before you win · the China arbitration clause · China debt recovery.
This article is general information for foreign companies, not legal advice on any specific matter. Rules and practice change; please take advice on your facts.