Hong Kong SAR court grants interim measures in aid of an arbitration seated in US

The Hong Kong Court of First Instance issued two injunctions in an ongoing arbitration being resolved by the US-based International Centre for Dispute Resolution, firstly ordering one company, referred to in the ruling as 'company C', to restrain from transferring assets to a subsidiary; and secondly restraining company C from disposing of assets up to $55 million, the amount its opponent, referred to as 'company A', was claiming in the proceedings.

Mohammed Talib, an international arbitration expert at Pinsent Masons, said: "The case shows how Hong Kong courts are able to provide swift interim relief in aid of arbitration ensuring parties get the necessary protection even when tribunals may not act as quickly.”

“By offering timely interim relief, the Hong Kong courts can maintain the integrity of the arbitration process and protect the interests of the parties involved.” he said.

“It also underlines Hong Kong’s pro-arbitration stance and its status as a leading hub."

In this case, company A sought emergency relief to prevent any divesting of company C's assets ahead of the award, and the tribunal agreed that company A could seek such relief from the courts, pending the tribunal’s determination on the issue. The tribunal then made at least five procedural orders directing parties to reach an agreement on the terms of an escrow agreement to alleviate company A's concerns. However, company C's offers for escrow relief were unsatisfactory and its conduct obstructive, and as a result the parties could not reach agreement on the applicable terms even after five months of negotiations.

On this basis, the court granted the relief having concluded that even if the tribunal made an order on the emergency relief, it was not effective as it had fallen on deaf ears and that the emergency relief application had been hindered by the company C's “procrastination” and “obstruction”.

Karah Howard, an international arbitration expert at Pinsent Masons, said: “Hong Kong arbitration law gives the courts broad powers to grant interim measures on proceedings commenced outside Hong Kong, even if similar powers may be exercised by the tribunal."

“But such powers tend to be used sparingly, and the court will decline to do so where it considers it more appropriate that the interim measure comes from the tribunal,” she said.

“In this case, the orders restraining company C's transfer and disposal of assets were necessary to maintain the status quo during the dispute due to the tribunal’s lack of coercive powers to have company C agree reasonable terms in the escrow agreement.”

The decision highlighted that despite the courts in Hong Kong SAR upholding non-interventionist principles, they will not hesitate to order interim measures if the arbitrations inability to prevent a party from obtaining adequate protection in the arbitration, even if the arbitration is occurring outside of Hong Kong.