On January 7, the Shanghai Financial Court (SFC) held a press conference to release the Operational Guidelines for Hong Kong Arbitration Parties to Apply for Preservation with the Shanghai Financial Court Pursuant to the Arrangement of the Supreme People’s Court on Mutual Assistance in Preservation Between the Courts of Mainland and Hong Kong Special Administrative Region in Arbitration Proceedings (hereinafter referred to as the “Operational Guidelines”). This is an important move by the SFC to support the development of Shanghai as an international financial center, promote the high-quality growth of China’s arbitration sector, and contribute to the country’s high-level opening-up. The press conference marked the fourth installment in the court’s series on “Innovative Practices in Modernizing Financial Adjudication.” Shan Suhua, Party Leadership Group Member and Vice President of the SFC, and Xu Wei, Chief Judge of the Case Filing Division, presented the relevant details and took questions from the press.
On October 1, 2019, the Arrangement of the Supreme People’s Court on Mutual Assistance in Preservation Between the Courts of Mainland and Hong Kong Special Administrative Region in Arbitration Proceedings (hereinafter referred to as the “Arrangement”) came into effect and was implemented. The implementation of the Arrangement further ensures the smooth enforcement of final arbitration awards between the two jurisdictions, providing domestic and foreign parties with diversified dispute resolution services that are inclusive, equitable, convenient, efficient, and optimally effective. It has significantly enhanced the credibility and international competitiveness of arbitration in China, helping foster a first-class market-oriented, law-based, and international business environment.
Over the past few years, the SFC has handled multiple applications for asset preservation filed by parties involved in Hong Kong arbitration proceedings. The court has actively and accurately applied the Arrangement to effectively safeguard the legal rights and interests of the parties. In one case where a foreign bank applied for asset preservation, the preserved amount reached USD 370 million - the largest asset preservation application in terms of the amount in dispute ever filed by a party in Hong Kong International Arbitration Centre (HKIAC) proceedings before a court of the Mainland. The HKIAC commented that the case “fully demonstrates the SFC’s commitment to facilitating parties involved in Hong Kong arbitration proceedings and its supportive stance toward arbitration.”
However, in handling these cases, the SFC observed that applicants were still uncertain about matters such as whether they could submit preservation application materials independently, what special considerations applied to preservation applications, whether guarantees were required, and how to determine the form and amount of such guarantees. These uncertainties adversely affected the efficiency and outcome of case handling. It thus became necessary to develop specific, clear operational guidelines for preservation applications by parties to Hong Kong arbitration proceedings, both to facilitate the application process for concerned parties and to provide unambiguous guidance for court personnel handling such cases.
To address these practical challenges in assisting with preservation applications for Hong Kong arbitration cases, the SFC systematically consolidated its case-handling experience, solicited input from parties involved, and came up with the specific, clear operational guidelines for preservation applications by parties to Hong Kong arbitration proceedings, with a view to strengthening the orderly coordination between financial arbitration and judicial preservation measures, supporting Shanghai’s accelerated development into an Asia-Pacific arbitration hub with global reach, and enhancing the competitiveness of Shanghai as an international financial center.
The Operational Guidelines contains fourteen provisions in Q&A form, covering topics such as the scope of preservation application, materials required for preservation application, time limits for reviewing preservation application, and remedy procedures for preservation ruling.
The Operational Guidelines specifies the types of preservation measures available to parties in Hong Kong arbitration proceedings when applying to the SFC, the jurisdictional scope of the SFC, and the methods for submitting preservation application. A preservation case shall fall under the jurisdiction of the SFC when the domicile of the respondent and the location of property or evidence is in Shanghai and the dispute involves financial civil and commercial matters. For arbitration cases that have been accepted, applicants may submit the preservation application together with a forwarding letter or certification letter from the arbitral institution or its permanent office directly to the SFC. The SFC will then verify with the arbitral institution or permanent office through contact details provided by the Department of Justice of the Hong Kong Special Administrative Region Government, thereby shortening the circulation period of preservation materials and improving preservation efficiency.
The Operational Guidelines specifies the key focus areas for the SFC’s review of preservation applications and the criteria for defining “Hong Kong arbitration proceedings.” To qualify as “Hong Kong arbitration proceedings,” the case must satisfy two conditions: the arbitration venue must be in the Hong Kong Special Administrative Region, and the arbitral institution or permanent office must be included in the confirmed list issued by the Supreme People’s Court. The SFC will decide by reviewing materials such as transmittal letters or certification documents issued by the arbitral institution or permanent office and by verifying against the confirmed list.
The Operational Guidelines specifies the required content of preservation applications and additional materials to be submitted by applicants. When the preservation amount is calculated in foreign currency, applicants should include in the preservation application the equivalent amount in RMB and the conversion basis to facilitate subsequent preservation procedures. In addition to the preservation application, applicants must submit the arbitration agreement, identity verification documents, arbitration application materials and relevant certification letters, as well as evidence demonstrating the urgency of the situation.
The Operational Guidelines specifies whether guarantees are required for preservation applications and the acceptable forms of guarantees. Generally, applicants should provide guarantees, and the SFC will determine the necessity and amount of guarantees based on the specific circumstances of each case. Acceptable forms of guarantees mainly include property or cash guarantees provided by the applicant or a third party, credit guarantees provided by third parties such as professional guarantee companies, guarantees provided by insurers under preservation liability insurance, and independent guarantees in the form of letters of credit provided by financial institutions.
The Operational Guidelines specifies the preservation application materials requiring notarization or certification and the corresponding requirements. It requires that foreign-language materials without a Chinese version must be accompanied by an accurate Chinese translation. Only identity verification documents formed outside the Mainland require certification procedures. For applicants from contracting states of the Convention Abolishing the Requirement of Legalisation for Foreign Public Documents, identity verification documents submitted to the SFC need only bear an Apostille issued by the originating country, exempting them from consular authentication procedures.
The Operational Guidelines specifies the time limits for the SFC’s review of preservation applications, the relief procedures available to parties contesting preservation rulings, and the notified parties regarding preservation ruling outcomes, facilitating the timely exercise of litigation rights by parties in Hong Kong arbitration proceedings. For urgent cases such as pre-arbitration preservation applications, the SFC will issue a ruling within 48 hours. Where preservation measures are granted, enforcement will commence immediately. Parties may submit applications for preservation reconsideration or lifting of preservation measures directly to the SFC without requiring transmission through an arbitral institution or permanent office. Upon issuing a preservation ruling, the SFC will notify the arbitral institution or permanent office of the outcome to meet their need for timely awareness of asset preservation results.
“The SFC will coordinate the advancement of domestic and foreign-related rule of law, standardize adjudication criteria and procedural rules for financial cases with foreign, Hong Kong, Macao and Taiwan elements, and strive to establish a financial judicial safeguard system characterized by fair adjudication, efficient procedures, accessible litigation, and predictable rulings. This will further enhance the international credibility and influence of China’s financial judiciary, providing stronger support for safeguarding China’s financial reform and opening-up,” said Shan Suhua.
Journalists from nearly 20 media outlets, including Guangming Daily, Shanghai Daily, Shanghai Law Journal, Hong Kong Wen Wei Po, and Hong Kong Commercial Daily, attended the event.
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