Legal disputes can often arise between business partners operating in China, prompting the need for effective resolution mechanisms. When entering into a commercial contract with Chinese partners, two popular options for arbitration seats are Hong Kong and Singapore. The question then arises –
Which seat is more advantageous for international businesses seeking to resolve legal disputes while conducting business in China?
Though it is Chinese territory, Hong Kong still maintains its judicial independence by keeping its Courts and Tribunals independent from Mainland China.
Hong Kong-seated institutional arbitration offers additional advantages in terms of interim measures applied to the mainland courts that are not available for arbitration seated in Singapore.
For example, it is easy to get your application for interim measures accepted by a court in Mainland China if your arbitration is being handled at the Hong Kong International Arbitration Centre (HKIAC). This same privilege is not extended to arbitration seated in Singapore because the Mainland court will not accept an order for interim measures issued by a tribunal seated in Singapore.
What does this mean for foreign investors and businesspeople in China?
Conducting arbitration in Hong Kong can better protect you against the bad faith transfer of assets in Mainland China.
While you wait for the arbitration result, you can ask the HKIAC for a temporary order (such as an asset freeze to prevent cash from being transferred out) and bring it to the Chinese Court where the defendant is located.
The Chinese Court will have an obligation to enforce the temporary order as per the Arbitration Interim Measures Arrangement agreed by and between Mainland and Hong Kong and help you prevent the counterparty from hiding or transferring its property before the arbitration award is granted.
Reduce your legal risk before going to arbitration. Order your Chinese Company Verification report today to ensure your Chinese manufacturer, supplier, distributor, or business partner is legitimate and in good standing.