The Impact team, led by Disputes Partner Eric Xu, has recently acted for an overseas client in an HKIAC arbitration. A key achievement was obtaining an asset preservation order from the PRC court, which resulted in the freezing of the Respondent’s substantial assets in Mainland China.

PRC Interim Relief Application

The process of applying for asset preservation in the PRC differs from its common law equivalent—the Mareva injunction—in two critical respects:

• Lower threshold: Unlike in Mareva injunction proceedings, claimants seeking asset preservation in the PRC do not have to prove a “real risk of dissipation.” Additionally, PRC courts rarely examine the merits of the underlying dispute when ruling on such applications. (To mitigate potential prejudice to respondents, PRC courts typically mandate that claimants provide an insurance policy to cover any losses respondents may incur if the asset preservation is later found to be wrongful.)
• Lower legal costs: Obtaining an asset preservation order in the PRC generally involves lower legal expenses compared to securing a Mareva injunction.

Notably, PRC courts only grant asset preservation orders in the context of domestic litigation or arbitration – not for foreign litigation or arbitration. The sole exception stems from a special arrangement between Hong Kong and Mainland China: this arrangement empowers PRC courts to issue interim relief (including asset preservation) to support arbitrations seated in Hong Kong.

Enforcement Strategies

We advise clients to proactively develop enforcement strategies at the pre-dispute stage. If your transaction involves a PRC counterparty, consider designating Hong Kong as the seat of arbitration. This choice entitles your company to access additional enforcement options through PRC courts—options that would not be available for arbitrations seated elsewhere.

If you face a Chinese respondent in a Hong Kong-seated arbitration, applying for a PRC asset preservation order can be a powerful tool to pressure the respondent into settling the dispute. Based on our experience, PRC banks act out of an abundance of caution upon receipt of such an order: even if the court only orders the freezing of a portion of the respondent’s funds, banks often freeze the entire balance of the respondent’s account. This action typically exerts immediate pressure on the respondent.

To achieve successful enforcement outcomes, effective legal representation is essential in both HKIAC arbitration proceedings and PRC court proceedings. Our disputes partner Eric Xu is qualified in England, PRC, and Hong Kong and has a proven record of cross-border enforcement matters. Should you have any questions or require assistance, please do not hesitate to contact us at contact@impactlawyers.co.uk.