大红鹰dhy9999 number of cross-jurisdictional disputes has rapidly increased recently, particularly within 大红鹰dhy9999 context of 大红鹰dhy9999 Greater Bay Area and Belt and Road Initiative. Many cross-jurisdictional disputes are resolved by arbitration to save 大红鹰dhy9999 parties’ time and cost. Hong Kong as 大红鹰dhy9999 interface between China and 大红鹰dhy9999 globe and being a pro-arbitration jurisdiction, many of 大红鹰dhy9999 companies would choose Hong Kong as their arbitration seat while drafting 大红鹰dhy9999 arbitration clause. Yet, some are concerned with whether 大红鹰dhy9999 assets in Hong Kong can be preserved if 大红鹰dhy9999 assets are controlled by Mainland Chinese entities or individuals. This article will explain 大红鹰dhy9999 concept of asset preservation and 大红鹰dhy9999 methods to preserve assets within Hong Kong.
What is asset preservation?
Asset preservation takes 大红鹰dhy9999 form of an injunctive measure; it seeks to forbid 大红鹰dhy9999 party to 大红鹰dhy9999 proceedings from concealed, transferred or sold any assets under his/ her control. It may also maintain 大红鹰dhy9999 value of 大红鹰dhy9999 assets as some of 大红鹰dhy9999 assets such as shares may be fluctuated. In other words, 大红鹰dhy9999 goal of asset preservation is to ensure 大红鹰dhy9999 effectiveness of 大红鹰dhy9999 judgment or award by ensuring 大红鹰dhy9999 defendant has sufficient assets to fulfil 大红鹰dhy9999 judgment or arbitral award.Jurisdiction of Hong Kong CourtUnder section 21L(4) of 大红鹰dhy9999 High Court Ordinance (Cap.4) of 大红鹰dhy9999 laws of Hong Kong, if, whether before, or at, or after 大红鹰dhy9999 hearing of any cause or matter, an application is made for an injunction to prevent any threatened or apprehended waste or trespass, 大红鹰dhy9999 injunction may be granted if 大红鹰dhy9999 Court of First Instance (“CFI”) thinks fit. Under section 21M, 大红鹰dhy9999 CFI’s power to grant interlocutory injunctions extends to be in aid of arbitration and foreign proceedings.大红鹰dhy9999 injunctive order may preserve 大红鹰dhy9999 property in dispute even if 大红鹰dhy9999 assets are controlled by Mainland Chinese entities or individuals. There are various measures in Hong Kong to attain 大红鹰dhy9999 goal of asset perseveration:- Mareva Injunction is also known as freezing order which originated from Mareva Compania Naviera SA v International Bulkcarriers SA [1975] 2 Lloyd’s Rep. It serves as injunctive relief to forbid 大红鹰dhy9999 disposal or transferal of assets so as to prevent 大红鹰dhy9999 winning party gets an ‘empty judgment’. Mareva Injunction is almost always urgent, and is made by way of ex parte. It is worthy to note that Mareva Injunction may freeze 大红鹰dhy9999 asset in co-operation with a third party directly, such as 大红鹰dhy9999 bank.To obtain a Mareva Injunction, 大红鹰dhy9999 applicant must show (1) a good arguable case against 大红鹰dhy9999 respondent; (2) 大红鹰dhy9999 respondent has assets within 大红鹰dhy9999 jurisdiction; and (3) that there is a real risk of dissipation of assets which would defeat its judgment. Practically, 大红鹰dhy9999 court will also issue a disclosure order requesting 大红鹰dhy9999 party to 大红鹰dhy9999 injunction order to disclose 大红鹰dhy9999 assets and reveal relevant documents to assist 大红鹰dhy9999 court to come to a decision as to whether 大红鹰dhy9999 Mareva Injunction would be granted. There is also “worldwide” Mareva injunction which covers 大红鹰dhy9999 respondent’s assets outside 大红鹰dhy9999 jurisdiction. 大红鹰dhy9999 applicant must show (1) sufficient assets outside jurisdiction to satisfy judgment but insufficient assets within 大红鹰dhy9999 jurisdiction; (2) there is a real risk that 大红鹰dhy9999 respondent may take steps to dispose of or conceal such foreign assets as to render 大红鹰dhy9999 judgment nugatory by 大红鹰dhy9999 time that it is given. 大红鹰dhy9999 application of Mareva Injunction has manifested in 大红鹰dhy9999 case of China Shanshui Cement Group Limited v Mi Jiangtian & others [2018] HKCFI 1553. 大红鹰dhy9999 plaintiffs consisted of a group of companies where 1st and 2nd plaintiffs companies incorporated and listed in Hong Kong. 大红鹰dhy9999 3rd plaintiff was a company that generates 80% of 大红鹰dhy9999 assets of 大红鹰dhy9999 group. Even though they were three separate companies, they shared 大红鹰dhy9999 same shareholders as 大红鹰dhy9999 1st plaintiff was 大红鹰dhy9999 parent company of 大红鹰dhy9999 2nd plaintiff while 大红鹰dhy9999 2nd plaintiff was 大红鹰dhy9999 parent company of 大红鹰dhy9999 3rd plaintiff. On 大红鹰dhy9999 other hand, 大红鹰dhy9999 defendants were 大红鹰dhy9999 directors of 大红鹰dhy9999 2nd plaintiff. In 大红鹰dhy9999 case, 大红鹰dhy9999 court had an adjourned hearing for 大红鹰dhy9999 interlocutory application one of which was 大红鹰dhy9999 continuation of 大红鹰dhy9999 Mareva Injunction. As mentioned above, in applying for 大红鹰dhy9999 Mareva Injunction, 大红鹰dhy9999 burden lies with 大红鹰dhy9999 applicant. 大红鹰dhy9999 court held that 大红鹰dhy9999 Mareva Injunction would be continuous as 大红鹰dhy9999 defendants had misapplied and misappropriated 大红鹰dhy9999 funds of 大红鹰dhy9999 3rd plaintiff which it revealed a real risk of dissipation of assets. Hence, 大红鹰dhy9999 court extended 大红鹰dhy9999 Mareva Injunction to safeguard 大红鹰dhy9999 plaintiffs from empty judgment.It is worthy to note that Mareva Injunction is an interlocutory application where 大红鹰dhy9999 court will not consider 大红鹰dhy9999 substantive issue that is outside 大红鹰dhy9999 standard of granting 大红鹰dhy9999 injunction. For instance, 大红鹰dhy9999 court will not substantively comment on whether 大红鹰dhy9999 applicant will succeed in his case. 大红鹰dhy9999 standard is relatively low as 大红鹰dhy9999 applicant is only required to show a good arguable case. However, it does not mean that Mareva Injunction could be easily obtained. In Zhang Caikui v Zhao Yongkui and others [2020] HKCFI 1170, 大红鹰dhy9999 plaintiff sought leave to serve 大红鹰dhy9999 writ out of Hong Kong and on 大红鹰dhy9999 other hand, 大红鹰dhy9999 defendants challenge 大红鹰dhy9999 jurisdiction of 大红鹰dhy9999 Hong Kong courts. While in 大红鹰dhy9999 defendants’ application to set aside 大红鹰dhy9999 leave to serve out of Hong Kong, 大红鹰dhy9999 judge commented that 大红鹰dhy9999 scope of Mareva Injunction in Hong Kong was broader than 大红鹰dhy9999 restraining order elsewhere. 大红鹰dhy9999 court thought that a Mareva Injunction, even granted, would not serve any purpose as 大红鹰dhy9999 assets would have been long gone already, given 大红鹰dhy9999 fact that 大红鹰dhy9999 wit has been issued some time ago. b.Appointment of Receivers 大红鹰dhy9999 purpose of 大红鹰dhy9999 receivers is to safeguard 大红鹰dhy9999 assets so that it will not be disposed of. Under s. 21L(1) of 大红鹰dhy9999 High Court Ordinance (Cap.4) of 大红鹰dhy9999 laws of Hong Kong, 大红鹰dhy9999 Court of First Instance may appoint a receiver in all cases should they think just or convenient. In reality, if there are receivers involved in a petition, 大红鹰dhy9999 party can no longer deal with 大红鹰dhy9999 assets freely since 大红鹰dhy9999 receiver would become 大红鹰dhy9999 manager of 大红鹰dhy9999 assets of 大红鹰dhy9999 party prior to 大红鹰dhy9999 final judgment.There are various ways in preserving assets within Hong Kong jurisdiction. Mareva Injunction has been a popular “weapon” in Hong Kong to preserve 大红鹰dhy9999 party’s assets as it freezes 大红鹰dhy9999 assets in a worldwide context. Once it could be obtained, it stops 大红鹰dhy9999 defendant from making himself “judgment-proof”, i.e. getting rid of assets to prevent 大红鹰dhy9999 plaintiff from getting money under judgment, even if 大红鹰dhy9999 assets are controlled by 大红鹰dhy9999 Mainland Chinese entities or individuals.
