Matter note: freezing assets

The practical question in any cross-border dispute is not whether you can win. It is whether the win translates into money. An award creditor holding a Hong Kong-seated arbitral award against a counterparty with assets split across the Mainland and Hong Kong faces a two-front enforcement task. The legal systems are different. The procedures are different. And the sequence of steps – the order in which you move – can determine whether the assets are still there when the enforcement machinery arrives.

Freezing assets across the Hong Kong–Mainland boundary involves two distinct regimes operating in parallel: Hong Kong's own courts and the interim-measures mechanism under the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings, which has been in effect since 1 October 2019 and allows a party to a Hong Kong-seated arbitration to apply directly to a Mainland court for preservation of evidence, assets, or conduct before or during arbitral proceedings.

This matter note sets out an anonymised cross-border situation from our disputes practice, the route we took, and the lesson that transfers to comparable positions.

The situation: a commercial dispute with assets on both sides of the boundary

A mid-sized European industrial group held a joint-venture structure with a Mainland counterparty. The operating entity sat in the Mainland; the holding vehicle was incorporated offshore, and the transaction documents were governed by Hong Kong law with an arbitration clause (a provision submitting disputes to arbitration rather than litigation) designating Hong Kong as the seat.

A payment dispute arose following the counterparty's failure to make a scheduled distribution. The quantum was substantial, though not publicly disclosed. More relevant to the strategic problem was the asset picture. The counterparty's realisable assets were partly cash accounts held through a Mainland banking relationship and partly shareholdings in two Hong Kong-incorporated entities.

The European group had already instructed Mainland counsel. Their advice, correctly, was that a direct Mainland preservation application without a pending arbitration would face serious procedural difficulty. The arbitration had not yet commenced. That timing constraint was the first structural problem.

What was the cross-border constraint?

The interim-measures mechanism introduced by the 2019 Arrangement requires that the arbitration be administered by a qualifying institution – the Hong Kong International Arbitration Centre (HKIAC) is the leading qualifying body – and that a case-filing number be issued before a Mainland preservation application can proceed. Without that reference, a Mainland court cannot accept the application.

This requirement created a hard sequencing constraint. The group needed to file the arbitration first, obtain the HKIAC case reference, and then move in parallel – a Mainland application for property preservation and a Hong Kong court application for a Mareva injunction (a freezing order granted by a common-law court preventing dissipation of assets pending or during proceedings) over the Hong Kong-held assets.

The risk of delay was real. The counterparty was aware of the dispute. There were observable signals – a transfer of one Hong Kong shareholding to a related entity a few weeks before the dispute broke into the open – suggesting asset movement was already under consideration. Every week without a freeze was a week of exposure.

A second constraint followed from the first. The Mainland assets and the Hong Kong assets called for different applications in different courts under different legal instruments. Coordinating two simultaneous applications across two legal systems, with different evidentiary standards and different procedural timetables, was the core challenge.

The route chosen: sequencing to contain the exposure window

Our desk coordinated the three-step sequence alongside allied counsel admitted in the relevant Mainland jurisdiction.

Step one was immediate: filing the arbitration with the HKIAC under the HKIAC Administered Arbitration Rules and obtaining the case-filing reference. This step was completed within days of instruction. The HKIAC's case-management function responds quickly to an initial filing; the reference is issued upon acceptance of the file.

Step two ran simultaneously. Using the case reference, the Mainland preservation application was filed in the competent Mainland people's court, targeting the cash accounts and moveable assets on the Mainland side. The application relied on the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings – the governing instrument that gives Mainland courts jurisdiction to order preservation in support of a Hong Kong-seated arbitration. A guarantee was required by the Mainland court as a condition of the preservation order, as is standard under the Mainland regime; the European group provided this through its Mainland holding entity.

Step three was the Hong Kong application. We applied to the Court of First Instance for a Mareva injunction over the Hong Kong-held assets, principally the shareholdings in the two Hong Kong-incorporated entities. The application was supported by evidence of the pre-dispute share transfer – the observable asset movement noted above – and relied on the well-established common-law principles governing the grant of freezing relief.

The critical design decision was timing. We did not stagger the applications across several weeks. Both the Mainland and Hong Kong applications were filed within hours of each other, after the HKIAC reference was confirmed. The goal was to close the window during which the counterparty might move assets in response to seeing one order but before the other was served.

The turning point

The Hong Kong Mareva application was heard on short notice. The Court of First Instance granted the order. This mattered for two reasons beyond the immediate freeze.

First, the Hong Kong order covered assets – the shares in Hong Kong-incorporated entities – that fell outside the scope of the Mainland preservation application. The two orders together gave the group comprehensive coverage across both asset pools. Neither order alone would have been sufficient.

Second, the existence of two simultaneous preservation orders from two different courts, in two different legal systems, changed the dynamic of the commercial negotiation materially. The counterparty could no longer credibly threaten to dissipate assets as a lever in the negotiation. Both pools were locked.

The arbitration proceeded before the HKIAC. The matter did not reach a final award. Instead, with assets frozen and the enforcement route clearly mapped, the counterparty engaged seriously in settlement discussions for the first time. A commercial resolution was reached during the arbitral process. The terms are confidential.

The transferable lesson

The lesson from this matter is not about any unusual or novel legal mechanism. Every instrument used – the HKIAC Administered Arbitration Rules, the 2019 Arrangement, the Mareva jurisdiction of the Court of First Instance – is established and well-tested. The lesson is about sequence and coordination.

Many award creditors and their counsel approach cross-border asset freezing as a two-stage process: complete the arbitration, then enforce. That approach is too slow when assets are mobile. The 2019 Arrangement was designed precisely to address this gap, allowing interim measures to be sought in parallel with the arbitration rather than after it. Using that instrument requires a Hong Kong-seated arbitration with a qualifying institution – but if those conditions are present, the window to preserve assets is significantly earlier than most parties realise.

What foreign counsel in particular tend to miscalculate is the guarantee requirement. Mainland courts routinely require the applicant to provide a form of security before granting a preservation order. If that requirement is not anticipated and the client's capacity to provide it not organised in advance, the Mainland application stalls at exactly the moment when speed matters most. In this matter, the guarantee was pre-arranged before the Mainland application was filed.

The second recurring mistake is treating the Hong Kong and Mainland steps as sequential rather than parallel. The instinct is to wait for confirmation of the Mainland order before filing in Hong Kong, or vice versa. That instinct should be resisted. Where the asset pool is split, both applications should move together. Courts in both systems are accustomed to operating in parallel; there is no procedural objection to simultaneous proceedings. The danger is not duplication – it is the exposure window created by a gap between the two.

For groups with cross-border structures and commercial relationships spanning the Mainland and Hong Kong, this sequencing logic should be built into dispute planning before a dispute arises. The transaction documents, the seat of arbitration, the choice of administering institution, and the identification of asset pools are all decisions that can either enable or foreclose the preservation strategy. By the time the dispute surfaces, several of those choices will already be fixed.

For a comparable matter involving enforcement of a Hong Kong arbitral award against counterparties in the CIS region, see our note at Enforcing a Hong Kong arbitral award: CIS considerations. For cross-border disputes with a UAE-based joint-venture partner, see Matter note: shareholder and joint-venture disputes with a UAE partner. Our broader disputes and arbitration practice is described at Disputes & Arbitration.

The sequence above describes the standard position under the current instruments. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. For a structured assessment of your cross-border preservation and enforcement position, write to us at info@lockhartyip.com.

Related practices

Disputes & Arbitration – cross-border arbitration, enforcement, and interim-measures strategy
Holding Structures – offshore and Hong Kong holding entity design with enforcement in mind

Frequently asked questions

What does the route look like for freezing assets across the Hong Kong-Mainland boundary?

The route requires simultaneous action in two systems. The arbitration must be filed with a qualifying institution – in practice, the HKIAC – to obtain a case reference. That reference activates the right to apply to a Mainland people's court for property preservation under the Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings, in effect since 1 October 2019. Concurrently, a Mareva injunction application is made to the Hong Kong Court of First Instance over Hong Kong-held assets. Sequencing both steps together closes the exposure window and prevents the counterparty from responding to one order before the other takes effect.

How does the cross-border element affect freezing assets across the Hong Kong-Mainland boundary?

The cross-border dimension creates both an opportunity and a complication. The opportunity is that assets on both sides of the boundary can be preserved under a single arbitral framework, provided the seat is Hong Kong and the institution qualifies under the 2019 Arrangement. The complication is that each system has its own evidentiary standards, procedural timetables, and conditions – including the Mainland requirement for a guarantee from the applicant. Without anticipating that guarantee requirement in advance, the Mainland application can stall at a critical moment. International groups with assets on both sides should map these requirements before any dispute arises.

Do I need a Hong Kong adviser for freezing assets across the Hong Kong-Mainland boundary?

Yes, in practice. The Mareva application in Hong Kong requires counsel familiar with the common-law freezing-order jurisdiction of the Court of First Instance. Coordinating that application with the timing of the Mainland preservation step, the HKIAC filing, and the guarantee requirement calls for a desk that works across both systems. In our cross-border practice, we coordinate the Hong Kong strategy and work alongside allied counsel admitted in the Mainland to manage the parallel procedural track. The two applications must move in lockstep; that coordination is where the outcome is most often determined.

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.

Matter note: freezing assets across the Hong Kong-Mainland boundary