Preservation of property in commercial arbitration

The preservation of property plays a useful role in the implementation of arbitral awards and the protection of the interests of the parties involved. The relevant provisions of the PRC Arbitration Law have evolved into a system with its own characteristics as regards adjudication and the implementation powers of the court.

Conditions for applications

In arbitration proceedings, only the parties involved may apply for the preservation of property. Under the Arbitration Law and in practice, parties applying for the preservation of property should meet the following conditions.

• The preservation of property only applies in cases involving a monetary claim.
• An application for the preservation of property must be supported by legally established facts and reasoning. The Arbitration Law stipulates that such applications can only be entertained where an arbitral award is difficult or impossible to enforce due to the behaviour of one of the parties, or for other reasons. In practice, the “behaviour of the parties” means acts by any party to evade its obligations by concealing, transferring, damaging or selling property. “Other reasons” may relate to objective circumstances, such as where the relevant property consists of fresh or seasonal goods not suited for long-term preservation.
• Applications for the preservation of property should be made to the arbitration
• commission handling the dispute, which will transfer it to a court.
• Applications for the preservation of property must be made within a certain period of time. The Arbitration Law does not clearly stipulate a time limit. In practice, an application should be made after an arbitration case has been accepted but before an award is made. Applications made before arbitration commences will usually not be accepted.

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Charles Pan is a senior consultant and Kevin Cong is an associate in the Shanghai office of Yao Liang Law Offices

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