Litigation And Arbitration: New Rules On Governing Law And Arbitration Seat For Hong Kong And Macau Investors In The Greater Bay Area

In a landmark development, Hong Kong and Macao enterprises in the Guangdong-Hong Kong-Macao Greater Bay Area ("GBA") can agree on either the Mainland China, Hong Kong or Macao as the governing law and seat of arbitration¹, even if the relevant agreement lacks "foreign" elements (such as the subject matter and performance of the contract are in the Mainland China). Prior to this, disputes without foreign related elements were required to designate Mainland China as the governing law and arbitral seat. As an example, for non-foreign related disputes, previously an arbitration clause with this wording would be regarded as defective: "If any dispute is not resolved within the time period specified aforementioned, upon written notice by either party, such dispute shall be finally resolved through arbitration handled by a single arbitrator both parties agree on, in accordance with the arbitration rules of the Hong Kong International Arbitration Centre in effect at that time".

The new rules were introduced as part of the (i) Opinion on Fully Leveraging the Functions of Arbitration to Serve the High-Quality Development of the Guangdong-Hong Kong-Macao Greater Bay Area² ("Opinion") jointly issued by the Supreme People's Court ("SPC") and the Ministry of Justice on 14 February 2025 and (ii) Official Reply on the Issues concerning the Validity of the Adoption of Hong Kong or Macao Law as the Applicable Law of Contracts or the Designation of Hong Kong or Macao as the Seat of Arbitration by Hong Kong or Macao-Invested Enterprises Registered in the Mainland Part of the Guangdong-Hong Kong-Macao Greater Bay Area³("Interpretation") issued by the SPC on the same day.

The Interpretation

The Interpretation provides:

• Governing Law: Where one or both parties are Hong Kong or Macau investment enterprises registered in Shenzhen and Zhuhai, contractual agreements to apply Hong Kong or Macao law will be upheld by People's Court, provided they do not violate mandatory Mainland laws or public policy (Article 1).
• Arbitration Agreements: Similarly, where one or both parties are Hong Kong or Macau investment enterprises registered in any of the nine GBA cities⁴, agreements to designate Hong Kong or Macao as the arbitral seat are valid. The People's Court will reject challenges to these arbitration agreements due to the absence of Hong Kong or Macau-related elements (Article 2).
• Enforcement of Arbitral Awards: If disputes are submitted to arbitration as agreed, and arbitral awards are made, the People's Court will not support claims that these arbitral awards should not be enforced on the grounds that the dispute lacks Hong Kong or Macau-related elements or that these arbitration agreements are invalid (Article 2).
• Definition of "Hong Kong / Macao investment enterprises": Those "wholly or partially invested by natural persons, enterprises, or other organisations from Hong Kong or Macao and duly established in Mainland China" (Article 3).

The Opinion

The Opinion reiterates the rules set out in the Interpretation and introduces additional measures as part of the broader policy of promoting economic integration in the GBA. The measures include:

• Building a unified GBA international commercial arbitration centre;
• Updating arbitration rules to support new industries like the artificial intelligence and digital economy sectors; and
• Establishing service platforms to connect courts and arbitration institutions and creating a shared database of arbitration cases and judicial reviews to guide practice and promote arbitration;
• Fostering collaboration through a joint GBA arbitrator panel, shared tribunal secretary resources, and the establishment of a joint training mechanism for foreign related arbitration talents, leveraging Hong Kong's established training systems.

Impact and Significance

The new rules mark a significant step toward a fully integrated and predictable legal environment for business in the GBA. They seek to consolidate the region's position as a leading global centre for international commercial arbitration, enhancing both its reputation and the competitiveness of dispute resolution within Mainland China.

The validity of this arrangement is confirmed by a discussion paper⁵ issued by the Department of Justice of Hong Kong, reinforcing the legal framework that supports cross-border investments and dispute resolution within the GBA.

Conclusion

Our Dispute Resolution team has extensive experience handling cases involving Mainland China and foreign elements, as well as advising on arbitration clauses. We are ready to assist businesses to seize these new opportunities. Please contact us to learn more.

Footnotes

1 The jurisdiction in which the arbitration is deemed legally to take place and the procedural framework, regardless of the geographical location of the tribunal and/or any hearings.

2 https://www.court.gov.cn/zixun/xiangqing/454931.html

3 https://www.court.gov.cn/zixun/xiangqing/454941.html

4 Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Zhongshan, Jiangmen and Zhaoqing.

5 https://www.legco.gov.hk/yr2025/english/panels/ajls/papers/ajls20250314cb2-418-2-e.pdf

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