With the Chinese government’s continued push for the development of the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area), the legal framework and international commercial arbitration system in the region have also undergone significant reforms. On October 22, 2024, the Supreme People’s Court (SPC) passed the Reply on the Effectiveness of the Choice of Hong Kong or Macao Law as the Governing Law of Contracts or the Agreement to Designate Hong Kong or Macao as the Place of Arbitration for Hong Kong and Macao-invested Enterprises Registered in the Mainland of the Greater Bay Area (hereinafter referred to as the “Reply”). This reply, which will be officially implemented on February 14, 2025, marks the further maturation and refinement of the arbitration legal system in the Greater Bay Area. At the same time, on February 16, 2025, the SPC and the Ministry of Justice jointly issued the Opinions on Fully Leveraging the Functions of Arbitration to Serve the High-quality Development of the Guangdong-Hong Kong-Macao Greater Bay Area (hereinafter referred to as the “Opinions”), providing clearer frameworks and guidance for commercial arbitration in the Greater Bay Area.
1. Changes in the Selection of Governing Law and Place of Arbitration
According to the Reply, Hong Kong and Macao-invested enterprises registered in the mainland of the Greater Bay Area can choose Hong Kong or Macao law as the governing law in their contracts and designate Hong Kong or Macao as the place of arbitration, even if the subject matter and performance of the contract are both located in mainland China. The specific provisions are as follows:
1) Choice of Governing Law: If at least one party to the contract is a Hong Kong or Macao-invested enterprise registered in the cities of Shenzhen or Zhuhai in the Greater Bay Area, the contract can explicitly choose Hong Kong or Macao law as the governing law. Even if the contract does not contain any “foreign-related” elements—such as when the counterparty is a mainland enterprise and the performance of the contract takes place within China—this choice will still be deemed valid, provided that the selected law does not violate any mandatory provisions of Chinese law or public policy.2) Choice of Place of Arbitration: Similarly, if at least one party to the contract is a Hong Kong or Macao-invested enterprise registered in one of the nine cities of the Greater Bay Area (i.e., Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan, or Jiangmen), the contract can specify that any disputes be submitted to arbitration in Hong Kong or Macao, even if the dispute itself does not have any obvious “Hong Kong or Macao-related” elements. As long as the arbitration agreement does not violate any mandatory legal provisions of China, and after judicial review by Chinese courts, it is determined that the agreement does not harm public interest, the arbitration agreement will be considered valid, and the arbitration award will be recognized and enforced within mainland China.
This policy is of significant importance for enterprises involved in Hong Kong and Macao investments, specifically in the following ways:
1) Enhanced International Compliance: In the past, when signing contracts with Hong Kong and Macao-invested enterprises, businesses often faced restrictions in the choice of applicable law and the place of arbitration. With the implementation of this reply, enterprises can now choose a legal environment that better suits their international needs, thus reducing cross-border legal conflicts that could arise from the application of mainland laws.2) Improved Dispute Resolution Efficiency: For enterprises that frequently cooperate or trade with Hong Kong and Macao, selecting these locations as the place of arbitration will facilitate quicker and more efficient dispute resolution, avoiding long litigation processes due to jurisdictional disputes.
2. Construction and Development of the Greater Bay Area International Commercial Arbitration Center
The Opinions propose that the Greater Bay Area will focus on advancing the development of international commercial arbitration centers in cities such as Guangzhou and Shenzhen, in close integration with the international legal and dispute resolution service centers in Hong Kong and Macao. This strategy not only strengthens the internationalization and professionalization of arbitration institutions in the Greater Bay Area but also provides enterprises with a more unified and flexible arbitration platform, including:
1) Promoting the Unification of Arbitration Rules: The establishment of unified arbitration rules and an online dispute resolution platform in the Greater Bay Area will help standardize and increase transparency in the arbitration mechanisms, enhancing the predictability of cross-border arbitration cases.2) Online Arbitration and Digital Innovation: With the application of internet arbitration and intelligent technologies, especially in the fields of artificial intelligence and digital economy, the Opinions also propose promoting innovation in arbitration rules and business models, and supporting arbitration through electronic platforms. This means that in the future, businesses will be able to benefit from more convenient, efficient, and cost-effective dispute resolution solutions.3) Convenient Arbitration Choices: For Hong Kong and Macao-invested enterprises registered in the Greater Bay Area, submitting disputes to arbitration centers in Guangzhou or Shenzhen will allow them to enjoy faster and more transparent arbitration processes. Additionally, the use of online platforms for dispute resolution is expected to save businesses significant time and costs.4) Arbitrator Resource Sharing: The introduction of a shared arbitrator resource policy among Guangdong, Hong Kong, and Macao means that enterprises can select arbitration teams with cross-border experience, further ensuring the professionalism and impartiality of the arbitration process.
3. Strategic Adjustment of Arbitration for Enterprises in the Greater Bay Area
As the arbitration mechanism gradually improves and becomes more internationalized, enterprises should assess the choice of applicable law and the place of arbitration when drafting contracts, ensuring that their choices comply with legal regulations and maximize the protection of their interests. Especially in complex international contracts, the choice of Hong Kong or Macao as the place of arbitration and the application of Hong Kong or Macao legal systems will become an indispensable advantage.
[Comment]
The Reply and the Opinions issued in 2024 represent an important initiative in the high-quality development of the Guangdong-Hong Kong-Macao Greater Bay Area. They provide a solid legal foundation for the innovation and internationalization of the cross-border arbitration system. Against this backdrop, enterprises need to actively adjust their arbitration clauses and legal choices based on their actual needs, ensuring that they can effectively leverage the multiple advantages offered by the Greater Bay Area’s arbitration mechanism in future commercial disputes.
1. Changes in the Selection of Governing Law and Place of Arbitration
According to the Reply, Hong Kong and Macao-invested enterprises registered in the mainland of the Greater Bay Area can choose Hong Kong or Macao law as the governing law in their contracts and designate Hong Kong or Macao as the place of arbitration, even if the subject matter and performance of the contract are both located in mainland China. The specific provisions are as follows:
1) Choice of Governing Law: If at least one party to the contract is a Hong Kong or Macao-invested enterprise registered in the cities of Shenzhen or Zhuhai in the Greater Bay Area, the contract can explicitly choose Hong Kong or Macao law as the governing law. Even if the contract does not contain any “foreign-related” elements—such as when the counterparty is a mainland enterprise and the performance of the contract takes place within China—this choice will still be deemed valid, provided that the selected law does not violate any mandatory provisions of Chinese law or public policy.2) Choice of Place of Arbitration: Similarly, if at least one party to the contract is a Hong Kong or Macao-invested enterprise registered in one of the nine cities of the Greater Bay Area (i.e., Guangzhou, Foshan, Zhaoqing, Shenzhen, Dongguan, Huizhou, Zhuhai, Zhongshan, or Jiangmen), the contract can specify that any disputes be submitted to arbitration in Hong Kong or Macao, even if the dispute itself does not have any obvious “Hong Kong or Macao-related” elements. As long as the arbitration agreement does not violate any mandatory legal provisions of China, and after judicial review by Chinese courts, it is determined that the agreement does not harm public interest, the arbitration agreement will be considered valid, and the arbitration award will be recognized and enforced within mainland China.
This policy is of significant importance for enterprises involved in Hong Kong and Macao investments, specifically in the following ways:
1) Enhanced International Compliance: In the past, when signing contracts with Hong Kong and Macao-invested enterprises, businesses often faced restrictions in the choice of applicable law and the place of arbitration. With the implementation of this reply, enterprises can now choose a legal environment that better suits their international needs, thus reducing cross-border legal conflicts that could arise from the application of mainland laws.2) Improved Dispute Resolution Efficiency: For enterprises that frequently cooperate or trade with Hong Kong and Macao, selecting these locations as the place of arbitration will facilitate quicker and more efficient dispute resolution, avoiding long litigation processes due to jurisdictional disputes.
2. Construction and Development of the Greater Bay Area International Commercial Arbitration Center
The Opinions propose that the Greater Bay Area will focus on advancing the development of international commercial arbitration centers in cities such as Guangzhou and Shenzhen, in close integration with the international legal and dispute resolution service centers in Hong Kong and Macao. This strategy not only strengthens the internationalization and professionalization of arbitration institutions in the Greater Bay Area but also provides enterprises with a more unified and flexible arbitration platform, including:
1) Promoting the Unification of Arbitration Rules: The establishment of unified arbitration rules and an online dispute resolution platform in the Greater Bay Area will help standardize and increase transparency in the arbitration mechanisms, enhancing the predictability of cross-border arbitration cases.2) Online Arbitration and Digital Innovation: With the application of internet arbitration and intelligent technologies, especially in the fields of artificial intelligence and digital economy, the Opinions also propose promoting innovation in arbitration rules and business models, and supporting arbitration through electronic platforms. This means that in the future, businesses will be able to benefit from more convenient, efficient, and cost-effective dispute resolution solutions.3) Convenient Arbitration Choices: For Hong Kong and Macao-invested enterprises registered in the Greater Bay Area, submitting disputes to arbitration centers in Guangzhou or Shenzhen will allow them to enjoy faster and more transparent arbitration processes. Additionally, the use of online platforms for dispute resolution is expected to save businesses significant time and costs.4) Arbitrator Resource Sharing: The introduction of a shared arbitrator resource policy among Guangdong, Hong Kong, and Macao means that enterprises can select arbitration teams with cross-border experience, further ensuring the professionalism and impartiality of the arbitration process.
3. Strategic Adjustment of Arbitration for Enterprises in the Greater Bay Area
As the arbitration mechanism gradually improves and becomes more internationalized, enterprises should assess the choice of applicable law and the place of arbitration when drafting contracts, ensuring that their choices comply with legal regulations and maximize the protection of their interests. Especially in complex international contracts, the choice of Hong Kong or Macao as the place of arbitration and the application of Hong Kong or Macao legal systems will become an indispensable advantage.
[Comment]
The Reply and the Opinions issued in 2024 represent an important initiative in the high-quality development of the Guangdong-Hong Kong-Macao Greater Bay Area. They provide a solid legal foundation for the innovation and internationalization of the cross-border arbitration system. Against this backdrop, enterprises need to actively adjust their arbitration clauses and legal choices based on their actual needs, ensuring that they can effectively leverage the multiple advantages offered by the Greater Bay Area’s arbitration mechanism in future commercial disputes.