On 14 February 2025, the Supreme People's Court (“<span class="news-text_medium">SPC</span>”) issued a significant judicial interpretation entitled
<p class="news-text_emphasize">“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 Area” </p>
This judicial interpretation clarifies the choice of governing law and seat of arbitration for contracts involving Hong Kong or Macao-invested enterprises in mainland cities of the Guangdong-Hong Kong-Macao Greater Bay Area (“<span class="news-text_medium">GBA</span>”). This interpretation, which came into effect immediately, represents a milestone in the resolution of commercial disputes within the GBA.
The newly issued interpretation allows Hong Kong or Macao-invested enterprises—enterprises that are either wholly or partially invested by entities or individuals from the Hong Kong Special Administrative Region (“<span class="news-text_medium">Hong Kong”</span>) or Macao Special Administrative Region (“<span class="news-text_medium">Macao</span>”)—to select Hong Kong or Macao law as the governing law and designate Hong Kong or Macao as the seat of arbitration for disputes, under certain conditions. This flexibility is provided for disputes in mainland cities within the GBA, subject to compliance with Chinese national laws and public interests.
The SPC’s clarification affects enterprises in Shenzhen and Zhuhai, where the parties may choose Hong Kong or Macao law as the applicable law for their contracts, provided it does not violate mandatory national laws or public policy - such as bypassing foreign exchange controls. Additionally, in any of the nine GBA cities - Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing - enterprises can select Hong Kong or Macao as the seat of arbitration for dispute resolution, even if there are no direct Hong Kong or Macao elements in the case. This marks a notable shift, as such arbitration agreements will no longer be invalid simply because they lack foreign-related elements.
This judicial interpretation aligns with broader efforts to support the development of the GBA and promote the region’s role as a hub for international arbitration. It also mirrors the document jointly issued by the SPC and the Ministry of Justice on 14 February 2025 entitled
<p class="news-text_emphasize">“Opinion on Fully Leveraging the Functions of Arbitration to Serve the High-Quality Development of the Guangdong-Hong Kong-Macao Greater Bay Area”</p>
The clarification also aligns with the Draft Amendment to the Arbitration Law, further confirming that the seat of arbitration determines the procedural law governing the arbitration and the nationality of the arbitral award. These developments highlight China's commitment to refining its arbitration framework and enhancing the region’s commercial dispute resolution capabilities.
This update is a significant development for businesses in the GBA and international parties engaging in commercial activities in the region, offering greater flexibility and certainty in dispute resolution.
