New rules on governing law and arbitration for contracts involving Greater Bay Area enterprises with Hong Kong and Macau investors

In a significant development, Hong Kong and Macau governing law and arbitration clauses can now be adopted for contracts involving certain enterprises with Hong Kong / Macau investors registered in the Guangdong-Hong Kong-Macao Greater Bay Area (Greater Bay Area).

This applies even where there are no "foreign-related" elements (for example, where the counterparty is a mainland PRC entity and the subject matter and performance of the contract are in the mainland PRC). 

Previously, only PRC governing law and arbitration seated in the mainland PRC were permitted in such circumstances.

The new rules were introduced in a judicial interpretation (Interpretation) issued by the PRC Supreme People’s Court (SPC) (Fa Shi [2025] No. 3), which came into effect on 14 February 2025.

They complement the existing advantages already offered by Hong Kong as the leading offshore forum for the resolution of PRC-related disputes, including the ability of parties to Hong Kong arbitrations administered by qualifying institutions to obtain interim measures from the mainland PRC courts.

New rules on governing law and arbitration

The Interpretation applies to contracts where at least one of the parties is a Hong Kong or Macau-invested enterprise registered in a relevant mainland PRC municipality in the Greater Bay Area.  In this regard:

• Hong Kong and Macau-invested enterprises: are defined as enterprises "wholly or partially invested by natural persons, enterprises, or other organizations from Hong Kong or Macau and duly registered in Mainland China"; and
• The Greater Bay Area: comprises Hong Kong, Macau, and nine municipalities in Guangdong Province (Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing).  Importantly, the new rules on arbitration apply where at least one of the parties is a relevant enterprise registered in any of the nine mainland municipalities in the Greater Bay Area, whereas the new rules on governing law apply only where at least one of the parties is a relevant enterprise registered in Shenzhen or Zhuhai.

The Interpretation provides as follows in relation to governing law and arbitration:

• Governing law: where at least one of the parties to a contract is a Hong Kong or Macau-invested enterprise registered in the cities of Shenzhen or Zhuhai, Hong Kong law or Macau law may be specified as the governing law of the contract.  The governing law clause is valid even where the contract does not contain any foreign-related element, provided that the application of Hong Kong law or Macau law does not violate any mandatory provisions of PRC law or public policy.  (Paragraph 1 of the Interpretation.)
• Arbitration: where at least one of the parties to a contract is a Hong Kong or Macau-invested enterprise registered in one of the nine mainland municipalities in the Greater Bay Area listed above and the contract provides for Hong Kong or Macau-seated arbitration, the arbitration agreement shall not be invalidated, and the award shall not be refused enforcement, on the ground that the dispute lacks a Hong Kong or Macau element.

Other measures to promote arbitration in the Greater Bay Area

On the same date as the new Interpretation, the SPC and PRC Ministry of Justice also jointly issued an "Opinion on Fully Leveraging Arbitration to Support High-Quality Development in the Greater Bay Area" (Opinion).  The Opinion reiterates the new rules set out in the Interpretation and introduces additional measures with the aim of promoting the Greater Bay Area as an integrated international arbitration hub, as part of the broader policy of promoting economic integration in the Greater Bay Area.  These include plans to:

• Establish a Greater Bay Area international commercial arbitration centre, by jointly developing international commercial arbitration centres in Guangzhou and Shenzhen and international legal and dispute resolution service centres in Hong Kong and Macau;
• Establish unified arbitration rules and a unified online arbitration platform across the Greater Bay Area;
• Establish a recommended list of arbitrators in Guangdong province, Hong Kong and Macau;
• Enhance judicial support for arbitration in the region, including by facilitating arbitration-related interim relief applications and establishing a Greater Bay Area judicial review case database; and
• Develop online arbitration and explore the application of smart technologies in arbitration, in order to support the development of new sectors in the region, including artificial intelligence, the digital economy and biotechnology.

This article has been co-authored by Herbert Smith Freehills (in relation to Hong Kong law only) and Herbert Smith Freehills Kewei, a joint operation between Herbert Smith Freehills LLP and Kewei Law Firm based in the Shanghai Free Trade Zone (which is exclusively responsible for any statements or commentary in relation to PRC law).