Supreme People's Court of China Supports Hong Kong law / Macau Law as Choice of Law for Hong Kong / Macau Enterprises in GBA

On 13 February 2025, the Supreme People's Court of China (the "SPC") issued an official statement that clarifies the legal framework for Hong Kong and Macau investment enterprises operating in the Greater Bay Area (the "GBA") on choice of law and place of arbitration.

Investment enterprises are defined as those wholly or partially invested by natural persons, enterprises, or other organisations from Hong Kong or Macau that are legally registered in Mainland China. The SPC's statement supports the choice of Hong Kong or Macau law as the applicable law for contracts and confirms the jurisdiction of Hong Kong and Macau as the designated seat of arbitration for Hong Kong and Macau investment enterprises. This statement ensures that such dispute resolution clauses are valid and enforceable provided that they do not violate any national laws or public interests of the PRC (the "New Policy"). This statement also confirms that the SPC will not entertain any application by any of the parties disputing the validity of the arbitration agreement or the arbitral award is invalid on the ground that there is an absence of Hong Kong or Macau related elements.

This New Policy enhances legal certainty and provides more options, flexibility and convenience for Hong Kong or Macau invested enterprises as they are now able to choose the law that they are familiar with and a suitable place for the seat of arbitration. Even if the disputes lack direct Hong Kong or Macau elements, the New Policy allows parties to choose Hong Kong or Macau law for their contracts and designate Hong Kong or Macau as the arbitration seat without worrying enforcement and recognition issues of awards.

The Department of Justice of Hong Kong has recently issued a discussion paper confirming the validity of this arrangement, which reinforces the legal framework supporting cross-border investments and dispute resolution within the GBA. The New Policy is also perceived as highly appealing to foreign investors who are accustomed to and favor the legal frameworks of Hong Kong and Macau but wish to take advantage of the opportunities within the GBA. With the New Policy in place, businesses can expect greater legal certainty, streamlined dispute resolution processes, and enhanced support for cross-border investments within the GBA in the furtherance of regional economic development.

The New Policy has taken effect since 14 February 2025.