Supreme People’s Court Judicial Interpretation on Hong Kong and Macau Investment Enterprises in the Greater Bay Area

On 14 February 2025, the Supreme People’s Court of China (SPC) published a judicial interpretation, catchily titled “Reply of the SPC on the Effectiveness of Agreements Choosing Hong Kong or Macau Law as the Applicable Law for Contracts or Choosing Hong Kong or Macau as the Arbitration Seat for Hong Kong and Macau Investment Enterprises Registered in Mainland China within the Guangdong-Hong Kong-Macao Greater Bay Area”.

On 14 February 2025, the Supreme People’s Court of China (SPC) published a judicial interpretation, catchily titled “Reply of the SPC on the Effectiveness of Agreements Choosing Hong Kong or Macau Law as the Applicable Law for Contracts or Choosing Hong Kong or Macau as the Arbitration Seat for Hong Kong and Macau Investment Enterprises Registered in Mainland China within the Guangdong-Hong Kong-Macao Greater Bay Area”.

In short, the interpretation purports to address legal issues surrounding Hong Kong and Macau investment enterprises registered in the Mainland areas of the Greater Bay Area (GBA). The interpretation clarifies the applicability of Hong Kong and Macau law in contractual agreements and the validity of arbitration agreements designating Hong Kong or Macau as the arbitral seat.

Key provisions of the Judicial Interpretation

The key provisions of the interpretation are as follows:

• Choice of Law: If one or both parties to a contract are Hong Kong or Macau investment enterprises registered in Shenzhen or Zhuhai, and they choose Hong Kong or Macau law as the applicable law for their contract, the People’s Court will support this choice, provided it does not violate mandatory provisions of national law or harm public interests.
• Arbitration Agreements: For Hong Kong or Macau investment enterprises registered in any of the nine cities within the GBA¹, if the parties agree to designate Hong Kong or Macau as the arbitral seat, the People’s Court will not support claims that the arbitration agreement is invalid due to the absence of Hong Kong or Macau-related elements.
• Recognition and Enforcement of Arbitral Awards: If a dispute is submitted to arbitration as agreed, and an arbitral award is made, the People’s Court will not support claims that the arbitral award should not be recognised or enforced on the grounds that the dispute lacks Hong Kong or Macau-related elements or that the arbitration agreement is invalid.
• Definition of Investment Enterprises: The interpretation defines “Hong Kong investment enterprises” and “Macau investment enterprises” as those wholly or partially invested by natural persons, enterprises, or other organisations from the Hong Kong Special Administrative Region or the Macau Special Administrative Region and registered in Mainland China.

Significance and impact of the Judicial Interpretation

The judicial interpretation has several significant implications for the legal and business environment in the GBA:

• Legal Certainty and Predictability: By clarifying the applicability of Hong Kong and Macau laws and arbitration agreements, the interpretation provides greater legal certainty and predictability for investors. This is particularly important for cross-border investments, where legal ambiguities can pose significant risks.
• Enhanced Investment Protection: The interpretation strengthens the protection of Hong Kong and Macau investors by ensuring that their choice of law and arbitration agreements are respected. This can enhance investor confidence and encourage more investments in the GBA.
• Promotion of the GBA Integration: The interpretation aligns with the broader goal of promoting economic integration within the GBA. By facilitating the use of Hong Kong and Macau laws and arbitration mechanisms, it supports the development of a more integrated and cohesive legal framework in the region.
• Judicial Support for Arbitration: The interpretation underscores the judiciary’s support for arbitration as a means of dispute resolution. By upholding the validity of arbitration agreements and the enforceability of arbitral awards, it reinforces the role of arbitration in resolving commercial disputes.
• Attractiveness to Foreign Investors: The interpretation may also make the GBA more attractive to foreign investors who are familiar with and prefer the legal systems of Hong Kong and Macau. This can contribute to the region’s economic growth and development.

Conclusion

The SPC’s judicial interpretation represents a landmark development in the legal framework governing the GBA. By recognising the validity of Hong Kong and Macau law in contracts and arbitration agreements, the interpretation enhances legal certainty, promotes cross-border economic collaboration, and reinforces the GBA’s position as a global business hub. This interpretation lays a strong foundation for the continued integration of the GBA’s legal and economic systems. It reflects China’s commitment to fostering a dynamic and investor-friendly environment within the framework of “one country, two systems,” ensuring the region’s long-term growth and competitiveness.

Anson Cheung, Trainee Solicitor, assisted in the preparation of this briefing.

Footnote

1. Guangzhou, Shenzen, Zhuhai, Foshan, Huizhou, Zhongshan, Jiangmen and Zhaoqing