Foreign investors in China’s Greater Bay Area could benefit from proposal to use Hong Kong laws

Hong Kong businesses in Shenzhen and Guangzhou may be able to choose Hong Kong as the applicable jurisdiction in commercial deals and arbitration of disputes

Beijing is attempting to maintain Hong Kong’s function as a bridge for global investors into mainland China

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The proposal was published in Ta Kung Pao, a Hong Kong newspaper that is backed by the mainland Chinese government, showing the likelihood of support from Beijing. Photo: Shutterstock.

Published: 6:15pm, 22 Nov 2020Updated: 11:18pm, 22 Nov 2020

Hong Kong has proposed a legal change that would boost the city’s role in settling business disputes in the Greater Bay Area, a move that could protect the city’s function as a gateway for foreign investment in mainland China.

Last month, Hong Kong Secretary for Justice Teresa Cheng Yeuk-wah floated the idea that Hong Kong businesses in Shenzhen and Guangzhou could be able to choose Hong Kong as the applicable jurisdiction in commercial deals and use the city for any potential arbitration of disputes.

The proposal was published inTa Kung Pao, a Hong Kong newspaper that is backed by the mainland Chinese government, showing the likelihood of support from Beijing.

The proposal, if approved by Beijing, will change a long-standing legal practice in China that mainland entities funded by Hong Kong money must use Chinese arbitrary panels or courts if disputes arise with local partners, which can be painful for Hong Kong and international investors who are not familiar with the mainland legal system.

The change could offer relief to businesses such as Brilliant Circle Holdings International. The Hong Kong-listed company had a dispute with a former executive and both sides agreed in their contract that the deal would be governed by Hong Kong law.