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 in Ta 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. China reports surge in long-term investment inflows despite talk of decoupling from US 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. The case was brought before the Shenzhen Court of International Arbitration for a ruling in 2017, but after three hearings in 2018, the tribunal has postponed its ruling 11 times – with the latest deadline at the end of 2020, according to a statement by Brilliant Circle. Hong Kong maintains a Common Law system and an independent judiciary, both of which are more trusted by local and foreign investors to settle disputes. For all foreign companies with operations in the Greater Bay Area, it’s desirable to have an arbitration tribunal that can make rulings and resolve disputes in a more efficient way than ordinary local courts Zheng Jinghui “If we had choice, we would choose to arbitrate in a Hong Kong court,” said Zheng Jinghui, a vice-president of Brilliant Circle. “For all foreign companies with operations in the Greater Bay Area, it’s desirable to have an arbitration tribunal that can make rulings and resolve disputes in a more efficient way than ordinary local courts. As such, the proposal by the secretary for justice is extremely important. “Under Hong Kong law, the date of rendering the award must be no later than three months from the date of the close of the arbitration or of the relevant phase. Our case just takes too long.” The Shenzhen court and the former executive both declined to comment when contacted about the case. The proposal comes at a time when the Chinese government is trying to more closely integrate Hong Kong’s economy with the mainland. While China has imposed a strict national security law on the city, Beijing is also attempting to maintain the city’s function as a bridge for global investors into mainland China. But for now, Hong Kong investors who invest in China through a mainland entity or company still have to solve disputes in mainland courts, said Thomas So, a partner at international law firm Mayer Brown, who specialises in dispute resolution. “The purpose of the new idea proposed by the secretary for justice is to ask for special treatment that will allow Hong Kong investors in the Greater Bay Area a choice on the resolution forum to be in Hong Kong,” said So, who represents banks, developers and corporate clients on equity disputes. “It will be welcomed by Hong Kong companies and entrepreneurs as they are more familiar with the legal system and the practice in the city.” The proposed law amendments will also benefit the legal services sector in Hong Kong, he added. On the mainland side, China has shown a willingness to give Hong Kong law, and Hong Kong lawyers, a bigger role to play in the fields of business and commerce. If Hong Kong and foreign investors are given the option to choose Hong Kong law and courts for dispute resolution, most would Luo Aiping China’s State Council last month issued a provisional regulation that allows lawyers from Hong Kong and Macau to provide legal services in neighbouring Guangdong province. The Qianhai free-trade zone in Shenzhen has also started to make arbitrary rulings in accordance with Hong Kong law, although the case of Brilliant Circle shows there are still gaps between Shenzhen and Hong Kong. “Hong Kong law and arbitrators have better credibility for foreign and Hong Kong investors,” said Luo Aiping, a partner with Beijing Yingke (Guangzhou) Law Firm. “If Hong Kong and foreign investors are given the option to choose Hong Kong law and courts for dispute resolution, most would,” Luo said.