Update: a services and licensing agreement governed by Hong Kong law

Cross-border services arrangements that name Hong Kong law as the governing law are more common than most principals realise – and more exposed than most of their contracts reflect. Where the counterparty is Mainland-connected, where intellectual property flows across the boundary, or where payment runs through an offshore holding chain, the choice of Hong Kong law is a structural decision with enforcement consequences from day one.

A services and licensing agreement governed by Hong Kong law is subject to the Companies Ordinance (Cap. 622) for any corporate-capacity issues, the common-law principles of contract formation and interpretation developed by the Hong Kong courts, and – where a dispute arises – either litigation before the Court of First Instance or arbitration under the Arbitration Ordinance (Cap. 609). The governing-law clause determines which body of rules applies to interpretation, performance, breach and remedy; the forum clause determines where a claim is resolved and, critically, where an award or judgment can be enforced.

This briefing covers the trigger, the affected parties, and the immediate steps advisers and in-house counsel should take.

What the development is and why it matters now

Two developments have sharpened the practical importance of Hong Kong governing-law clauses in services and licensing agreements.

First, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645), in force since 29 January 2024, expanded the range of Hong Kong court judgments that can be registered and enforced on the Mainland – and vice versa. That change affects every services or licensing arrangement where performance, payment or IP exploitation occurs across the Mainland–Hong Kong boundary. An agreement drafted before that date may have been built around assumptions about enforcement that no longer reflect the current position.

Second, the Arbitration Ordinance (Cap. 609), which is modelled on the UNCITRAL Model Law, now sits alongside a mature set of HKIAC Administered Arbitration Rules – the 2024 Rules, effective 1 June 2024 – that most template service agreements do not yet reference by their current version. An outdated arbitration clause in a Hong Kong-governed agreement may operate correctly in form but sub-optimally in practice.

Together, these developments mean that a services or licensing agreement with a Hong Kong governing-law clause written before mid-2024 warrants a formal review of both its dispute-resolution and its enforcement architecture.

The sequence above describes the standard position. Your agreement turns on the specific governing-law clause, the dispute-resolution mechanism selected, and the jurisdictions where assets and obligations actually sit – which is where the enforcement route is won or lost.

To discuss how these developments apply to your cross-border services or licensing position, contact info@lockhartyip.com.

Who is affected across the cross-border corridor

Any principal with a services or licensing agreement that names Hong Kong law should review the instrument. The exposure is sharpest in three situations.

• Mainland–Hong Kong IP licensing: where a licensor in Hong Kong grants rights to a Mainland operating entity, or where the reverse flow applies. The governing-law clause controls how the licence is interpreted; the forum clause controls where a breach claim runs; and Cap. 645 now determines how a resulting Hong Kong judgment travels to the Mainland. These three elements must align.
• Offshore-to-Hong Kong service arrangements: where a BVI or Cayman holding entity contracts with a Hong Kong service provider or vice versa. The absence of a clear seat of arbitration, or a forum clause that points to a jurisdiction other than Hong Kong, can produce an enforcement gap that only emerges at the point of dispute.
• Technology and software licensing across the boundary: where source-code escrow (an arrangement under which software source code is deposited with a neutral custodian for release on defined trigger events), API access rights and maintenance obligations run across the Mainland–HK interface. These agreements often carry governing-law clauses added at a late drafting stage without analysis of the enforcement chain.

Groups with European, CIS or Middle Eastern parent structures that use Hong Kong as a contracting hub for Greater China operations are similarly affected. The governing-law choice in the Hong Kong-level agreement controls the interpretation of the entire contractual stack where Hong Kong is the hub entity's seat.

Our desk regularly advises on cross-border services and licensing arrangements of this kind – from initial drafting through to enforcement review when a dispute arises.

If an earlier agreement has already produced a stalled enforcement position or an ambiguous governing-law outcome, a second read can identify the structural issue and the routes still available. Write to info@lockhartyip.com.

What to do now

Three immediate steps apply to any principal with a services or licensing agreement governed by Hong Kong law.

First, audit the governing-law and forum clause together. A governing-law clause that names Hong Kong law paired with a forum clause that points elsewhere – or that is silent on seat – creates an interpretive conflict. The two provisions must be read as a system, not in isolation. Where the agreement is silent on the seat of arbitration, the default under the Arbitration Ordinance is Hong Kong, but that default should be made express rather than assumed.

Second, review the enforcement chain. If the counterparty or its assets sit on the Mainland, Cap. 645 now provides the primary route for enforcing a Hong Kong court judgment there. The scope of the Ordinance includes monetary and non-monetary civil and commercial judgments, with defined exclusions. Whether the agreement's subject matter falls within or outside those exclusions is a factual and legal question that should be answered before a dispute arises, not after.

Third, update the arbitration reference. Where the agreement includes an HKIAC arbitration clause, verify that the reference is to the current HKIAC Administered Arbitration Rules. The 2024 Rules, effective 1 June 2024, carry updated provisions on emergency relief and expedited procedure that affect the tactical options available to a claimant in the early stages of a dispute.

For cross-border service and licensing matters, we work alongside our corporate counsel practice, drawing on the analysis developed in our work on terminating or exiting cross-border commercial relationships and the standard-terms considerations addressed in our briefing on standard contract terms for Asia-facing businesses.

Parties should verify the current position under Cap. 645 and the 2024 HKIAC Rules before acting, as the regime continues to develop through administrative and judicial practice.

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Related

• Corporate Counsel
• Terminating Or Exiting Cross Border Commercial Relationship Analysis
• Standard Contract Terms Asia Facing Business Briefing

This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.