Update: standard contract terms for an Asia-facing business

For any group with counterparties in Greater China, the governing-law and forum clause is not a boilerplate afterthought. It is the first document a court or arbitral tribunal will read if the commercial relationship fails. That clause, and the suite of standard terms built around it, determines whether your dispute goes to a neutral forum, whether an adverse award can be enforced where the assets sit, and whether the contract even survives translation into a second legal system.

The single most consequential development for Asia-facing standard terms is the entry into force of the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) on 29 January 2024. Under that ordinance, an effective Mainland judgment – monetary or non-monetary – may now be registered with the Court of First Instance in Hong Kong without the old requirement that the parties had agreed to exclusive jurisdiction in the Mainland court. The terms your business uses today were almost certainly drafted before that change.

This briefing identifies who is affected, what the change demands in practice, and the immediate action for groups with a cross-border Asia exposure.

What changed – and when it took effect

Before 29 January 2024, a Mainland money judgment could be registered in Hong Kong only where the parties had entered into an exclusive jurisdiction agreement designating a Mainland court. That requirement screened out most commercial relationships, which typically use either an arbitration clause or no express forum agreement at all.

Cap. 645 replaces that regime. The old choice-of-court mechanism under Cap. 597 no longer governs new judgments. In its place, a connection-based test applies. A Mainland court's jurisdiction is recognised if the defendant was present or resident in the Mainland, if the contract was performed there, or if other specified connecting factors exist. That is the normal fact pattern for any group sourcing, manufacturing, or selling through a Mainland entity.

The practical consequence is direct: standard terms that were designed under the old enforcement environment may no longer allocate forum and enforcement risk as their drafters intended. A governing-law clause that selects Hong Kong law, paired with a non-exclusive jurisdiction clause or silence on forum, now operates in a materially different enforcement context. Groups that have not reviewed their standard terms since the ordinance came into force are carrying unexamined exposure.

For arbitration users, the position is distinct. The 1999 Arrangement and its 2020 Supplemental Arrangement continue to govern mutual enforcement of arbitral awards between the Mainland and Hong Kong, and simultaneous enforcement applications have been permitted since the 2021 amendment to that regime. The HKIAC Administered Arbitration Rules 2024, effective 1 June 2024, also reflect updates to emergency relief and procedural sequencing. A contract that uses a Hong Kong-seated arbitration clause is engaging both the Arbitration Ordinance (Cap. 609) and the Mainland–Hong Kong Arrangements – two instruments that reward careful drafting at inception.

Who is affected across the corridor

The affected group is broad. It includes any business that contracts with Mainland Chinese entities, whether as buyer, supplier, licensor, distributor, or joint-venture partner. The exposure is not limited to large groups. Mid-market operators using template purchase orders or standard supply terms are equally in scope.

Our corporate counsel desk regularly reviews standard terms for international groups entering the Greater China corridor for the first time, as well as for established groups whose terms have not been updated in several years. The question we consistently encounter is not whether to use Hong Kong as the governing-law jurisdiction – Hong Kong's common-law system and English-language courts make it a rational choice for Asia-facing agreements – but whether the forum and enforcement clauses have been calibrated to the current regime.

The cross-border interface at stake runs across at least three systems: Hong Kong law as the governing law, Mainland Chinese law as the law of the counterparty and often of the place of performance, and – where assets or enforcement is in view – the offshore holding structure through which many groups operate their regional vehicle. A standard terms review that addresses only one of these layers will miss the day-two operating reality.

The immediate action

Groups affected by this development should take three steps promptly.

First, locate the governing-law and forum clauses in every standard agreement used with Mainland counterparties. Identify whether those clauses designate a forum exclusively, non-exclusively, or not at all. Identify whether the arbitration clause – if there is one – designates Hong Kong as the seat and specifies the HKIAC or another recognised institution.

Second, assess whether the enforceability position assumed when those terms were drafted still holds under Cap. 645 and the current Mainland–Hong Kong Arrangements. The new reciprocal enforcement regime creates both a tool and an exposure: it is easier for either party to register a judgment in the other jurisdiction. That cuts in both directions.

Third, review any related documents – confidentiality agreements, purchase orders, framework supply contracts, and any terms incorporated by reference – for consistency. A carefully drafted master agreement is undermined if the purchase order it governs contains a conflicting or silent forum clause.

For guidance on how the governing-instrument position applies to your specific counterparty structure and asset location, our corporate counsel practice can assess the current terms and prepare updated standard forms calibrated to the present enforcement environment. For cross-border supply and manufacturing arrangements specifically, the structural considerations set out in our guide to supply and manufacturing contracts with a Cyprus-law party are directly relevant to the governing-law choice. Groups operating through a joint venture should also read our analysis of shareholders' agreement terms for a UAE joint venture, which addresses forum and enforcement alignment at the structural level.

The sequence above describes the standard position. Your matter turns on the documents, the jurisdictions actually engaged, and the order of steps – which is where the route is won or lost. To discuss how the current regime applies to your standard terms across the Hong Kong and Mainland corridor, write to us at info@lockhartyip.com.

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