Update: a supply or manufacturing contract with the Cayman Islands party

When a supply or manufacturing arrangement sits above a Cayman Islands holding entity, the governing-law and forum clause is not a boilerplate decision – it is the structural spine of the contract, and the document that determines what enforcement looks like on day two. The commercial picture changed in practical terms in early 2024, when the Mainland–Hong Kong judgment-recognition regime under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance came into force, reshaping the enforcement corridor that sits behind many cross-border supply chains that route through the Cayman Islands and Hong Kong.

This briefing sets out what groups with a Cayman Islands counterparty need to check now, who the development affects most directly, and the immediate step.

What has changed – and why the Cayman–Hong Kong corridor is in focus

The Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance – known informally as Cap. 645 – took effect on 29 January 2024. It replaced the earlier choice-of-court regime and removed the old requirement for an exclusive jurisdiction clause as a condition of recognition.

The practical consequence for supply and manufacturing contracts is this. A Hong Kong governing-law clause paired with a Hong Kong forum clause now carries an enforcement tail that did not exist in the same form before that date. Judgments obtained in Hong Kong courts can be taken to the Mainland for registration and enforcement through a defined procedural route. For a Cayman Islands holding entity that sits above a Mainland operating company, the forum choice in the supply contract now determines whether that enforcement tail is available at all.

Cayman Islands companies are common as group vehicles above Greater China operations. The governing-law and forum clauses in their supply and manufacturing contracts are rarely revisited after first execution. That is where the exposure sits today.

The window matters. Contracts executed before 29 January 2024 operate under the old regime. Contracts renewed or freshly executed from that date engage the new one. Groups that renewed on standard terms without updating the dispute-resolution clause may have missed the alignment point. The Arbitration Ordinance (Cap. 609) provides an alternative route – arbitration awards have their own recognition framework between Hong Kong and the Mainland – and in some fact patterns that route remains preferable. The choice turns on the contract structure, the asset location, and the counterparty profile.

Who this affects across the Hong Kong–Cayman corridor

Our desk regularly advises on cross-border supply arrangements where a Cayman Islands entity is the contracting party on one side and a Greater China operating entity sits on the other. The pattern is consistent: the governing-law clause defaults to the Cayman Islands or to a third jurisdiction, and the forum clause points to the same place. Neither choice reflects where the assets are or where enforcement will actually need to run.

The groups most directly affected by the current position are those in four situations.

First, groups with a Cayman Islands holding entity as the named manufacturer or supplier under a long-form contract with a Mainland Chinese operating counterparty. Second, Hong Kong intermediary companies that execute supply agreements on behalf of a Cayman parent and have not updated their standard terms since the Cap. 645 commencement date. Third, groups that arbitrate under institutional rules but have not verified that the seat of arbitration aligns with the interim-measures Arrangement that has been in effect since 1 October 2019. Fourth, procurement teams that rely on a governing-law clause pointing to English law or a third-country law without a corresponding forum clause that can be operationalised where the assets sit.

In each of these situations, the question is the same: if the counterparty defaults and the assets are in Greater China, what does the enforcement route actually look like? If the answer requires a detour through a jurisdiction with no direct recognition mechanism, the clause needs attention.

The immediate action

For a supply or manufacturing contract with a Cayman Islands party, three steps are worth taking now.

First, identify whether the governing-law and forum clause was last reviewed before or after 29 January 2024. If the contract is up for renewal in the near term, the review point is now – not at signature.

Second, consider whether a Hong Kong seat for arbitration under the Arbitration Ordinance or a Hong Kong governing-law clause with Hong Kong jurisdiction better serves the enforcement objective. The answer is fact-specific, but the analysis should happen before execution, not after a dispute arises.

Third, verify that the Cayman Islands entity has the contractual capacity and the operational substance to perform and to be sued in the chosen forum. A Cayman Islands company that is purely a holding vehicle may introduce complications at enforcement that the governing-law clause alone cannot resolve.

We regularly advise on the governing-law, forum, and enforcement architecture of cross-border supply and manufacturing contracts involving Cayman Islands parties and Greater China counterparties. For a read on how the current regime applies to your contract, contact us at info@lockhartyip.com.

For a wider view of the corporate-counsel considerations in cross-border contracting, visit our Corporate Counsel practice. For the structuring considerations that arise in parallel joint-venture and shareholders' agreement contexts, see our analysis of shareholders' agreement terms in a cross-border joint venture. For standard contract-terms guidance relevant to Asia-facing businesses, see our note on standard contract terms for the Asia-facing business.

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