How to approach drafting an HKIAC arbitration clause for a Mainland China counterparty

The clause that governs your dispute resolution is the last thing negotiated and the first thing that matters when the relationship breaks down. For contracts with Mainland China counterparties, the drafting decision reaches further than most in-house counsel expect: it determines not just the forum, but whether an award can be enforced against assets on the Mainland at all.

An HKIAC arbitration clause in a commercial contract with a Mainland China counterparty allows the winning party to enforce the resulting award through the mutual enforcement arrangements between Hong Kong and the Mainland – a bilateral mechanism, not the New York Convention – provided the clause is drafted to satisfy the gateway conditions of both the Arbitration Ordinance (Cap. 609) and the relevant Mainland–Hong Kong enforcement arrangements. The specific sequence of drafting steps, and the gates within each step, determines whether that enforcement right is preserved or forfeited.

This guide sets out the decision the drafter faces, the correct sequence, the gates at each stage, the common mistakes, and a short checklist for in-house counsel and their advisers handling this cross-border interface.

Why the Hong Kong–Mainland interface changes the drafting calculus

Most standard arbitration-clause guidance is written for the New York Convention world: seat in a Convention state, award recognised in another Convention state. The Mainland–Hong Kong interface does not work that way. The two jurisdictions sit within one country. The New York Convention does not apply between them.

Instead, enforcement of Hong Kong-seated arbitral awards in the Mainland runs through a separate bilateral mechanism – the Arrangement Concerning Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR (the 1999 Arrangement), as supplemented in 2020 and further amended in 2021. The 2021 amendment permitted simultaneous enforcement applications in both jurisdictions, removing the prior sequencing bar. That mechanism operates on its own gateway conditions, which differ from Convention practice in several important respects.

What does that mean for the drafter? It means that an HKIAC clause drafted for a purely offshore or Western-counterparty context may not be fit for purpose here. The clause must be assessed against the Mainland gateway, not just the Hong Kong one. In our cross-border practice, the most common error we see is a clause copied from a prior contract without that assessment.

The commercial stakes are straightforward. If your counterparty's assets sit on the Mainland – and for most significant commercial counterparties they do – the award is only as useful as the enforcement route behind it. The clause is that route.

Step 1 – Confirm the seat and why Hong Kong is the right choice for this counterparty

The seat of arbitration is the legal domicile of the proceedings: it determines which national courts supervise the arbitration, which procedural law governs it, and – critically for this context – which enforcement regime applies. For contracts with Mainland counterparties where the dispute is expected to arise from a commercial transaction governed by a foreign or Hong Kong-law choice, Hong Kong as seat is typically the correct answer.

The Arbitration Ordinance (Cap. 609), modelled on the UNCITRAL Model Law, provides the supervisory framework. The Court of First Instance of the High Court supervises Hong Kong-seated arbitrations. The HKIAC, as the administering institution, applies its own rules – the HKIAC Administered Arbitration Rules (2024 Rules, effective 1 June 2024).

The seat should be stated expressly in the clause. An unstated or ambiguous seat creates an immediate enforcement risk: if the Mainland court cannot confirm that the award arose from a Hong Kong-seated arbitration, the bilateral arrangement may not apply. The HKIAC's model clause names Hong Kong as the seat; follow that model, do not paraphrase it.

One point that frequently surprises foreign principals: the seat is a legal concept, not a physical one. Hearings can take place anywhere. What matters is the legal designation. Stating "hearings in Hong Kong" is not a substitute for "the seat of the arbitration shall be Hong Kong."

Step 2 – Select the institution and the rules, and state them precisely

For a Mainland-counterparty contract, the HKIAC is the correct institutional choice for most situations. It is recognised by the Mainland courts as an established arbitral institution, which matters at the enforcement stage. An ad hoc arbitration (one conducted without an administering institution) is enforceable in principle under the arrangements, but Mainland practice is more comfortable with institutional awards. The risk differential is real.

The clause must name the institution and the rules with precision. "HKIAC Rules" without specifying the version creates an ambiguity: which version governs if the rules are updated between signing and commencement? The HKIAC's own model clause resolves this by referring to the rules "in force at the date of commencement of the arbitral proceedings." Adopt that formulation verbatim.

State the number of arbitrators. A clause silent on this leaves the number to the HKIAC to determine under its rules, which is workable but may not reflect the parties' intent. For mid-market contracts, a sole arbitrator is typically appropriate; for higher-value or technically complex disputes, a three-member tribunal is the standard. The choice has cost and time implications. Make it at the drafting stage, not in a subsequent dispute about constitution.

If the contract involves a Mainland state-owned enterprise as counterparty, verify whether that entity has any institutional preferences or regulatory requirements governing its arbitration agreements. Some categories of Mainland entity are subject to specific rules about choice of arbitral institution; this is a verification step for local counsel, not a matter the clause drafter can resolve unilaterally.

Step 3 – Handle the governing law of the arbitration agreement separately from the contract

The governing law of the main contract and the governing law of the arbitration agreement are distinct questions. Most commercial contracts state a governing law for the main contract – often Hong Kong law or English law in transactions involving Mainland counterparties. That choice does not automatically apply to the arbitration agreement embedded within the contract.

Why does this matter? The validity and enforceability of the arbitration agreement itself may be assessed by a Mainland court at the enforcement stage under the law of the seat – Hong Kong – or, in some circumstances, under the law of the place of enforcement. An arbitration agreement valid under Hong Kong law may face a different analysis if the enforcing court applies Mainland law to the agreement itself. This is a gate that practitioners miss.

The prudent approach is to specify expressly in the arbitration clause that the clause itself is governed by Hong Kong law. The HKIAC's model wording does not include this by default; it should be added by the drafter for Mainland-counterparty contracts. We regularly advise clients to include this addition as a separate sentence within the clause, not as part of the governing-law clause for the main contract.

The separability of the arbitration agreement – the principle that the clause survives the termination or invalidity of the main contract – is well-established under both the Arbitration Ordinance and Mainland arbitration law. The clause does not need to state this; it is implied by law. But if the counterparty's legal team attempts to add carve-outs that qualify the clause's survival, resist them. Any qualification to separability creates an enforcement vulnerability.

Step 4 – Draft the scope of disputes and the carve-outs with the Mainland enforcement gate in mind

The enforcement arrangements between Hong Kong and the Mainland apply to awards arising from "commercial" disputes. That term is interpreted broadly, but there are exclusions: certain categories of dispute, including some involving governmental or regulatory acts, may fall outside the arrangements. The drafter should define the scope of the arbitration agreement to capture all commercial disputes arising from or in connection with the contract.

Use the standard formulation: "any dispute, controversy or claim arising out of, relating to, or in connection with this agreement, including its existence, validity, interpretation, performance, breach or termination." This is the HKIAC's recommended scope. It is broad enough to capture tortious and restitutionary claims connected to the contract, not just pure contractual claims. Narrower scope language – "disputes under this contract" or "disputes about payment" – creates gaps that a counterparty can exploit to litigate ancillary claims outside the arbitration.

Carve-outs are the primary source of scope risk. The two most common commercial carve-outs – urgent interim relief and IP disputes – need specific attention.

On interim relief: the parties may preserve the right to seek urgent relief from the courts. For Mainland-counterparty contracts, the more important mechanism is the Arrangement for Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region, which has been in force since 1 October 2019. Under this arrangement, a party to a Hong Kong-seated HKIAC arbitration may apply to a Mainland court for interim measures – including property preservation orders – before or during the arbitration. This is a significant practical advantage. The clause should not be drafted in a way that inadvertently waives or restricts this right.

On IP disputes: some categories of IP dispute are subject to exclusive Mainland court jurisdiction under Mainland law. If the contract involves IP-intensive subject matter, the carve-out must be carefully calibrated. A blanket carve-out for all IP disputes can remove a large category of commercially important claims from the arbitration.

Step 5 – Address language, law, and procedural choices that affect Mainland proceedings

The language of the arbitration has a direct practical effect on Mainland enforcement proceedings. Mainland courts require documents submitted in Chinese, or certified translations. An award and the key procedural record in Chinese – or with certified translations already prepared – reduces friction at the enforcement stage. The clause should specify the language, and many practitioners specify bilingual proceedings or allow the tribunal to permit dual-language submissions.

The choice of substantive law for the main contract affects how the arbitral tribunal analyses the merits, and may affect how a Mainland court characterises the transaction in an enforcement challenge. Contracts governed by Mainland law are arbitrable in a Hong Kong-seated arbitration; there is no rule requiring the seat to match the governing law. However, if the contract is governed by Mainland law, the parties should retain Mainland-law expertise in the arbitration. The governing-law designation in the main contract is separate from the seat designation in the arbitration clause.

The procedural rules governing the arbitration are set by the HKIAC Administered Arbitration Rules. These rules provide for emergency arbitrator proceedings – ordinarily completed within 14 days of file transmission – and for expedited procedures where the amount in dispute falls within a defined threshold, with an award delivered within 6 months of file transfer to the tribunal. Whether to elect the expedited procedure is a contracting decision; some practitioners include an express election for expedited procedure in mid-market contracts to reduce time and cost.

Step 6 – Review the finalised clause against the enforcement checklist

Before signing, test the clause against the enforcement gate – the conditions a Mainland court will apply when asked to recognise and enforce the award. The core conditions are: the arbitration agreement is in writing; the agreement designates an established arbitral institution; the seat is in Hong Kong; the award is final and binding; the subject matter is arbitrable under Mainland law; and enforcement is not contrary to Mainland public policy.

Each condition maps to a drafting choice. The writing requirement means the clause must appear in the signed contract or in a separately signed ancillary document; oral agreements or conduct-based agreements will not satisfy it. The institutional requirement means the HKIAC must be named. The seat requirement means Hong Kong must be expressly designated. The finality condition means the clause should not include appeal mechanisms that qualify the award's finality before enforcement.

Public policy is the residual Mainland-court ground for refusal. In practice, public policy is invoked rarely in commercial-arbitration enforcement, but contracts involving sensitive Mainland-regulated sectors – natural resources, media, certain financial services – carry a higher risk of a public-policy objection. If the contract sits in a sensitive sector, the clause design should be reviewed against that risk before signing.

If an earlier contract already governs the relationship and its arbitration clause is deficient, it is not too late to amend. Parties can execute an amendment agreement incorporating a new or revised arbitration clause. That amendment must itself comply with the writing and validity requirements to be effective.

For in-house teams managing a portfolio of contracts with Mainland counterparties, a clause audit across the portfolio is the single most effective risk-reduction exercise available. In our experience, a significant proportion of existing contracts contain one or more of the common deficiencies identified in this guide – and the risk is discovered only when a dispute arises, by which point the options are reduced.

The sequence above describes the standard position. Your contract turns on its specific commercial terms, the counterparty's entity type, and the sector – and those details determine which gates actually apply and in what order.

To discuss how the enforcement route applies to your specific contract and counterparty, contact info@lockhartyip.com.

Common mistakes and how to avoid them

The most frequently recurring error is the copied clause: a clause taken from a prior contract with an offshore counterparty, or from a generic template, without adapting it to the Mainland enforcement regime. The template may be perfectly valid for a New York Convention enforcement context and fail at the Mainland gateway.

The second most common error is the silent seat. Practitioners sometimes assume the seat is implied by naming the HKIAC. It is not. The seat must be stated. A clause that names the HKIAC but says "hearings to be held in Hong Kong" without designating Hong Kong as the legal seat creates ambiguity that a Mainland court, in a refusal application, may exploit.

Third: the overly narrow scope. "Disputes arising under this agreement" or "payment disputes" will leave tortious claims, pre-contractual claims, and claims relating to termination outside the arbitration clause. For Mainland-counterparty contracts, where counterparty litigation risk is real, leaving gaps in the scope is a structural error.

Fourth: failing to include the governing law of the arbitration agreement. As set out in Step 3, this creates a vulnerability at the enforcement stage that is easily avoided at the drafting stage.

Fifth: treating the interim-measures arrangement as separate from the clause design. The right to seek Mainland property preservation through the 2019 arrangement is valuable. A carelessly drafted carve-out – or a waiver of court jurisdiction broader than intended – can remove it.

What foreign counsel sometimes get wrong is the assumption that Mainland courts approach enforcement challenges in the same manner as courts in common-law jurisdictions. They do not. The grounds for refusal, the procedural requirements for the enforcement application, and the treatment of public policy are specific to Mainland law. The clause design should account for that specificity from the outset.

If a prior arbitration under a deficient clause produced a stalled or refused enforcement, a second read of the clause and the enforcement record can identify whether any routes remain open. The grounds for refusal are finite; an adverse first application does not always close every option.

To discuss a stalled enforcement or a clause that may need amendment, email info@lockhartyip.com.

Decision checklist: HKIAC clause for a Mainland China counterparty

The following checklist is a working tool for in-house counsel and their cross-border advisers. It is not a substitute for specific legal advice on the contract and counterparty in question.

• Is Hong Kong designated expressly as the legal seat – not merely the location of hearings?
• Is the HKIAC named as the administering institution, with the rules referenced by the "rules in force at the date of commencement" formulation?
• Is the number of arbitrators stated?
• Does the scope of the clause capture all disputes "arising out of, relating to, or in connection with" the contract?
• Is the governing law of the arbitration agreement itself stated as Hong Kong law?
• Has the clause been reviewed against the Mainland enforcement gateway conditions?
• Are carve-outs – particularly for IP and interim relief – calibrated to preserve the right to Mainland property preservation under the 2019 interim-measures arrangement?
• Is the language of the arbitration specified, with consideration given to Mainland enforcement document requirements?
• If the counterparty is a Mainland state-owned enterprise, has local counsel verified any specific institutional or regulatory constraints on the arbitration agreement?
• If an existing clause is being relied upon, has it been reviewed against each of the above points?

For a structured assessment of your clause or contract portfolio across the Hong Kong and Mainland enforcement regimes, write to us at info@lockhartyip.com.

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• Disputes & Arbitration – cross-border arbitration, enforcement, and interim relief across Greater China
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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.