A practical guide to a supply or manufacturing CIS

A commercial group moving goods or production capacity across the boundary between Hong Kong and the CIS (the Commonwealth of Independent States, the grouping of post-Soviet republics that includes Russia, Kazakhstan, Ukraine, Azerbaijan, Uzbekistan and their neighbours) faces a contract-drafting decision that its domestic counsel is rarely equipped to answer alone. The governing-law clause and the dispute-resolution clause are not boilerplate. They are the two variables that determine whether the contract is worth enforcing – and where.

A supply or manufacturing contract with a CIS counterparty should be governed by a neutral, commercially developed body of law – Hong Kong law being the most practicable choice for groups with a Greater China or Asia-Pacific operating base – and should designate a recognised international arbitration seat, typically Hong Kong, with enforcement rights under the New York Convention. The governing instrument is the Arbitration Ordinance (Cap. 609), modelled on the UNCITRAL Model Law, which applies to arbitrations seated in Hong Kong.

This guide sets out the decision, the sequence, and the common mistakes. It is written for general counsel, legal directors and in-house teams handling cross-border commercial relationships in the CIS corridor.

What decision does the in-house team actually face?

The immediate commercial pressure is to close the contract and move goods. The governing-law and forum clause feels secondary. It is not. Every cross-border supply or manufacturing contract with a CIS party involves a choice between three structuring paths, and the choice is made – explicitly or by default – the moment the contract is signed.

Path one is a CIS-jurisdiction governing law with a CIS court or arbitration clause. This is the path a CIS counterparty will push for. It is the least favourable for a Hong Kong or offshore holding group. Enforcement of a foreign judgment or arbitral award against assets in the CIS is possible in some states but highly variable. The quality of local courts differs materially across the region.

Path two is an offshore governing law – English law, Hong Kong law, or Swiss law – combined with an international arbitral seat (London, Hong Kong, Stockholm, Singapore). This path gives the international party a neutral, well-tested body of contract law and an award that is enforceable in all New York Convention states. Most CIS states are New York Convention parties.

Path three is a hybrid: a CIS governing law for operational matters, with an international arbitration clause for disputes. This is sometimes commercially necessary but adds interpretive complexity. Courts and tribunals in different jurisdictions can read the same hybrid clause differently.

In our cross-border practice, the question that determines the right path is not which party has more bargaining power at signing. It is where the assets sit at the point of any future enforcement action. The answer to that question drives everything that follows.

Which governing law should apply, and why does it matter here?

Hong Kong law is a well-developed, commercially neutral, common-law system. English is an official working language of the Hong Kong courts. The body of Hong Kong contract law on supply and manufacturing relationships is deep, and international counsel can advise on it with precision. For a group with a holding entity in Hong Kong or an offshore centre such as the BVI or the Cayman Islands, designating Hong Kong law as the governing law of a CIS supply contract creates a direct line between the operating contract and the group's holding structure.

The alternative most frequently put forward by CIS counterparties is their own national law. Kazakhstan, Russia, Uzbekistan and other CIS states each operate civil-law systems derived from different versions of the Soviet civil code, later significantly reformed. The quality of commercial-law development varies across states and across the decade of reform. For an international party without domestic counsel in the relevant CIS state, accepting local governing law means accepting interpretive risk that is difficult to price.

There is a practical middle ground. Where the CIS counterparty requires a local-law reference for operational matters – customs, export licences, sanitary and phytosanitary certificates, specific product-liability standards – those provisions can be carved out and governed by local mandatory rules, while the general contract obligations, payment, remedies and dispute resolution remain under Hong Kong law. This is a clause-level drafting choice, not a structural one.

One common mistake is to agree on "English law" as a shorthand for "neutral law" without considering the enforcement implications. English law is commercially equivalent to Hong Kong law for most supply-contract purposes. The difference lies in enforcement: a Hong Kong-seated award has additional enforcement routes in the Mainland under the Mainland–Hong Kong Arrangements, whereas an English-law, London-seated award does not. For groups with any Mainland-connected asset or counterparty, that distinction is material.

How should the dispute-resolution clause be structured?

International arbitration is the correct default for a supply or manufacturing contract with a CIS party. Most CIS states are contracting states to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning an award made at a recognised international seat is – in principle – enforceable in those states by way of application to the national courts.

"In principle" is the operative phrase. The quality of enforcement varies by CIS state and has varied over time. Kazakhstan and Armenia have comparatively well-developed commercial court systems and track records of enforcing international awards. Russia's enforcement record became significantly more complicated after 2022 and remains unpredictable. Ukraine's courts have been operating under conditions of armed conflict. In our cross-border practice, we advise clients to map the enforcement jurisdictions before finalising the clause, not after a dispute arises.

The recommended structure for most CIS corridor contracts is: HKIAC administered arbitration, Hong Kong seat, English or Hong Kong law, three arbitrators for contracts above a material threshold and one for smaller disputes. The HKIAC Administered Arbitration Rules – the 2024 Rules, effective 1 June 2024 – provide a well-tested procedural framework with emergency-relief provisions, confidentiality rules and an expedited procedure for qualifying claims.

The emergency arbitrator mechanism under the HKIAC Rules is ordinarily completed within 14 days of file transmission. That is a concrete procedural timeline that matters in supply chains: injunctive relief in a manufacturing dispute can prevent a counterparty from diverting goods or intellectual property before a full tribunal is constituted.

Two further points on clause structure. First, the clause must be self-contained and pathological-clause-free. A clause that says "disputes shall be resolved by arbitration in Hong Kong in accordance with HKIAC rules, provided that the courts of [CIS state] shall have jurisdiction" creates a multi-forum ambiguity that has caused real enforcement failures. Second, the language of the arbitration should be specified: English is the default choice for international parties and aligns with HKIAC practice.

What is the sequence from term sheet to signed contract?

The following sequence reflects the order in which cross-border supply and manufacturing contracts should be built. Each step has a gate: proceed only if the gate condition is met.

Step 1 – Counterparty due diligence. Before any term sheet is exchanged, confirm the counterparty's legal identity, registration status, authorised signatories and – critically – any sanctions exposure. Hong Kong implements United Nations sanctions. It does not give domestic effect to unilateral measures of other states. However, a Hong Kong-incorporated party that contracts with a UN-sanctioned entity creates compliance and reputational exposure that cannot be unwound post-signing. The gate: clean sanctions and KYC file for the counterparty and any identified UBO (ultimate beneficial owner).

Step 2 – Structure and entity mapping. Identify which entities within the group will be the contracting parties. A supply or manufacturing contract entered into by a Hong Kong operating company has different tax and enforcement consequences from one entered into by a BVI or Cayman holding entity. The Significant Controllers Register (SCR) – a register of persons with significant control over the company, which all Hong Kong-incorporated companies have been required to maintain since 1 March 2018 – must be current before the entity is used as a contracting party. The gate: correct contracting entity identified; corporate authorisations in order.

Step 3 – Commercial terms and heads of agreement. Capture the key commercial variables: product specification, price adjustment mechanisms, delivery terms, quality standards, minimum purchase obligations, exclusivity if any, IP ownership for tooling or product development. A heads of agreement is not a binding contract in most jurisdictions, but it anchors the drafting and prevents scope creep. The gate: principal commercial terms agreed in writing.

Step 4 – Governing-law and forum clause (first draft). The governing-law and arbitration clauses should be drafted at this stage, not inserted at the end. The reason: the choice of law affects how all other clauses are interpreted. A force-majeure clause, a limitation-of-liability clause, and an IP-assignment clause each operate differently under Hong Kong law versus a CIS civil-law system. Draft the governing-law clause, obtain sign-off from the international adviser, and then draft the balance of the contract. The gate: governing-law and forum agreed between the parties.

Step 5 – Full contract draft. Draft the operative provisions against the agreed governing law. Key provisions for a CIS supply or manufacturing contract include: delivery and Incoterms (the standardised International Chamber of Commerce trade terms defining risk and cost allocation for cross-border delivery), payment terms and currency, inspection and rejection rights, representations and warranties on regulatory compliance (export licences, customs, product standards), force majeure with a CIS-specific drafting note, IP and tooling ownership, confidentiality, and termination. The gate: full first draft reviewed by both parties' counsel.

Step 6 – Negotiation and translation. CIS parties will frequently require a Russian-language version. Where the contract is bilingual, the governing-language clause must specify which version prevails in case of conflict. Absent that clause, a CIS court may apply the local-language version. The gate: agreed language clause; certified translation where required.

Step 7 – Execution formalities. Confirm the execution requirements in the CIS counterparty's jurisdiction. Some CIS states retain notarial requirements or apostille requirements for commercial contracts above certain value thresholds. Confirm whether a power of attorney is required for the signatory. The gate: valid execution by all parties in accordance with their respective constitutional documents.

What are the most common mistakes in this corridor?

The first and most consequential mistake is accepting the CIS counterparty's standard form without modification. Most CIS commercial standard forms designate local courts and local law. This is not a matter of bad faith; it is simply the counterparty's starting position. The international party that signs without amendment has accepted a dispute-resolution regime it may never be able to use effectively.

The second mistake is treating the governing-law clause and the dispute-resolution clause as separable choices. They are not. A contract governed by Hong Kong law but with a CIS court clause creates a situation in which a CIS court must interpret and apply Hong Kong law – a task for which it may have limited tools and no institutional incentive to perform well. The two clauses must be paired.

The third mistake is failing to address sanctions and compliance obligations at the counterparty-due-diligence stage. For groups operating in the CIS corridor, the sanctions picture changed materially after 2022. A contract that was clean at signing can become a compliance problem within months if the counterparty's ownership structure changes or if new designations are made under applicable UN sanctions lists. A well-drafted contract includes a representation and warranty on sanctions compliance and a termination right triggered by a sanctions event.

A fourth, structural mistake is using a BVI or Cayman holding entity as the contracting party without ensuring the entity has the substance and authorisations required to hold and enforce a commercial contract. An award obtained by a shell entity against a CIS counterparty can face challenges to enforceability on public-policy grounds in some CIS state courts.

We regularly act on cross-border supply and manufacturing matters of this kind. In one pattern we see repeatedly, a European manufacturing group used a Hong Kong subsidiary as the contracting party for a Central Asian manufacturing agreement, but failed to obtain a proper arbitration clause at the outset. When the counterparty defaulted, the group faced a choice between CIS court proceedings under an ambiguous jurisdiction clause and a negotiated exit. A Hong Kong-seat arbitration clause would have provided a third option: a neutral forum, an enforceable award, and the ability to seek interim measures under the HKIAC Rules.

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 governing-law and forum clause applies to your CIS contract, contact info@lockhartyip.com.

Day-two operating reality: managing the contract after signing

A well-drafted contract is not self-executing. The day-two operating reality in a CIS supply or manufacturing relationship involves a set of recurring legal and compliance touchpoints that in-house teams need to manage proactively.

First, payment mechanics. CIS parties frequently operate in currencies – the Russian ruble, the Kazakhstani tenge, the Uzbekistani soum – that are subject to capital controls and periodic devaluation. A contract denominated in USD or EUR with payment through a third-country correspondent bank is more defensible than one denominated in a local CIS currency. Currency and payment provisions should be reviewed at each contract renewal or amendment.

Second, export and customs documentation. CIS states maintain customs unions and bilateral trade agreements that affect the classification, valuation and duties applicable to goods. The Eurasian Economic Union (EAEU, the customs and economic union comprising Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan) applies common external tariffs and product standards. A contract that ignores EAEU standards for goods entering the bloc will face customs clearance problems regardless of what the contract says.

Third, IP protection. In manufacturing contracts, tooling, moulds, and product specifications created by the international party are frequently at risk. CIS civil-law systems treat IP ownership differently from common-law systems. An explicit IP-assignment clause under the governing law of the contract is necessary but not sufficient; registration of trade marks and design rights in the relevant CIS states provides an additional enforcement layer.

Fourth, contract amendments. CIS parties frequently seek informal amendments – by email, by addendum, by course of dealing. Under some CIS civil codes, a course of dealing or a signed addendum can override the original contract terms, including the dispute-resolution clause. A well-drafted contract specifies that amendments must be in writing, signed by authorised representatives, and that no amendment alters the governing-law or dispute-resolution clause without an express reference to it.

If an earlier structure or enforcement attempt has produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. For a structured assessment of your CIS contract and enforcement position, write to info@lockhartyip.com.

Decision checklist for in-house counsel

The following checklist reflects the gates described in the sequence above. Each item should be confirmed before the contract is signed and, where marked with an asterisk, reviewed at each renewal or material amendment.

Counterparty legal identity and registration confirmed; authorised signatory verified.
Sanctions and KYC file complete for counterparty and identified UBOs; no UN-sanctioned entity in the chain. *
Correct contracting entity identified within the group; corporate authorisations in order; SCR current (for Hong Kong-incorporated entities). *
Key commercial terms captured in writing before full drafting commences.
Governing-law clause agreed: Hong Kong law (or equivalent neutral common law) recommended for international party.
Dispute-resolution clause: international arbitration with a recognised seat; HKIAC or equivalent; three or one arbitrators as appropriate to contract value.
Emergency-relief and interim-measures provisions reviewed; HKIAC emergency arbitrator mechanism noted.
Incoterms agreed and consistent with customs and logistics arrangements in the relevant CIS state(s).
EAEU standards and product-compliance obligations reviewed where goods enter the EAEU bloc.
Language clause: governing language specified; certified translation obtained if bilingual.
Execution formalities in CIS counterparty jurisdiction confirmed; notarial or apostille requirements addressed if applicable.
IP and tooling ownership clause in place; registration in CIS states considered.
Amendment clause: written amendments only; express reference required to alter governing-law or dispute-resolution clause. *
Payment currency and correspondent-bank route confirmed; capital-control risk assessed. *
Force-majeure clause drafted with CIS-specific events in view. *

This checklist does not replace legal advice on your specific transaction. The position in individual CIS states varies, and parties should verify the current position before acting.

For a preliminary read on your supply or manufacturing contract and the enforcement route across the CIS corridor, email info@lockhartyip.com.

The cross-border interface: Hong Kong as structuring and enforcement hub

Hong Kong's role in a CIS supply or manufacturing contract goes beyond governing law. For groups with a holding entity in Hong Kong, the territory offers a set of structural advantages that are relevant from contract inception to enforcement.

First, Hong Kong is a common-law jurisdiction with an independent judiciary and the Court of Final Appeal as the apex court. Contract disputes governed by Hong Kong law can be litigated in the Court of First Instance if arbitration is not the chosen forum, or if court-assisted enforcement steps are required after an arbitral award is obtained.

Second, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into force on 29 January 2024. For groups whose CIS counterparties have assets or operations in Mainland China – a significant portion of CIS trade flows through China – this creates a route to enforce Hong Kong-obtained judgments in the Mainland, and vice versa. An arbitral award obtained in Hong Kong can be enforced in the Mainland under the Mainland–Hong Kong Arrangements, which have been in operation since 1999 and were supplemented in 2020.

Third, Hong Kong's position outside any unilateral sanctions regime means that a Hong Kong-based international counsel can advise on a CIS transaction without the jurisdictional limitations that apply to counsel in some Western capitals. This is a structural reality, not a policy preference. The compliance obligation is clear: Hong Kong implements UN sanctions; transactions involving UN-listed entities are not permissible regardless of structuring.

For groups considering whether to use a Hong Kong operating entity, a BVI holding entity, or a direct offshore structure for a CIS contract, the analysis at the holding-structure level interacts with the contract terms at the operating level. Our corporate counsel practice addresses both layers. See our overview of corporate counsel services and, for a comparative perspective on the UAE corridor, our briefing on supply or manufacturing contracts with a UAE party. For groups reviewing their holding structure above the operating entity, our analysis of corporate restructuring across Hong Kong and the BVI addresses the structural options in detail.

Related practices

Disputes & Arbitration – enforcement of awards and judgments across the CIS and Greater China corridor
Holding Structures – structuring the contracting entity above the CIS operating relationship

Frequently asked questions

Which jurisdiction's law applies to a supply or manufacturing contract with the CIS party?

The parties are generally free to choose the governing law of a commercial contract, and Hong Kong law is a well-tested, commercially neutral choice for an international party. Most CIS states give effect to a governing-law choice by the contracting parties, provided it does not override mandatory local rules – such as product-safety standards, export-licence requirements or currency-control regulations – that apply to performance in that state. A contract governed by Hong Kong law with a Hong Kong-seat arbitration clause places interpretation and dispute resolution in a common-law environment with reliable enforcement routes under the New York Convention, which most CIS states have ratified.

What documents are needed for a supply or manufacturing contract with the CIS party?

The contract itself is the primary document. Supporting documents typically include: the counterparty's corporate registration extract and authorised-signatory certificate; a sanctions and KYC file for the counterparty and its UBOs; any required product-compliance or export-licence documentation; and, where the contract is bilingual, a certified translation. For the Hong Kong contracting entity, the company's certificate of incorporation, articles of association, and a board resolution authorising the contract and the signing officer are required. The Significant Controllers Register should be current. Execution formalities in the CIS counterparty's jurisdiction may require notarisation or an apostille on certain documents.

How does the cross-border element affect a supply or manufacturing contract with the CIS party?

The cross-border element has three practical effects. First, it creates a choice-of-law question: the contract must specify which legal system governs interpretation and remedies, and the governing-law clause must be paired with a consistent dispute-resolution clause. Second, it introduces enforcement complexity: an award or judgment obtained in Hong Kong must be recognised and enforced in the CIS state where the counterparty's assets sit, under the New York Convention or the relevant bilateral arrangement. Third, it creates a compliance layer: sanctions screening, KYC, and export-control checks apply at signing and throughout the life of the contract, and the contract should include representations, warranties and termination rights that address a sanctions event. Parties should verify the current position in the specific CIS state before acting.

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

A practical guide to a supply or manufacturing contract with the CIS party