Matter note: drafting an HKIAC arbitration Mainland

A contract without a working arbitration clause is a contract without a remedy. For cross-border agreements with Mainland China counterparties, that problem is structural, not theoretical. The clause determines where a dispute is heard, which procedural rules apply, and – critically – where and how an award can be enforced. Get the clause right, and an award can move from the arbitral seat to the People's Courts under the mutual enforcement arrangements between the Mainland and Hong Kong. Get it wrong, and the award becomes paper.

Drafting an HKIAC arbitration clause for a Mainland China counterparty requires precise drafting against the Arbitration Ordinance (Cap. 609), the HKIAC Administered Arbitration Rules, and the mutual enforcement arrangements that allow Hong Kong-seated awards to be recognised and enforced in Mainland courts. The clause must be enforceable in both directions: by the foreign or Hong Kong party against the Mainland counterparty, and in principle by the Mainland counterparty against the other side. The asset endgame – where assets actually sit – drives every drafting choice.

This matter note describes an anonymised cross-border engagement on exactly this question. It traces the situation, the issue, the route we chose, and the transferable lesson for counsel and principals structuring agreements with Mainland China exposure.

The situation: a mid-market agreement with a Mainland operator

A European industrial group – itself holding its Greater China interests through a Hong Kong intermediate entity – was finalising a long-term supply and distribution agreement with a Mainland Chinese operating company. The agreement was of material commercial value and covered the supply of specialised equipment with multi-year maintenance obligations.

The European group's home-country counsel had proposed a dispute resolution clause nominating a European arbitral institution. The clause was short, the seat was unspecified, and the governing law was the law of a continental European jurisdiction.

Our desk was engaged late – after the commercial terms were substantially agreed but before the agreement was signed. The instruction was narrow: review and replace the dispute resolution and governing law provisions before execution.

What we found was a clause that would have been difficult to enforce in any forum that mattered. The Mainland counterparty held its operating assets in China. A European-seated award, before a non-recognised institution, under a foreign procedural law, would have faced recognition challenges in the People's Courts that were entirely avoidable. The window to fix it was exactly the remaining negotiation period before signature.

The issue: enforceability and the asset endgame

The governing question in any dispute clause for a Mainland counterparty is not which institution the foreign party prefers – it is which award can actually be enforced where the assets sit. That question almost always points to the mutual enforcement arrangements between Hong Kong and the Mainland.

Hong Kong-seated arbitrations conducted under institutional rules – including the HKIAC Administered Arbitration Rules – benefit from the 1999 Arrangement (the arrangement between the Mainland and the Hong Kong Special Administrative Region on mutual enforcement of arbitral awards) and its 2020 Supplemental Arrangement (which, following a 2021 amendment, permits simultaneous enforcement applications in both jurisdictions). These instruments allow a Hong Kong-seated award to be enforced in the People's Courts without re-litigation on the merits. No comparable route exists for a European-seated award before an institution not covered by these arrangements.

The issue was therefore twofold. First, the proposed clause offered no credible enforcement route against Mainland assets. Second, an unspecified seat created ambiguity that a resourceful respondent could exploit to delay or derail proceedings entirely.

There was a secondary issue of comparable importance: the choice of governing law. A dispute resolution clause can be technically perfect and still produce an award that turns on a legal question neither party had modelled. The interaction between the substantive law of the contract and the procedural law of the seat requires alignment, not coincidence.

The route chosen: Hong Kong seat, HKIAC rules, and a defined enforcement path

We proposed, and the parties ultimately agreed, a clause designating Hong Kong as the seat of arbitration, the HKIAC Administered Arbitration Rules as the procedural regime, and English as the language of the proceedings. The clause specified the number of arbitrators and included a short-form mechanism for appointment where the parties could not agree.

The governing law of the main agreement was renegotiated to Hong Kong law. This alignment between seat and substantive law was not cosmetic. It removed a layer of conflicts analysis that can complicate both the arbitral proceedings and any subsequent enforcement application in the People's Courts.

Three drafting details received particular attention.

First, the scope of the arbitration clause. A clause confined to "disputes arising under this agreement" will exclude claims that arise "in connection with" the agreement – tortious claims, pre-contractual representations, and claims about the formation or validity of the contract itself. The broader formulation was adopted.

Second, the interim-measures position. The Interim-Measures Arrangement – in force since 1 October 2019 – allows a party to a Hong Kong-seated arbitration to apply to a Mainland court for interim relief before or during the arbitral proceedings. This is a material right and one that is jurisdiction-specific: only arbitrations seated in Hong Kong benefit from this arrangement. The clause was drafted to preserve this right expressly, by confirming that neither party waived its right to seek interim measures from any court of competent jurisdiction.

Third, the confidentiality position. The HKIAC Administered Arbitration Rules carry default confidentiality obligations. The parties agreed to retain the default but to carve out disclosures required for enforcement proceedings and for regulatory reporting obligations – a practical necessity for a listed European parent with disclosure obligations under its home-country regime.

The sequence and the turning point

The Mainland counterparty initially pushed back on the HKIAC as institution and on Hong Kong as seat. This is a common position, and it is worth understanding why. From the Mainland counterparty's perspective, a Hong Kong seat in an international arbitration before the HKIAC means that a foreign or offshore party holds the perceived procedural advantage of a common-law seat. The concern is not irrational.

The turning point came when we mapped the enforcement position in both directions. The Mainland counterparty also had a legitimate commercial interest in a clause that would allow it to enforce an award against the European group's assets – including assets held through the Hong Kong intermediate entity. A Hong Kong-seated award, under the mutual enforcement arrangements, was enforceable in Hong Kong against that intermediate entity. A European-seated award before an unrecognised institution was not. The enforceability argument worked symmetrically.

We also addressed the institutional-familiarity point directly. The HKIAC Administered Arbitration Rules are available in both English and Simplified Chinese. The HKIAC maintains a panel of arbitrators with Mainland Chinese law expertise. The institution has administered disputes with Mainland parties for decades. These are facts, not marketing.

The counterparty's counsel accepted the seat and institution once the enforcement map was presented in a form their client could follow. The remaining negotiation concerned the number of arbitrators – the parties settled on three, with each side nominating one and the third appointed by the HKIAC – and the language question, which was resolved in favour of English with a right to submit documentary evidence in Chinese.

The agreement was signed with the revised clause. There has been no dispute since execution. That is the most common outcome, and it is itself a function of the clause: a credible, enforceable dispute resolution provision changes the calculus for a counterparty considering whether to perform.

The sequence above describes the standard position in a well-functioning negotiation. Your matter turns on the documents, the jurisdictions actually engaged, and the specific asset profile of the counterparty – which is where the route is won or lost.

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

What foreign counsel get wrong – and the transferable lesson

The error in this matter was not unusual. Home-country counsel drafted a clause optimised for their own forum, their own institutional relationships, and their own professional comfort. That is entirely understandable. It is also the wrong starting point for a contract whose enforcement risk sits in a different jurisdiction entirely.

Several patterns recur on our desk.

An unspecified seat is the most common error. Without a designated seat, the governing procedural law of the arbitration is uncertain. The seat determines which national courts have supervisory jurisdiction over the arbitration, which interim-measures regime applies, and in some cases whether the New York Convention applies at all. For Mainland China counterparties, the seat also determines whether the mutual enforcement arrangements are available. "The arbitration shall be conducted under HKIAC Rules" without a seat designation leaves all of these questions open.

A second recurring error is the choice of institutional rules without considering the institution's recognition in the enforcement forum. Not all institutional awards are created equal for Mainland enforcement purposes. The mutual enforcement arrangements between Hong Kong and the Mainland are institution-neutral – but they apply only to Hong Kong-seated awards. A Hong Kong-seated arbitration before a recognised institution, under rules that are well-understood in Mainland courts, is a more defensible position than an exotic procedural choice that triggers recognition arguments at the enforcement stage.

A third error is the failure to consider the interim-measures position at the drafting stage. The right to seek interim relief from a Mainland court – preserved under the 2019 Arrangement – depends on the seat being Hong Kong. A party that agrees a different seat, or fails to specify the seat, forfeits that right. Where counterparty assets are primarily on the Mainland, that is a significant forfeiture.

The transferable lesson is straightforward. Dispute resolution clauses in cross-border agreements with Mainland China counterparties should be drafted by counsel who understand the enforcement route, not just the arbitral institution. The clause is not a boilerplate administrative provision. It is the mechanism by which a commercial agreement becomes, if necessary, a judgment against real assets.

If an earlier filing, structure, or enforcement attempt produced an adverse or stalled result in a comparable matter, a second read can identify the strategic error and the routes still available.

To discuss how the HKIAC arbitration clause and the mutual enforcement arrangements apply to your cross-border position with a Mainland counterparty, contact info@lockhartyip.com.

Interaction with the broader enforcement architecture

A well-drafted arbitration clause is the starting point, not the finish line. The broader enforcement architecture for Mainland-connected disputes also includes the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645), which came into force on 29 January 2024. That instrument covers the registration of effective Mainland court judgments – monetary and certain non-monetary – with the Court of First Instance in Hong Kong, and provides a route for Hong Kong court judgments to be recognised and enforced in the Mainland.

The arbitration route and the judgments route are not alternatives of equal standing in all cases. For a dispute arising under a commercial agreement, the arbitration route – a Hong Kong-seated award enforced via the mutual enforcement arrangements – typically offers a more defined and faster path than litigation followed by a recognition application. But the two regimes interact: an award creditor with both a Mainland and a Hong Kong enforcement need may, since the 2021 amendment, pursue simultaneous applications.

Understanding which route applies – and in what sequence – requires analysis of the assets, the nature of the claim, and the procedural posture at the time enforcement is needed. Our cross-border disputes practice covers both the arbitration and the judgments enforcement routes, and the interaction between them. See our Disputes & Arbitration practice for the full scope of our work in this area, and our matter note on enforcing an arbitral award from a CIS jurisdiction in Hong Kong for a comparable enforcement-sequencing analysis in a different jurisdictional pair. For clause-drafting questions involving a Cyprus counterparty, see our note on drafting an HKIAC clause for a Cyprus counterparty.

Related practices

Disputes & Arbitration – cross-border arbitration, enforcement, and interim measures across Greater China
Holding Structures – structuring Greater China holding entities above Mainland operating companies

Frequently asked questions

What does the route look like for drafting an HKIAC arbitration clause for a Mainland China counterparty?

The route runs from clause negotiation through seat designation – Hong Kong – to institutional selection (HKIAC Administered Arbitration Rules) and a defined enforcement path via the mutual enforcement arrangements between Hong Kong and the Mainland. The clause must cover scope, seat, language, arbitrator number, interim-measures preservation, and confidentiality carve-outs. The governing law of the main agreement should align with the seat where possible. The sequence matters: each drafting decision affects the enforcement position at the end of the proceedings.

What are the main risks in drafting an HKIAC arbitration clause for a Mainland China counterparty?

The primary risk is an unenforceable award: a clause that names an institution but omits the seat, or designates a non-Hong Kong seat, forfeits the benefit of the mutual enforcement arrangements and the right to seek interim measures from Mainland courts under the 2019 Arrangement. Secondary risks include a scope too narrow to capture all claims, a governing law misaligned with the seat, and confidentiality provisions that conflict with the enforcing party's regulatory disclosure obligations. Each risk is addressable at the drafting stage; none is easily corrected after execution.

What is the first step in drafting an HKIAC arbitration clause for a Mainland China counterparty?

The first step is an asset and enforcement map: identify where the counterparty holds assets, where the other party's assets are situated, and which enforcement routes are therefore material. For Mainland asset exposure, that analysis almost always identifies Hong Kong as the correct seat and the HKIAC as a well-recognised institution for Mainland enforcement purposes. The clause drafting follows the enforcement map, not the other way around. Parties should verify the current position in their specific fact pattern before finalising any dispute resolution provision.

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

Matter note: drafting an HKIAC arbitration clause for a Mainland China counterparty