China’s Greater Bay Area needs streamlined legal systems, says Baker McKenzie arbitration chief

Hong Kong will need to play up its role as a reliable legal hub in the mainland’s Greater Bay Area (GBA) economic zone.

Paul Teo, head of Baker McKenzie’s arbitration practice for Greater China, says the legal aspects of the pact will face a number of challenges given the different systems being employed in Hong Kong, Macau and the GBA’s nine mainland cities.

“With the rapid growth and increasing sophistication of business activity being conducted on the mainland, including in particular, the GBA, many businesses and companies [there] are well-attuned to the need to adhere to legal obligations and lawful business practices,” Teo says.

“At the policy level, one of the key areas of focus for the GBA will be on finding ways to enhance and streamline the relevant laws and legal systems of Hong Kong, Macau and Guangdong to support and further promote deals and transactions, especially those with a ‘cross-border’ element.

“Key areas of focus will include enhancing parties’ freedom on the choice of law and dispute resolution forum, and the process of securing enforcement of court judgments and arbitral awards within the GBA. At the business level, they should of course make sure that they continue to do all necessary due diligence, especially when entering into deals and transactions with parties they are not familiar with.”

Teo adds: “It is also critical to ensure that they get proper advice when structuring the agreements so that the appropriate law, forum and other safeguards are incorporated to preserve their rights of enforcement.”

From a legal point of view, Teo says negotiations should focus on relaxing mainland regulations to allow Chinese companies to choose Hong Kong law in the event of legal disputes.