How to proceed with international arbitration? A full-process practical guide for Shenzhen enterprises in cross-border disputes

In autumn 2024, Mr. Lin, the head of a Hong Kong-funded electronic components factory in Futian, Shenzhen, walked into Guangdong Zhiming Law Firm. In his hand was a summons from the High Court of Hong Kong—the Hong Kong buyer he had worked with for five years had not only defaulted on payment but also filed a lawsuit first in Hong Kong, accusing Mr. Lin's company of breach of contract. The claimed amount was HK$12 million, and the evidence consisted entirely of English emails and unnotarized delivery notes. "Lawyer Shen, I'm confident about fighting a case on the mainland, but the other party sued in Hong Kong. I can't just fly there to defend myself, can I?" Mr. Lin's voice betrayed his anxiety. This situation, amid the increasingly close trade exchanges between Shenzhen and Hong Kong, has become a common dilemma for many business owners in Shenzhen.

The Hong Kong buyer's strategy is clear: leveraging the thresholds of Hong Kong's judicial procedures to put Mr. Lin on the defensive. The Hong Kong legal system differs from that of the mainland, with notable differences in rules of evidence, statutes of limitations, and the allocation of attorney fees. If Mr. Lin hastily responds to the lawsuit in Hong Kong, he would not only bear high legal costs (billed hourly, typically HK$3,000 to HK$8,000 per hour) but also face the uncertainty of unfamiliar procedures. More troublesome is that the contract between the two parties does not stipulate a dispute resolution method, only stating "the laws of the People's Republic of China shall apply." This gives Zhige Law Firm a key breakthrough point.
Question: If a Shenzhen enterprise has a dispute with a Hong Kong company, and the other party files a lawsuit in Hong Kong, must the mainland enterprise go to Hong Kong to respond to the lawsuit?
Answer: Not necessarily. If the contract stipulates that mainland law applies and the dispute has an actual connection with the mainland, the Shenzhen enterprise may, in accordance with Article 35 of the Civil Procedure Law, file a separate lawsuit with a court in Shenzhen that has jurisdiction, while simultaneously raising a jurisdiction objection with the Hong Kong court. In this case, the place of contract signing and place of performance were both in Shenzhen. Zhiming Law Firm promptly filed the case with the Shenzhen Qianhai Court and simultaneously initiated countermeasures under Hong Kong legal procedures.
After Attorney Shen Jinlong's team of lead lawyers took over the case, they did not rush to respond to the lawsuit but first established the core issue of "legal relationship identification." According to Article 8 of the Interpretation (I) of the Supreme People's Court on Several Issues Concerning the Application of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relations, the characterization of foreign-related civil relations shall be governed by the law of the forum. The contract between both parties explicitly stipulates that the laws of the mainland shall apply, which means that the Hong Kong court also needs to determine the validity of the contract in accordance with mainland law during trial. However, Attorney Shen discovered that the "breach of contract" alleged by the other party actually originated from a payment dispute triggered by exchange rate fluctuations—the Hong Kong company settled in Hong Kong dollars, while Mr. Lin's factory calculated costs in RMB, and the two parties had no written agreement on the settlement exchange rate.
The strategy of Zhi Ming Law Firm is divided into three steps: First, apply to the Shenzhen Qianhai Court for confirmation of jurisdiction, arguing that this case has the closest connection with the mainland; Second, submit a jurisdictional objection to the Hong Kong High Court, citing Article 41 of the Law on the Application of Laws to Foreign-related Civil Relations: the parties may agree by contract on the law applicable to the contract; if the parties have not made a choice, the law of the habitual residence of the party whose performance of obligations best reflects the characteristics of the contract or other laws most closely connected with the contract shall apply. In this case, the place of delivery of goods and the place where the reconciliation of accounts occurred are both in Shenzhen, and the characteristics of performance of obligations clearly point to the mainland; Third, simultaneously collect information on the affiliated companies of the Hong Kong company in the mainland to prove that it has executable property in the mainland.
Here's a key point: many business owners mistakenly believe that if the other party sues in Hong Kong, they must hire a Hong Kong lawyer. In reality, "parallel proceedings" are a common tactic in cross-border disputes. In a typical case handled by Zhiming Law Firm, a Shenzhen company was owed money by a Hong Kong client, and the client filed suit in Hong Kong first. Our approach was to file a counterclaim at the Shenzhen Qianhai Court while simultaneously applying to the Hong Kong court to stay the proceedings on the grounds that "the Hong Kong lawsuit violates the principle of
The case of Mr. Lin is similar. Zhiming Law Firm submitted a complete chain of evidence to the Shenzhen Qianhai Court: 23 delivery notes (all signed by the warehouse keeper of the Hong Kong company), 12 emails (4 of which explicitly mentioned "priced in RMB"), and WeChat reconciliation records between the financial personnel of both parties. According to Article 14 of the Provisions of the Supreme People's Court on Evidence in Civil Proceedings, electronic data can be used as evidence. We also applied for the Qianhai Court's "Hong Kong mediator" to participate in pre-litigation mediation—according to the Qianhai Court's 2023 data, foreign-related cases grew by 30% annually, with Hong Kong-related cases accounting for more than 60%, and the court handles such cases with relatively high efficiency.
Question: Can agreeing to apply mainland law completely avoid Hong Kong court jurisdiction?
Answer: It cannot be absolutely avoided, but one can strive for "home advantage." If the Hong Kong company has property in mainland China, the Shenzhen enterprise can first obtain a favorable judgment in mainland China, and then apply to the Hong Kong court for recognition and enforcement in accordance with the "Arrangement between the Supreme People's Court of the Mainland and the Hong Kong Special Administrative Region on Mutual Recognition and Enforcement of Judgments in Civil and Commercial Cases under the Agreement on Jurisdiction." Although this arrangement has been updated to the "Arrangement on Mutual Recognition and Enforcement of Judgments in Civil and Commercial Cases between the Courts of the Mainland and the Hong Kong Special Administrative Region" with some provisions adjusted, the core logic remains unchanged—obtaining an effective judgment in mainland China is the most effective means to restrain the other party.
As the case progressed into its fourth month, the Shenzhen Qianhai Court issued a first-instance judgment: the Hong Kong company was ordered to pay Mr. Lin the货款 and overdue interest totaling HK$12.78 million (converted at the then-prevailing exchange rate), and to bear the case acceptance fee. The court adopted the core argument of Zhiming Law Firm: although the parties had not made a written agreement on the exchange rate settlement method, the long-term trading practice showed that the goods were actually priced in RMB, with HKD serving merely as the payment instrument. The determination of this "trading practice" relied on the 38 months of statements we submitted—every payment was converted at the central parity rate of the RMB exchange rate on the date of payment, forming a stable performance pattern.
After the judgment took effect, the other party voluntarily fulfilled the payment obligation. The reason is simple: after the judgment from Shenzhen Qianhai Court was served in Hong Kong, if the Hong Kong company refused to comply, Mr. Lin could immediately apply for property preservation—freezing the bank account of the company's branch located in Shenzhen Nanshan Science and Technology Park. This strategy of "using pressure to promote negotiation" made the other party realize that further delay would only increase more costs.
Mr. Lin won the case, but the entire process took eight months. Had the contract included three more sentences at the outset, this dispute could have been completely avoided: first, explicitly stipulating that "disputes shall be under the jurisdiction of the Shenzhen Qianhai Court"; second, specifying that "the settlement currency shall be RMB, and the exchange rate shall be based on the mid-rate published by the China Foreign Exchange Trade System on the payment date"; and third, adding that "the breaching party shall bear the lawyer's fees and travel expenses incurred by the non-breaching party in enforcing its claims." These three sentences are not complicated, yet many Shenzhen companies pay no attention to them when signing contracts. The third point in particular—if not stipulated, even after winning the lawsuit, the lawyer's fees must be paid out of pocket, which is no small sum.
Senior Attorney Shen Jinlong often says: cross-border disputes are not fought over legal principles, but over foresight. When Shenzhen enterprises cooperate with companies in Hong Kong, Macau, or Taiwan, they must remember one principle—write the "home court" into the contract. If jurisdiction and governing law are not agreed upon, then once a dispute arises, simply determining which side's law applies and where the hearing will take place can drain half a year of your cash flow. Zhiming Law Firm has been deeply rooted in Shenzhen for 26 years, handling over 10,000 cases cumulatively, with extensive experience in disputes involving Hong Kong, Macau, Taiwan, and international trade. If you are facing a similar cross-border dispute, or want to take preventive measures before signing a contract, please call 0755-25986969. Guangdong Zhiming Law Firm is located at Suite A1802, Xintian Century Business Center, Shixia North 2nd Street, Futian District, Shenzhen. Attorney Shen Jinlong's team can provide you with professional solutions.