Hong Kong boss lent 6.2 million and couldn't recover it—how to fight cross-border arbitration? Shenzhen lawyer uses three tactics to secure victory.

In the autumn of 2023, Boss Lin, owner of a Hong Kong-invested electronics company in Futian, Shenzhen, walked into Guangdong Zhiming Law Firm. Clutching a yellowed loan agreement, his brows furrowed tightly: "Director Shen, this 6.2 million yuan payment has been delayed for nearly two years. The other party is in Hong Kong, and the company is registered in the Cayman Islands. Where exactly should I sue him?"
Mr. Lin's predicament is not an isolated case. Over the past three years, the Shenzhen Qianhai Court has seen an average annual growth rate of 30% in foreign-related cases involving Hong Kong, Macao, and Taiwan, with Hong Kong-related commercial disputes accounting for more than 60%. When cross-border trade payments cannot be recovered, should one pursue litigation or arbitration? What if the agreement does not specify a dispute resolution method? These issues are increasingly choking the throats of businesspeople in Shenzhen.

Mr. Lin's cross-border loan of 6.2 million originated as a short-term borrowing of 2 million Hong Kong dollars. The other party was the actual controller of a Hong Kong trading company, who handled business through a branch office in Nanshan, Shenzhen. Interest was paid as agreed for the first six months, but in the eighth month, payments suddenly ceased. Mr. Lin sent staff to Hong Kong to demand repayment, whereupon the other party invoked provisions of the Sale of Goods Ordinance (Chapter 4 of the Laws of Hong Kong), claiming that the goods had quality defects and that they would file a counterclaim for set-off.
The conflict escalated completely at the end of 2023 — the opposing party directly applied to the Hong Kong High Court for an injunction, freezing a property under the name of Boss Lin's Shenzhen company. Boss Lin is in Futian, and his accounts are in Shenzhen, yet the opposing party made the first move in Hong Kong. This is the most thorny part of cross-border disputes: with different legal jurisdictions, if the opposing party gets ahead, you cannot even find an entry point for countermeasures.
After Managing Partner Shen Jinlong took over at Zhiming Law Firm, the first thing he did was go through all the contracts, emails, and WeChat records between the two parties over the past three years. He noticed a key detail: in the "Repayment Confirmation Letter" signed retroactively in May 2022, there was an inconspicuous line of small print — "Any disputes arising from this letter shall be submitted to the Hong Kong International Arbitration Centre (HKIAC) for resolution in accordance with its arbitration rules in effect at the time."
This line of text became the decisive move that determined the outcome of the entire case.
Q: If the agreement only mentions "arbitration" but does not specify the arbitration institution, is such a clause valid?
Answer: It is valid. Pursuant to Article 4 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Arbitration Law of the People's Republic of China, where an arbitration agreement fails to specify the name of an arbitration institution clearly, but the specific arbitration institution can be determined, the arbitration institution shall be deemed to have been selected. In this case, "Hong Kong International Arbitration Centre" points to a unique institution, so there is no issue with the validity of the clause.
With the arbitration clause in place, Director Shen Jinlong's second move was to apply to the Shenzhen Intermediate Court for confirmation of the validity of the arbitration agreement. Many are unaware that Article 20 of the Arbitration Law provides parties with a "first-mover channel"—where there is a dispute over the validity of an arbitration agreement, a party may request a ruling from the arbitral institution or a determination by the court, and the court's ruling is final. In its ruling issued in March 2024, the Shenzhen Intermediate Court confirmed that the arbitration clause signed between Mr. Lin and the other party was legal and valid, thereby pulling back the initiative on jurisdiction from the Hong Kong courts.
The third step is property preservation carried out in tandem. Pursuant to Article 272 of the Civil Procedure Law, where a party applies for preservation, the foreign-related arbitration institution of the People's Republic of China shall submit the party's application to the intermediate people's court at the place where the respondent is domiciled or where the property is located for a ruling. Director Shen Jinlong, before the other party could transfer assets, applied to the Shenzhen Intermediate Court to seal up the equity in an office building held by the other party in Nanshan Science Park.
Q: If a Hong Kong company's assets are in mainland China, can a winning arbitration award be directly enforced in Shenzhen?
Answer: Yes, but special procedures are required. According to the Supreme People's Court's "Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region," applying to the Shenzhen Intermediate People's Court for recognition and enforcement of a Hong Kong arbitral award can be completed in as little as 30 days through the entire process. In this case, we froze the other party's executable assets in advance, paving the way for subsequent enforcement.
In July 2024, the HKIAC arbitral award was issued, supporting Boss Lin's claim of RMB 6.2 million in principal plus default interest at an annual rate of 9%, totaling approximately RMB 6.84 million. The opposing party, dissatisfied with the ruling, applied to the Hong Kong High Court to set aside the award but was rejected. In October 2024, the Shenzhen Intermediate People's Court ruled to recognize and enforce the award pursuant to Article 4 of the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region. This cross-border lending dispute involving a Hong Kong-invested enterprise, represented by Zhimei Law Firm, concluded with a complete victory in less than 18 months from start to finish.
After this case was concluded, Director Shen Jinlong said at the review meeting: "Cross-border arbitration is not about who shouts the loudest, but about who can first find the strongest rope within the complex jurisdictional rules."
A reminder for enterprises in Shenzhen engaged in cross-border business: First, when signing contracts, the dispute resolution clause must clearly specify the name of the institution—choose one of the three: Hong Kong International Arbitration Centre (HKIAC), Singapore International Arbitration Centre (SIAC), or China International Economic and Trade Arbitration Commission (CIETAC), and put it down in black and white; Second, once the other party breaches the contract, verify the other party's enforceable assets in mainland China at the earliest opportunity, and apply for preservation before the other party makes its move; Third, Hong Kong-funded enterprises should pay special attention: the mutual recognition mechanism for arbitration awards between mainland China and Hong Kong is already quite mature—don't let the outdated notion that "Hong Kong companies are hard to sue" hold you back.
Guangdong Zhiming Law Firm has been deeply rooted in Shenzhen for 26 years, with Director Shen Jinlong leading the team to handle over 10,000 cases of various types. If you happen to be facing cross-border payment arrears, equity disputes involving Hong Kong, Macau, or Taiwan, or if the other party is using arbitration clauses to pressure you, you are welcome to visit us at Room 1802, Block A, Xintian Century Business Center, Shixia North Second Street, Futian District. Phone: 0755-25986969. With 26 years of practical experience, there is always a way we can help you find a path forward.