Contractual interpretation of jurisdiction clauses in Chinese 

Highlights

It is critical to adopt clear language in commercial and other legal agreements when drafting clauses for the governing law and jurisdiction. Only this way can parties avoid the potentially very significant additional costs and delays in resolving any dispute arising from “forum shopping” and disputes about jurisdiction. In the English-speaking world, decades, if not centuries, of cases have ensured that it is clear what language is necessary, in particular for exclusive jurisdiction and non-exclusive jurisdiction clauses, respectively. In the Chinese language, the position has been less clear. A recent decision of the lower-level court in Hong Kong (the District Court) has very helpfully reviewed extensive Hong Kong authorities on the construction of jurisdiction clauses in Chinese. The ruling by the District Court judge should be reviewed and understood by anybody involved in drafting jurisdiction clauses in Chinese.

In Ho Pak Hung also known as Ho Wing On v Cheng Lai Ping [2026] HKDC 753, the defendant engaged the plaintiff to apply for a cross-border vehicle licence. The plaintiff commenced action in Hong Kong, claiming that he had performed his contractual obligations but the defendant refused to pay the balance of the purchase price. The defendant applied for a stay of the action, arguing that the contract included an exclusive jurisdiction clause (EJC) conferring jurisdiction to a court in Shenzhen. The relevant clause states that: “本合同在执行过程中，产生争议的，双方应该友好协商； 如协商不成的，交给深圳市罗湖区法院通过诉讼解决。(Any dispute arising out of or in connection with the performance of this Contract shall be resolved by both parties through amicable negotiation. Failing such negotiation, either party shall have the right to submit the dispute to the People’s Court of Luohu District, Shenzhen for litigation).” (the Clause).

The Court reviewed extensive Hong Kong authorities on the construction of jurisdiction clauses in Chinese, characterising them under three categories by textual features displayed: (1) clauses with a verb preceded by imperative words (e.g. 应, 应当, 须/shall); (2) clauses with a verb preceded by permissive words (e.g. 可, 可以/may); and (3) clauses simply employing a “bare verb” which is not preceded by any word in the nature of an auxiliary verb. While courts have generally been prepared to find an EJC under category (1), an analysis of categories (2) or (3) is not as straightforward and requires not only looking at the textual meaning of the clause, but also the contextual factors surrounding the contract. 

The Court first determined that Mainland law was the governing law of the contract as it had the “closest and most real connection with the transaction”. As the Clause fell within category (3), i.e. the “bare verbs” category, when read in Chinese, the Court found that the Clause conferred exclusive jurisdiction on the court in Shenzhen for the following reasons:

• The most important obligation under the contract also appeared with bare verbs, rendering a textual analysis of other provisions (including the Clause) inconclusive and a contextual analysis necessary.
• Clause 4 of the contract listed out the plaintiff’s obligations, which were required to be performed in Mainland and which were prescribed by Mainland procedures, suggesting Mainland was the most natural and convenient forum to adjudicate the dispute arising from the contract. 
• The judge was not persuaded, based on the limited evidence, that the designated court in Shenzhen lacked jurisdiction.
• If the plaintiff obtained judgment in Mainland, it would be possible for him to enforce the judgment in Hong Kong under the common law. 

Having found an EJC, the Court exercised its discretion to stay the action in Hong Kong. 

Commentary

This decision serves as a reminder that Hong Kong courts will carefully scrutinise the factual matrix and adopt a contextual analysis when construing jurisdiction clauses in contracts drafted in Chinese, rather than applying a one-size-fits-all, rigid textual analysis, unless the language of the jurisdiction clauses is expressly imperative. It also demonstrates the courts’ pragmatic approach to such clauses, noting that bare verbs often connote mandatory obligations under Chinese language as seen from the Chinese text of the Hong Kong Basic Law. Clauses that appear permissive or declaratory may also be construed as exclusive where the commercial and regulatory context strongly favours the designated Mainland forum.

The decision also illustrates the courts’ willingness to presume, in the absence of expert evidence concluding otherwise, that Mainland law is the same as Hong Kong law in its approach to construe a contractual term, and to apply Hong Kong law in interpreting contracts governed by Mainland law and drafted in Chinese. 

For cross-border commercial agreements drafted in Chinese, it is critical to adopt clear language, for example, to use imperative words in describing the parties’ obligations for clauses in areas such as governing law and jurisdiction, to avoid the potentiality of “forum shopping” and jurisdictional dispute.