Cross-border contracts are contracts typically entered into by two parties from different countries or jurisdictions. Generally, to have the right to sue for a breach of contract, one must be a party to the contract. Upon one party’s breach of contract, the other party may choose to take different measures, such as to continue to act on the contract but sue the breaching party for compensation.
Suing another party in Hong Kong for breaching a cross-border contract
If you wish to sue someone in Hong Kong for breaching one or more terms of a cross-border contract, the first and most important factor that you need to consider is whether there is an exclusive jurisdiction clause in the contract. An exclusive jurisdiction clause is included in a contract if the parties wish all contractual disputes to be determined or adjudicated by the courts of a particular country or jurisdiction. The main purpose of including this clause is to ensure certainty and consistency. An exclusive jurisdiction clause may look like this:
“Each of the parties to this Agreement irrevocably agrees that the courts of Hong Kong shall have exclusive jurisdiction to hear and decide any suit, action or proceedings, and/or to settle any disputes, which may arise out of or in connection with this Agreement or its formation or validity and, for these purposes, each party irrevocably submits to the jurisdiction of the courts of Hong Kong.”
If the jurisdiction clause is exclusive, this means that the parties can only litigate in the courts specified. If the clause is non-exclusive, it means the parties can also sue in other jurisdictions relevant to the contract.
What if the contract does not contain a jurisdiction clause?
However, if the cross-border contract does not contain a jurisdiction clause, the rules of private international law would determine which court(s) can settle any dispute arising from the contract. The starting point is that the prospective defendant would be sued in their own country or jurisdiction.
In Hong Kong, generally, the local courts have jurisdiction over a dispute arising from a cross-border contract if the prospective defendant to the dispute resides or is present in Hong Kong, even when the case has minimal connection with Hong Kong. However, if the prospective defendant is not in Hong Kong, the claimant will have to obtain leave from the Court of First Instance to serve the proceedings out of the jurisdiction. As the grant of leave is discretionary, the dispute must be sufficiently connected to Hong Kong for the court to grant leave (see further in the Rules of the High Court (Cap. 4A)).
The claimant must also bear in mind the various limitations of suing for a breach of contract in Hong Kong. These limitations are set out in the Limitation Ordinance (Cap. 347), such as the six-year limitation to sue for a breach of contract from the date of the breach. Under certain circumstances, the limitation period may be extended.
Key takeaways
You would have the right to sue another party in Hong Kong for a breach of a cross-border contract if:
- You are a party to the contract; and
- The contract contains an exclusive jurisdiction clause stipulating that Hong Kong courts determine disputes arising from the contract; or
- The prospective defendant resides or is present in Hong Kong.
