Outsourcing: Hong Kong Overview

This Q&A guide authored by Morrison & Foerster partner Gordon Milner and associate Gigi Yuen gives a high-level overview of legal and regulatory requirements on different types of outsourcing; commonly used legal structures; procurement processes; formalities required for transferring or leasing assets; data protection issues; supply chain compliance; specification, service levels and escalation; flexibility in volumes purchased; charging methods; customer remedies and protections; warranties and indemnities; term and notice period; termination and its consequences; liability, exclusions and caps; dispute resolution; and the tax issues arising on an outsourcing.

Below is a snapshot of all 35 questions covered in this article. Read the full article.

1. To what extent does national law specifically regulate outsourcing transactions?

2. What additional regulations may be relevant for the following types of outsourcing?

• Business Process, Knowledge Process and Professional Services
• Legal Process
• IT and Cloud Services
• Telecommunications
• Public Sector
• Manufacturing

3. What further legal or regulatory requirements (formal or informal) are there concerning outsourcing in any industry sector?

4. What requirements (formal or informal) are there for regulatory notification or approval of outsourcing transactions in any industry sector?

5. What legal structures are commonly used in an outsourcing?

6. What procurement processes are used to select a supplier of outsourced services?

7. What formalities are required to transfer assets on an outsourcing transaction?

8. What formalities are required to lease or license assets on an outsourcing?

9. Are employees transferred by operation of law?

10. What legal or regulatory requirements and issues may arise on an outsourcing concerning data protection?

11. Are there any circumstances where an outsourcing customer would need (or want) to include compliance-related provisions in the contract documentation?

12. How would the customer seek to ensure compliance with these requirements further down the supply chain (for example, if the outsourcing supplier engages a subcontractor)?

13. How is the service specification typically drawn up and by whom?

14. How are the service levels and the service credits scheme typically dealt with in the contract documentation?

15. Are there any service escalation mechanisms that are usually included in the contract documentation? How often are these exercised and how effective are they in restoring the services to the required levels?

16. What level of flexibility is allowed to adjust the volumes customers purchase?

17. What charging methods are commonly used on an outsourcing?

18. What other key terms are used in relation to costs, including auditing and benchmarking mechanisms?

19. If the supplier fails to perform its obligations, what remedies and relief are available to the customer under general law?

20. What customer protections are typically included in the contract documentation to supplement relief available under general law?

21. What express warranties and/or indemnities are typically included in the contract documentation?

22. What requirements are imposed by national or local law on fitness for purpose and quality of service, or similar implied warranties?

23. What other provisions may be included in the contractual documentation to protect the customer or supplier regarding any liabilities and obligations arising in connection with outsourcing?

24. What types of insurance are available in your jurisdiction concerning outsourcing, and to what extent are they available?

25. Does national or local law impose any maximum or minimum term on an outsourcing? If so, can the parties vary this by agreement?

26. Does national or local law regulate the length of notice period required (maximum or minimum)? If so, can the parties vary this by agreement?

27. What events justify termination of an outsourcing without giving rise to a claim in damages against the terminating party?

28. In what circumstances can the parties exclude or agree additional termination rights?

29. What remedies are available to the contracting parties?

30. What, if any, implied rights are there for the supplier to continue to use licensed IP rights post-termination? To what extent can the parties exclude or include these by agreement?

31. To what extent can the customer gain access to the supplier's know-how post-termination and what use can it make of it?

32. What liability can be excluded?

33. Are the parties free to agree a cap on liability and, if desirable, a cap on indemnities? If so, how is this usually fixed?

34. What are the main methods of dispute resolution used?

35. What are the main tax issues that arise on an outsourcing?

This article is intended for your general information only. It is not intended to be nor should it be regarded as or relied upon as legal advice. You should consult a qualified legal professional before taking any action or omitting to take action in relation to matters discussed herein. This article does not create an attorney-client relationship and is not attorney advertising.