2024.04.16
The client was a company incorporated in the British Virgin Islands. In May 2018, the client entered into a bond subscription agreement (the “Bond Subscription Agreement”) and issued other transaction documents with an offshore bond issuer and other onshore and offshore security providers. After the client paid the principal of the bonds to the issuer, the issuer failed to make coupon payments to the client, nor did it redeem the principal of the bonds upon maturity. Accordingly, an event of default under the Bond Subscription Agreement took place, and the client intended to sue the issuer and the other entities. The amount involved was more than RMB 570 million.
JunHe comprehensively analyzed the jurisdiction clauses in the Bond Subscription Agreement and the other transaction documents. They determined that although the jurisdiction agreement provides for the exclusive jurisdiction of the Hong Kong courts, it actually constitutes an “asymmetric” jurisdiction agreement and does not exclude the jurisdiction of the courts in mainland China. Due to the relationship between the Bond Subscription Agreement and the other transaction documents, a special jurisdiction rule for foreign-related cases should apply. JunHe assisted the client to successfully file a lawsuit against the issuer and all the onshore and offshore security providers as co-defendants in a mainland China court and have the key assets of the defendants in mainland China preserved. JunHe assisted the court in effecting the service of the case documents upon the overseas defendants including those located in Hong Kong and Taiwan in a very short period of time. The offshore defendants objected to the jurisdiction of the mainland China court on the grounds that the case should be subject to the jurisdiction of a Hong Kong court, but, after careful analysis and rebuttal by JunHe, the mainland China court rejected the jurisdiction objection.
The governing law of the Bond Subscription Agreement as the principal contract in this case was Hong Kong law. By utilizing the resources of its mainland China and Hong Kong offices, JunHe provided the mainland China court with the Hong Kong laws and precedents to support the client’s claim at the early stage of the case and applied to the mainland China court for clarification of Hong Kong law issues, thereby enabling the substantive trial of this Case to proceed smoothly. This Case involved Chinese legal issues such as the so-called “Nei Bao Wai Dai” and the requirements for company resolutions on the provision of external guarantees. JunHe paid particular attention to the potential effectiveness and compliance issues at the initial internal review and evidence-gathering stages, and provided evidence to the court to prove the compliance of the so-called “Nei Bao Wai Dai” and the effectiveness of the provision of the external guarantees.
In the end, the defendants requested the client withdraw the Case from the mainland China court by offering to procure a transfer of the offshore bonds. JunHe fully demonstrated its strength and ability in providing comprehensive legal services again by actively cooperating with the client in maintaining, promoting, and applying for the withdrawal of the Case, provided legal advice on the legality and compliance of the client’s transfer of the subscribed bonds, and finally assisted the client to complete the transfer.
The JunHe team was led by partners Tsui, Minglun (Alan Tsui) and ZHU, Jiayin (Jay).
