The plaintiff, the defendant, another company (of which the defendant was the founder and director of) and other subsidiaries of the company entered into a subscription agreement whereby the company would issue convertible notes to the plaintiff. The defendant also issued a guarantee in favour of the plaintiff. The subscription agreement, the convertible notes and the conditions of the convertible notes all contained arbitration clauses, whereas the said guarantee contained a clause which stated the following: “irrevocably submits to the non-exclusive jurisdiction of the Hong Kong courts”.

The plaintiff commenced legal proceedings under the guarantee, whilst the defendant relied on section 20 of the Ordinance to apply for a stay of the legal proceedings commenced by the plaintiff and for the dispute to be referred to arbitration.

At issue was whether the action is “in the matter which is the subject of an arbitration agreement” as set out under section 20 of the Ordinance. If it did fulfil the requirements under section 20, it would be mandatory for the court to order a stay of the proceedings.

The judge held that no clause in the guarantee clearly excluded or displaced the mandatory arbitration clause contained in the subscription agreement as the dispute resolution method. It was also held that it is arguable that the non-exclusive jurisdiction clause contained in the guarantee can operate in parallel with the arbitration provisions found in the other agreements. The judge held that as the proceeding brought by the plaintiff is “in the matter which is the subject of an arbitration agreement”, a stay of the proceedings was ordered. The plaintiff was also ordered to pay the defendant’s costs of the summons on an indemnity basis.

The implications of the aforementioned case are twofold. Firstly, it reinforces the pro-arbitration stance of the Hong Kong judiciary. Secondly, contracting parties involved in transactions concerning multiple contracts should be mindful of the contractual inconsistencies that may be brought to light in the event of disputes arising, which in turn leads to parties incurring further time and costs. In order to resolve disputes as effectively as possible, parties should therefore think carefully how they wish disputes to be resolved during the drafting stages of multiple contracts.

We are delighted to announce that Stevenson, Wong & Co. has been shortlisted as a finalist by Asian Legal Business at the 15th annual Macallan ALB Hong Kong Law Awards in the award categories of “Arbitration Law Firm of the Year”, “BDO Limited Award Matrimonial Law Firm of the Year”, “Deal Firm of the Year”, “Insolvency and Restructuring Law Firm of the Year”, “Real Estate Law Firm of the Year” and “Litigation Law Firm of the Year”. Meanwhile, AllBright Law Offices was nominated for “PRC Firm, Hong Kong Office of the Year”.

The ALB Awards recognise the industry and excellence of people behind the great deals, tremendous projects and matters and cases that overturned landmark decisions to set an entirely new jurisprudence.

Please contact our Mr. Lui for any enquiries or further information about this article.

On 5 August 2016, SW Head of Business Development, Ms Connie Yeung gave a seminar on retirement trust arrangements and family inheritance at our Hong Kong office.

Based in mainland China, Ms Yeung is an expert in handling offshore trust structures for Hong Kong and Chinese enterprises as well as private individuals. She explained the laws relating to occupational retirement schemes, MPF and family trusts, and further illustrated the legal issues arising from inheritance. Participants were all heads and top management from leading trust companies and organizations in PRC including China Trustee Association and National Trust Ltd. The seminar was well received and participants found the discussion both useful and practical.

Please contact Ms. Connie Yeung for any enquiries or further information about this event.

On 4 August 2016, our partner Mr Eric Lui attended “Forum on M&A and Restructuring in assistance of Reform of State-Owned Enterprises” organised by AllBright Law Offices and co-organised by the Association of Corporate Counsel of State-Owned Enterprises of Shanxi Province, Academy of Social Sciences of Shanxi Province and Taiyuan Arbitration Commission. The Forum was held at Hubin International Hotel in Taiyuan, Shanxi.

Speakers from AllBright and the coal mining industry covered various topics in relation to how state-owned enterprises (SOEs) in China could undergo reform through corporate restructuring, including risk management in M&A activities, difficulties being faced by SOEs during reform, how winding-up laws could assist reform activities, and the outlook for state-owned coal mining corporations.

Please contact our Mr Eric Lui for any enquiries or further information about this event.