First Time Recognition by a PRC Court of Enforcement of a U.S. Commercial Judgment

Recently, the Wuhan Intermediate People’s Court (“Wuhan Court”) recognized and enforced a commercial judgment awarding damages entered by the Los Angeles County Superior Court, California, USA (“CA Court”).

Case Background

Wuhan Court Verdict: (2015) 鄂武汉中民商外初字第00026号
(http://wenshu.court.gov.cn/content/content?DocID=498d1508-6e7a-4f61-9a54-a7b6012dafaa&online: KeyWord=2015)

The applicant and the respondents agreed that the respondents would transfer to the applicant a 50% equity interest held in an American corporation for USD 125,000. After the consideration was paid, the respondents absconded with the money and the applicant sued the respondents in the CA Court. CA Court sided with the applicant and ordered the respondents to refund the sum of USD 125,000 with interest. As the respondents were domiciled and had assets available for enforcement in Wuhan, the applicant filed the case in Wuhan Court.

Held:

Procedural

A certified copy of the U.S. judgment and its Chinese translation were submitted by the applicant.

Substantive

Under Article 282 of Civil Procedural Law of the People’s Republic of China, PRC courts shall rule on recognition and enforcement if the PRC court “concludes, upon examination and pursuant to an international treaty which includes the People’s Republic of China or in accordance with the principle of reciprocity, that the basic principle of the laws of the People’s Republic of China or the sovereignty, security or public interest of the State is not violated”,

Pursuant to Article 282, Wuhan Court issued the decision on the following grounds:
1. China and USA have not reached any international treaty relating to the recognition and enforcement of court judgments.
2. There is a precedent of U.S courts recognizing and enforcing civil judgments rendered by PRC courts. Therefore, Wuhan Court held that there is a reciprocal relationship between China and the U.S in respect of mutual recognition and enforcement.
3. The CA Court’s judgment intended to resolve a dispute arising out of an equity transfer agreement between individuals. As a result, such judgment is not in violation of PRC principles.

However, there is no clearly established definition under PRC law regarding reciprocity. Therefore, PRC courts have discretion, albeit limited, to determine what constitutes reciprocity and whether there is a reciprocal relationship in a case. Unlike courts under the common law legal system, a judgment made by local courts is not binding on lower courts in China.

The U.S court judgment acted as a precedent in this case which was not based on the reciprocity principle, but on the Uniform Foreign Money Judgments Recognition Act. The lesson is that it is still worth spending time and effort to review a dispute resolution clause very closely.

Introduction

Amid the high level of interest relating to the Belt and Road (一带一路) Initiative of the Chinese Central Government, the Securities and Future Commission (“SFC”) delivered a statement in April 2017 regarding its approach to listings of certain infrastructure project companies on The Stock Exchange of Hong Kong Limited (“SEHK”).  Infrastructure project companies are generally recognised by the SFC as having special risks attached to them, and are accorded greater levels of scrutiny during the listing application process to ensure that the infrastructure project companies are suitable for listing on the SEHK.  The recent statement from the SFC aims to provide a measure of clarity regarding its view of such listings and to enhance the attractiveness of Hong Kong’s capital market by permitting more listings of infrastructure project companies, in particular those falling within the Belt and Road Initiative.

Statement of the SFC

The SFC has set out a list of mitigating factors which, if one or more are present, will improve the risk profile of an infrastructure project company and reduce the likelihood of the SFC in exercising its discretionary power to reject the proposed listing:

1. large shareholding by a relevant PRC SOE, sovereign wealth fund, substantial listed company or substantial and globally-active institutional investor;
2. committed project financing from a sizeable PRC, Development or International bank;
3. overnment where the project assets are located has direct involvement or shareholding; and
4. the project is located in a jurisdiction that is a signatory to the IOSCO MMOU, or where the SFC has sufficient comfort that it can obtain relevant public and non-public information about the activities of the company in the jurisdictions in which it operates.

This list of factors is not exclusive and other attributes may be proposed in substitution.  It is also likely that not all of these attributes will be applicable in any one case.

SEHK Listing Rules and Waiver Conditions

On the other hand, under the current SEHK Listing Rules, a Main Board listing applicant normally must (i) have a minimum track record period of three financial years and (ii) meet certain minimum financial standards requirements (such as the profit test of at least HK$20 million in the latest financial year and at least a total of HK$30 million in the first two financial years, and a Growth Enterprise Market (“GEM”) applicant generally must (i) have a minimum track record period of two years and (ii) satisfy different financial standard requirements (such as possessing operating cashflow of at least HK$20 million in aggregate for the two financial years) in order to qualify for a listing on the SEHK.

With newly-formed infrastructure project companies, however, Main Board Listing Rules (Main Board Listing Rule 8.05B) and GEM Listing Rules (GEM Listing Rule 11.14) in fact allow the SEHK to accept shorter track record period and/or waive such financial listing requirements if certain conditions are met.  A summary of such waiver conditions are set out below:

Implications

It appears from the current listing rules that Hong Kong regulators place a high priority on protecting the interests and investments of retail investors.  The statement from the SFC can be seen as its desire to open up Hong Kong’s primary stock market to different infrastructure project companies, particularly those relating to the Belt and Road Initiative.  Coupled with the New Board proposals, it could represent an opportunity for Hong Kong to capture the future growth from the Belt and Road, becoming a more attractive listing venue for infrastructure projects in Asia as well as playing a key role in bridging the infrastructure funding gap.

This newsletter is for information purposes only.  Its content does not constitute legal advice, and should not be treated as such.  Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage.

Please contact our Eric Lui or Rodney Teoh for any enquiries or further information.

(中文) 江苏省律师协会联合江苏省产业海外发展和规划协会、国际商会中国国家委员会仲裁委员会、国际商会仲裁院、香港国际仲裁中心、新加坡国际仲裁中心、中国国际经济贸易仲裁委员会香港仲裁中心、中国国际经济贸易仲裁委员会上海分会、上海国际仲裁中心等举办「涉外仲裁江苏行：国际商事仲裁实务研讨及模拟开庭」研讨会于2017年10月12日在南京完满结束。本所合伙人、诉讼及争议解决部门主管徐凯怡律师获邀出席，并担任主讲嘉宾之一。

是次研讨会以「深化了解国际商事仲裁程序及实务」为主题，吸引300多名人士参加，莅临嘉宾包括国际商会中国国家委员会仲裁委员会沈四宝主席、香港仲裁司协会王则左会长、国际商会北亚地区仲裁与ADR主任范铭超先生、新加坡国际仲裁中心中国代表处首席代表刘润东先生、香港国际仲裁中心上海代表处首席代表Joe、中国国际贸易仲裁委员会香港仲裁中心总法律顾问王皓成先生、上海国际仲裁中心副秘书长黄文先生、艾伦格禧律师事务所国际律师Sophia Feng Pu、江苏省高级人民法院民三庭审判长王天红、以及省律协涉外委等。

研讨会由省律师协会副会长车捷、宋政平和省产业海外发展和规划协会副会长仇小萍致辞掀开序幕。研讨会分别由主旨演讲、分论坛和国际商会仲裁院模拟仲裁庭三个环节组成。首环节的主题是「国际商事仲裁的最新改革与创新」，省律协车捷副会长担任该环节主持人。各位嘉宾就当前国际仲裁现状、仲裁的优势、国际仲裁的最新动态以及创新进行了深入的探讨。

第二个环节主题为「国际商事仲裁裁决的承认与执行」，并由中国国际经济贸易仲裁委员会上海分会秘书长焦亚尼担任主持人。各位嘉宾就国际商事仲裁裁决的承认与执行中存在的问题以及实务操作展开了探讨。徐律师在本节中，就中国内地仲裁裁决于香港的执行及司法实践的最新发展发表演讲。

最后是国际商会仲裁院模拟仲裁庭。CMS香港律师事务所董希林高级律师、江苏省律师协会车捷副会长、国浩律师（南京）事务所高级合伙人陈发云担任模拟仲裁庭的仲裁员，本所合伙人徐凯怡律师和江苏迈图律师事务所合伙人朱永磊担任申请人律师，上海力勤律师事务所副主任郑亮和国际商会北亚地区仲裁与ADR助理主任黄一文担任被申请人律师。各方代表唇枪舌剑，从事实、法律等方面展开了激烈的辩论，向广大参与人员全面展现了国际商事仲裁的庭审流程和程序，也充分呈现了律师娴熟的庭审技巧，让台下观众看得津津有味，完全沉浸在仲裁的氛围当中。

徐律师很感谢江苏省律师协会的盛情邀请，她非常荣幸可以参与其中，也十分珍惜能有机会与江苏各界精英分享交流。

如阁下对本次活动有任何查询或想了解更多详情，请联络本所徐凯怡律师。

UK Home Office makes enormous profits from immigrants
The UK Home Office has been accused of rejecting UK visa applications based on technicalities and forcing visa applicants to reapply in order to increase profits. The UK may have the highest visa fees in the world. It is estimated that the Home Office is making an 800 % profit from some UK visa applications.

For example, the application fee for indefinite leave to enter or remain has been set at £2,297; however the actual cost to process an application is only about £252. This shows a great discrepancy between how much it costs the government to process the application and the fee it charges the applicant.

Not only is the fee higher, the Home Office has even started to introduce a new charge of £5.48 for anyone contacting UK Visas and Immigration from overseas by email.

The Home Office response to the backlash is that the approach is “only right and fair”, since it ensures that those who benefit directly from the UK visa system contribute to it appropriately.

In order to avoid mistakes on technicalities and resubmission, visa applicants should therefore consider employing professionals to apply for their visas on their behalf.

(Source: http://www.independent.co.uk/voices/home-office-immigration-costs-government-huge-profits-underfunded-theresa-may-a7944206.html)

Introduction

The Primary Equity Connect (“PEC”) initiative is a key element of The Hong Kong Exchanges and Clearing Limited’s (“HKEX”) Strategic Plan 2016 – 2018, specifically to complete Mainland-Hong Kong Mutual Market connectivity of the equity market segment. The PEC aims to expand cross-border accessibility to the primary equity markets in both the Mainland and Hong Kong for mainland and global investors. This will be achieved by allowing Mainland investors to subscribe for Initial Public Offerings (“IPOs”) in the Hong Kong market via the PEC (Southbound) and global investors in Hong Kong to subscribe for IPOs in the Mainland market via the PEC (Northbound). It is believed that this initiative will be of mutual benefit to each market in view of the limited “internationalisation” development of both markets. Industry players have expressed interest in the PEC, in the belief that the initiative will improve market liquidity, expand investor base and attract sizable global IPOs. However, concerns have been raised regarding the PEC’s potential negative impact on both markets, as well as regulatory and operational complications relating to the implementation of the PEC. In response to such concerns, HKEX has released a research report seeking to elaborate and clarify the details of the PEC, to address the concerns, and to enhance public confidence and support for the initiative.

Background

HKEX has identified deficiencies currently faced by the Mainland and Hong Kong markets:

(a) A Mutual Market without primary market connectivity; and

(b) Developmental bottlenecks in Mainland and Hong Kong stock markets.

The table below summarises the deficiencies as presented by the HKEX:

In light of the above deficiencies, HKEX proposes that the mutual market connectivity model with access to the primary equity market via PEC, supplemented by access to the secondary stock market via Stock Connect, will sufficiently remedy those deficiencies. The PEC will also provide various benefits to the Stock markets on both sides of the border, and contribute to China’s wider economic strategy of attaining a balanced economy, opening up the financial market, and fully realising RMB capital account convertibility.

Implications

The PEC’s potential benefits to both the Mainland and Hong Kong markets are detailed in the table below:

However, there are legitimate concerns in connection to the implementation of the PEC. Sound market regulations for the PEC will have to be established to ensure a fair environment for investors, and to provide adequate investor protection and risk control. This may include eligibility criteria for issuers and investors, and obligations and liabilities of interested parties such as exchanges, market regulators, intermediaries, issuers and investors on both sides of the Mutual Market. Additional disclosure requirements may also need to be imposed for both IPOs under PEC (Southbound) targeting Mainland investors, and IPOs under PEC (Northbound) offered to local and global investors in Hong Kong. A coherent and well-constructed regulatory framework will ensure that regulatory incidents relating to issuers under PEC which impact investors’ interests could be minimised and resolved.

Operational concerns, such as those relating to IPO procedures and general market practices were raised:

(a) whether cross-border retail investors will be allowed to subscribe for PEC shares, or will PEC shares only be open to cross-border institutional investors;

(b) how PEC shares will be allotted to cross-border investors;

(c) whether there will be a separate subscription pool for cross-border subscription, or a combined pool with domestic market subscription;

(d) whether cross-border subscription be subject to different market rules or follow the IPO home market rules;

(e) whether cross-border investors be served by intermediaries in the IPO home market or in the investor’s market; and

(f) whether intermediaries serving cross-border investors be subject to different regulatory requirements, such as Know-Your-Client rules and placement guidelines.

For example, with regards to (a), if the PEC allows retail investors in the Mainland to subscribe for IPO shares, it may entail additional regulatory requirements for the listing company, as this will be deemed as a mainland public offering. This will foreseeably lead to increased time and costs for the listing company. Conversely, if the PEC only allows institutional investors in the Mainland to subscribe for IPO shares, the listing will be exempt from those regulatory requirements. Such operational uncertainties must be properly remedied to preserve market fairness and integrity.

It is anticipated that with considerable effort, a suitable model design catering to the best interests of the Mainland-Hong Kong Mutual Market will be able to effectively address the regulatory and operational concerns, and the PEC will be a successful endeavour benefitting both the Mainland and Hong Kong markets.

This newsletter is for information purposes only. Its content does not constitute legal advice, and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage.

Please contact our Eric Lui or Rodney Teoh for any enquiries or further information.

¹ Refer to HKEX Research Report “Primary Equity Connect – A Breakthrough Opportunity for Mainland-Hong Kong Mutual Market Connectivity and RMB Internationalisation” pp 7; and CSDC Monthly Statistics, CSDC website, December 2016
² Refer to HKEX Research Report “Primary Equity Connect – A Breakthrough Opportunity for Mainland-Hong Kong Mutual Market Connectivity and RMB Internationalisation” pp 7; and Southwest Securities research report on QFII 2017Q1 shareholding status, 1 May 2017
³ Refer to HKEX Research Report “Primary Equity Connect – A Breakthrough Opportunity for Mainland-Hong Kong Mutual Market Connectivity and RMB Internationalisation” pp 10 – 11 and Figure 7

We are delighted to announce that our Partner and Head of Litigation and Dispute Resolution Department Ms. Heidi Chui has been appointed by The Honourable Chief Justice Geoffrey Ma, the Chief Justice of the Hong Kong Court of Final Appeal as a Practising Solicitor Member of the Solicitors Disciplinary Tribunal Panel in October 2017 for a term of three years.

The Solicitors Disciplinary Tribunal deals with specific disciplinary cases brought by The Law Society of Hong Kong against any person who is, or was at the relevant time, a solicitor, a registered foreign lawyer, a trainee solicitor or an employee of a solicitor or a registered foreign lawyer of Hong Kong for alleged professional misconduct.

Ms. Heidi Chui is an Arbitrator (on the panel list of the Law Society of Hong Kong), Fellow of the Chartered Institute of Arbitrators (U.K.) and an Accredited General Mediator with both the Hong Kong International Arbitration Centre and the Law Society of Hong Kong. She is also a member of the Arbitration Committee of The Law Society of Hong Kong. She is a China Appointed Attesting Officer.

Please contact Ms. Heidi Chui for any enquiries or further information.