Introduction

In May 2021, a cooperation mechanism between Hong Kong and the Mainland on recognition of and assistance to cross border insolvency proceedings (“Cooperation Mechanism”) was implemented. “The Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region” (“SPC Opinion”) was further issued to facilitate the implementation of the Cooperation Mechanism.
Recently on 25 January 2022, in the landmark decision of (2021) 粤03认港破1号, the Shenzhen Intermediate People’s Court (“Shenzhen Court”) approved the first ever application for recognition of and assistance to Hong Kong insolvency proceedings.

Brief facts
Samson Paper Company Limited (“Company”) was incorporated in Hong Kong and went into creditors’ voluntary liquidation in August 2021. The Company had substantial assets in the Mainland including Shenzhen.
In order to deal with the Company’s assets in the Mainland, the liquidators – pursuant to the SPC Opinion – applied to the High Court of Hong Kong for issuing a letter of request to the Shenzhen Court for recognising and assisting the liquidators. The application was granted in Re Samson Paper Co Ltd [2021] HKCFI 2151 in Hong Kong and the letter of request was accordingly issued to the Shenzhen Court.

The Shenzhen Court’s decision

The Shenzhen Court first considered the issue of jurisdiction and held that it had jurisdiction over the application because Shenzhen was the Company’s main location of assets in the Mainland.
The Shenzhen Court then acceded to the letter of request, recognising both the Hong Kong insolvency proceedings of the Company and the status of its liquidators.

Takeaway points
With this first ever case where a Mainland court recognised and assisted liquidators appointed by the Hong Kong High Court, given the close business connections between Hong Kong and Mainland, it is expected that a growing number of applications by Hong Kong liquidators for recognition and assistance in the Mainland Courts under the Cooperation Mechanism will be seen in the future.

Our Hung’s litigation team is equipped to assist clients in applying to the High Court of Hong Kong, through our association with AllBright Law Offices, to obtain the recognition of and assistance to Hong Kong insolvency proceedings in the Mainland Courts.

Please contact our Partner, Ms Milly Hung, or Senior Associate, Mr Michael Lau, for any enquiries or further information.

This article 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.

Between 22 to 25 February 2022, our firm’s Partners Willy Cheng, Lai Lam, Heidi Chui, and Milly Hung, together with our Senior Associate Michael Lau, participated as speakers and panelists at Interlaw’s 2022 Virtual Asia Pacific Regional Meeting, titled “Together, We Work”, which attracted more than 500 delegates around the globe.

• Willy Cheng – Homeward Bound? A News Direction for Tax Policy
• Heidi Chui – Arbitration on the Ascendancy: A New Perspective on Disputes
• Milly Hung and Michael Lau – Digitalization and Disputes
• Lai Lam – Creating an Inclusive Workplace at a Distance

22 February 2022 | Partner Willy Cheng- Homeward Bound? A News Direction for Tax Policy

Mr. Cheng’s sharing at the tax panel discussion delved into the impact of COVID and the shift from globalisation to the domestic front- moving production onshore. He discussed the growing need for businesses to restructure given current and future tax policies and mentioned Hong Kong’s tax exemptions during COVID. In particular, how corporate and individuals need to adapt to these pressing times on a global and national scale.

Our Partner Willy Cheng (Top right)

22 February 2022 | Partner Heidi Chui- Arbitration on the Ascendancy: A New Perspective on Disputes

With new arbitration institutions opening across the region, the popularity of arbitration in Asia continues to rise. Ms. Chui joined the expert panel and discussed the drivers behind the trend and how it reshapes business disputes’ culture.

Our Partner Heidi Chui (Bottom right)

23 February 2022 | Partner Milly Hung and Senior Associate Michael Lau- Digitalization and Disputes

This expert panel explored technology solutions across jurisdictions so as to stay ahead and be the strongest to support clients in the new era for disputes. Ms. Hung and Mr. Lau shed light on topics including cyber security, cyber risk management, and shared their experiences in recovering loss in cyber fraud. They also explained the latest development of the “Letter of No Consent Regime” for cybercrime and money laundering in Hong Kong.

Our Partner Milly Hung (Top left) and Senior Associate Michael Lau (Top middle)

24 February 2022 | Partner Lai Lam- Creating an Inclusive Workplace at a Distance

As the Vice-Chair of Interlaw Diversity, Inclusion and Community (Asia Pacific), Ms. Lam took part in a discussion on shifting attitudes to working patterns. The panel also explored how leaders can establish effective working models that improve inclusivity in the new-era hybrid workplace with learning and development, recognition and promotion.

Our Partner Lai Lam (Second row in the middle)

Please contact our Partners Willy Cheng, Lai Lam, Heidi Chui or Milly Hung for further enquiries about this event.

The Quality Migrant Admission Scheme (“QMAS”) is a points based admission scheme for global talents to apply to settle in Hong Kong without first securing a job offer as normally required in work visa application. The scheme was first introduced in February 2006 with an initial quota of 1,000 applicants.

Following the announcement of the Chief Executive’s 2021 Policy Address, the Hong Kong Government has decided to double the annual quota of the QMAS in 2020 to 4,000 entrants. The objective is to attract more talents to come to Hong Kong and to increase Hong Kong’s economic competitiveness. With the introduction of more professional categories, it is expected that Hong Kong will welcome an influx of applications from different sectors. The Talents List was first drawn up in 2018 and now the list covers 13 professions. The latest addition includes professionals in asset management, and environmental, social and governance. Further, individuals from medical and healthcare sciences, microelectronics, integrated circuit design and arts technology, and the disputes resolution/transaction law industries are also now eligible to apply under the QMAS. Potential entrants from other industries and sectors not covered by the Talent List are still welcome to apply as long as they meet the respective eligibility criteria.

The Immigration Department will prioritise the applications of applicants undertaking research and development work under the Technology Talent Admission Scheme (TechTAS). With the expansion of professional categories under the QMAS, it is expected that the Immigration Department may also provide a fast-track arrangement for eligible individuals to work in Hong Kong.

Certain countries have introduced schemes to attract immigrants from Hong Kong. This no doubt posts a threat to Hong Kong on outflow of talents. The significant increase in the Talents quota to a large extent reveals the Hong Kong Government’s effort to counter that threat. Hong Kong has experienced different challenges in recent years. With the strong resilience of Hong Kong people, Hong Kong usually recovers fast from difficult times. Interested candidates with relevant skills and talents should seize this good opportunity to seriously consider coming to Hong Kong to pursue their career dreams.

Our Immigration Team are on standby to help interested applicants understand the requirements and walk through the application process. Please contact our Partner Willy Cheng or Paralegal Arial Ng (arial.ng@sw-hk.com) for any further enquiries or information.

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 arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

(中文) 2022年2月21日, 本所合伙人、诉讼及争议解决部主管徐凯怡律师受香港税务学会 (TIHK) 邀请，为其专业进修课程「税务顾问应知的仲裁知识——流程、优势和最新进展」担任讲师。

本次网络研讨会旨在让 TIHK 的会员了解仲裁在税务或其他商业纠纷中的好处，并介紹香港仲裁法和最新发展。徐律师先详细向与会者介绍了什么是仲裁以及仲裁的优势, 并特别提到起草有效仲裁协议的注意事项及拥有有效的仲裁条款之重要性。徐律师在会上阐释了仲裁的程序，并通过案例分析分享了商业交易中税务纠纷的可仲裁性，以及仲裁在涉及稅务范畴的收购合并争议中的应用。此外，徐律师亦分享了跨境仲裁的最新进展，和内地与香港对仲裁的支持和司法合作。

徐律师以回答现场提问的方式圆满地结束了是次充满互动性的网上课程，获得了与会者的正面回馈。

如阁下有任何查询或想了解更多详情，请联络本所徐凯怡律师。

In July 2021, the Court of First Instance (“CFI”) handed down its decision in Securities and Futures Commission v Isidor Subotic and Others[1] (“Subotic”).

The Subotic decision contains useful discussions on whether the Hong Kong Court has jurisdiction and may exercise it over overseas defendants of statutory claims commenced by the Securities and Futures Commission (“SFC”) in respect of breaches of the Securities and Futures Ordinance (“SFO”).

Without making a general observation that the SFC can enforce the SFO against overseas offenders, the Subotic decision was, on its specific factual matrix and in respect of the jurisdiction issue, in favour of the SFC.

Given that market participants (and offenders) often operate from out of Hong Kong, the Subotic decision is important to the SFC’s effectiveness as a Hong Kong regulator.

An appeal against the Subotic decision (the jurisdiction issue in particular) is pending the determination of the Court of Appeal.

Meanwhile, however, the Subotic decision remains an integral part of the SFC’s arsenal. On 14 February 2022, the reasonings in Subotic were adopted in SFC v Yik Fong Fong and Others[2], which decision was in favour of the SFC.

Background

In February 2016, an extensive network of traders orchestrated by 6 of the Defendants, including Eastmore Global, Ltd. (“the Eastmore Defendants”), executed manipulative trading orders to pump up the share price of Ching Lee Holdings Limited (stock code: 3728.hk) to 700% above its placing price.

The inflated price was maintained for 7 months, whereupon the shares were dumped onto the market abruptly, causing the share price to plummet by 90%.

The pump-and-dump scheme generated illicit profits of around HK$124.88 million for the Eastmore Defendants and the proceeds of sale was remitted overseas.

An estimate of some 896 market participants suffered an aggregate loss of over HK$101.28 million.

The SFC’s Action against the Eastmore Defendants

The SFC commenced an action in the CFI against, amongst others, the Eastmore Defendants for breach of various sections of the SFO, including conspiracy to do “false trading” (i.e. by creating a false or misleading appearance of “active trading”, and creating and maintaining an artificially inflated price).

Pursuant to section 213 of the SFO, the SFC sought various reliefs against the Eastmore Defendants, including a restoration order (i.e. to restore the market participants to the status quo ante), injunctive reliefs, and damages.

The SFC successfully obtained leave to serve the originating processes out of jurisdiction on the Eastmore Defendants.

Subsequently, the Eastmore Defendants sought to set aside the leave for service out in order to nullify the action against them.

Under Order 11 rule 1(1) of the Rules of High Court, for leave for service out to be granted, the Court must be satisfied that the following requirements are met:-

(1)   There is a good arguable case that the plaintiff’s case falls within one of the “gateways”;

(2)   There is a serious issue to be tried on the merits of the plaintiff’s case;

(3)   Hong Kong is the appropriate forum for the trial.

The 2^nd and 3^rd requirements were not in serious dispute in this case. The main argument for the Eastmore Defendants was that the SFC’s case did not fall within any of the gateways.

The Gateways

The SFC sought reliance on the following three gateways: –

(i)     Tort – “the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction”

(ii)    Injunction – “an injunction is sought ordering the defendant to do or refrain from doing anything within the jurisdiction”

(iii)   Necessary or proper party – “the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto”

(i)      Tort

Having considered authorities from different jurisdictions, the Court distilled the following principles for deciding whether a claim is a tort:-

(1)   There is no universal definition of tort;

(2)   A claim in tort can be created by common law or statute. For those created by statute, it is not necessary for the statutory cause of action to be analogous to a pre-existing common law cause of action in tort;

(3)   Within the same statute, some claims may be in the nature of tort whilst others may not;

(4)   The presence of a “duty” towards person generally or a class of persons is an element of tort;

(5)   If the statute prohibits certain conduct, a breach may result in liability in tort;

(6)   If the statute merely provides that damages are recoverable without regard to the defendant’s intention, negligence or default, it may not be a tort, as the statute does not impose a duty on anyone to act in a particular way;

(7)   A claim in tort is redressible by unliquidated damages but not every statute which creates a liability to pay damages creates a tort; and

(8)   The mere fact that other discretionary remedies (e.g. injunction or declaration) may be available should not alter the characterization of a cause of action as a tort.

The Court considered that the above principles should apply notwithstanding the caveat that the authorities from which they were distilled concerned private plaintiffs who have suffered personal loss (contra. the SFC, which had not personally suffered any loss).

In finding that there was a good arguable case that the SFC’s statutory claim falls within the tort gateway, the Court considered the following factors:-

(1)   Proof of intent on the part of the wrongdoer is required to establish the statutory claim of “false trading”;

(2)   Those who had suffered loss plainly belong to a class of the public that the SFO intends to protect;

(3)   Although civil remedies are available to individual investors, there are circumstances when it would be eminently reasonable for proceedings to be taken by the SFC for the investors’ benefit. The fact that the SFC might bring the action in its own name as the protector of individual market participants (many of whom with relatively small losses) did not undermine the tortious nature of such a claim;

(4)   The fact that section 213 of the SFO also fulfilled public purposes and conferred upon the SFC rights that went further than the purpose of tort and ordinary enforceable civil law rights did not undermine the fact that the conduct sued upon was tortious in nature;

(5)   While the remedies under section 213 were restorative in nature, where the Court has power to make a restorative order, it may, in addition or in substitution, make an order for damages against the defendants; and there was a good arguable case that the measure of damages for tort would apply;

(6)   The fact that the SFO afforded more reliefs than damages was immaterial as a statutory tort did not require a parallel tort with parallel reliefs at common law;

(7)   There were sound policy reasons that a claim under section 213 of the SFO should be regarded as a tort for the purpose of this gateway. A pragmatic and realistic approach should be adopted; and

(8)   The “double actionability rule” required the plaintiff to satisfy the Court that its claim was actionable in tort both in Hong Kong and the place abroad, but if the Court found that the tort had in substance been committed in Hong Kong, the fact that some of the relevant events have happened abroad and the law of the foreign country where such events may have happened were irrelevant, and the Court could wholly disregard the double actionability rule. In this connection, the Court found that although the Eastmore Defendants were resident outside Hong Kong, there was a good arguable case that the conspiracy was in substance committed in Hong Kong. Therefore, the double actionability rule did not apply.

(ii)           Injunction

The SFC sought injunctions against the Eastmore Defendants to (1) freeze their assets; and (2) restrain them from contravening the provisions against false trading. The injunctions sought are wide in scope to restrain the Eastmore Defendants from contravening section 213 of the SFO in any way, anywhere and anytime.

An injunction may be granted if there is an appreciable risk that the defendant would in the future interfere with the plaintiff’s rights. On the other hand, the court would not grant injunctions that are hopelessly wide and ill-defined, and it has no power to restrain conduct outside the jurisdiction.

The Court found that there was a good arguable case that an injunction would be granted against the Eastmore Defendants restraining them from committing further false trading activities in Hong Kong given that the Eastmore Defendant had maintained sufficient connections in Hong Kong and remained capable of conducting further acts in Hong Kong.

The injunction as sought by the SFC may be too wide in geographical scope, as the Hong Kong courts may not grant an injunction to restrain acts not only in Hong Kong but also unspecified “elsewhere”, and the injunction gateway specified that the writ should be one that seeks an injunction to restrain the defendant from doing anything “within the jurisdiction”.

That said, the Court commented further that the SFC did not need to rely on the injunction gateway if the tort gateway was passed. The scope of the injunction can be debated at the trial, and should the SFC need to rely solely on the injunction gateway, leave to serve the Eastmore Defendants out of jurisdiction should still be granted as if the injunction to restrain would be limited to acts within Hong Kong.

(iii)           Necessary or proper parties

The SFC had not relied on this gateway initially when it applied for leave for service out.

Upon the Eastmore Defendants applying to set aside the leave for service, and in case they were successful vis-à-vis the tort and injunction gateways, the SFC additionally referred to the “necessary or proper parties” gateway and asked the Court to grant leave for service out afresh.

The Court noted that the validity of the Writ of Summons had already expired at the time of the decision, and it would be futile to regrant leave for service out without also extending the validity of the writ.

In any event, the Court found that the tort gateway was passed, the original leave for service out was valid, and it was unnecessary to grant leave for service out afresh.

Appeal

In November 2021, the Court granted the Defendants leave to appeal regarding these questions: (1) whether the SFC’s claim is in the nature of torts, and (2) the applicability of authorities on private tort claims to regulatory enforcement actions.

Leave was granted on the basis that the grounds of appeal involved points of general public importance:

(1)   There was an apparent lacuna in the rules regarding service of a writ out of jurisdiction in regulatory enforcement action under section 213 of the SFO; and

(2)   The SFO has extra-territorial effect, such that a decision on appeal will have impact beyond the present case as the SFC may have to serve writs for similar claims out of jurisdiction in future.

Conclusion

Hong Kong is an international financial centre. In this age of globalization and electronic communications, there are policy reasons to facilitate enforcement of the SFO against overseas offenders. The Subotic decision may indicate the Court’s readiness to support this.

On the other hand, the Court traditionally exercises its long-arm jurisdiction with caution. It is noteworthy that English decisions maintain the view that any doubt as to the correct construction of the gateways should be resolved in favour of the foreign defendant. There may also be cases where the policy reasons are less compelling, e.g. the public investors suffered no apparent loss.

Further, it is noted that the Court was not required to apply the “double enforceability rule” in the Subotic case upon finding that the tort had in substance been committed in Hong Kong. It remains theoretically possible for overseas offenders to devise a scheme such that no tort is committed in Hong Kong.

We await the determination of the Court of Appeal and hopefully a comprehensive guideline on when and how SFC may enforce the SFO against overseas offenders.

Please contact our Partners Mr. Osbert Hui or Mr. Dominic Lau for any enquiries or further information.

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 arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

(中文) 本所合伙人、诉讼及争议解决部主管徐凯怡律师再度获深圳国际仲裁院委任为新一届仲裁员，任期由2022年2月21日起，为期三年。

新一届《深圳国际仲裁院仲裁员名册》经深圳国际仲裁院（又称“华南国际经济贸易仲裁委员会”“粤港澳大湾区国际仲裁中心”“深圳仲裁委员会”）第二届理事会审议，共有1549名仲裁员，来自全球114个国家和地区，其中149名來自中国香港特别行政区。深圳国际仲裁院的仲裁员均经过层层严格筛选和审核，集合了国内外在法律、投资、金融、建设工程、房地产、知识产权、高新科技等不同领域的顶尖专家和精英，并在业界均享有公道正派的良好口碑。

徐律师是仲裁员，为少数获取认可进入香港律师会仲裁员名册的仲裁员。另外，徐律师是香港国际仲裁中心、中国国际经济贸易仲裁委员会、上海国际仲裁中心、深圳国际仲裁院、海南国际仲裁院（海南仲裁委员会）、上海仲裁委员会、南京仲裁委员会、广州仲裁委员会、宁波仲裁委员会、合肥仲裁委员会及廊坊仲裁委员会的仲裁员。她亦是香港国际仲裁中心，香港律师会及土地审裁处（建筑物管理案件）的认可调解员，英国特许仲裁司学会院士，同时也是婚姻监礼人。徐律师亦是中国司法部委任的中国委托公证人。

如阁下有任何查询或想了解更多详情，请联络本所徐凯怡律师或按此查看深圳国际仲裁院仲裁员名册。