Benchmark Chambers International & BenchmarkInternational Mediation Center (BCI & BIMC),located in Shenzhen City, serves as the “Secretariat of China Institution forDiscerning Foreign Law supported by China Law Society and other institutions”and “The Base of Supreme People’s Court of China for Discerning Hong Kong,Macau, Taiwan and Foreign Law”. By making optimal use of its advantages in theplatform resources, BCI & BIMC established a network of experts forascertaining foreign law concerning nearly a hundred countries and regions, andestablished cooperation relationships with 158 domestic and foreign legalinstitutions, and appointed more than 1,700 individual experts for foreign lawascertainment.
By now, BCI & BIMC had undertaken more than one hundredforeign law ascertainment at the request of enterprises, courts and governmentdepartments across China, and the ascertainments concern nearly one hundredcountries and regions worldwide, including the United States, the UnitedKingdom, Canada, Switzerland, Mexico, Argentina, Kazakhstan, India, Malaysia,Cayman Islands, Marshall Islands, Kenya, Ghana, Hong Kong SpecialAdministrative Region (HKSAR), Taiwan China, etc. The ascertainments touchedupon a wide range of legal fields, including contract law, company law,marriage law, maritime law, and arbitration law, etc.
In this Article, BCI & BIMC will introduce the keyissues in ascertaining Hong Kong Law. After taking full account of theconfidentiality of entrusted cases, we will only take typical cases related tothe HKSAR that have been published on China Judgments Online as examples,intuitively demonstrate the operation of foreign law ascertainment mechanism ofBCI & BIMC, and provide foreign law ascertainment guidance for legalprofessionals engaged in foreign-related legal affairs.
Issue 1 Determinationof the Validity of Investment Agreements
Case reference
First instance: [2013] Shen Zhongfashewai Chuzi No.26 ofShenzhen Intermediate People’s Court
Outcome of Ascertainment
Under Hong Kong Law, the elements for the examination ofthe validity of an investment agreement are identical to those for a generalcontract, and the agreement in this case is legal and valid.
Ascertainment Process
In this case, both parties submitted their respective legalopinions. However, these are only parties’ opinions on how they think this caseshould be dealt with, and no provision of Hong Kong law related to contract wasstipulated therein. In view of this, the Shenzhen Intermediate People’s Courtentrusted BCI & BIMC, the Base of Supreme People’s Court of China forDiscerning Hong Kong, Macau, Taiwan and Foreign Law, to ascertain the followingissues regarding Hong Kong laws concerned in this case and issue a LegalOpinion:
1. Provisions of Hong Kong law on the validity ofcontracts. That is, how to determine a valid contract?
2. The parties involved in the case signed the StrategicInvestment Agreement. Is there any special provision in Hong Kong law forthis type of contract?
Under the entrustment, Andrew Y. S. Mak, Barrister in HongKong, provided the Legal Opinion on the abovementioned issues.
TIAN Xiaoling had no objection to the Legal Opinion,but HE Peiheng applied for the appearance of Mr. Andrew Y. S. Mak in court for examinationon the ground that the Legal Opinion was inconsistent with the oneissued by HE’s attorney, Tim Chan & Co. Given that the court entrusted theexpert to issue the Legal Opinion on contract validity in Hong Kong law,and both parties did not raise any objection regarding this part, the courthereby confirmed the Legal Opinion on the concerned issues. The analysison specific issues in the Legal Opinion did not fall within the scope ofthe entrustment by the court. Therefore, the court hereby declined HE Peiheng’sapplication.
The court then adopted the Legal Opinion (issued byAndrew Y. S. Mak, the expert appointed by BCI & BIMC) and held that,according to the Legal Opinion, there is no special provision in HongKong law for the Strategic Investment Agreement and the elements for theexamination of the validity of the Strategic Investment Agreement areidentical to those for a general contract, those elements including, thecontract’s binding force, legality, and enforceability. The StrategicInvestment Agreement concerned between TIAN Xiaoling and HE Peiheng was anagreement on Tian Xiaoling’s acquisition of 30 million HKD shares of the projectcompany after its listing by paying 15 million HKD. The agreement concernedmeets the legally binding force element for contracts under Hong Kong commonlaw, and there is no circumstance in this case precluding the legality andenforceability of this contract and it was made under the true intentions ofboth parties. Thus, the agreement is legal and valid, and both parties shall abideby the agreement. Therefore, the court held that the plaintiff’s claims hadfactual and legal basis, and the court hereby accepted the plaintiff’s claims.
Highlights of Ascertainment
In this case, both parties issued their legal opinions tothe court. Subsequently, the Shenzhen Intermediate People’s Court entrusted BCI& BIMC to ascertain the content of Hong Kong law on contract and issue alegal opinion.
As for the issuing body of the legal opinions, the formerlegal opinions were issued by each parties’ attorneys in this case, while thelatter was issued by an authoritative expert of an independent, third-partyascertainment institution. In essence, both the former and the latterconstitute materials and opinions provided by professional and qualified “legalexperts” for law ascertainment under the relevant Chinese law. From thetraditional perspective, the foreign law ascertainment reports were mostly providedby attorneys. However, in this case, compared to the traditional practice whereattorneys undertake law ascertainment, a third-party institution for foreignlaw ascertainment has its obvious advantages in terms of “neutrality”:
First, such institutions endorse the neutrality of thelegal opinions with their “independence” and “third-party identity”. Thebiggest difference between legal opinions provided by third-party institutionfor foreign law ascertainment and those provided by attorneys is that theformer is more neutral. In order to maintain the objectivity of opinionsprovided by experts, BCI & BIMC’s ascertainment rules stipulate that theexperts must conduct the conflict of interest investigation and make adeclaration of no conflict of interest before accepting the appointment, andthe experts shall not take the appointment in case of conflict of interests. Inthe course of ascertainment, through its standard procedures, BCI & BIMCalso ensures that the ascertainment experts issue ascertainment reportsindependently based on their own professional knowledge and legal skills. BCI& BIMC’s ascertainment expert who issued the legal ascertainment report isindependent of any party and must declare that there is no conflict ofinterests with either party concerned in the case before accepting theappointment.
Second, third-party institutions for foreign lawascertainment endorse the report’s neutrality with its pertinence. Theprofessional opinions issued by the ascertainment experts are based only on thecase materials provided by the court, focusing on the legal issues raised bythe court, without judging and drawing conclusions on the facts of the case. Inthe aforementioned case, the legal opinions issued by both parties focused onexpressing their opinions on the overall trial of the case while the legalexpert of BCI & BIMC would closely follow the court’s entrustment, based onthe expression and the scope of the questions, and provided targeted answers tothe identified questions. As a neutral and objective third-party institutionfor foreign law ascertainment, BCI & BIMC focuses on the ascertainment oflegal issues entrusted by the parties or the court. The ascertained issues, thescope of ascertainment and degree of clarity are all in strict accordance withthe entrustment. In order to maintain neutrality, BCI & BIMC’s experts donot express opinions on or prejudge the specific issues in dispute or theoverall outcome of the trial, but only explain the disputed legal issuesconcerned in the case, thus fully respecting the court’s right of trail. Thisis an advantage that ascertainment by lawyers, especially by parties’ attorneys,does not possess.
Issue 2 Thedetermination of the heirs and his liabilities for debts of the deceased
Case Reference
First instance: [2015] Shen Qianfashewai chuzi No.250 ofShenzhen Qianhai Cooperation Zone People’s Court (Qianhai Court)
Outcome of Ascertainment
According to the laws of Hong Kong, the heir does notnecessarily bear the responsibility of paying off the debts of the deceased.
Ascertainment Process
In this case, the most fundamental basis on which theplaintiff ZHUANG Cheng brought the claims against WEN Jiguang and WEN Jishoufor their repayment obligations was the loan agreement signed by ZHUANG Cheng, WENHuotai and XIE Lang and guarantee clause signed by ZHUANG Cheng. Since WENJiguang and WEN Jishou were not parties to the above-mentioned loan agreement, theirrelevance to this case lies in the fact that they are the legal heirs of WENHuotai. Therefore, this case mainly relates to the relevant provisions of legalrelationship of inheritance under Hong Kong law.
Shenzhen Qianhai Cooperation Zone People’s Court entrustedBCI & BIMC to ascertain relevant provisions under Hong Kong law on November25, 2016. The foreign law ascertainment experts of BCI & BIMC issued the HongKong Law Ascertainment Opinion (the “Legal Opinion”) on February 16,2017. The Legal Opinion presented the laws of Hong Kong regarding thedetermination of heirs and the circumstances under which the heirs areobligated to pay off the deceased’s debts.
In order to better understand and apply the provisions ofinheritance under Hong Kong law in the ascertainment, during the trial, thecourt entrusted a third-party legal expert to assess the Legal Opinionprovided by BCI & BIMC’s experts, the identity of the experts andcase-related materials and to issue a neutral third-party assessment report.The assessment report affirmed the foreign law ascertainment opinions issued bythe legal experts of BCI & BIMC in this case.
The court then adopted the Legal Opinion and thethird-party assessment report and held that the law of Hong Kong is applicablelaw for the inheritance relationship concerned in this case, and the heirs donot necessarily bear the obligation to pay off the debts of the deceasedaccording to the law of HKASR. Based on the available evidence in this case, WENJiguang and WEN Jishouwere not proper defendants of this case.
During the trial of this case, the defendants WEN Jiguangand WEN Jishou did not appear in court or submit any written statement ofdefense or evidence. On September 13, 2016, the plaintiff ZHUANG Cheng appliedfor the addition of WEN Maiyingmei (WEN Huotai’s wife), WEN Jifeng and WENJishun (Wen Huotai’s daughters) as the defendants. On August 1, 2017, ZHUANGCheng requested to withdraw the lawsuit from the court on the ground that he willseek other legal approaches to resolve related disputes, and the court acceptedthe withdrawal.
Highlights of Ascertainment
The foreign law ascertainment report helps the partiesunderstand the potential risks in the lawsuit and improves the predictabilityof the outcome of the case. In this case, the Qianhai Cooperation Zone People’sCourt, based on the foreign law ascertainment report issued by BCI & BIMC,adopted a new mechanism of third-party assessment, which combined foreign lawsand relevant facts to conduct litigation risk analysis, and promoted theresolution of disputes through evaluation. In the end, the parties decided towithdraw the case based on their own judgments on the case.
As a third-party foreign law ascertainment institution, BCI& BIMC has always maintained its professionalism. Specifically, BCI &BIMC has taken the following measures in its work:
The first was the establishment of an expert database thathas undergone strict qualification screening, and carried out labelclassification management of relevant experts to achieve the goal of accuratematching and meet the diverse needs of users. In this case, the evaluation agency entrustedby the court focused on the qualification of the expert. When BCI & BIMCidentifies legal experts for clients, it mainly considers two aspects: First,the professional quality and qualifications reflected from the academicqualifications, expertise, professional experience, and related researchexperience of the experts; Second, the major field, service charges, and timecoordination of experts would be considered in order to decide whether theexperts can meet the needs of the clients. Based on BCI & BIMC’s richexperience in serving courts and going global enterprises, it can makeeffective and accurate match in practice, becoming a reliable intermediarybridge between the client and the demander.
The second was understanding the needs of the clients indetail. After accepting the entrustment of the parties, BCI & BIMC willlearn more about the specific legal issues, application scenarios and otherspecific situations that the entrusting parties need to find out throughphysical meetings and telephone conferences. Especially in the case oflitigation, BCI & BIMC will further understand the court’s requirements forascertainment. BCI & BIMC would ensure the correct direction of foreign lawascertainment by full communication in advance, which also could avoid wastingtime and unnecessary burden on clients.
The third is the implementation of a strict managementprocedure for foreign law ascertainment. BCI & BIMC has formedascertainment rules, and improved the ascertainment efficiency through strictascertainment procedures, standardized management, and standardized contracts.Under normal circumstances, it usually takes about two months for BCI &BIMC to finish the work of foreign law ascertainment, starting from formalentrustment to formal issuance of a written foreign law ascertainment report,and it only takes 2-3 days to organize an online ascertainment consultationwith the participation of legal experts.
Through above efforts, as of now, the foreign law ascertainmentreports issued by BCI & BIMC have been widely adopted by courts inShenzhen, Dongguan, Wuhan, Liuzhou, Urumqi and other places, and there hasnever been a case of denial of acceptance due to issues related to professionalqualifications of experts or ascertainment procedures. Similarly, in terms ofserving going global enterprises, BCI & BIMC has also been highlyrecognized by the society. The 2017-2018 Chinese Enterprise Going GlobalResearch Report released by LexisNexis and the China Institute of CorporateLegal Affairs andThe 2018 Action Report on Chinese (Guangdong) CompaniesGoing Global along the Belt and Roadreleased by the Information Office of People’s Government of GuangdongProvince, the Research Center of State-owned Assets Supervision andAdministration Commission of the State Council, and Guanghua School ofManagement, Peking University made grand introduction to BCI & BIMC.
Issue 3 The legalrelationship between a limited company and its branches; Effectiveness of theagreed interests on overdue payment;
Recourse toself-recognized deductions
Case Reference
First instance: [2009] Dong Faminsi chuzi No.282 of theFirst People’s Court of Dongguan, Guangdong Province
Appeal: [2014] Dong Zhongfaminsi zhongzi No.37 of the FirstPeople’s Court of Dongguan, Guangdong Province
Outcome of Ascertainment
The branch of a Hong Kong limited company is an affiliatedagency, and the liabilities should be borne by the parent company. The law doesnot prohibit the limited company from operating in the name of the branch.
Ascertainment procedure
During the appeal proceedings, the three appellantssubmitted to the court a certificate of Legal Opinion issued by a Hong Kong lawyerappointed by themselves. Out of the requirement for neutrality and completenessof the report, on November 17, 2015, the Intermediate People’s Court ofDongguan entrusted BCI & BIMC to ascertain the relevant provisions of HongKong laws. On February 1, 2016, foreign law ascertainment experts of BCI &BIMC completed the Legal Opinion Report and submitted it to the court onFebruary 23, 2016.
According to the Judgment ([2014] Dongzhong FaminSi ZhongziNo. 37 (Dongguan Weaving Factory A)) made on June 1, 2016, the court adoptedthe aforementioned Legal Opinion Report and cited it in the judgment. Itis determined by the court that a limited company in Hong Kong can set up abranch, which is an affiliated agency by its nature, and the parent company shallbear liability for the branch. Hong Kong law does not prohibit a limitedcompany from operating in the name of its branch. When a few limited companiesparticipate in different phase of the contract performance, it is notnecessarily the case that all participating companies need to bear joint liability.The actual undertaking of liability depends on the contract.
Highlights of Ascertainment
According to Article 193 of the Noticeof the Supreme People’s Court on Issuing the Opinions on Several Issuesconcerning the Implementation of the General Principles of the Civil Law of thePeople’s Republic of China (For Trial Implementation) (No. 6[1988] of the Supreme People’s Court ) issued by the Supreme People’s Court in 1988:“The applicable foreign law may be found out through the following ways: (1)Provided by the parties; (2) Provided by the central organ of the oppositeparty who has concluded judicial assistant convention; (3) Provided by ourembassy or consulate in the foreign country; (4) Provided by the embassy of theforeign country in China; (5) Provided by both Chinese and foreign legalexperts. If the applicable foreign law still cannot be determined through theabove method, the law of the People’s Republic of China shall be applied.”
Among these five approaches, the most commonly applied inpractice is the “legal expert” approach. The legal experts can be classifiedinto internal experts and external experts. In this case, the appellant firstsubmitted a Hong Kong Certificate of Legal Opinion to the Court, andthen the Dongguan Intermediate People’s Court entrusted a Hong Kong legalexpert from BCI & BIMC’s expert database to issue a foreign lawascertainment report. The internal expert model is undoubtedly a good attemptto ascertain foreign law. The parties could have a high degree of trust inexperts and the cost is relatively low. The internal expert model can play arole in solving certain types of cases, especially if the parties have noobjection, the opinions issued by internal experts on foreign law ascertainmentmay also be adopted. However, there are two difficult problem to be solvedabout internal expert model: the first is the contradiction between the limitationin terms of expert resources and the diversity in demands for ascertainment;the second is that the neutrality of experts is likely challenged. While theabove-mentioned problems can be tacked by external expert model, especially throughexternal expert database built by platform, which can achieve higher ratio of matchingthrough quantitative advantages. As an independent third-party institution, theplatform can also provide opinions more freely and neutrally without beingaffected by the background or tendency of the case.
BCI & BIMC has established a legal expert pool withmore than 1,700 legal experts from all over the world through a platform-basedexternal expert database. Compared with the extra-territorial legal opinionsprovided by the attorneys, the third-party platform is more neutral; Comparedwith the more “official” central authorities, embassies and consulates, thethird-party platform has more advantages in sensitive response, rapid matchingand standardized operation. In this case, BCI & BIMC provides professionaladvice as an independent third party through the US legal experts of its expertdatabase, which ensures that there is no interest relationship between theexperts and the parties and assures the neutrality of the ascertainment report.The ascertainment report was eventually adopted and applied by the court.Moreover, on the premise that the detailed circumstances of the case has notbeen disclosed, according to the ascertainment issues in the entrustment letterissued by the court, the experts of BCI & BIMC issued a 22-page ExpertOpinion detailing the various situations that may occur under a single issue,and submitted the relevant and complete legal texts concerned to the court todemonstrate the integrity and clarity of the ascertainment content.
Issue 4 Determinationof the validity of the guarantee contract and the undertaking of the guaranteeliability
Case reference
First instance:[2016] Yue 0391 Minchui No.905of Shenzhen Qianhai Cooperation Zone People’ Court, Guangdong Province
Outcome of Ascertainment
The guarantee contract is valid, and the concept of”jointand several liability” under common law and Chinese law are similar.
Ascertainment Process
On December 7, 2015, Shenzhen Huirong Financial GuaranteeCo., Ltd. (“Huirong Guarantee”) entrusted BCI & BIMC to ascertain therelevant Hong Kong laws, and submitted the Legal Opinion issued by HongKong Legal Experts of BCI & BIMC to the court on January 19, 2016 when filingthe suit. In the course of trial, at the request of the court, on October 24,2017, Huirong Guarantee once again entrusted BCI & BIMC to ascertain therelevant provisions on the ways of undertaking guarantee liability under HongKong law, and submitted the Supplementary Legal Opinion issued by thesame expert to the court on December 28, 2017.
Huirong Guarantee and Shengli Plastic Industrial (Shenzhen)Co., Ltd. (“Shengli Plastic”) have no objection to the Hong Kong law provisionsascertained in the two legal opinions. The defendant Shengtian Industry Co.,Ltd. (“Shengtian Industry”) did not appear in court.
The court held that the case was a dispute over a guaranteecontract in Hong Kong, and the parties can choose the law applicable to thecontract by agreement. It was agreed in the Guarantee and Compensation Letterthat the Hong Kong law will be applicable, which is not inconsistent with thelaw. Therefore, the laws of Hong Kong shall be applied with respect to theadjudication of the dispute related to the Guarantee and Compensation Letter.Since Shengtian Industry was the guarantor for the debt, thus the laws of HongKong shall also be applicable to determine whether Shengtian Industry shallbear the liability as guarantor after the assignment of the creditor’s rights.
The court adopted the Legal Opinion and the SupplementaryLegal Opinion provided by BCI & BIMC, with reference to which the courtconducted analysis on the legal issues of Hong Kong Law concerned in the case,and adjudicated the guarantee issue of the guarantee in accordance with the lawof Hong Kong. The court made the following judgment: The Guarantee andCompensation Letter is legal and valid; The guarantee liability promised byShengtian Industry shall be the “joint and several liability” under common law,and such a concept can also be found under Chinese law; The assignment of thecreditor’s rights between DBS Bank and Huirong Guarantee is valid, and the debtguarantor should perform his guarantee obligations toward the assignee as stipulatedin the Guarantee and Compensation Letter. The court finally supportedthe plaintiff, Huirong Guarantee’s requests and ruled that the defendantShengtian Industry should make the payment.
Highlights of Ascertainment
In this case, Huirong Guarantee made preparation for thetrial by ascertaining Hong Kong laws before filing the suit. While the trialproceeded, as the court considered that the first Legal Opinion did notascertain the ways of undertaking guarantee liability under Hong Kong law, thecourt requested Huirong Guarantee to conduct a supplementary ascertainment.After receiving the second entrustment from Huirong Guarantee, BCI & BIMCentrusted the Hong Kong expert who issued the first Legal Opinion toissue the Supplementary Legal Opinion on the new ascertainment issues posedby the court.
In practice, foreign legal issues to be ascertained oftenchange, increase, or refine as the case proceeds, especially when the entrustbody is also a party to the case. If, at the time of ascertaining the law, thecase has not entered into the litigation phase yet, or the needs for ascertainmentwere not properly communicated to the court, chances are that the ascertainmentresults are not entirely the same as what the court actually needs in trial. Inview of this, BCI & BIMC, as a professional foreign law ascertainmentinstitution, provides clients with a way to make supplementary ascertainment,and requires the ascertainment experts to issue supplementary ascertainmentreports to meet the needs of the trial. If requested by the court, BCI &BIMC can also provide supplementary explanations and in-person explanations(expert appearing in court for the examination) to help the users of the reportto better understand its contents.
Issue 5 Foreign lawascertainment experts appear in court and explain
Ascertainment Process
This case is a Hong Kong-related guarantee contract disputeinvolving a Hong Kong securities company and a Mainland resident, who is theguarantor. The Hong Kong securities company sued the defendant requesting thatthe defendant bear the joint and several liability in accordance with the law, asthe debtor failed to repay the money. As the court confirmed that the Hong Konglaw is the applicable law in this case, one of the parties entrusted BCI &BIMC to conduct Hong Kong law ascertainment. After the Hong Kong lawascertainment report was submitted to the court, upon the parties’ application,the Hong Kong legal expert appeared in court and explained the relevantprovisions of Hong Kong law regarding the understanding and application of themin this case, and responded to the inquiries of both parties in detail.
Highlights of Ascertainment
On June 24, 2018, the trial of this case went on live broadcastin Shenzhen Courts’ “Ten Thousand Live Broadcasting and Pronouncing Judgementin Court” event and the Open Day of Shenzhen Qianhai Cooperation Zone People’sCourt. There are more than 300 legal professionals watched the live trial atthe venue.
The live trial of this Hong Kong-related cases and theinvitation of Hong Kong legal experts to elaborate on Hong Kong laws was co-hostedby Qianhai Court and BCI & BIMC, the latter being the Base of SupremePeople’s Court of China for Discerning Hong Kong, Macau, Taiwan and Foreign Law.It is a case in practice to illustrate the progress in foreign lawascertainment in Shenzhen. The trails were widely praised, and some deputies tothe People’s Congress stated that, after this live trail, they had a deepunderstanding of the openness, transparency and procedural norms of Hong Konglaw applied by Mainland courts and praised the positive efforts made to build abusiness environment under the rule of law.
Issue 6 Provisions onloan contract relationship and interests;
Provisions on pledgeand guarantee liability
Case reference
First instance: [2015] Wu Zhongminsan chuzii No.64 ofUrumqi Intermediate People’ Court, Xinjiang Uygur Autonomous Region
Outcome of Ascertainment
The court cited the legal ascertainment report on the legalityand validity of the loan contract as the ground for the court’s judgment;however, the law governing the relationship of the pledge guarantee contractwas the law of Mainland China
Ascertainment Process
The main legal content for ascertainment concerned in thiscase is provisions of debtor-creditor relationships, interests and guaranteeunder Hong Kong law.
EVENTINT INTERNATIONAL LIMITEDfiled the suit to Urumqi Intermediate People’s Court, Xinjiang Uygur AutonomousRegion, but no judgment has been made due to the application of law. In January2016, EVEN TINT INTERNATIONAL LIMITED entrusted the BCI & BIMC, the Base ofSupreme People’s Court of China for Discerning Hong Kong, Macau, Taiwan andForeign Law, to ascertain legal issues concerned in this case. After BCI &BIMC accepted the entrustment, it appointed a Hong Kong barrister to completethe Hong Kong law ascertainment report according to the entrustment. On March29, 2016, the expert issued a Legal Opinion and concluded that:
1. Under the Loan Contract, it is assumed that EVENTINT INTERNATIONAL LIMITED can provide solid evidence to prove that ELEGANT TOPINVESTMENT LIMITED and LIU Moujia and others have breached the contract onDecember 31, 2010 and EVEN TINT INTERNATIONAL LIMITED suffered losses. EVENTINT INTERNATIONAL LIMITED may require ELEGANT TOP INVESTMENT LIMITED to repaythe loan principal of RMB 30 million based on the Loan Contract, the SupplementaryCommitment Letter and the Supplementary Commitment Agreement;
2. The 20% annual loan interest rate agreed by EVEN TINTINTERNATIONAL LIMITED and ELEGANT TOP INVESTMENT LIMITED in the SupplementaryCommitment Letter and the Supplementary Commitment Agreement did notviolate the prohibition of excessively high interest rates under Section 24 ofthe Money Lenders Ordinance. Therefore, the agreement of the annual loaninterest rate is allowed.
3. Based on the existing evidence, the five equity pledgeagreements are legal in form, and the guarantee obligations of LIU Moujia and ZHAOMoumou are valid. However, it is unclear whether ZHAO Moumou has proposed adefense reason for being “improperly affected” by LIU Moujia at this stage;
4. EVEN TINT INTERNATIONAL LIMITED would like to proposethat its money lenders business is governed by the Money Lenders Ordinance(Cap. 163), which is a defense and it should bear the relevant burden of proof.When the court believes that the plaintiff EVEN TINT INTERNATIONAL LIMITED isindeed engaged in “operating money lender business” under the Hong Kong MoneyLenders Ordinance, the requirement for a money lender’s license may become arelevant legal restriction.
As the Legal Opinion which determines that Hong Kong lawshould be applied was submitted by the plaintiff EVEN TINT INTERNATIONALLIMITED in this case, the court of the first instance discussed whether HongKong law should be applied to hear this case. The court believed that the casewas a dispute over a loan contract, and the applicable law for the loancontract relationship part should be the Hong Kong law. The plaintiff EVEN TINTINTERNATIONAL LIMITED is a company incorporated in the British Virgin Islands,and the defendant ELEGANT TO PINVESTMENT LIMITED is a company incorporated inHKSAR. Thus, the applicable law for this case shall be determined in accordancewith the relevant provisions for foreign-related civil cases. From theperspective of applicable private international law rules, parties are allowedto choose the applicable law when a dispute occurs, whether it is before orafter the implementation of the Law of the People’s Republic of China onChoice of Law for Foreign-related Civil Relationships. In the LoanContract signed by both parties, it was agreed that the law of Hong Kong wouldbe the applicable law for the resolution of contract disputes, and in thelitigation process of this case, they still insisted on the application of thelaws of Hong Kong. After examination, the agreement did not violate prohibitiveprovisions of the law of Mainland China. Therefore, the law of Hong Kong shallbe determined as the applicable law for the loan contract relationship of thiscase. Although both parties did not mention the application of law in the SupplementaryCommitment Letter and the Supplementary Commitment Agreement signedlater, since both of them were supplements and changes to the Loan Contract,the same law should be applied for the purpose of the resolution of the dispute.However, both parties reached a consensus in five equity pledge agreements thatthe equity pledge guarantee contract relationship concerned in the loan shallbe governed by the laws and regulations of Mainland China. Therefore, theabove-mentioned equity pledge guarantee contract relationship shall be governedby the law of Mainland China.
The court of the first instance subsequently cited thecontents of the Legal Opinion issued by the legal experts of BCI &BIMC as the basis for its judgment on the following two issues: “The validity ofthe Loan Contract” and “The plaintiff’s request that the defendantELEGANT TOP INVESTMENT LIMITED, Dingqi Company, Dingwangjin Company and TianhuiTongli Company to repay the loan principal of RMB 30 million and the intereststhereof jointly”. However, as the court of the first instance held that the lawof Mainland China should be applied to the pledged guarantee contractrelationship, Hong Kong law shall not be applied in this part.
Highlights of Ascertainment
The plaintiff EVEN TINT INTERNATIONAL LIMITED entrusted BCI& BIMC to conduct foreign law ascertainment. Article 10 of the Law ofthe People’s Republic of China on Choice of Law for Foreign-related CivilRelationships stipulates that “Foreign laws applicable to foreign-relatedcivil relations shall be ascertained by the people’s court, arbitral authorityor administrative organ. If any party chooses the applicable foreign laws, heshall provide the laws of this country.” In the past, it is difficult to findeligible and authoritative legal experts, or it is difficult to ensure theneutrality of the ascertainment procedure, which makes it impossible toascertain foreign law or the outcome of ascertainment of foreign law are notrecognized by the court. Although BCI & BIMC physically “isolates” theclient and the expert through procedural design, by transferring the client’sneeds and matching qualified and authoritative experts, the expert’s foreignlaw ascertainment report would be more procedurally and professionally acceptableby courts. However, it should also be noted that the foreign law ascertainment ofBCI & BIMC are based on the client’s entrustment. Therefore, whether the foreignlaw issues that the client wants to ascertain are the same as the court needsto know is crucial to whether the court will eventually adopt the ascertainmentreport. At the same time, from the perspective of procedural justice, when oneparty requested foreign law ascertainment, the opinions of the court and theother party should be sought, so as to increase the likelihood of admissibilityof foreign law ascertainment reports.
The court of the first instance in this case is the UrumqiIntermediate People’s Court, which is located in the west of China. Therefore,it would be difficult to ascertain the law of Hong Kong due to the longdistance between Urumqi and Hong Kong. Therefore, although the trial of thiscase began at the end of 2014, due to the application of Hong Kong law,thejudgement has been delayed. Two months after entrusting BCI & BIMC toconduct legal ascertainment, a report on the ascertainment of Hong Kong lawrelated to this case was obtained, which promoted the trial process, greatly improvedthe efficiency, and respected the parties’ autonomy in applying Hong Kong law.This fully reflects the original intention of the “Base of Supreme People’sCourt of China for Discerning Hong Kong, Macau, Taiwan and Foreign Law”-toserve people’s courts at all levels and parties across the country, to promotethe correct application of laws and the fair settlement of cases.
Issue 7 The legalstatus of a registered Hong Kong company after reinstatement and its impact onthe deregistration period
Case reference
First instance: [2011] Shen Longfaminer Chuzi No.1691 ofLonggang District People’ Court of Shenzhen, Guangdong Province
Second instance: [2012] Shen Zhongfashewai Zhongzi No.47 ofShenzhen Intermediate People’ Court, Guangdong Province
Retrial: [2015] Yue Gaofaminsi Shenzi No.55 of High Courtof Guangdong Province
Outcome of Ascertainment
A Hong Kong company should be regarded as having continuedin existence as if it had not been deregistered after its reinstatement
Ascertainment Process
At the retrial stage, WEI MEI GROUPLIMITED applied to the court for entrusting BCI &BIMC to ascertain thelegal provisions of HKSAR on the above three issues. Shenzhen Tronsun PlasticProducts Co., LTD also agreed to entrust BCI & BIMC to conduct the legalascertainment. The court then entrusted BCI & BIMC to conduct the foreignlaw ascertainment.
BCI & BIMC issued a Foreign Law Ascertainment Reportby Hong Kong legal experts in its expert database, stating that: 1. Hong Kongcompanies should be regarded as having continued in existence as if it had notbeen dissolved after reinstatement; 2.Under common law, only the solicitor or the barrister can participate in thelitigation activities on behalf of the subject of litigation, except for theparties acting in person. But the company’s authorization to the lawyers shouldbe invalidated or automatically revoked from the moment the company isdissolved. Therefore, during the period of a Hong Kong company’s dissolution untilthe registration is restored, the lawyers’ conducts on behalf of the company isinvalid; 3. There was no provision for ratification after the Hong Kong company’sreinstatement. During the period from the dissolution of the company to its reinstatement,the state of the company was as if it were in sleep and the company resumes itsactivities until the court order declares the company’s dissolution invalid.
WEI MEI GROUP LIMITED and Shenzhen Tronsun Plastic ProductsCo., LTD had no objection to the Foreign Law Ascertainment Report, andthe court adopted it. According to the first item of the Foreign LawAscertainment Report issued by the Hong Kong legal experts of BCI &BIMC, a Hong Kong company should be regarded having continued in existence asif the company has never been deregistered after its reinstatement. Therefore,the court determined that WEI MEI GROUP LIMITED has the qualification of acivil subject according to law and should be a proper litigation subject ofthis case after reinstatement. According to the second item of the ForeignLaw Ascertainment Report, after the reinstatement of WEI MEI GROUP LIMITED,it is regarded as having continued in existence as if the company has neverbeen dissolved and it should be regarded as if WEI MEI GROUP LIMITED was in astate of sleep from the time when WEI MEI GROUP LIMITED was deregistered to thetime of its reinstatement. During the deregistration period, whether thelitigation act of its lawyer on behalf of the company has legal effects on WEI MEIGROUP LIMITED shall be determined according to the intention of WEI MEI GROUPLIMITED after the reinstatement. As the Foreign Law Ascertainment Reportpoints out that there is no provision inHong Kong law for ratification after the company’s reinstatement , according toArticle 10, Paragraph 2 of Law of the People’s Republic of China on Choiceof Law for Foreign-related Civil Relationships, if foreign laws cannot beascertained or there are no provisions in the laws of this country, the laws ofthe People’s Republic of China should be applied. The court applied the laws ofMainland China and held that the acts of the agents of WEI MEI GROUP LIMITEDduring the second trial of this case were legal and valid. The final judgmentupheld the original judgment and did not support the retrial request of ShenzhenTronsun Plastic Products Co., LTD.
Highlights of Ascertainment
In this case, the subject qualification of a party is amajor factor affecting the resumption of the trial in the second instance, andit is also the direct reason for the start of the retrial procedure. Whenparties raised different opinions concerned Hong Kong law in the case, theretrial court did not “easily” determine that it was unable to ascertain the foreignlaw but chose a neutral third-party foreign law ascertainment institution to conductascertainment with the consent of both parties. The court finally adopted theforeign law ascertainment report, which reflects the emphasis on proceduraljustice.
Read the original: 香港特别行政区查明焦点问题
