[Executive Summary]
Court of First Instance, High Court of the Hong Kong Special Administrative Region (HKSAR) rendered a default judgment in a case involving Keepwell Deed. As the Respondent failed to appeal to the competent court of the HKSAR within a reasonable period, such judgment constituted a final judgment enforceable under the Supreme People’s Court’s Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to the Jurisdiction Agreement between the Parties (the “Arrangement”).
Whether such judgment is a default one or not, the involved Keepwell Deed’s legal validity in China Mainland, an issue governed by substantial laws, should not be considered in this case. The term “public interest” referred to in Paragraph 2 of Article 9 of the Arrangement, the violation of which can be relied on to refuse the recognition and enforcement of civil and commercial judgments rendered by a court chosen by the parties, should be interpreted narrowly. In other words, to determine whether the recognition and enforcement of the HKSAR judgment would violate the public interest of the mainland, we should not invoke the mainland laws to review the nature and validity of the Keepwell Deed, but should only consider whether its recognition and enforcement is contrary to the public interest at the time the case was decided.
[Keywords]
Keepwell deed; public interest; jurisdiction agreement
Applicant: Right Time Global Investment SPC-Right Time Value Investment Fund SP, a fund domiciled in Georgetown, Grand Cayman, British Cayman Islands.
Representative: Chen, Director.
Respondent: CEFC Shanghai International Group Limited, a company domiciled in China (Shanghai) Pilot Free Trade Zone.
Litigation representative: Bankruptcy Administrator of CEFC Shanghai International Group Limited.
Wise Source International Limited (“Wise Source”), established in the British Virgin Islands, is an indirect wholly-owned subsidiary of CEFC Shanghai International Group Limited (“CEFC”). To enhance the credibility of Wise Source as the bond issuer, CEFC issued a Keepwell Deed to the Applicant, Right Time Global Investment SPC-Right Time Value Investment Fund SP (“Right Time”), who purchased the Eurobond issued by Wise Source. According to the Deed, CEFC undertook that it shall cause: (a) the issuer to have a Consolidated Net Worth of at least US$1.00 at all times; (b) the issuer to have sufficient liquidity to ensure timely payment by the issuer of any amounts payable under or in respect of the Notes in accordance with the Conditions of the Notes and otherwise under the Deed of Covenant; and (c)the issuer to remain solvent and a going concern at all times. CEFC expressively stated that such undertaking constitutes no guarantee; however, it will be held liable for legal liabilities if it fails to fulfill its obligations specified therein. The Parties agreed that the Keepwell Deed should be governed by English law and any disputes arising therefrom should be subject to the jurisdiction of a court of the HKSAR.
Later, Right Time filed a lawsuit with the High Court of the HKSAR on the ground that CEFC beached the Keepwell Deed. As CEFC did not appear in court, Court of First Instance, High Court of the HKSAR rendered a default judgment, ordering CEFC to pay Right Time the principal, interest of the bond and certain related expenses. The judgment took effect; however, CEFC failed to satisfy it. Therefore, Right Time applied to the Shanghai Financial Court for recognition and enforcement of such judgment.
On October 30, 2020, the Shanghai Financial Court announced its Civil Ruling [2019] Hu 74 Ren Gang No. 1. to recognize and enforce the Judgment HCA 1712/2018 rendered by Court of First Instance, High Court of the HKSAR. Neither the Applicant nor the Respondent has filed a request for reconsideration of the ruling.
[Comment]
This case involves an application for recognition and enforcement of a civil and commercial judgment rendered by the High Court of the HKSAR, which, as agreed between the Applicant and the Respondent, has exclusive jurisdiction over disputes arising under the Keepwell Deed. Therefore, this case falls within the scope of and should be considered in accordance with the Arrangement.
First of all, the plaintiff in the judgment by the High Court of the HKSAR was named as Right Time Global Investment SPC - Right Time Value Investment Fund SP for the purpose of asset separation and risk isolation, because Right Time Global Investment, a Segregated Portfolio Company (“SPC”) established in accordance with the Company Law of the Cayman Island, is an independent entity, while Right Time Value Investment Fund SP is the former’s Segregated Portfolio (“SP”) without independent legal status. Such expression is recognized by the Shanghai Financial Court and adopted to refer to the Applicant in this case.
In addition, according to the certificate issued by the High Court of the HKSAR, the judgment concerned is an effective and enforceable one ordering payment, and a final one because CEFC failed to appeal to a competent court of the HKSAR within a reasonable period.
Furthermore, the legal validity of the involved Keepwell Deed in China, an issue governed by substantial laws, is beyond the consideration scope of this case, whether the judgment concerned is a default one or not.
Moreover, the Keepwell Deed provides for the exclusive jurisdiction of the High Court of the HKSAR over disputes between the Parties. Since the complaint has been legally served on CEFC by the High Court of the HKSAR, CEFC’s argument that it was not legally summoned and that the judgment was obtained by fraud is untenable.
Last but not least, this case involves interregional judicial assistance between the mainland and the HKSAR, requiring narrow interpretation of “public interest” to restrict refusal of recognition and enforcement to such judgments whose recognition and enforcement would result in direct violation of the mainland’s public interest. In this case, the recognition and enforcement of the default judgment neither violates the due process nor interest of the public of the mainland. As mainland laws are not the governing laws of the Keepwell Deed, for the purpose of determining whether the recognition and enforcement of the judgment concerned would violate the public interest of the mainland, we should not invoke the mainland laws as the criteria to judge on the nature and validity of a Keepwell Deed, but should only consider whether its recognition and enforcement is contrary to the current public interest when the case was decided. CEFC also argued that the possible breach of foreign exchange regulations may fall into the scope of “contrary to public interest.” However, China mainland’s foreign exchange regulations have been continuously evolving, and CEFC failed to prove that the recognition and enforcement of the HKSAR judgment would violate China’s current public interest.
In summary, the judgment concerned is not one under Article 9 of the Arrangement whose recognition and enforcement should be refused, and the conditions set forth in the Arrangement are satisfied; therefore, the Applicant’s request for recognition and enforcement of the above-mentioned judgment should be supported.
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