Hong Kong has published its long-awaited Code of Practice for third party funders, and announced that amendments to the Arbitration Ordinance which permit funding of Hong Kong arbitrations will come fully into force on 1 February 2019. Similar amendments to the Mediation Ordinance (Cap. 620) have been deferred for further consultation.
LEGAL ADVICE PRIVILEGE: WHY HK LAWYERS AND BUSINESSES NEED TO KNOW ABOUT THE NARROW POSITION UNDER ENGLISH LAW
Hong Kong law and English law have over recent years diverged on the meaning of “client” for the purposes of asserting legal advice privilege. Practitioners and businesses in Hong Kong need to be aware that communications involving an in-house lawyer and their “client” may not be privileged under English law as it currently stands, whereas they would be privileged under Hong Kong law. While the narrow English interpretation has not been adopted by the Hong Kong Courts, any Hong Kong based client who could potentially become involved in English litigation (whether through an English business/subsidiary or in relation to an English law governed contract) should be aware of the developments on legal advice privilege in the English Courts. Privilege is determined by the law of the forum of the litigation under both English and Hong Kong law.
The recent English High Court decision in Glaxo Wellcome UK Ltd v Sandoz Ltd [2018] EWHC 2747 (Ch) shows the potential holes in what businesses would usually consider to be privileged in-house communications. The English Court held that an in-house lawyer’s communications with an employee of the business, who was accepted to be her in-house “client” in these circumstances, were not protected by legal advice privilege where the purpose of those communications was to seek and obtain information to provide to external lawyers in order to obtain their legal advice. In doing so, the English Court applied the narrow interpretation of “client” established in the notorious Three Rivers No 5 decision, as recently confirmed by the English Court of Appeal in the ENRC case (see here).
This decision confirms that (under English law) an individual may be a lawyer’s “client” and therefore entitled to communicate information to the lawyer under the protection of privilege for one purpose but not for others. In equivalent circumstances in Hong Kong, the broader meaning of “client” would potentially make all such communications privileged. Continue reading
Filed under Hong Kong
China’s new law on judicial assistance in criminal matters will impact investigations
The People’s Republic of China recently enacted a new law that will impact foreign authorities, corporations and individuals involved in overseas criminal enforcement actions. The Law on International Judicial Assistance in Criminal Matters allows Chinese authorities to block requests for documents, testimony and assets requested in international criminal investigations.
The law introduces new procedures governing how and when assistance should be provided with approval from a “Chinese competent authority” (eg the National Supervisory Commission, the Supreme People’s Court, the People’s Procuratorate, Ministries of National and Public Security) required before a Chinese entity or individual provides assistance to a foreign body or person.
The law’s stated goal is simultaneously to curb corruption and stem extra-territorial claims by foreign authorities, some of whom approach Chinese counterparts/contacts direct for evidence. The law acts as a break on this practice and allows China to screen requests and withhold its consent. For jurisdictions where treaties are already in place (like the UK, US and 39 others), there may be little change as similar procedures already apply. But for jurisdictions without a treaty in place, or where informal practices have evolved in lieu of treaty provisions, this creates a new procedural hurdle in the context of criminal investigations. Continue reading
Filed under China
Supreme People’s Court Issues Rules of Procedure for the China International Commercial Courts
On 1 July 2018, the Supreme People’s Court of China (SPC) promulgated Provisions on Several Issues Regarding the Establishment of International Commercial Courts (Fa Shi 2018 – No.11). We reported this major development here. The SPC has now, on 5 December 2018, released further rules canvasing out the operation of the China International Commercial Courts (CICC).
On 5 December 2018, the CICC Rules of Procedure (trial implementation) (Fa Fa Ban 2018 – No.13) (CICC Rules of Procedure) came into force. The SPC promulgated concurrently the Working Rules of the CICC Expert Committee (CICC Expert Committee Rules) (Fa Fa Ban 2018 – No.14). Also issued on the same day was the SPC’s Notification on the International Commercial Arbitration and Mediation Institutions Included in the “One-stop-shop” International Commercial ADR Mechanism (Fa Ban 2018 – No.12) (One-stop-shop Institutions Notification).
These rules provide further details on the CICC and its procedure. However, the CICC Rules of Procedure, consisting of only 40 articles, are still relatively brief. It appears that the CICC Rules of Procedure have its blueprint from the Chinese civil procedure law, and not international arbitration rules. It is likely that, when applying these rules in practice, reference to PRC civil procedure rules will need to be made frequently. We will now turn to the features of these new rules. Continue reading
Filed under China
Hong Kong Court grants injunction, holds tortious claim unaffected by arbitration agreement
In Castlemil Infant (HK) Supplies Co Ltd v Care N Love Development Ltd [2018] HKDC 1419, the Hong Kong District Court granted a mandatory injunction, having found that the plaintiff’s underlying tort claims did not fall within the scope of the parties’ arbitration agreement. Continue reading
Filed under Arbitration, Hong Kong, Interim applications
A new international Convention for the enforcement of mediated settlements
We are soon to have a new international regime for the enforcement of mediated settlement agreements.
The UN Convention on International Settlement Agreements Resulting from Mediation, which will be known as the Singapore Convention, was approved in June 2018 by UNCITRAL (the United Nations Commission on International Trade Law). It is expected to be open for signature from 1 August 2019 and will come into force upon ratification by at least three contracting States.
The Convention will oblige contracting States (except in specified limited circumstances) to recognise international settlement agreements resulting from mediation in commercial disputes, either to enforce the agreement or allow it to be invoked as a defence to a claim (that is, either as a sword or a shield).
It is hoped that the Singapore Convention will achieve for mediation what the New York Convention has for international arbitration, encouraging a greater global acceptance of mediation as a credible and reliable dispute resolution mechanism in international commerce.
For more detail on the Convention, and commentary on how likely it is to achieve that aim, see the article by Jan O’Neill (Professional Support Lawyer, London) recently published on the Practical Law Dispute Resolution Blog, here.
Filed under ADR, Mediation (General)
Hong Kong Courts refuse challenge to recognise mainland judgment under the Mainland Judgments (Reciprocal Enforcement) Ordinance
In the case of Wang Qian Wei v 郭文雨 & 郭小琼 [2018] HKCFI 2253, the 1st Defendant (a judgment debtor) opposed the Plaintiff’s (the judgment creditor) application to register a judgment of the Intermediate People’s Court of Xiamen (the Mainland Judgment) pursuant to the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (the Ordinance). The 1st Defendant relied on three grounds of objections, all of which were dismissed by the Court of First Instance (the Court). Specifically, this case serves as a good reminder that (i) the Ordinance does not restrict applicants for the registration of a Mainland judgment to the original parties to any specified contracts only; and (ii) in the absence of expert evidence on foreign law, it is presumed that the laws of the foreign jurisdiction are the same as Hong Kong laws. Continue reading
Filed under China, Hong Kong, Jurisdiction
Hong Kong: Proposed changes to Laws impacting employers
In the 2018 Policy Address on 10 October 2018, the Chief Executive of the HKSAR Carrie Lam announced several key proposals in respect of benefits available to employees under Hong Kong law. Continue reading
Filed under Employment, Hong Kong
Hong Kong Court Refuses Recognition of Mainland Award on Public Policy Grounds
On 18 October 2018, the Hong Kong Court of First Instance (Court) in Z v Y [2018] HKCFI 2342 refused to recognise an Award of the China Guangzhou Arbitration Commission by reason of public policy. Mimmie Chan J presided and considered the several grounds raised for a set aside order under the Arbitration Ordinance.
Filed under Arbitration, Hong Kong
HONG KONG COURT CONFIRMS THAT A THIRD PARTY SECURITY HOLDER CAN EXCERISE ITS POWERS OF SALE OVER ASSETS DESPITE A MAREVA INJUNCTION PROHIBITING THE DISPOSAL OF THOSE ASSETS
In the recent case of China Merchants Bank Co Ltd, Taiyuan Branch v Cai Sui Xin (HCMP 2911/2016), the Hong Kong Court of First Instance (CFI) has confirmed that a security holder is entitled to exercise its power of sale over a defendant’s assets after the grant of a Mareva injunction and is, strictly speaking, not required to make any application to vary the injunction order although the court agreed that it would nevertheless be sensible to do so.
Background
The Defendant directly and indirectly holds shares in General Nice Development (GND). In support of the Defendant’s commercial projects, charged assets were granted as security by GND to Prosper Talent Limited (Prosper Talent).
GND defaulted under the security. Prosper Talent subsequently exercised its powers of sale pursuant to the security agreement. As a result, part of the charged assets were sold in the open market.
However, the sale was effected notwithstanding that the Plaintiff had, prior to that, obtained a Mareva injunction against the Defendant, restraining him from disposing his assets up to RMB 150 million.
Prosper Talent, as a third party affected by the Mareva injunction, applied to the court to vary the Mareva injunction order so as to allow itself to exercise its rights to sell certain charged assets.
Issues
The key issue in this case was whether the CFI should refuse to entertain the variation application because Prosper Talent had already disposed of some of the charged assets after the granting of the Mareva injunction.
The Plaintiff contended that Prosper Talent should have sought the approval of the court before exercising its security rights and disposing the charged assets. As Prosper Talent had not done so, it was guilty of contempt. Until Prosper Talent purged its contempt, the court should not entertain its variation application.
Prosper Talent argued that it is under no duty to obtain the court’s permission to exercise its powers of sale. In particular, a power of sale exercised by a third party to dispose of the property is to be distinguished from a disposal by the defendant, which is caught by the Mareva injunction.
The defendant adopted a neutral stance in these proceedings but denied any allegations of collusion with Prosper Talent in disposing of the charged assets.
Outcome
The CFI upheld Prosper Talent’s variation application and dismissed the Plaintiff’s arguments.
The judge considered that Prosper Talent has all along enjoyed an unchallenged security right over the charged assets which would take priority over any judgment debt owed by the Defendant to the Plaintiff. There was also no basis of collusion between the Defendant and Prosper Talent in the disposal of the charged assets. As such, Prosper Talent was not under a duty to make the variation application before disposing of the charged assets.
Practical considerations
Strictly speaking, a security holder is entitled to exercise its powers of sale even after the grant of a Mareva injunction, without the need to seek permission from the court. The court, however, reminded all third parties in a similar situation (as Prosper Talent in this case) that there is some good sense for making a variation application. Such an application will help protect a security holder from potential challenges to its security interests over a property. It also defeats, at the outset, any allegation of collusion between the defendant and the security holder.
Given a contempt of court allegation carries serious consequences, it is advisable for a security holder to obtain permission and an approval from the court to vary the injunction order well before exercising its powers of sale.
For more information, please contact Dominic Geiser, Jojo Fan or your usual Herbert Smith Freehills contact.
Filed under Hong Kong
