China Business Law Journal’s editorial team has selected the top China-related deals for 2020, recognising their outstanding achievements
The pandemic of the past year has reinforced the hard lines of national boundaries like no other recent event. Lockdowns and quarantines have forced countries and economies to isolate themselves, although in another sense the pandemic also brought us closer than ever and opened new avenues for businesses like e-commerce and online retailing.
While a China-US trade deal earlier in the year created hopes of a revival in ties between the world’s two biggest economies, the pandemic dampened optimistic spirits as the year progressed.
In the early days of the pandemic, there was a slowdown in deal activity, but businesses soon learned to live with the pandemic. The need for capital and emerging business opportunities saw Chinese companies tapping the financial markets at home and abroad.
The homecomings of US-listed Chinese companies and the flow of PRC businesses tapping US capital market were occurring at the same time. There may have been fewer M&A deals, but Chinese companies kept the capital markets buzzing, both at home and internationally, with some truly landmark deals.
With the pandemic, we also saw the emergence of new kinds of deals, such as the issue of pandemic bonds, and an increased focus on sustainable financing, such as through blue bonds.
The crisis didn’t spare all businesses though, and with a lot of enterprises struggling, bankruptcy and restructuring became keywords. There was also a marked rise in dispute resolution cases as companies sought ways to keep their businesses afloat, and also with contracts being cancelled under force majeure.
Although the past year was tough, law firms and hardworking legal advisers showed resilience to stay on top of their game, and helped forge some notable deals.
China Business Law Journal’s editorial team has selected the outstanding China-related deals and cases in 2020, applauding remarkable legal efforts. We have selected 114 deals out of thousands of landmark transactions and disputes that have closed, or have had a significant development, between 1 November 2019 and 31 October 2020, following intensive research and consultation. In our decisions, we attach the most importance to the overall significance, complexity and innovative nature of the deals and cases, while also taking into account deal size and broader interests.
The winning deals and cases have been placed in four sections: Deals in China; overseas deals; disputes and investigations; and Belt and Road initiative. In each section, the deals or cases are listed in alphabetical order, to avoid presumptions of ranking.
- Amgen acquires BeiGene stake
- Baidu acquires YY Live
- Bank issues anti-pandemic panda bonds
- CanSino Biologics’ Star board listing
- China Merchants Group’s industry-related restructure
- CICC’s US$2 billion A-share IPO
- Contemporary Amperex Technology’s non-public offering
- First QFLP fund launched in free-trade port
- Full Truck Alliance US$1.7 billion share issuance
- Grifols’ share swap in Shanghai RAAS
- Guazi.com series D financing
- Hefei Jianghang Aircraft’s A-share listing on Star
- HSBC first foreigner to own life insurer
- Huaxin Hydropower’s bankruptcy restructuring
- Huishan Dairy restructuring
- Huya’s US$10bn merger with Douyu
- Massive toll road asset securitization project
- Minerva establishes operations in China
- National Energy, EDF set up wind power JV
- Ninebot’s Star market IPO
- Nuclear company acquires Tsinghua Tongfang
- PipeChina takes over major oil and gas lines
- Postal Savings Bank invests in state-owned VC fund
- Shanghai Legoland construction project
- Share transfer from Huatai to Ace Tempest
- Shipping giants merge into world’s biggest
- SMIC’s A-share listing on Star board
- Special zones co-operate via development agreements
- Tesla’s Shanghai factory financing
- UCloud Technology’s A-share listing on Star board
- XGMG Machinery mixed-ownership reform
- Xi’an Heavy Equipment issues RMB2 billion ABS
- Yangtze River PPP project
- 58.com’s privatisation
- Blue City’s Nasdaq listing
- Burning Rock Biotech’s Nasdaq listing
- CCBLI’s JV with Norwegian Air Shuttle
- China Bohai Bank’s Hong Kong Listing
- China Eastern issues Korean bonds
- China Merchants Commercial REIT’s HK listing
- China Yangtze Power acquires major Peru asset
- Fintech giant Lufax’s US listing
- First blue bond offering by PRC joint-stock bank
- Fosun, BioNTech form covid vaccine alliance
- Haier’s H-share issue, privatisation of Haier Electronics
- Hong Kong first virtual bank launches
- Indonesian high-speed rail tunnel project launched
- JD Health’s Hong Kong IPO
- JD.com’s secondary HK listing
- KE Holdings’ US IPO
- Kingsoft Cloud’s US IPO
- LVMH acquires Tiffany & Co
- Mainland ministry issues sovereign bonds in HK
- Mengtai Group acquires Europe’s apt Group
- Mexico City subway construction project
- MINISO’s US IPO
- NetEase’s secondary listing in HK
- New Oriental’s HK secondary listing
- Nongfu Spring’s HK listing
- RemeGen’s Hong Kong Listing
- Risen Energy financing for Australian solar project
- SINA merges with new Wave, goes private
- Smoore International’s Hong Kong listing
- State Power Investment acquires Brazil GNA project
- Trip.com Group issues exchangeable bonds
- Universal Global Technology acquires FAFG
- WIMI’s US public offerings
- Xpeng’s US IPO and US$1.3 billion pre-IPO financing
- Yuanfudao G-round financing
- Yum China’s HK secondary listing
- Airbus Group multinational investigation
- Boyalife Valuation Adjustment Mechanism performance dispute
- China General Nuclear Power Group property dispute
- Civil-military contract dispute
- Collision case between Chenchang 332 and Morning Cherry
- EI Zorro and Ellington collision dispute
- Equity transfer contract dispute over change in circumstance
- HK migrant domestic worker’s compensation case win
- India’s pyridine anti-dumping investigation
- Jushi Egypt and EU anti-dumping investigation
- Lukfook Jewellery wins TM infringement
- Malaysia’s anti-dumping case victory for China
- Min Fengzhen v Republic of Korea
- MK brand trademark infringement dispute
- NBA pirated programming case
- Netease and Duoyi’s copyright dispute
- New Balance action against copycat trademarks
- Norwegian Shipowners’ Association dispute with China shipyard
- Patent infringement dispute between Qihoo and 2345
- Pernod-Ricard sues over counterfeit spirit sales
- Red Bull trademark ownership dispute
- Red sole trademark disputes
- Richland 58 marine insurance contract dispute
- Sembcorp’s environmental damage civil compensation case
- Sinovac Biotech dispute between board and shareholders
- Sogou, Baidu patent disputes
- Staples industry anti-dumping investigation
- Starbucks files criminal action against counterfeiters
- Tencent sues 4 over copyright, unfair competition
- Tonkolili’s dispute over marine cargo contract
- Unique case over shareholder marriage disclosure
- US anti-dumping investigation on China fabricated steel
- Wang Jing sues WeRide
- Yuanquan, Huajian and Guosen Securities’ fund contract dispute
- BRI joint project rejuvenates overland exports
- Consortium invests in Turkey road projects
- CRRC Zhuzhou Locomotive acquires overseas enterprise
- Financing of wind power project in Kazakhstan
- Ghana infrastructure boosted by Belt and Road
- Gwadar International Airport project in Pakistan
- Kazakhstan Boguty Tungsten Mine’s Equity and Debt Financing Project
- Red Sea tourism mega project in Saudi Arabia
- Shanghai Power invests in Turkey thermal power plant
- Yunnan Investment Group invests in Cambodia
Amgen acquires BeiGene stake
CATEGORY: Acquisition
LEGAL COUNSEL: Gibson Dunn, Ropes & Gray and Latham & Watkins acted as counsel to Amgen. Global Law Office, Goodwin, Skadden and Mintz acted as counsel to BeiGene.
KEY POINTS: In October 2019, US pharmaceutical company Amgen announced a strategic collaboration to acquire a 20.5% stake in Chinese biotech company BeiGene for about US$2.7 billion.
Under the partnership, BeiGene will commercialise the registered drugs XGEVA, KYPROLIS and BLINCYTO in China, and advance 20 drugs in Amgen’s innovative oncology pipeline in China and globally. In addition, Amgen has acquired a seat on the board of directors of BeiGene. The transaction is reportedly the largest cross-border US-China biotechnology deal to date.
Baidu acquires YY Live
CATEGORY: Acquisition
LEGAL COUNSEL: Han Kun Law Offices and Skadden served as a legal counsel to Baidu. CM Law Firm, Simpson Thacher and Ogier served as legal counsel to Joyy.
KEY POINTS: In November 2020, internet giant Baidu signed a definitive binding agreement with Joyy to wholly acquire Joyy’s domestic live streaming business, YY Live, for about US$3.6 billion. The transaction is expected to close in the first half of 2021.
CM Law Firm says YY Live’s mature operational team, technical capabilities and anchor team will help Baidu quickly build its operational system and develop the live-streaming business. As Chinese legal counsel to the seller, CM Law Firm assisted Joyy and Baidu in reaching agreement on the divestment of YY Live, and the restructuring arrangements, within a short time.
Bank issues anti-pandemic panda bonds
CATEGORY: Bond issuance
LEGAL COUNSEL: Global Law Office served as legal counsel to New Development Bank, the issuer.
KEY POINTS: In the first anti-pandemic panda bonds issued in China by an international bank, New Development Bank raised RMB5 billion in the Chinese interbank bond market. The Shanghai-based multilateral financial institution, formerly known as BRICS Bank, raised the funds to provide emergency assistance loans to China in its fi¬¬ght against covid-19.
This was also the largest single renminbi bond issuance in the panda bond market to date.
CanSino Biologics’ Star board listing
CATEGORY: SSE Star board listing; pharmaceutical
LEGAL COUNSEL: Tian Yuan Law Firm acted as legal adviser to CanSino Biologics.
KEY POINTS: CanSino Biologics, an innovative biopharmaceutical company, completed its Star market IPO on 13 August 2020.
The company had filed its application for listing in January, in accordance with the fifth set of listing standards, which allows the listing of pre-revenue companies. The proceeds of the IPO will be used to increase new vaccine production capacity, and for R&D.
CanSino was the first vaccine stock in Hong Kong. Cansino Biologics was listed in March 2019, raising more than HK$1.2 billion (US$154 million). CanSino was the first pure H-share company listed in accordance with Hong Kong Stock Exchange’s new chapter 18A regime.
CanSino Biologics is a vaccine R&D company. Its founder and management team have worked in well-known international pharmaceutical companies, and its current vaccine production and research covers pneumonia, tuberculosis, Ebola virus disease, meningitis, diphtheria, and a series of other diseases.
China Merchants Group’s industry-related restructure
CATEGORY: Restructuring
LEGAL COUNSEL: Zhonghao Law Firm acted as the legal counsel to China Merchants Group, and Solton Partners acted as legal counsel to Chongqing Development Investment.
KEY POINTS: China Merchants Group held Chongqing Testing and Certification Group by way of capital increase, after which China Merchants Testing and Certification and Chongqing Development Investment, under China Merchants Group, held 56% and 44%, respectively, and changed the name of Chongqing Testing and Certification to China Merchants Testing and Certification (Chongqing), with the amount of capital increase exceeding RMB2 billion.
This is the largest single investment in China’s testing and certification industry, and the first company in the industry to complete a restructuring in the form of market-oriented reform with the co-operation of the central government and the relevant local government, as well as the first investment by China Merchants Group after entering the testing and certification industry.
According to Zhonghao, there were nearly 20 target companies and subordinate subsidiaries, but the firm’s lawyers completed legal due diligence of the companies and formed comprehensive due diligence reports within six weeks.
CICC’s US$2 billion A-share IPO
CATEGORIES: A-share listing; investment banking
LEGAL COUNSEL: King & Wood Mallesons represented the issuer, and Haiwen & Partners represented the sponsors and underwriters.
KEY POINTS: China International Capital Corporation (CICC), China’s biggest investment bank, debuted on Shanghai’s main board on 2 November, and raised US$2 billion by issuing 459 million A shares.
CICC is the first Sino-foreign joint venture investment bank in China. Its main shareholders include Central Huijin Investment, Haier Group (Qingdao) Financial Holdings, China National Investment and Guaranty Corporation, and Mingly Corporation. Established in 1995, CICC completed its H-share IPO and was listed on the Hong Kong Stock Exchange in 2015, and currently possesses complete domestic and foreign securities business qualifications.
Contemporary Amperex Technology’s non-public offering
CATEGORY: Non-public offering
LEGAL COUNSEL: Llinks Law Offices represented Contemporary Amperex Technology.
KEY POINTS: In August 2020, Contemporary Amperex Technology raised RMB19.7 billion in a non-public offering on the Shenzhen Stock Exchange, making it the largest single refinancing project on ChiNext to date.
Contemporary Amperex Technology is a leading power battery provider, specialising in the research and development, production and sales of new energy vehicle power battery systems, and energy storage systems. The company currently ranks first on ChiNext in terms of market capitalisation, with SAIC Motor, Geely, Yutong Bus, BAIC Group and other well-known Chinese vehicle enterprises maintaining long-term co-operation.
According to Llinks Law Offices, the project was completed quickly, taking no more than three months from application to approval by the China Securities Regulatory Commission (CSRC), and was also the first non-public offering released in accordance with the new rules on refinancing.
First QFLP fund launched in free-trade port
CATEGORY: Fund formation
LEGAL COUNSEL: Global Law Office acted as PRC counsel to the fund.
KEY POINTS: In September 2020, Hainan Bank of Communications International Science and Technology Innovation Shengxing Equity Investment Partnership (Limited Partnership) was formally established in Jiangdong new district, Haikou, Hainan province, becoming the first Qualified Foreign Limited Partnership (QFLP) fund after implementation of the free-trade port policy.
The fund was initiated and established by Bank of Communications (BOCOM) International Equity Investment Management with an amount of US$100 million. The fund will focus on the new generation of the information technology industry, including the new generation of information technology, financial technology and high-end equipment to support the development of relevant domestic high-tech enterprises.
Global Law Office says the successful landing of the BOCOM International Technology and Innovation Fund in Hainan boosted the implementation of the free trade port’s QFLP policy, promoted cross-border investment and financing facilitation, and released positive signals for investors about further opening of the financial market.
Full Truck Alliance US$1.7 billion share issuance
CATEGORY: PE/VC
LEGAL COUNSEL: Carey Olsen represented Full Truck Alliance.
KEY POINTS: Full Truck Alliance, a Cayman Islands exempted company providing an Uber-style service for the trucking industry, issued US$1.7billion of series A-16 preferred shares to investors (including SoftBank Group and Tencent Holdings) prior to its potential IPO.
Full Truck Alliance has more than 10 million certified drivers, more than five million certified cargo owners, and is valued at US$10 billion.
Grifols’ share swap in Shanghai RAAS
CATEGORY: Share swap
LEGAL COUNSEL: JunHe, Osborne Clarke and Proskauer represented Grifols. Grandway Law Offices and Kirkland & Ellis represented Shanghai RAAS.
KEY POINTS: On 31 March 2020, Grifols, a manufacturer of blood plasma products, acquired a 26.2% stake in Shanghai RAAS, a listed A-share company, and the corresponding shares were listed on the Shenzhen Stock Exchange, completing the final settlement of Grifols’ strategic investment and cross-border share swap in Shanghai RAAS.
The consideration for the transaction was about RMB13.24 billion. Grifols is Europe’s largest, and a top global leader, in the plasma products industry, headquartered in Barcelona, Spain, and its shares are listed on the Madrid Stock Exchange and the Nasdaq. Shanghai RAAS is a well-known blood products manufacturer in China and its shares are listed on the SME board of Shenzhen Stock Exchange.
For a long time in cross-border M&A involving Chinese listed companies, the transaction consideration was usually paid in cash, while the few transactions that were paid in equity mostly contained a state-owned capital background or were under the same control. This transaction was the first truly cross-border share swap between a private A-share listed company and an overseas listed company, and is ground-breaking in the context of changes in foreign investment regulations.
Guazi.com series D financing
CATEGORY: Financing
LEGAL COUNSEL: Han Kun Law Offices represented Guazi.com. Morrison & Foerster and Zhong Lun Law Firm advised the investors.
KEY POINTS: The parent company of Guazi.com, Chehaoduo Group, completed its series D financing transaction in April 2020, in which Softbank Vision Fund invested US$1.5 billion. In May, Chehaoduo Group announced the completion of US$200 million funding from Sequoia Capital China and Softbank Vision Fund. In total, Chehaoduo Group received US$1.7 billion in D-round financing.
Han Kun Law Offices says this is the largest investment in this industry to date in China. Due to the significant deal size, this was a complicated deal, not only involving PE elements, but also regulatory issues, because Softbank Vision Fund is a private equity fund highly regulated under the relevant jurisdictions.
Hefei Jianghang Aircraft’s A-share listing on Star
CATEGORY: Star board
LEGAL COUNSEL: Jia Yuan Law Offices acted as legal counsel to the issuer.
KEY POINTS: On 27 May 2020, Hefei Jianghang Aircraft Equipment made its IPO and listed on the Star board, becoming the first shares for a military state-owned enterprise (SOE) on the board.
Jia Yuan Law Offices says the company took three years to prepare since its mixed ownership reform in 2017. As the company is a military SOE, it needs to comply with the requirements of securities regulators and national defence authorities before it can be disclosed in an application for listing. The listing is of significance in accelerating SOE reform.
HSBC first foreigner to own life insurer
CATEGORIES: Acquisition; life insurance
LEGAL COUNSEL: Haiwen & Partners and Norton Rose Fulbright acted as PRC and international legal counsel to the purchaser, HSBC, respectively.
KEY POINTS: On 4 May 2020, HSBC announced its acquisition of a 50% equity interest in HSBC Life Insurance, held by the National Trust. HSBC Life Insurance was founded in 2009 by HSBC and National Trust, and each held 50% of the shares.
Haiwen & Partners says the deal is one of the first of its kind in China, after the recent lift of limits on foreign ownership in life insurance companies. Upon completion, HSBC Life Insurance expects to become the first sole foreign-owned life insurance company in China.
Huaxin Hydropower’s bankruptcy restructuring
CATEGORY: Bankruptcy/restructuring
LEGAL COUNSEL: Zhong Lun Law Firm was the legal adviser to China Energy Investment Corporation (China Energy)
KEY POINTS: The Maerdang hydropower project (in Qinghai province) is a large hydropower hub project in China, with a total installed capacity of 2.2 million kilowatts – which is the second-largest hydropower plant under construction in China and the fifth-highest concrete panel rockfill dam in the world – with an investment of over RMB20 billion.
The project was initially invested and constructed by Huaxin Hydropower, which was ruled by Xining Intermediate People’s Court to enter bankruptcy reorganisation procedures in June 2020 due to insolvency.
As Qinghai province is a new energy base in China, National Energy became a strategic investor, with a bid of RMB6.28 billion. While settling the relevant debts, it will acquire 100% of Huaxin and continue to invest to complete the construction of the power station. National Energy will co-operate with the Qinghai provincial government to build a new energy base integrating hydropower, wind power, photovoltaic and pumped storage.
Zhong Lun lawyers say Huaxin Hydropower had a complex shareholding structure, with shareholding substitution and buyback, debt-to-equity swaps, shareholding pledges, and shareholders who were not the actual controllers. The Mar Block Hydropower Station had problems such as construction before approval, irregular procurement procedures, land acquisition compensations and resettlement of immigrants not properly resolved.
The lawyers proposed preventive measures such as the withdrawal of the equity transaction price, setting aside a risk reserve from the restructuring funds, and restricting the rights of late filing creditors.
Huishan Dairy restructuring
CATEGORIES: Merger; bankruptcy/restructuring
LEGAL COUNSEL: Zhong Lun Law Firm served as the administrator to the project. JunHe served as legal counsel to the debtors, and Dentons acted as legal counsel to the financial creditors’ committee. Jincheng Tongda & Neal represented the Yuexiu Group, a major investor.
KEY POINTS: Huishan Dairy is the first full industry chain dairy enterprise in China. From December 2017 to May 2018, the Shenyang Intermediate People’s Court ruled that Huishan Dairy and 83 other enterprises were subject to substantive consolidation proceedings.
On 30 October last year, the draft restructuring plan was voted by the third creditors’ meeting, marking a significant achievement in the restructuring of Huishan Dairy series enterprises after nearly three years.
The industrial chain of Huishan Dairy series of companies covers all upstream and downstream industries of the dairy industry, with a complex system structure involving more than 120 affiliated companies. The scale of debt in the case is estimated as high as RMB30 billion.
This case, claimed to be the restructuring of the largest number of enterprises in a de facto merger bankruptcy in China, is of great significance for exploring the restructuring of large private non-listed enterprises.
Huya’s US$10bn merger with Douyu
CATEGORIES: M&A; games
LEGAL COUNSEL: Skadden is US legal adviser to Huya, while Haiwen & Partners is PRC legal adviser, and Maples Group is the Cayman Islands legal adviser. Davis Polk is DouYu’s US legal counsel, while Han Kun Law Offices is advising on PRC law, and Ogier is Cayman Islands legal counsel. Latham & Watkins is US legal adviser to Tencent, while Zhong Lun Law Firm is PRC legal adviser, and Walkers is Cayman Islands legal adviser. Kirkland & Ellis represented Citigroup Global Markets, the financial adviser to Huya. Weil Gotshal & Manges advised Morgan Stanley, which was DouYu’s financial advisor. Cleary Gottlieb acted as legal counsel to Tencent’s financial adviser Goldman Sachs.
KEY POINTS: In October 2020, China’s most popular game live-streaming platforms, Huya and DouYu, announced a US$10 billion merger. As part of the agreement, NYSE-listed Huya will acquire all the outstanding shares of Nasdaq-listed DouYu, including ordinary shares represented by American depositary shares (ADS), through a stock-for-stock merger.
As a result of the merger, DouYu will become a wholly-owned subsidiary of Huya. The transaction is expected to close in the first half of 2021. Technology giant Tencent will control two-thirds of the new company upon the merger, and will have more than 60% of the voting rights after the transaction.
Massive toll road asset securitization project
CATEGORY: Asset securitisation
LEGAL COUNSEL: FenXun Partners served as legal counsel for the deal and Hylands Law Firm acted as legal counsel to the manager.
KEY POINTS: The Capital Securities-Beijing-Tianjin Expressway toll revenue rights Asset-backed Special Plan is the largest infrastructure toll right asset securitization project of the past three years. With Tianjin Jingjin Expressway as the issuer and Capital Securities as the manager, the infrastructure toll rights asset raised RMB4.25 billion (US$660 million).
The scheme is an important initiative to support the “Beijing-Tianjin-Hebei Synergistic Development”, helping to revitalise the stock of assets, increase the proportion of direct financing, and promote the marketisation of infrastructure investment and financing.
Minerva establishes operations in China
CATEGORY: Joint venture
LEGAL COUNSEL: East & Concord Partners represented Minerva Foods.
KEY POINTS: Greenland Group has signed a contract with one of the largest beef producers and marketers in South America, Brazil’s Minerva Foods Group, to set up a physical operation in China. Through 15 company sales offices and 14 distribution centres around the world, Minerva exports to more than 100 countries on five continents.
The €64 million (RMB499 million) joint venture with Greenland Group establishes a meat distribution centre with the objective of creating the largest distribution centre for imported animal protein products in China. In the second year of the partnership, the company will be the number one importer of South American beef in China.
According to East & Concord Partners, for this project the firm’s lawyers needed an in-depth knowledge and experience in international M&A and investment. The project required the co-ordination of legal issues involving Brazil, Chile, Hong Kong and Singapore.
China Energy, EDF set up wind power JV
CATEGORIES: Overseas investment; energy
LEGAL COUNSEL: AnJie Law Firm acted as legal counsel to China Energy. JunHe acted as legal counsel to Electricité de France.
KEY POINTS: The China Energy has entered into a joint venture with EDF Renouvelables, a subsidiary of the Electricité de France (EDF) Group. Founded in 1946, EDF is the French state-owned company responsible for the generation, transmission and distribution of electricity throughout France, and is one of the world’s leading electricity companies.
The framework agreement for this transaction was signed in the presence of Chinese President Xi Jinping and French President Emmanuel Macron during Xi’s visit to France in March 2019. The offshore wind farms to be operated by the joint venture have a total installed capacity of 500MW, and a total investment of almost RMB8 billion.
This project involves sorting out and regulating the legal issues related to the operation of the offshore wind power business (including investment, operation and construction-related aspects). As the first Sino-foreign joint venture offshore wind power operation in China, this project was negotiated around the time when the Foreign Enterprises Investment Law came into force, and, in this context, the governance structure of foreign-invested enterprises was discussed and arranged in line with the relevant requirements of corporate laws.
Ninebot’s Star market IPO
CATEGORY: Star market
LEGAL COUNSEL: Zhong Lun Law Firm and Maples Group acted as the PRC and Cayman Islands legal adviser to Ninebot. King & Wood Mallesons served as the PRC legal adviser for the sponsor and lead underwriter.
KEY POINTS: On 29 October, 2020, Chinese e-scooter maker, Ninebot, made its initial public offering of China Depository Receipts (CDRs) and listed on the Star market of Shanghai Stock Exchange, raising net proceeds of about RMB1.241 billion.
Established in the Cayman Islands, Ninebot is a red-chip company focusing on intelligent short-route transportation and service robots. It is the first company to issue CDRs and go public in the Chinese capital market, and the first case in the Chinese capital market to adopt the red-chip variable interest entity structure for domestic listing.
Ninebot also adopted a special voting rights system and the existence of a pre-filing option incentive plan for post-listing implementation. Its successful listing has a demonstrative effect on attracting red-chip companies to issue CDRs in the domestic capital market, and also makes useful exploration and experience accumulation for the future full launch of China’s system of listing overseas companies in China through issuing CDRs.
Nuclear company acquires Tsinghua Tongfang
CATEGORY: Acquisition
LEGAL COUNSEL: Dentons and Morgan Lewis served as legal counsel to China Nuclear Engineering Capital (CNEC). Commerce & Finance Law Offices acted as legal counsel to Tsinghua University and Tsinghua Holdings. Gaopeng & Partners acted as the legal counsel to Tsinghua Tongfang.
KEY POINTS: In April 2019, Tsinghua Holdings, the controlling shareholder of Tsinghua Tongfang, signed a share transfer agreement with CNEC, where Tsinghua Holdings intends to transfer about 620 million shares of Tsinghu Tongfang to CNEC for about RMB6.4 billion.
After the transaction, CNEC acquired 21% of the equity interest in Tsinghua Tongfang, and became the controlling shareholder. Meanwhile, the actual controller of Tsinghua Tongfang changed from the Ministry of Education to the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council.
Tsinghua Tongfang is a high-tech listed company involved with industries such as public security, civil-military, and knowledge services. CNEC is a state-owned company managed by the central government. Commerce and Finance Law Offices says this reform of Tsinghua University’s enterprise is the first nationwide pilot of university enterprise reform.
PipeChina takes over major oil and gas lines
CATEGORY: Restructuring
LEGAL COUNSEL: King & Wood Mallesons acted as legal counsel to PipeChina. Guantao Law Firm acted as legal counsel to PetroChina, Sullivan & Cromwell advised Goldman Sachs (Asia), the financial adviser to the company. DeHeng Law Offices represented China Development Bank. Haiwen & Partners acted as the legal counsel to Sinopec.
KEY POINTS: On 23 July 2020, PipeChina took over the oil and gas pipeline infrastructure assets, business and personnel formerly belonging to three major oil companies – CNPC, Sinopec and CNOOC – and formally operated the network, marking a significant achievement in the market-oriented reform of China’s oil and gas pipeline network operation mechanism.
PipeChina signed a cash capital increase agreement with six investment institutions including China Chengtong, China Guoxin, Social Security Foundation, China Insurance Investment Fund, China Investment International, and Silk Road Fund. These investors subscribed to the equity of PipeChina in the form of cash capital increase. China Development Bank granted loans to China Chengtong and China Guoxin.
Postal Savings Bank invests in state-owned VC fund
CATEGORY: Fund formation
LEGAL COUNSEL: DOCVIT Law Firm served as legal counsel to Postal Savings Bank.
KEY POINTS: In August 2020, China Guoxin initiated the establishment of the China’s State-Owned Capital Venture Capital Fund with the joint contribution of Postal Savings Bank, Construction Bank and Shenzhen Investment Holdings.
The fund was approved by the State Council and has a total size of RMB200 billion, with an initial size of RMB102 billion, of which Postal Savings Bank contributed RMB30 billion.
According to DOCVIT Law Firm, the transaction was difficult. In view of the current financial environment, China Postal Savings Bank and Pacific Asset Management proposed to conduct a transaction in relation to the shares of the state-owned VC fund. As the original structure included a two-tier trust scheme arrangement, including the equity income right trust scheme, the structure of this transfer transaction was therefore complex and involved a number of specific legal issues such as the performance of the vicarious contribution obligations between the limited partnerships, the payment of the underlying shares during the income right transfer, profit and loss arrangements, and the internal decision-making procedures for the exercise of the income right transfer.
Shanghai Legoland construction project
CATEGORIES: Construction; entertainment; IP
LEGAL COUNSEL: Mayer Brown acted as legal counsel to Merlin Entertainments, while Clifford Chance represented the Lego Brand Group. Grandway Law Offices and Dentons acted for Shanghai Jianshan Chengtou, and RICC & Co acted for CMC Inc.
KEY POINTS: In November 2020, Shanghai Legoland Resort project officially signed in Shanghai to an investment of US$550 million. The project will become one of the world’s largest Legoland resort areas.
Investors include Shanghai Jinshan Chengtou, the UK Merlin Entertainment Group, Lego Brand Group, and CMC Inc. The project was listed as one of the major construction projects in Shanghai in 2020, announced by the Shanghai Municipal Development and Reform Commission.
The formal agreement negotiation phase of the project started in November 2019, and took one year to reach the final contract. The deal involves several master agreements and a series of subsidiary agreements, that required thorough consideration and design in terms of investment structure, entity structure, operation and management model, IP licensing system, and development and construction of large theme parks. The project is expected to start construction in 2021, and officially open in early 2024.
Share transfer from Huatai to Ace Tempest
CATEGORIES: Acquisition; insurance
LEGAL COUNSEL: Tian Yuan Law Firm represented Junzheng Group, and Jincheng Tongda & Neal represented Ace Tempest Reinsurance.
KEY POINTS: In June 2020, the China Banking Regulatory Commission approved the transfer of 5.31% of Huatai Insurance Group’s shares – held by Inner Mongolia Junzheng Energy and Chemical Group, and Inner Mongolia Junzheng Chemical – to Ace Tempest Reinsurance for a RMB10.8 billion.
After the transfer, Junzheng Energy and Junzheng Chemical continued to hold 7.05% of Huatai Insurance’s shares, while Ace Tempest Reinsurance held a total of 46.21% of the shares.
This is the first case of a domestic insurance group company changing into a foreign-owned insurance group company in China’s insurance industry, fully reflecting the policy of continuing the opening up of the industry.
Shipping giants merge into world’s biggest
CATEGORY: Merger
LEGAL COUNSEL: DHH Law Firm and Clifford Chance acted as PRC and international legal counsel to the project, respectively.
KEY POINTS: On 26 November 2019, China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Corporation (CSIC) merged into China Shipbuilding Group Corporation (CSSC), which is now the world’s largest shipbuilding group, owning the largest shipbuilding and repair base in China, with total assets of RMB790 billion.
With the Yangtze River as a boundary, CSSC and CSIC were commonly known as “south shipping” and “north shipping” in the industry. DHH says there are a large number of associated enterprises engaged in the business related to the concentration, not only horizontal competition, but also upstream and downstream enterprises, all of which have very large market shares.
During the process of market identification, analysis of market share and justification, DHH lawyers categorised and organised each parameter, issued professional opinions, and obtained the “Decision of Non-Prohibition on Anti-Monopoly Review on Concentration of Operators” issued by the State Administration of Market Regulation in a timely manner, in September 2020.
SMIC’s A-share listing on Star board
CATEGORY: Star board listing
LEGAL COUNSEL: AllBright Law Offices acted as legal counsel to the issuer, while DeHeng Law Offices and Fangda Partners jointly acted as legal counsel to the joint sponsors and lead underwriters. Conyers provided Cayman Islands legal advice to SMIC.
KEY POINTS: Chinese chipmaker Semiconductor Manufacturing International Corporation (SMIC) raised RMB53.2 billion in its recent listing on the Star market, making it the largest A-share IPO since 2010.
Incorporated in the Cayman Islands, SMIC listed in New York and Hong Kong in 2004, and delisted from the New York Stock Exchange last year. Its listing on the Star market has made it the first overseas listed red-chip company to return to the A-share market.
“This project involved the jurisdictions of Cayman Islands, Hong Kong and mainland China,” says Wang Li, a senior partner at AllBright, “and we needed to compare and co-ordinate on the rules for listings in Hong Kong and mainland China.
Special zones co-operate via development agreements
CATEGORIES: Infrastructure; restructuring
LEGAL COUNSEL: JunHe served as legal counsel to China Merchants Group.
KEY POINTS: In December 2019, JunHe lawyers represented China Merchants Shekou Holdings in completing its asset restructuring and the setting up of a JV company, Qianhai Free Trade Investment, with Qianhai Investment Holding. According to JunHe, the transaction amounted to RMB145.8 billion, making it the largest asset restructuring deal in recent years.
The newly established Qianhai Free Trade Investment will play a leading role in the preparation and development of the 2.9 square kilometres of land of Qianhai Shekou Free Trade Zone (FTZ). In the joint venture co-operation agreement, the implementation plans of land preparation, and how the JV will work in Qianhai FTZ, were clarified.
Previously in December 2018, a land preparation agreement was signed by Shenzhen Municipal Land Planning Commission, Qianhai Management Authority, China Merchants Group and other relevant parties against the backdrop of enhancing development of the area.
Tesla’s Shanghai factory financing
CATEGORY: Financing
LEGAL COUNSEL: King & Wood Mallesons acted as Tesla’s external legal counsel.
KEY POINTS: In early 2019, electric car maker Tesla officially launched its super factory in Shanghai, becoming Tesla’s first outside the US to produce specific models of the brand’s vehicles.
In December 2019, to support the super factory, China Construction Bank, Agricultural Bank of China, Shanghai Pudong Development Bank and Industrial and Commercial Bank of China formed a syndicate to provide a RMB11.25 billion term loan and revolving loan to Tesla Shanghai.
King & Wood Mallesons says that, as the largest foreign-funded manufacturing project in Shanghai and a key landmark project backed by Shanghai’s government, the development of Tesla Shanghai has a special positive meaning, considering the global pandemic outbreak and ongoing tensions between the US and China.
UCloud Technology’s A-share listing on Star board
CATEGORY: Star board
LEGAL COUNSEL: JunHe acted as legal counsel to UCloud.
KEY POINTS: Cloud services provider UCloud Technology made its IPO on Shanghai’s Star board, becoming the first company with a dual-class shareholding structure approved to list on China’s Star market, and raising RMB1.94 billion.
UCloud focuses on providing neutral public cloud computing services. This listing has made the company the first listed company in the A-share market with a public cloud business. JunHe lawyers participated in the whole process of listing on the Star board, and applications for the E and E+ round financing. The team assisted the issuer in handling major legal matters including application for identification of state-owned shareholder, demolition and sorting of overseas red-chip structure, sorting out and inspection of related parties, historical evolution, shareholding reform and setup of special voting rights.
XGMG Machinery mixed-ownership reform
CATEGORY: Asset restructuring
LEGAL COUNSEL: AllBright Law Offices served as legal counsel to the project. Haiwen & Partners acted as legal counsel to one of the strategic investors, Goldstone Investment.
KEY POINTS: XCMG Machinery was originally a wholly-owned subsidiary of XCMG Group Construction Machinery (XCMG Group). XCMG Machinery introduced strategic investors and an employee shareholding platform by way of capital increase, and transferred old shares by way of non-public agreement transfer, to complete the adjustment of shareholding structure of XCMG Machinery and achieve the goal of mixed ownership reform of simultaneous transfer of old shares and capital increase, the co-existence of state-owned capital and private capital, and sharing of the employee shareholding platform.
XCMG Machinery introduced strategic investors by way of capital increase through public listing on Jiangsu Provincial Property Rights Exchange, and introduced the employee shareholding platform. XCMG Group introduced capital by way of old share transfer, with a total investment of RMB21.05 billion, which is the largest mixed ownership reform case in the reform of state-owned enterprises in Jiangsu province.
Xi’an Heavy Equipment issues RMB2 billion ABS
CATEGORY: Asset-backed securitisation
LEGAL COUNSEL: Hansheng Law Offices served as legal counsel to Xi’an Heavy Equipment Manufacturing Group.
KEY POINTS: Xi’an Heavy Equipment Manufacturing Group, a state-owned enterprise focusing on the design and manufacturing of coal mining equipment, issued RMB2 billion asset-backed securities (ABS), also the first single off-balance sheet ABS for the Chinese coal industry. The deal, priced on 31 December 2019, is also the first such transaction by a state-owned enterprise in Shaanxi.
Yangtze River PPP project
CATEGORY: Infrastructure
LEGAL COUNSEL: DeHeng Law Offices represented Yangtze Ecology and Environment under China Three Gorges Corporation. Ganshang Law Firm acted as legal counsel.
KEY POINTS: In December 2020, as the National People’s Congress voted to adopt the Yangtze River Protection Law, the Jiujiang Municipal Government of Jiangxi province hired Ganshang Law Firm as a permanent legal adviser for the first and second phases of the Yangtze River Protection Water Environment Management PPP (public-private partnership) Project.
The first four pilot cities of the Yangtze River project are: Yueyang, in Hunan province; Yichang, in Hubei province; Jiujiang, in Jiangxi province; and Wuhu, in Anhui province. The six projects of the Jiujiang Water Environment Management PPP Project Phase I were the first to be landed among the pilot city projects, and included comprehensive sewage treatment and ecological renovation.
A total investment of phase one and phase two is RMB14.38 billion. The project is the largest investment PPP project in Jiangxi province to date.
58.com’s privatisation
CATEGORIES: Privatisation; internet
LEGAL COUNSEL: Skadden and Han Kun Law Offices acted as the US and PRC legal counsel, respectively, to 58.com. Conyers advised 58.com on Cayman Islands laws. Fenwick & West represented the special committee. Wilson Sonsini, Paul Weiss, Kirkland & Ellis, and Weil Gotshal & Manges are serving as international co-counsel to the buyer group, with Fangda Partners and Maples Group advising under PRC laws and Cayman Islands laws, respectively. Linklaters and JunHe advised the financing banks in the deal.Davis Polk represented Tencent Holdings, a major shareholder of 58.com.
KEY POINTS: On 18 September 2020, Chinese online classifieds company, 58.com, announced the completion of a merger with Quantum Bloom, as provided for under a merger agreement signed on 15 June. Following the merger, 58.com ceased to be a public company, and the company’s shares ceased trading on the NYSE as of 18 September.
The investor group included Warburg Pincus, General Atlantic, Gulling Capital and 58.com chairman and CEO, Yao Jinbo. The deal, valued at US$8.7 billion, is the largest privatisation deal for a Chinese stock since 360 was taken private and delisted in 2016.
58.com is the largest online marketplace for classifieds in China, based on the number of monthly unique visitors to its www.58.com website and mobile app.
Blue City’s Nasdaq listing
CATEGORY: US listing
LEGAL COUNSEL: King & Wood Mallesons and Skadden acted as the issuer’s China and US legal counsel, respectively. Global Law Office and Simpson Thacher acted as the Chinese and American legal counsel for the joint bookrunners and lead underwriter. Conyers provided Cayman Islands legal advice to BlueCity.
KEY POINTS: Blue City, owner of Blued, China’s biggest LGBTQ+ dating app, raised US$85 million in a Nasdaq IPO. The company is the first business in the world built on the LGBTQ+ community to go public. Blue City had issued 5.3 million American depositary shares and started trading on 8 July.
Burning Rock Biotech’s Nasdaq listing
CATEGORIES: Nasdaq listing; medicine
LEGAL COUNSEL: Cleary Gottlieb and Shihui Partners advised the issuer. Simpson Thacher and Jingtian & Gongcheng advised the underwriters. Maples Group was Cayman Islands counsel on the deal.
KEY POINTS: Burning Rock Biotech was listed on the Nasdaq on 12 June. The total amount of funds raised was about US$256 million.
Established in 2014, Burning Rock Biotech mainly focuses on research and development into its tumor detection reagent and tumor testing businesses. It is one of the leading companies in China for second-generation cancer genetic testing. It is also the second Chinese biotechnology company to be listed on the Nasdaq recently, following Legend Biotech.
Jingtian & Gongcheng says Burning Rock Biotech is the first stock of next-generation sequencing (NGS) testing issued by a Chinese company. The transaction involves legal work in a new field with high requirements.
CCBLI’s JV with Norwegian Air Shuttle
CATEGORIES: Joint venture; aviation
LEGAL COUNSEL: A&L Goodbody was the Irish law counsel and Bird & Bird was the English law counsel to advised China Construction Bank Leasing International (CCBLI) in relation to its joint venture with Norwegian Air Shuttle. Matheson was lead counsel for Norwegian Air Shuttle.
KEY POINTS: In late October 2019, Norwegian Air Shuttle announced the formation of an aircraft leasing joint venture with CCBLI. CCBLI is a 100% owned subsidiary of China Construction Bank, an industry leader in banking, financial services and leasing, and the world’s second-largest bank by asset value.
CCBLI will be majority owner of the JV with a 70% share, with Norwegian, through its wholly owned subsidiary, Arctic Aviation Assets, holding the remaining 30%.
China Bohai Bank’s Hong Kong Listing
CATEGORIES: Hong Kong listing; banking
LEGAL COUNSEL: Commerce & Finance Law Offices and Paul Hastings acted as the issuer’s Chinese and international legal counsel, respectively. Haiwen Partners and Clifford Chance acted as the sponsors and underwriters’ Chinese and international legal counsel, respectively.
KEY POINTS: In July 2020, Bohai Bank completed a US$1.77 billion global offering and listed in Hong Kong. Established in 2005 in Tianjin, Bohai Bank is the youngest nationwide joint-stock commercial bank in China. It was the first PRC bank to be publicly listed in 2020, and the deal is the biggest listing by a Chinese bank on the Hong Kong bourse in the past five years.
Vincent Wang, a corporate partner of Paul Hastings in its IPO practice, said: “In the past decades, there have been more and more Chinese banks getting listed in Hong Kong to access international capital, and we expect such a trend to continue with support from the resilience of the Chinese economy, as well as the development of global economic co-operations.”
China Eastern issues Korean bonds
CATEGORIES: Bonds issuance; aviation
LEGAL COUNSEL: Hui Ye Law Firm and FIRST Attorneys acted as domestic and foreign legal counsel for the issuer and guarantor, respectively. King & Wood Mallesons and Kim & Chang acted as domestic and foreign legal counsel for the underwriters, respectively.
KEY POINTS: In a significant transaction for the South Korean bond market, Eastern Airlines Overseas (Hong Kong), a wholly owned subsidiary of China Eastern Airlines, issued KRW300 billion (US$268 million) in bonds, with its parent company as the guarantor.
This is the first time a foreign company has successfully issued Qualified Institutional Buyer bonds in South Korea. The bonds, issued in December 2019, were independently underwritten by KB Securities, with Kookmin Bank as the custodian.
China Merchants Commercial REIT’s HK listing
CATEGORY: REIT
LEGAL COUNSEL: Zhong Lun Law Firm, Baker McKenzie and Maples Group acted as the PRC, US and BVI legal counsel to the REIT’s manager respectively. JunHe and Freshfields acted as PRC and Hong Kong legal counsel, respectively to the sole listing agent and the underwriters. Allen & Overy was counsel to entrusted parties.
KEY POINTS: In December 2019, China Merchants Commercial Real Estate Investment Trust, with properties located in the Greater Bay Area (GBA) of China, offered its listing on the Hong Kong Stock Exchange, raising HK$2.56 billion.
This is the first authorisation application of a real estate investment trust (REIT) under the sponsors’ regime adopted by the Hong Kong Stock Exchange, and the first Hong Kong REIT listing by a PRC state-owned enterprise since 2006. The fund was launched by a wholly owned subsidiary of China Merchants Shekou, a real estate platform of China Merchants Group, and the manager is China Merchants Land Capital Management, a wholly owned subsidiary of China Merchants Land.
With the potential that the GBA presents, this offering will encourage other GBA-based developers to list in Hong Kong, and therefore boost the Hong Kong REIT market.
China Yangtze Power acquires major Peru asset
CATEGORIES: Acquisition; energy
LEGAL COUNSEL: Tian Yuan Law Firm, Baker McKenzie, Estudio Muniz, and Walkers acted as the buyer’s PRC, New York, Peru and Bermuda legal counsel, respectively. White & Case acted as Sempra Energy’s New York Law adviser, and Estudio Rodrigo acted as its Peru counsel. Mayer Brown served as legal counsel to the lenders. Garrigues served as the lenders’ Peru counsel. JunHe served as the lenders’ PRC counsel.
KEY POINTS: On 30 September 2019, China Yangtze Power International (Hong Kong) announced its acquisition of a 83.6% equity interest of Peru’s largest electric company, Luz del Sur, from Sempra Energy for about US$3.59 billion. A syndicate of banks that included the Industrial and Commercial Bank of China, Bank of China, Santander and MUFG Bank provided financing to the project.
This is the largest acquisition made by a Chinese SOE in the Americas in 2020, and financial close was reached in April 2020. The deal also marks the first time that a Chinese company has entered the large utility sector in Peru, and the first time that China Yangtze Power has been able to enter the overseas electricity distribution market.
Fintech giant Lufax’s US listing
CATEGORIES: US listing; fintech
LEGAL COUNSEL: Haiwen & Partners, Skadden and Conyers acted as the issuer’s China and US legal counsel, respectively. Zhong Lun Law Firm and Kirkland & Ellis provided China and US legal advice, respectively, to the underwriters. Conyers provided Cayman Islands legal advice to Lufax.
KEY POINTS: Financial technology giant Lufax made its debut on the NYSE on 30 October, raising about US$2.36 billion, which makes it both the largest fintech IPO to date and the biggest Chinese IPO since 2015 in the US. Lufax partners financial institutions to offer small business loans and wealth management products via its platform.
First blue bond offering by PRC joint-stock bank
CATEGORIES: Blue bond; environment
LEGAL COUNSEL: King & Wood Mallesons acted for Industrial Bank Company.
KEY POINTS: Chinese lender Industrial Bank Company on October 29 priced the first blue bond by a China joint-stock commercial bank, amounting to US$450 million, to support marine pollution prevention and sustainable blue economic development in China.
Blue bonds are a type of green bond issued to finance marine projects that have positive environmental, economic and climate benefits. This offering focuses on the areas of marine renewable energy, sewage pipelines and sewage treatment in coastal areas, shipping and port pollution prevention facilities, and urban flood control facilities in coastal areas. This marks the first blue bond offering by a PRC joint-stock bank.
The blue bond offering is in line with the Green Bond Principles (2018), published by the International Capital Market Association.
Fosun, BioNTech form covid vaccine alliance
CATEGORY: Biotechnology
LEGAL COUNSEL: Paul Hastings advised Fosun Pharma, and Freshfields represented Biopharmaceutical New Technologies of Germany (BioNTech), as to German corporate and contract law. Stephenson Harwood represented BioNTech on IP law, while Covington & Burlington represented BioNTech on US securities law.
KEY POINTS: Fosun Pharma, one of the leading Chinese healthcare groups, formed a strategic alliance with NYSE-listed BioNTech to develop and commercialise a vaccine that prevents covid-19 infections using BioNTech’s mRNA vaccine candidate BNT162.
Paul Hastings lawyers engineered a complex cross-border strategic alliance between a Chinese pharmaceutical behemoth and a NYSE-listed German biotech start-up extremely quickly, against seesawing market conditions and swinging company fortunes as covid-19 spread from East to West, and amid the risk of political intervention.
Haier’s H-share issue, privatisation of Haier Electronics
CATEGORIES: Privatisation; Hong Kong listing
LEGAL COUNSEL: Haier Smart Home appointed Clifford Chance and King & Wood Mallesons as its legal advisers, while Sullivan & Cromwell and Zhong Lun Law Firm were legal advisers to the company’s joint financial advisers. Fangda Partners was legal adviser to Haier Electronics.
KEY POINTS: On 23 December 2020, Haier Smart Home announced its successful issuance and listing of H shares by way of introduction on the Main Board of the Stock Exchange of Hong Kong, and the privatization of Haier Electronics Group by way of a scheme of arrangement.
Haier Smart Home, which has already listed on the Shanghai and Frankfurt stock exchanges, became the first company in the world simultaneously listed on “A+D+H” markets.
King & Wood Mallesons says the transaction was the largest privatisation of Chinese shares in Hong Kong in 2020, and the largest introductory listing project of Hong Kong shares to date.
Hong Kong first virtual bank launches
CATEGORIES: Fintech; banking
LEGAL COUNSEL: King & Wood Mallesons’ Shanghai and Hong Kong teams acted as PRC and Hong Kong legal counsel to ZA Bank.
KEY POINTS: The first virtual bank in Hong Kong, ZA Bank, launched in December 2019. The Hong Kong Monetary Authority first announced its revised authorisation requirements for virtual banks in 2018. After the implementation, ZA Bank was among the first eight virtual banking licences granted in 2019.
KWM says the launch of virtual banks marks a major milestone for the development of the banking industry in Hong Kong. The firm advised on a wide range of issues including cybersecurity, privacy and cross-border data transfer, outsourcing, virtual on-boarding, cross-border payment and remittance.
Indonesian high-speed rail tunnel project launched
CATEGORIES: Infrastructure; financing
LEGAL COUNSEL: Baker McKenzie FenXun acted as English counsel to the Indonesian sponsors, PSBI and KCIC. Ashurst and Oentoeng Suria & Partners acted as international and Indonesian legal counsel, respectively, for the Chinese consortium.
KEY POINTS: Baker McKenzie FenXun advised the Indonesian sponsors and PSBI in connection with the establishment of KCIC as the joint venture company with the Chinese sponsors’ side in the development of Indonesia’s first high-speed train project connecting Jakarta and Bandung. The investment in the railway project is about US$5.5 billion.
The project is 75% financed through a Chinese loan provided by the China Development Bank, and the remaining 25% is arranged by KCIC as an equity portion. While the facility agreements had been signed in Beijing on 14 May 2017, after a number of delays, including a stoppage owing to the coronavirus, the railway is scheduled to begin operating in the second half of 2021 as reported.
Baker McKenzie FenXun says the aggressive schedule of the project, the absence of existing rules on high-speed railways and technology in Indonesia, and also the high-profile nature of the deal have added significant challenges to the transaction.
JD Health’s Hong Kong IPO
CATEGORIES: Hong Kong IPO; pharmaceutical
LEGAL COUNSEL:Shihui Partners, Skadden and Maples Group advised JD Health. Cleary Gottlieb and Han Kun Law Offices represented the joint sponsors and the underwriters.
KEY POINTS: Chinese online medical consultation and pharmaceutical sales provider, JD Health International, issued its HK$26.4 billion IPO in Hong Kong.
Shihui Partners says JD Health owns retail pharmacies and provides online medical and health services, including online hospitals, retailing drugs and medical devices. The lawyers tackled issues such as foreign investment access, industry regulation and the impact of new policies.
JD.com’s secondary HK listing
CATEGORIES: Hong Kong IPO; e-commerce
LEGAL COUNSEL: Shihui Partners was the China legal adviser to the issuer, and Skadden was Hong Kong and US legal adviser to the issuer. Maples Group was Cayman Islands counsel on the JD.com deal. Clifford Chance and Han Kun Law Offices provided legal advice to IPO sponsors.
KEY POINTS: Online retailer JD.com raised about HK$29.8 billion from the offering on 18 June 2020. JD.com has been listed on the Nasdaq since May 2014, and is a technology-driven e-commerce company transforming into a supply chain-based technology and service provider. JD.com was the largest retail company in China by total revenue in 2019, according to Fortune Global 500.
Zhang Jian, a partner at Shihui Partners, said at the time pf the deal: “As a US-listed company, JD.com is regulated under both PRC and US legal systems. So, for cases like this, lawyers should be familiar with mainland China, Hong Kong and US laws, and understand current regulatory situations, and the issuer’s long-term plans.”
KE Holdings’ US IPO
CATEGORY: US IPO
LEGAL COUNSEL:Skadden, Han Kun Law Offices and Maples Group acted as US, PRC and Cayman Islands counsel to KE Holdings. Jingtian & Gongcheng and Davis Polk acted as PRC and US legal counsel to the underwriters respectively.
KEY POINTS: KE Holdings, which is backed by Tencent and Softbank, offered its US$2.12 billion NYSE IPO in August 2020. KE Holdings is a leading online and offline real estate transaction and service platform in China, dedicated to providing related services including second-hand and new housing transactions, housing rentals, housing decorations and real estate financial solutions.
Jingtian & Gongcheng says this transaction was the largest US IPO for a Chinese company in 2020, with respect to its financing amount and the offering valuation.
Kingsoft Cloud’s US IPO
CATEGORIES: Nasdaq IPO; cloud provider
LEGAL COUNSEL: Davis Polk, Fangda Partners and Conyers acted as the issuer’s US, PRC and Cayman counsel, respectively. Han Kun Law Offices and Kirkland & Ellis acted as PRC and US counsel to the underwriters, respectively.
KEY POINTS: Kingsoft Cloud, a leading cloud service provider in China, listed on the Nasdaq Global Select Market on 8 May. The IPO raised about US$551.3 million. Kingsoft Cloud provides cloud infrastructure, cloud products and industry-specific solutions across cloud services and other related services.
In the context of the global pandemic, the US stock market plunge and the crisis of confidence in Chinese stocks, Kingsoft Cloud “bucked the trend” and went public in the US, which was an important reference for Chinese companies choosing a place to go public.
LVMH acquires Tiffany & Co
CATEGORY: Acquisition
LEGAL COUNSEL: Sunland Law Firm represented LVMH.
KEY POINTS: LVMH is a world leader in luxury products, active in the design, manufacture and sale of luxury goods through its portfolio of 75 brands worldwide. Tiffany is a well-established US luxury jewellery and specialty retailer known for its luxury goods, particularly its diamond and sterling silver jewellery. The US$16.2 billion transaction caused much debate from international regulators, stakeholders, and even the general public.
The review process of this deal coincided with the covid-19 outbreak in China, and thus faced great challenges, such as multi-parties’ co-operation and communications, as well as drastically changed and complex market conditions. With this backdrop, Sunland advised LVMH with respect to the antitrust notification in China, managed to work closely with the parties via remote communications, and effectively resolved their competition concerns.
This deal acquired its clearance in China without conditions on 25 July 2020, and is considered one of the most important deals in the global luxury sector.
Mainland ministry issues sovereign bonds in HK
CATEGORIES: Sovereign bonds
LEGAL COUNSEL: Deacons advised Bank of Communications Hong Kong Branch as the issuing and lodging agent as to Hong Kong law. Linklaters acted as Hong Kong counsel to the PRC’s Ministry of Finance.
KEY POINTS: Mainland China’s Ministry of Finance issued sovereign bonds in Hong Kong in September and November 2019, worth a total of RMB10 billion. The renminbi-denominated sovereign bonds continue to serve as a pricing benchmark for other offerings of renminbi bonds in Hong Kong by PRC institutions. The government’s support reinforces Hong Kong’s positioning as the global offshore renminbi business hub.
Mengtai Group acquires Europe’s apt Group
CATEGORIES: Acquisition; aluminum industry
LEGAL COUNSEL: Heuking Kühn Lüer Wojtek advised Chinese Inner Mongolia Mengtai Group (Mengtai Group). Skye Partners, CMS Hasche Sigle and Dentons were legal advisers to the sellers.
AKD and Kocián Šolc Balaštík served as local counsel to Mengtai Group in the Netherlands and the Czech Republic, respectively.
KEY POINTS: Mengtai Group acquired apt Group in June 2020. Mengtai Group is a family-owned group of companies headquartered in Ordos, Inner Mongolia, with a turnover of about US$2.2 billion in 2019. The apt Group is a leading company in the European aluminum industry, manufacturing and refining high-quality aluminum profiles in Germany, the Netherlands and the Czech Republic.
Heuking Kühn Lüer Wojtek says Mengtai Group joined the bidding process in late December 2019, and therefore required a speedy and well co-ordinated due diligence. In addition, the firm had to co-ordinate the local counsel from its Dutch and Czech partner firms, who did the due diligence in their respective jurisdictions.
After winning the bid, Germany entered into a strict lockdown. The firm had to navigate the parties through the foreign investment control proceedings while many staff at the relevant German ministries responsible for FDI procedures were working from home for the first time, which led to considerable delays.
Mexico City subway construction project
CATEGORIES: Infrastructure; Belt and Road
LEGAL COUNSEL: Pinsent Masons acted as legal counsel to China CRRC Hong Kong (CRRC HK) and China CNR Zhuzhou Electric Locomotive (CRRC ZELC).
KEY POINTS: The consortium consisting of CRRC HK and CRRC ZELC invested in the integral modernisation of trains, control systems and road track for Mexico City Subway Line 1. The project was awarded by Mexico City’s Sistema de Transporte colectivo (STC).
CRRC HK is a Chinese state-owned and publicly traded rolling stock manufacturer. The project will be developed based on the PPP model in which STC pays an annual service fee to the consortium for it to supply new trains, rehabilitate tracks and control systems, and maintain Line 1 for a period of 20 years. The total investment is about US$1 billion.
It is the first overseas PPP project of CRRC HK, and also a landmark Belt and Road project. The deal is one of the few projects in which Chinese sponsors are to utilise local lenders to provide project finance. Thus, this project sets a good reference for the market, with very few existing precedents.
MINISO’s US IPO
CATEGORIES: US; IPO
LEGAL COUNSEL: JunHe and Skadden acted as the issuer’s China and US legal counsel, respectively. Jingtian & Gongcheng and Cleary Gottlieb and Maples Group acted as Chinese, US and Cayman Islands legal counsel, respectively, for the underwriters.
KEY POINTS: MINISO, a fast-growing global value retailer, completed a US$608 million IPO of 30.4 million American depositary shares (ADS) on the New York Stock Exchange (NYSE) on 19 October, each representing four class A ordinary shares of MINISO.
According to the prospectus, as of 30 June 2020, MINISO, founded in 2013, has built a retail network of more than 4,200 stores in over 80 countries and regions around the world. And with more than 95% of the brand’s products retailing for less than RMB50 in China, the listing of MINISO marks the expansion of China’s downstream retail footprint.
NetEase’s secondary listing in HK
CATEGORIES: US listing; internet
LEGAL COUNSEL: Skadden, Zhong Lun Law Firm and Maples Group were the US and Hong Kong, PRC, and Cayman Islands legal advisers, respectively, to the issuer. JunHe and Davis Polk were the PRC and international advisers, respectively, to the underwriters.
KEY POINTS: NetEase has been listed on the Nasdaq since June 2000, and is the second-largest mobile game company in the world. The offering, which closed on 11 June 2020, raised about HK$21 billion, not including the over-allotment option, and is the second-largest offering in Hong Kong in 2020.
“There are two noticeable reasons behind homecoming [of Chinese companies], He Li, a partner at Davis Polk & Wardwell, has told China Business Law Journal. “One is the Sino-US trade war, and various US legislations against Chinese stocks, and the other is the further reforming and opening of China’s A shares, and Hong Kong capital market.”
New Oriental’s HK secondary listing
CATEGORY: Hong Kong listing
LEGAL COUNSEL: Tian Yuan Law Firm, Conyers, and Skadden represented New Oriental. Jia Yuan Law Offices and Herbert Smith Freehills represented the joint sponsors and underwriters.
KEY POINTS: New Oriental Education & Technology, the largest provider of private educational services in China, completed its US$1.31 billion secondary listing in Hong Kong on 9 October 2020. The company debuted on the New York Stock Exchange in 2006 as the first overseas-listed Chinese education company.
It is also the first “homecoming” Chinese education company. The listing raised over HK$10 billion at an issue price of HK$1,190 per share, marking the birth of the first HK$1,000 stock on the Hong Kong Stock Exchange.
Nongfu Spring’s HK listing
CATEGORIES: Hong Kong IPO; retail
LEGAL COUNSEL: Jingtian & Gongcheng was the Chinese legal adviser to the company, while Freshfields acted as Hong Kong and US legal counsel. Tian Yuan Law Firm was China legal counsel for the joint sponsors and underwriters, while Clifford Chance served as global legal counsel.
KEY POINTS: Chinese bottled water and beverage company, Nongfu Spring, completed its US$1.08 billion IPO in Hong Kong on 8 September, becoming the most oversubscribed offering to date on the city’s bourse, after its retail tranche was covered 1,148 times.
Nongfu Spring also became the first company to achieve “full tradability” of H shares on listing. The CSRC had announced the full tradability system in November 2019, which allowed unlisted shares held by mainland Chinese companies to be sold and traded on the Hong Kong Stock Exchange.
RemeGen’s Hong Kong Listing
CATEGORIES: Hong Kong listing; pharmaceutical
LEGAL COUNSEL: King & Wood Mallesons and O’Melveny acted as the issuer’s Chinese and international legal counsel, respectively. Tian Yuan Law Firm and Davis Polk acted as the sponsors and underwriters’ Chinese and international legal counsel, respectively. JunHe acted as IP legal counsel to RemeGen.
KEY POINTS: RemeGen debuted its IPO and primary listing on the Hong Kong Stock Exchange on 9 November 2020. The IPO offering size was about HK$4 billion, making it the largest IPO project in the biotechnology industry (excluding secondary listings) since chapter 18A of the Listing Rules of the Hong Kong Stock Exchange came into effect.
As the only biotech company seeking listing under chapter 18A with two innovative drugs already filed for marketing, RemeGen has outstanding R&D capabilities, a complete and large product pipeline, and a pre-IPO private placement valuation of nearly US$1.4 billion.
After trading, RemeGen’s market capitalisation exceeded HK$32 billion, leaping to become the highest valuation chapter 18A biotech company in Hong Kong.
Risen Energy financing for Australian solar project
CATEGORIES: Project financing; energy
LEGAL COUNSEL: King & Wood Mallesons acted as legal counsel to the project.
KEY POINTS: In August 2020, the 132MWdc Merredin large-scale photovoltaic (PV) plant in Western Australia state – which is the largest PV plant in Western Australia and one of the fastest-built PV plants to date – was successfully connected to the grid as part of a package project undertaken by Risen Energy. At the end of 2019, Minsheng Bank provided project financing to support the construction of this project. King & Wood Mallesons Shanghai, as the general co-ordinating counsel for Minsheng Bank, was involved in the entire financing project.
The transaction covered three jurisdictions – China, Australia and Singapore – and involved a number of tasks such as project due diligence in Australia, registration under the Personal Property Securities Act in Australia, registration of equity pledge in Singapore, and guarantee for listed companies in China.
SINA merges with New Wave, goes private
CATEGORIES: Merger; privatisation
LEGAL COUNSEL: Skadden acted as US legal counsel to New Wave. Gibson Dunn and Harneys’ Shanghai team acted as the US legal counsel and Cayman Islands legal counsel, respectively, to the special committee of SINA. Kirkland & Ellis acted as counsel to Morgan Stanley as financial adviser.
KEY POINTS: SINA, a global Chinese-language internet media company, announced its merger agreement with New Wave on 23 September 2020. New Wave is owned by the management team of SINA, led by SINA’s chairman and CEO, Charles Chao.
The take-private acquisition deal amounts to US$2.59 billion. After the transaction, SINA will become a private company and its ordinary shares will no longer be listed or traded on any stock exchanges.
Smoore International’s Hong Kong listing
CATEGORY: Hong Kong listing
LEGAL COUNSEL: DeHeng Law Offices, Simpson Thacher and Conyers represented the issuer. Zhong Lun Law Firm and Reed Smith represented the sole sponsor and the underwriters.
KEY POINTS: The world’s largest vaping device manufacturer, Smoore International, listed on the Hong Kong Stock Exchange on 10 July 2020, issuing approximately 574 million shares and raising US$918 million.
Smoore has a number of original equipment manufacturing (OEM) products, and its own e-cigarette brands. As of 20 June 2020, Smoore had filed more than 1,600 domestic and international patents, of which more than 700 were granted. With the listing of Smoore, it officially became the first vape stock in China.
State Power Investment acquires Brazil GNA project
CATEGORY: Overseas M&A
LEGAL COUNSEL: Grandall Law Firm and Trench Rossi Watanabe represented State Power Investment Corporation.
KEY POINTS: On 8 August 2020, State Power Investment Corporation, a major electricity generation company in China, through its Brazilian energy subsidiary, signed an equity acquisition agreement, a subscription agreement and a co-development agreement with PRUMO Brazil, a company held by the US-based EIG Global Energy Fund, BP and Siemens, in relation to GNA, a large-scale gas project in Porto Açu, Brazil. Under the agreement, State Power Investment Corporation will acquire a 33% stake in the GNA I and GNA II power projects, and the right to participate in future investments in the GNA III and GNA IV projects.
The GNA I and GNA II power stations are the largest natural gas-fired power projects in Latin America. According to Grandall, the project is complex due to its size, the multi-sectoral assets involved (power, gas and ports), the need to integrate the strengths of each party in their respective sectors, and the tight timeframe of the project during the covid-19 pandemic.
Trip.com Group issues exchangeable bonds
CATEGORIES: Exchangeable bonds issue
LEGAL COUNSEL: Jingtian & Gongcheng acted as PRC legal counsel for the underwriters, and Skadden served as international counsel. Commerce & Finance Law Offices was PRC legal counsel for the issuer, and Davis Polk was international legal counsel.
KEY POINTS: On 20 July 2020, Trip.com, a leading Chinese online travel service company, offered exchangeable bonds worth US$500 million, convertible into shares of its subsidiary, Huazhu Group. It was the first exchangeable bond issuance by a US-listed Chinese company.
Universal Global Technology acquires Asteelflash
CATEGORIES: Acquisition; technology
LEGAL COUNSEL: Merits & Tree represented Universal Global Technology and was responsible for anti-monopoly review. Davis Polk was the transactional lawyer representing Universal Global Technology. De Pardieu Brocas Maffei advised Asteelflash and its parent company, Financière AFG (FAFG).
KEY POINTS: In December 2019, Universal Global Technology announced the acquisition of Asteelflash, a subsidiary of FAFG. FAFG is the second largest electronics manufacturing service provider in Europe. Universal Global Technology is a leading global provider of miniaturised system modules and electronics manufacturing services, with its main businesses covering communications, consumer electronics, computers, storage, industrial and automotive electronics.
Universal Global Technology is a leading global provider of miniaturised system modules and electronics manufacturing services, with its main businesses covering communications, consumer electronics, computers, storage, industrial and automotive electronics.
According to Merits & Tree, the transaction was unconditionally approved by the China Anti-Monopoly Bureau and the CSRC as the first cross-border share swap M&A case in 2020.
The case involved operator concentration filings in four jurisdictions including China, the EU, US and Taiwan, of which China was the earliest jurisdiction to be approved, strongly safeguarding the smooth progress of the transaction.
WIMI’s US public offerings
CATEGORY: Nasdaq listing
LEGAL COUNSEL: Jingtian & Gongcheng and Ellenoff Grossman & Schole acted as PRC and US legal advisers, respectively, to WIMI. Commerce & Finance Law Offices and DLA Piper represented the underwriters.
For the follow-on public offering, DLA Piper, Maples Group and Jingtian & Gongcheng represented the issuer. Sheppard Mullin and PacGate Law Group represented the underwriters.
KEY POINTS: The holographic augmented reality (AR) company WIMI went public on the Nasdaq on 1 April 2020, raising US$26.1 million.
WIMI is the largest holographic platform in China, ranking first in the industry in terms of revenue and profit, customer scale and number of IP rights. The company focuses on computer vision holographic cloud services, covering one-stop services such as AI synthesis, holographic visual presentation, holographic interactive software development, holographic AR online and offline advertising, holographic face recognition and face swapping.
Subsequently, in July 2020, WIMI issued ADS, completing a follow-on public offering of more than US$60 million. Participants in the offering included Weibo Online Investment, a subsidiary of Weibo, and a select group of US and Asian institutional investors.
WIMI expects to invest 40% of the net proceeds from the offering in technology research and development, strategic acquisitions and investments.
Xpeng’s US IPO and US$1.3 billion pre-IPO financing
CATEGORIES: IPO; financing; automobile
LEGAL COUNSEL: For the IPO, Fangda Partners, Simpson Thacher, and Harneys represented the issuer. JunHe and Latham & Watkins represented the underwriters. For pre-IPO financing, Simpson Thacher represented XPeng. Paul Weiss, Skadden, JunHe, Kirkland & Ellis, and Fangda Partners advised the investors.
KEY POINTS: Chinese smart electric vehicle XPeng completed its US$1.3 billion pre-IPO series C/C+ financing, with investors including Alibaba, Aspex, Coatue, Hillhouse, Sequoia China, Qatar Investment Authority, Mubadala and Xiaomi Corporation.
According to XPeng, the signing of the series C+ financing demonstrates investor confidence in the company’s strategy, market positioning, and its long-term vision as a leading smart electric vehicle (EV) player in China. The company debuted on the NYSE in August 2020, raising US$1.7 billion.
Yuanfudao G-round financing
CATEGORIES: Financing; internet
LEGAL COUNSEL: Sunland Law Firm acted as counsel to Yuanfudao. Clifford Chance, Goodwin , CM Law Firm and Han Kun Law Offices acted for the lead investors, while Fangda Partners, Morgan Lewis, Paul Weiss, Haiwen Partners and Tian Yuan Law Firm acted for the other investors.
KEY POINTS: China’s largest online live course platform, Yuanfudao, received US$1 billion funding in its series G financing. The lead investors were Hillhouse Capital, Tencent and DST Global.
As of publication, this transaction was the biggest investment in the education industry to date, and Yuanfudao had become the top platform in terms of valuation among its peers.
Yum China’s HK secondary listing
CATEGORY: IPO
LEGAL COUNSEL: Jingtian & Gongcheng acted as Chinese legal counsel, and Sidley Austin advised on Hong Kong and US legal matters for Yum China. Commerce & Finance Law Offices, Freshfields and Simpson Thacher represented the sponsors and underwriters.
KEY POINTS: In Hong Kong’s third-largest secondary listing to date in 2020, Yum China started trading on the Hong Kong Stock Exchange on 10 September. The secondary listing raised about HK$17 billion.
Yum China is the largest restaurant operator in China, with brands including KFC, Pizza Hut and Little Sheep.
Airbus Group multinational investigation
CATEGORY: Anti-corruption investigation
LEGAL COUNSEL: Zhong Lun Law Firm provided legal services to the Airbus Group in relation to Chinese law compliance.
KEY POINTS: In January 2020, Airbus Group reached a stay of prosecution agreement with French, British and US authorities over investigations into an alleged bribery and corruption scandal, and paid a record fine of €3.6 billion (US$4.3 billion).
Since late 2017, Airbus Group had been the subject of a joint investigation by the French National Economic and Financial Prosecution Service, the UK Serious Fraud Office and the US Department of Justice over allegations of involvement in fraud, bribery and corruption, which also allegedly involved a third-party consultancy.
According to Zhong Lun, although the entire Airbus investigation was conducted jointly by overseas multinational law enforcement agencies, the focus and main part of the specific conduct investigated was Airbus’ conduct in the Chinese market. The investigations involved many complex factors, such as criminal judicial assistance under Chinese law, government relations, public relations, crisis management, public opinion control, legal analysis, risk assessment, and development and adjustment of the whole investigation response strategy and follow-up.
In addition, disclosure of documents was involved in the investigation process, which also triggered the protection of state secrets under Chinese law, document review and so on. Due to the sensitivity of the case, the client’s market position on a global scale, geopolitical and other factors, the lawyers handling of this case, in addition to a strong legal professional literacy, must have excellent overall awareness and control ability, including non-legal professional crisis handling ability, good communication skills, and an understanding of different jurisdictions.
Boyalife Valuation Adjustment Mechanism performance dispute
CATEGORY: Company control dispute
LEGAL COUNSEL: Jingtian & Gongcheng represented Boyalife’s founder.
KEY POINTS: The founder, also the minority shareholder of Boyalife, has been involved in a series of disputes with the company’s controlling shareholder, an A-share listed company, over control of Boyalife.
The A-share listed company had acquired a combined 80% equity in Boyalife from its customers and other minority shareholders in 2015, and had signed an agreement on a valuation adjustment mechanism (VAM) with the founder of Boyalife.
The agreement stipulates that the founder of Boyalife will assume a strict VAM obligation on the subsequent four years of Boyalife’s performance, and only if the performance is completed will the founder of Boyalife receive the subsequent equity transfer payment. Otherwise, he will pay compensation to the A-share listed company for the uncompleted performance. The court of jurisdiction for the dispute is the High People’s Court of Ningxia Autonomous Region, where the A-share listed company is domiciled.
In 2017, a dispute arose between the A-shared listed company and the founder of Boyalife over completion of performance, which led to more than 10 dispute cases, one after another. When Jingtian & Gongcheng lawyers intervened, the founder of Boyalife was required to pay hundreds of millions of renminbi in performance compensation, faced the threat of losing the management of Boyalife, received regulatory penalties, and had his reputation damaged.
Jingtian & Gongcheng, through expert witnesses and cross-examination of the auditors who testified on the other side, prompted the court to find that the audit and evaluation report submitted by the listed company was seriously flawed, and could not be used as a basis for adjudication.
The court accordingly commissioned a third-party auditor and appraiser to re-evaluate Boyalife’s performance, breaking a situation where only the unilateral audit and appraisal report of the A-share listed company was available, and enabling Boyalife’s founder to avoid a direct economic loss of about RMB300 million.
In addition, the legal team applied to the CSRC for administrative reconsideration of the penalty decision made by the Ningxia Provincial Securities Regulatory Bureau, and, with the help of the effective judgment obtained in the Ningxia Provincial High People’s Court, and after several rounds of communication with the CSRC and the Ningxia Provincial Securities Regulatory Bureau and the quasi-hearing procedures, eventually the CSRC issued a reconsideration decision revoking the original administrative act, which enabled the founder of Boyalife to avoid having a bad record in the integrity file of the securities and futures market.
China General Nuclear Power Group property dispute
CATEGORIES: Real estate dispute
LEGAL COUNSEL: Anli Partners represented China General Nuclear Power Corporation (CGN Power).
KEY POINTS: CGN Power and Beijing Jinfeng Kehua Real Estate Development Company entered into housing sale and purchase agreements in relation to buildings 1-3 of Jinfeng Energy Centre, developed by Jinfeng Kehua, and CGN Power later arranged for seven of its subsidiaries to sign Beijing commodity housing pre-sale contracts with Jinfeng Kehua and file the contracts with the competent authority.
The three office buildings in Beijing had a contract price of about RMB2.6 billion and an actual value of more than RMB5 billion.
In the process, CGN Power actually paid about 90% of the price of the housing in question, and Jinfeng Kehua actually delivered the housing but had not yet applied for property certificates.
During this time, Jinfeng Kehua repeatedly borrowed money from external parties and mortgaged the housing in question. Due to the inability to repay the corresponding debts, creditors such as Beijing Zhonghong Ruide Investment Management Centre applied to the court for compulsory execution in accordance with the relevant notarised creditor documents, and all six buildings of Jinfeng Energy Centre were taken for multiple rounds of seizure, so CGN Power could not obtain the ownership of the purchased housing in accordance with the contract.
As a result, CGN Power filed an execution objection with the execution court, which was rejected, and then Anli Partners filed an execution objection suit with the Beijing No. 2 Intermediate People’s Court representing CGN Power, which overturned the first decision.
Anli says this case was complex, with 10 different companies involved, multiple purchase contracts signed, and a purchase price paid by different subjects in multiple ratios. There was some crossover between the time of delivery of the buildings and the time of seizure, and the evidentiary materials were extremely complicated.
In addition, the case involved the issue of whether the client, as the buyer of the housing, could exclude the execution applied by the general money creditor. The relevant legal provisions were relatively simple, the scale of adjudication in practice was not uniform, and there were no precedents to follow.
Civil-military contract dispute
CATEGORIES: Contract dispute
LEGAL COUNSEL: Dentons Law Offices represented Changsha Zhonglian Hengtong Machinery (ZL Hengtong).
KEY POINTS: ZL Hengtong won the bid for the prototype manufacturing project of the Special Service Institute of PLA Army Research Institute, and the two parties signed a prototype manufacturing contract. Three years later, ZL Hengtong completed the project, passed the review, and delivered the prototype for use, but the army research institute failed to pay the price.
During the period, due to military restructuring of the institute and the retirement of the signatory, the payment was delayed. Eventually, ZL Hengtong brought the dispute to court, and after first instance and second instance trials, it recovered the arrears and interest, totalling more than RMB8 million.
Dentons says that this case is of exemplary significance in disputes involving military subjects, the succession of claims and debts, and the trend of enlightened rule of law. It shows that a civil dispute between a military subject and a general civil subject should not be uniformly subject to military jurisdiction, and that confidentiality does not mean that the secret is a “military secret at or above classified level”.
The case also reflects the progress of China’s rule of law in several decades, and that the concepts of equal subjects in commercial transactions, and attaching importance to the nature of cases, rather than blindly following the precedents that enjoy popular support.
Collision case between Chenchang 332 and Morning Cherry
CATEGORY: Dispute resolution
LEGAL COUNSEL: Huang & Huang Co Law Firm represented the insurer of Chenchang 332, PICC P&C Dongguan Branch.
KEY POINTS: The collision between Chenchang 332 and Morning Cherry occurred in Lingdingyang waterway of Guangzhou on 28 March 2018, resulting in the sinking of Chenchang 332 and its cargo, the death of four crew members, and serious damage to Morning Cherry. After two years and four months of reconciliation, consultation and negotiation, all stakeholders finally successfully closed the case through mediation, before litigation, on the basis of resolving disputes one by one, and narrowing their differences.
The subject matter of this case is relatively large, including the mutual infringement claim between the two ships, the emergency pollution prevention and cleaning fee claim by the Maritime Safety Administration, a claim by the salvage company for salvage charges, the personal injury and death claims of the crew, etc., totalling about RMB50 million.
EI Zorro, Ellington collision dispute
CATEGORY: Maritime
LEGAL COUNSEL: Wang Jing & Co acted as the PRC legal counsel to EI Zorro.
KEY POINTS: In late 2018, the Marshall Islands tanker El Zorro was struck by the Singaporean tanker Ellington in the waters of Jiaxing, Zhejiang province, resulting in El Zorro’s hull being ruptured and several hundred tonnes of cargo oil spilling into the water. Subsequently, the owners of the two vessels filed separate lawsuits in the Ningbo Maritime Court to claim collision damages against each other.
The Ningbo Maritime Court handed down a judgment on 31 March 2020, to determine the proportion of responsibility for the collision between the two vessels. However, in addition to the ship collision liability and loss compensation dispute, the collision also triggered litigation such as shipboard cargo damage compensation, oil pollution removal and anti-fouling cost claims, as well as marine environmental damage claims.
Ningbo Maritime Court says the case is the first one to be formally heard through the establishment of the Oil Pollution Damage Liability Limitation Fund in China’s judicial practice since China’s accession to the International Convention on Civil Liability for Oil Pollution Damage, setting a precedent for the industry.
Moreover, the vessels involved are both foreign, which is of great significance to the future hearing of similar cases, and the construction of a maritime judicial trial centre in China.
Equity transfer contract dispute over change in circumstance
CATEGORY:Equity transfer dispute
LEGAL COUNSEL: Boss & Young Attorneys-at-Law represented Beijing Xinsong Property Investment (Xinsong).
KEY POINTS: This case is a dispute over equity transfer between the plaintiff (counterclaim defendant), Evergrande Group Changsha Real Estate, and the defendant (counterclaim plaintiff), Xinsong. Hunan High People’s Court rejected all claims of Evergrande and supported all claims of Xinsong in the first instance. Evergrande continued to appeal to the Supreme People’s Court, and both parties finally reached a mediation under the auspices of the Supreme People’s Court.
Xinsong publicly listed and transferred 67% equity of Hunan Qianshuiwan Xiangya Hotspring Garden (Qianshuiwan) through equity exchange agencies, and Evergrande won the bid. Both parties signed an equity exchange contract. When the payment time limit stipulated in the equity exchange contract expired, Evergrande refused to make payment and brought a lawsuit to Hunan High People’s Court, demanding rescission of the contract on the ground of changed circumstances. Xinsong filed a counterclaim, demanding that Evergrande fulfill its payment obligation and bear the liability for breach of contract.
Evergrande believed that when 67% equity of Qianshuiwan was listed for trading, Qianshuiwan won the land dispute lawsuit. However, after the transaction between the two parties was completed and the equity exchange contract was signed, Qianshuiwan lost in the final trial of the land dispute and had to bear compensation of RMB400 million, which constituted a changed circumstance. Xinsong held that the litigation result of Qianshuiwan in the land dispute was a commercial risk and that Xinsong made full disclosure of the risk during the early consultation with Evergrande, when publicly listing the equity and in the equity exchange contract, and that the two parties allocated the land litigation risk to Evergrande in the contract.
Boss & Young says that the background of this case is complex, and how to distinguish a change of circumstances from commercial risk has always been a difficult point in judicial practice. In addition, since 2008, Qianshuiwan’s land dispute litigation had gone through five litigation stages and had not been resolved for more than 10 years. The uncertainty of land litigation has a great influence on the equity value of Qianshuiwan, which increases the difficulty of the court in measuring the transaction fairness.
Hong Kong migrant domestic worker’s compensation case win
CATEGORY: Pro bono
LEGAL COUNSEL: LC Lawyers represented Justice Without Borders on an appeal and application for leave to appeal.
KEY POINTS: Justice Without Borders is a non-profit organisation supporting victims of labour exploitation and human trafficking in seeking just compensation, and a migrant domestic worker (individual A) in a matter concerning individual A’s claims for compensation for unfair dismissal.
LC Lawyers overturned the Hong Kong Labour Tribunal’s dismissal of individual A’s claims, after first successfully obtaining leave to appeal from the High Court of Hong Kong SAR. The appeal was significant because it was based on challenges against the labour tribunal’s findings of fact, which are generally immune from challenges, on the grounds that they were perverse or irrational.
The high court allowed the appeal and ordered a rehearing of individual A’s claims on the basis that the labour tribunal’s conclusions were based on a misunderstanding of the evidence, and/or finding of facts, or inference from the facts, which were perverse or irrational. The high court sent the case back to the tribunal for a retrial before another presiding officer.
LC Lawyers had earlier also successfully applied for leave to appeal, and appealed the labour tribunal’s dismissal of individual A’s application for orders for union representation and using video-conferencing facilities (VCF) to give evidence from her home country, where she had returned, and assisted individual A in obtaining such orders from the tribunal.
This resulted in the first labour tribunal case where a claimant (who would ordinarily have to attend hearings personally, with limited assistance from union officers only in special circumstances) was able to pursue her claims by giving evidence through VCF from outside Hong Kong, and with union representation at the hearing. A precedent has now been set for future cases in the labour tribunal and the Hong Kong Small Claims Tribunal (which has the same procedural impediments).
The appeals and labour tribunal decisions on the use of VCF and union representation have been hailed as a testament to fair trials, and a breakthrough in access to justice that leaves a lasting impact for Hong Kong’s population of more than 380,000 migrant domestic workers.
India’s pyridine anti-dumping investigation
CATEGORY: Anti-dumping
LEGAL COUNSEL: JunHe represented Jubliant Life Sciences.
KEY POINTS: On 21 September 2012, the Ministry of Commerce (MOFCOM) launched an anti-dumping investigation into imports of pyridine originating from India and Japan. JunHe represented India’s largest producer and exporter, Jubilant Life Sciences, and responded to the complaint, which took more than a year, and was imposed an anti-dumping duty of 24.6% on 20 November 2013, after questionnaire responses, damage defence, hearings, preliminary rulings, field verification in India, price commitment negotiations and a final ruling.
In early 2015, JunHe again represented Jubilant to apply to MOFCOM for an interim review, which took one year, and successfully persuaded the ministry to reduce the anti-dumping duty rate applied to Jubilant to 17.6% on 5 February 2016.
On 20 November 2018, MOFCOM initiated the sunset review, and on 20 November 2019, the ministry terminated the investigation and declared that anti-dumping duties would no longer be imposed on imports of pyridine originating from India and Japan.
JunHe says the entire case has taken seven years and been a difficult one. It is rare to see a successful termination of anti-dumping duties in a sunset review, and the usual outcome is that the investigating authority rules to continue to impose anti-dumping duties for five years.
Jushi Egypt and EU anti-dumping investigation
CATEGORY: Anti-dumping investigation
LEGAL COUNSEL: AllBright Law Offices represented the China Jushi Group.
KEY POINTS: The China Jushi Group is the world’s largest fibreglass producer, and in considering its global strategic layout, resolving trade barriers became one of the issues. China Jushi has been investing in the Sino-Egyptian Economic Development Zone located on the Red Sea, a joint venture between TEDA Holdings and the local Egyptian community, since 2012, setting up Jushi Egypt to produce glass fibres for construction, pipelines and new energy sources.
In 2018, Jushi Egypt’s glass fibre production base, with an annual capacity of 200,000 tons, was fully completed and put into operation, with a total project investment of more than US$600 million. Jushi Egypt glass fibre base is the world’s largest glass fibre production base outside of China, and the only glass fibre production base in Africa, filling a gap in the glass fibre manufacturing industry on the African continent. It is also the first large-scale glass fibre production project built by China overseas.
The EU and Turkish industries launched anti-dumping investigations against Egyptian companies in 2019 and 2017, respectively, and zero tariffs were granted in both cases. On 2 June 2020, the European Commission issued a notice formally announcing the termination of anti-dumping investigations on glass fibre products from Egypt and Bahrain.
During the field verification process, AllBright lawyers applied the market economy treatment rules of the WTO and the EU Basic Regulation on Anti-dumping to prove to the EU investigation officials that the financial records of Jushi Egypt reasonably reflected the production and sales costs of glass fibre products from the perspective of the enterprise’s own financial data, and local law on customs and taxation in Egypt, and eliminated the possibility of the EU investigating officials denying Jushi Egypt’s own financial records, and thus calculating the dumping margin.
Lukfook Jewellery wins TM infringement
CATEGORY: Trademark infringement
LEGAL COUNSEL: Wanhuida Intellectual Property represented the plaintiff in the first instance, and the appellant in the appeal proceeding, against the trademark infringer.
KEY POINTS: In March 2017, Hong Kong-based jewellery retailer Luk Fook Holdings sued an infringer called Shenzhen 6+ Fook Jewelry (sic) before the Shenzhen Intermediate Court, on the ground of trademark infringement and unfair competition.
For its defence, 6+ Fook challenged the distinctiveness of Luk Fook’s trademarks, arguing the Chinese characters of these trademarks, which represents luck and fortune, are widely used in the jewellery industry, and are devoid of distinctiveness. 6+ Fook also claimed that its trademarks were not similar to Luk Fook’s cited marks, and that, through constant use, they had established a distinct reputation.
The first-instance court ruled in favour of the plaintiff on the basis of trademark infringement. The court, however, dismissed the plaintiff’s unfair competition claim and awarded damages and reasonable costs of RMB500,000.
Luk Fook appealed to the Guangdong High Court (GHC), insisting on its unfair competition claim. The GHC confirmed the first-instance judgment based on trademark infringement, but reversed its finding that unfair competition could not be established.
GHC affirmed that Luk Fook had acquired a high reputation through continual promotion, that the trademark “Lukfook” is not a commonly used expression in Chinese but unique words coined by the plaintiff, and that the plaintiff had established, since 1991, a stable correspondence with the cited trademarks.
In a judgment on 8 October 2019, the GHC partially reversed the decision made by the Shenzhen Intermediate Court, and affirmed that the defendant was also engaged in unfair competition, raising the number of damages from RMB500,000 to RMB6 million.
Malaysia’s anti-dumping case victory for China
CATEGORY: Anti-dumping investigation
LEGAL COUNSEL: Jincheng Tongda & Neal and Jason Teoh Choon Hui Law Firm acted for Ben Gang Group Corporation.
KEY POINTS: Recently, the Malaysian Government published in its Federal Government Gazette the amended final ruling on an anti-dumping case against Chinese hot-dip galvanised steel sheets. Previously, pursuant to a judicial review process initiated on the application of Ben Gang POSCO Cold Rolled Sheet and Ben Gang Plate, the Kuala Lumpur High Court issued a valid judgment, pursuant to which the anti-dumping duty rate applicable to the hot-dip galvanised steel products of the two companies was corrected to zero, with retroactive effect from the date of the original duty order.
Accordingly, future exports of Ben Gang’s hot-dip galvanised steel products to Malaysia will no longer be subject to the anti-dumping duty and the anti-dumping duty already levied will be refunded. Thus, after more than two years of original investigation and judicial review, Ben Gang Group has achieved a final victory in the anti-dumping investigation from Malaysia.
This case is the first case in Malaysia to date in which a Chinese enterprise has gone through a complete judicial review process and has successfully had the anti-dumping measures revoked after a successful decision in trial.
Min Fengzhen v Republic of Korea
CATEGORY: International arbitration
LEGAL COUNSEL: King & Spalding and Hui Zhong Law Firm represented Min Fengzhen.
KEY POINTS: This case revolved around whether the forced disposal of Min Fengzhen’s entire investment in South Korea by a state-owned bank, and the subsequent deprivation of Min’s entire investment in South Korea by the South Korean judicial authorities through improper judicial proceedings, violated the fair and equitable treatment obligation under the 2007 China-Korea Agreement on the Encouragement and Reciprocal Protection of Investments, whether there was a miscarriage of justice, and whether it constituted an expropriation.
Min’s 100% equity interest in the South Korean company actually corresponds to a landmark building Min owned, located in the central business district of Beijing’s East Second Ring Road, valued at nearly RMB10 billion. The South Korean bank disposed of Min’s property in Beijing in place of the money he owes the bank. The bank can dispose of property in Beijing under the 2007 China-Korea Agreement on the Encouragement and Reciprocal Protection of Investments.
The case involves extremely complex legal issues in a number of jurisdictions, including South Korea, Hong Kong, Barbados and China.
According to Hui Zhong Law Firm, this case is the first arbitration case under an international investment protection treaty – a bilateral investment treaty, or BIT – brought by a Chinese private investor against the South Korean government, and one of the few investment arbitration cases brought by a Chinese investor against a foreign government.
The arbitration began on 3 August 2020, and has not been completed. The progress of the dispute in this case will undoubtedly be instructive as to whether the actions of state-owned enterprises can be attributed to the state in international investment, and how to determine the connotation and extension of the fair and equitable treatment principle, and expropriation.
MK brand trademark infringement dispute
CATEGORY: Trademark infringement
LEGAL COUNSEL: Chang Tsi & Partners represented the defendant.
KEY POINTS: This is a typical case in which a small domestic company, Jianfa Handbag Craft Factory in Chenghai district of Shantou, Guangdong province, sued a multinational company for infringement of trademark rights and demanded huge compensation. The MK logo, as a prominent commercial logo, has been used worldwide for many years, and has established a close relationship with the Michael Kors Switzerland brand.
Jianfa filed an application for registration of the trademark containing the letters “MK” with the trademark office in 1997, and was granted registration in 1999, designating the use of the trademark for goods such as bags, in class 18.
In 2000, Michael Kors (Switzerland) created a trademark based on its brand name and the initials of its main mark “Michael Kors”, and in 2007 created two other trademarks containing the letters “MK”, which were subsequently used on their bags.
On 9 January 2017, Jianfa filed a lawsuit against Michael Kors, its Chinese subsidiary and two other sellers, on the grounds that the series of MK logos used by Michael Kors infringed its exclusive right to register its trademark, and demanding that the infringements stop.
If the use of the MK logo by Michael Kors is recognised as an infringement, it would not only result in huge compensation from Michael Kors, but also have a negative impact on the future business of Michael Kors in China.
Chang Tsi & Partners effectively safeguarded the commercial interests of its client in the first-instance and second-instance trials. From RMB95 million in the first-instance trial to RMB10 million in the second-instance trial, then to the retrial procedure, Chang Tsi & Partners did not compromise, thus maximising the interests of its client. In April 2020, the Supreme People’s Court issued a ruling rejecting the retrial request.
NBA pirated programming case
CATEGORIES: Litigation; sport
LEGAL COUNSEL: Gen Law Firm represented NBA.
KEY POINTS: In the first-instance trial of this case, Beijing No.1 Intermediate People’s Court ruled that the live broadcast of sports events did not constitute a work. But in the second-instance trial, Gen appealed on behalf of the NBA, and compared the similarities in video shooting skills between live sports programmes and movies in detail, showing that technological progress provided creators with more room to play, and that the same technical movements could express different situations through different video shooting skills.
The lawyers also compared the case with similar ones in Germany, Britain and the US, showing that the live broadcast of sporting events is generally protected as a work in the world.
In the judgment of the second instance, Beijing High People’s Court determined that the distinction between works created in a way similar to film making and video recordings is “whether there is originality, rather than high or low originality”. This case also makes it clear that the types of works in the current Copyright Law are not a closed list, which echoes the revision of types of works in the newly revised Copyright Law.
This case is one of the most important cases to promote the live broadcast of sporting events to be recognised as a film-like work in China. It is an important milestone for the Copyright Law to be in line with international standards, and has attracted the attention of the global sports industry and judicial circles.
Netease and Duoyi’s copyright dispute
CATEGORY: Copyright dispute
LEGAL COUNSEL: JunZeJun Law Offices represented Guangzhou Duoyi Network and Xu Bo, and King & Wood Mallesons represented Guangzhou Netease Computer Systems.
KEY POINTS: Netease sued Duoyi for copyright infringement and unfair competition. The case involved Netease’s famous game, Fantasy Westward Journey, and Duoyi’s famous game, Shenwu.
In the first-instance trial, Duoyi lost, and the court ordered Duoyi to compensate Netease for RMB15 million. Duoyi appealed to Guangdong High People’s Court. In the second-instance trial, Netease raised the claim amount to RMB100 million.
JunZeJun successfully applied for the court of second instance to add a third person (Xu Bo, chairman of Duoyi) to participate in the lawsuit. The court finally revoked the original judgment and requested a retrial of the case. In October 2020, Guangzhou Intellectual Property Court made a judgment, revoking several decisions of the original trial and lowering the compensation amount to RMB10 million.
Both parties are appealing to the Supreme People’s Court. This case, called “the first case in the game industry”, is complicated and has been in process since 2016.
New Balance action against copycat trademarks
CATEGORY: Trademark infringement
LEGAL COUNSEL: Wanhuida Intellectual Property represented New Balance.
KEY POINTS: Wanhuida represented New Balance (NB) in the retrial proceeding before the Supreme People’s Court (SPC), seeking to invalidate a copycat’s registered trademarks of the stylised letter “N” in class 25, which simulates its unique “N” logo. The SPC formally accepted NB’s retrial applications in September 2017, and ruled in favour of the client in March 2020, upholding NB’s invalidation request against the copycat trademarks.
New Balance is a major sport footwear manufacturer, known mostly for its high-quality and high-performance sneakers with an iconic “N” logo. In 1983, New Balance registered the trademark “N” in class 25 in China.
The rulings made by the SPC have had significant impact on similar cases where bad faith in actual use of a registered trademark may have retrospective impact on determination of similarities in trademark invalidation procedure.
Norwegian Shipowners’ Association dispute with China shipyard
CATEGORY: Maritime
LEGAL COUNSEL: AllBright Law Offices represented the Chinese shipyard.
KEY POINTS: In 2007, a Chinese shipyard signed three international shipbuilding contracts with Norwegian shipowner A for US$50 million. The performance process was affected by the 2008 global financial crisis, and in 2010, shipowner A assigned its rights and obligations under the contract to Norwegian company B.
Later, the Chinese shipyard and company B signed a contract termination of the agreement, in December 2015, because they could not agree on the performance of the contract. From there, a five-year prolonged dispute arose between the parties over a series of issues related to the termination of the contract.
In 2020, the parties filed an application for arbitration in London, in accordance with the contractual agreement, to apply English law to the dispute resolution.
The Global pandemic made it difficult for the parties involved in the case to travel to and from the UK, Norway and China to apply for arbitration, so the team at AllBright Law Offices managed an agreement with the authorised representative of the Norwegian shipowner on a change of jurisdiction to the Chinese Maritime Court and the application of Chinese law.
The Chinese Maritime Court handled the case both online and offline, and settled the dispute successfully in less than a month, although the details have not been made public. The case is typical for the implementation of national strategies in China’s maritime industry and the Belt and Road Initiative, which aim to transform China into an international maritime judicial centre.
Patent infringement dispute between Qihoo and 2345
CATEGORY: Patent infringement
LEGAL COUNSEL: Lifang & Partners represented Beijing Qihoo Technology and Qizhi Software (Beijing).
KEY POINTS: Beijing Qihoo Technology and Qizhi Software (Beijing) filed six patent infringement lawsuits in Beijing and Wuhan against 2345 for alleged infringement of several of their patents, claiming more than RMB60 million in damages. The alleged infringing products involved include crucial main business income products such as the security guards, game box and browser of the defendant, 2345.
The standard of evidence rules applied by the court in this case, the standard of infringement determination of software patents, and the standard of patentability determination applied by the Patent Re-examination Board in the invalidation procedure, all have a profound impact on the protection and confirmation of intellectual property rights in the internet software industry.
Lifang & Partners says 2345 reached a settlement agreement with the patent owners, Qihoo and Qizhi, prior to the court’s decision. On 4 June 2020, the court issued a ruling granting the patent owners’ dismissal of the case.
Pernod-Ricard sues over counterfeit spirit sales
CATEGORY: Counterfeit
LEGAL COUNSEL: Baker McKenzie FenXun acted as legal counsel for the plaintiff.
KEY POINTS: Baker McKenzie FenXun advised Pernod-Ricard with regard to a criminal case concerning three individuals who sold counterfeit spirits in their jointly owned Yi Nuo Cigar and Liquor Store. Among these counterfeit products, six brands, namely Martell, Chivas Regal, Ballantine, Hennessy, Remy Martin and Johnnie Walker, were affected.
Yi Nuo engaged in selling the counterfeit spirits to local clubs in Fuqing, Fujian province, sourcing a lot of the goods from Lu Xuequi, who was arrested in December 2017. All defendants were convicted of their crimes and each were sentenced to more than five years imprisonment and fined a total of RMB15 million.
Red Bull trademark ownership dispute
CATEGORY: Trademark right dispute
LEGAL COUNSEL: Global Law Office represented TC Pharmaceutical Industries of Thailand. Duan & Duan Law Firm represented Red Bull Vitamin Drink to appeal against TC Pharmaceutical Industries in November 2020.
KEY POINTS: On 21 December 2020, the Supreme People’s Court made a final judgment on the case of trademark ownership of “Red Bull” between Red Bull Vitamin Drink and TC Pharmaceutical Industries, rejecting the request of Red Bull to “revoke the first-instance judgment and judge that Red Bull enjoys legal rights to Red Bull series trademarks”, and made it clear that TC Pharmaceutical Industries was the owner of Red Bull series trademarks.
On 6 January 2021, Red Bull Vitamin Drink issued a statement that it would make a prudent decision on whether to apply for retrial and lodge a protest.
TC Pharmaceutical Industries is the registered owner of the Red Bull trademark and the founder of the Red Bull beverage and brand. This case is a major one in China’s intellectual property arena in terms of the amount involved, the popularity of the trademark involved, and the complexity of the case.
Red sole trademark disputes
CATEGORIES: IP; litigation; fashion industry
LEGAL COUNSEL: King & Wood Mallesons represented Christian Louboutin.
KEY POINTS: In October 2010, the Trademark Office issued a refusal decision, in a dispute between the China National Intellectual Property Administration (CNIPA) and fashion retailer Christian Louboutin, rejecting the latter’s application for territorial extension of protection on the ground that the applied-for mark lacked distinctiveness. In December 2010, Louboutin filed an application for re-examination with the Trademark Review and Adjudication Board (TRAB), claiming that the applied-for mark had acquired distinctiveness through use. After a five-year review, in 2015, the TRAB upheld the Trademark Office’s refusal, finding that “the applied-for mark consists of a commonly used graphic of a high-heeled shoe and a single colour designated for the sole”, which is a graphic mark, designated for use on women’s high-heeled shoes, and not distinctive.
Louboutin then filed an administrative lawsuit, and after the first-instance and second-instance trials, the Beijing High People’s Court finally found, in 2018, that the trademark “red colour used on the sole of the shoe” was a single-colour trademark with a limited location of use, and that a single colour with a limited location of use could be registered and protected as a trademark in China. It also found that a single colour in a restricted location could be registered and protected as a trademark in China.
In addition, the Beijing high court also confirmed that the examination and hearing of applications for the extension of protection of international trademark registrations in China should be subject to international publication of the World Intellectual Property Organisation (WIPO). The CNIPA later applied to the Supreme People’s Court (SPC) for a retrial. After examination, the SPC rejected the application and affirmed the Beijing high court’s view on 24 December 2019.
During the administrative proceedings, King & Wood Mallesons produced the evidence from the perspectives of both the constitutive elements and distinctiveness of the trademark, and successfully persuaded the Beijing High People’s Court and the SPC through sufficient legal arguments and a large number of precedent cases, academic literature, legislative material, international treaties and related interpretations, extraterritorial judicial cases and registration examples.
The decision in this case put an end to the longstanding controversy over the registrability of the trademark “red-soled shoes”. At the same time, the case also clarified the benchmarks for examining the territorial extension of protection of international registrations, which will be of reference for similar cases in the future.
Richland 58 marine insurance contract dispute
CATEGORIES: Maritime; insurance
LEGAL COUNSEL: Hui Zhong Law Firm represented Amlin Corporate Insurance NV (Amlin).
KEY POINTS: In July 2012, Richland 58 was detained after its cargo from China arrived at the port of Thailand, and the ship requested the insurer to provide a security for releasing the ship. Amlin provided shipowner protection and liability insurance for the shipowner of Richland 58 in May 2012.
However, in this case, the captain issued a clean bill of lading at the loading port against the actual situation of the cargo, thus violating the insurance clauses, and there was no insurance accident. Therefore, the insurer clearly informed the insured that its behaviour violated the terms of the insurance contract, and that the cargo damage secured by the consignee’s application for detaining the ship was not covered by the insurance liability, but it was willing to provide assistance to the insured for releasing Richland 58. However, since then, both parties have been unable to reach an agreement on the specific issues of providing the security for releasing the ship. Richland 58 was detained for more than one year, and released after the insured provided security itself.
In 2014, the insured filed a lawsuit in Ningbo Maritime Court, claiming that the agreement excluding the provision of release security in the insurance contract was invalid, and that the insurer had agreed to provide security. The insured claimed compensation for the loss caused by the ship’s being detained on this ground, but did not claim that the insurer should bear the compensation liability for cargo damage caused by the ship being detained.
The court of first instance held that the loss suffered from the ship being detained was an insurance accident under the “liability insurance” in the case, and ordered the insurer to compensate for the related losses. The insurer appealed to Zhejiang High People’s Court. However, the judgment of the latter upheld the judgment of the first instance.
Amlin submitted a retrial application to the Supreme People’s Court. Huizhong carefully studied the facts and legal relations in the case. In the retrial, the plaintiff of the original trial changed its claim in the first and second instances, that the insurer was obliged to provide the release security according to the original contract, and instead claimed that the insurer should reach a separate agreement with the plaintiff on providing release security after the accident occurred. The Supreme People’s Court finally made a judgment on 26 August 2020, revoking the judgments of the first and second instances, and rejecting all the plaintiff’s claims.
As a typical insurance contract dispute, this case has been viewed with concern by Chinese and foreign insurance companies engaged in protection and compensation business. The significance of the above-mentioned judgment of the Supreme People’s Court lies in the agreement between the insurer and the insured, that the insurer is not obliged to provide security for releasing the ship is valid, and whether the negotiation between the insurer and the insured on the release of the ship is regarded as an agreement on providing the security in the absence of the contractual obligations depends on the true meaning of the correspondence between the two parties.
Sembcorp’s environmental damage civil compensation case
CATEGORIES: Commercial compensation; environment
LEGAL COUNSEL: Kangda Law Firm represented Sembcorp Nanjing Suiwu.
KEY POINTS: Nanjing Gulou District People’s Procuratorate accused Sembcorp Nanjing Suiwu of repeatedly receiving high-concentration wastewater from sewage disposal enterprises and illegally discharging it by using concealed pipes, and illegally discharging low-concentration wastewater by using concealed pipes under the circumstances that the high-concentration wastewater treatment system was not running and the SBR sewage pool could not be used normally.
The procuratorate then filed criminal proceedings and an incidental civil lawsuit. After two years, the final effective judgment of the case confirmed that the company concerned should compensate RMB237 million for the cost of ecological environment restoration, and complete an alternative restoration project with a capital investment of no less than RMB233 million for construction, upgrading and reconstruction, environmental governance, energy conservation, emission reduction and ecological environmental protection projects.
This case is not only a criminal proceeding with an incidental civil public interest litigation case on environmental pollution, but also a case co-supervised by the Supreme People’s Procuratorate, the Ministry of Public Security and the former Ministry of Environmental Protection. The significance of this case is it provides an example in terms of attaching great importance to the effective protection of environmental public interests, guiding procuratorial authorities to supplement fixed evidence in time, and recommending public interest litigation prosecutors to increase litigation claims according to new facts.
Sinovac Biotech dispute between board and shareholders
CATEGORY: Biotechnology dispute
LEGAL COUNSEL: Latham & Watkins represented the board of directors of Sinovac Biotech. Dentons Delany acted as local counsel in Antigua.
KEY POINTS: Sinovac Biotech, a leading provider of biopharmaceutical products in China, defended its case against dissident shareholders. In May 2020, the US Securities and Exchange Commission (SEC) charged activist investor Jiaqiang “Chiang” Li and his firm, 1Globe Capital, based on their failure to disclose the full amount of Sinovac shares they beneficially owned, and their participation in an activist plan to replace the majority of Sinovac’s board.
This milestone follows Latham’s successful representation of Sinovac’s board in a high-stakes trial in December 2018 in the Antigua High Court, in which the court upheld Sinovac’s position that 1Globe had a secret plan to take control of the company.
In the recent SEC order, the agency found that Li and 1Globe violated US federal securities laws and SEC rules requiring individuals or entities whose total ownership of a company’s stock exceeds certain thresholds to disclose their ownership, intention to acquire additional shares, and plans regarding changes in company management or control. Li and 1Globe agreed to the entry of the SEC’s order without admitting or denying the SEC’s findings of violations, and agreed to pay civil penalties totalling US$290,000.
The SEC’s findings align with both the factual findings of Sinovac’s board in triggering the company’s rights agreement, and with previous findings by the High Court of Justice of Antigua and Barbuda, where Sinovac and 1Globe are engaged in ongoing litigation.
For example, the High Court of Justice of Antigua and Barbuda previously determined that there was a secret plan in advance of Sinovac’s annual general meeting to take control of the company, thereby depriving the company’s shareholders of the opportunity to make an informed decision when casting their votes.
Likewise, the SEC found that, “Li and 1Globe participated in an activist plan to replace four of five incumbent directors through a shareholder vote at Sinovac’s 2018 annual shareholder meeting in Beijing, but failed to disclose material information that is required in a schedule 13D.” Part of the undisclosed activist plan to take control of Sinovac’s Board was putting one of Li’s relatives on the board.
The SEC also found that the participants in the activist plan were advised to “keep the whole thing strictly confidential from Sinovac”. Apart from not disclosing their participation in the activist plan, the SEC found that Li and 1Globe “failed to disclose their full beneficial ownership of Sinovac stock, inclusive of substantial shares held by related parties”. The SEC found that the disclosure failures deprived “existing and potential shareholders of information necessary to make fully informed investment decisions”.
The SEC decision highlights how Li and 1Globe’s illegal and improper actions negatively impacted Sinovac’s shareholders, and reaffirms factual determinations made by the rightfully elected directors of Sinovac. With the cease-and-desist order in place, Sinovac’s directors and management team will continue to act in the best interests of its investors and facilitate the development of vaccines to solve global health issues, including current fast-track work on a vaccine for covid-19.
Sogou, Baidu patent disputes
CATEGORIES: IP; litigation
LEGAL COUNSEL: King & Wood Mallesons represented the defendants, Baidu Online Network Technology and Baidu Netcom Science & Technology (Baidu), and Zhong Lun Law Firm represented Beijing Sogou Technology Development (Sogou).
KEY POINTS: Since 2014, Sogou and Baidu, starting with unfair competition and based on more than 20 patents, have waged a six-year patent war in the field of input method, with nearly 100 cases and litigation subject matter concerning up to RMB360 million in total.
In December 2017, the Shanghai Intellectual Property Court issued a first-instance judgment for the lawsuit filed by Sogou on 16 November 2015, rejecting all of the plaintiff’s requests. Sogou appealed to the Shanghai High People’s Court. On 30 March 2020, the Shanghai High People’s Court pronounced an online judgment on one of the patent infringement cases, rejected all of Sogou’s appeal requests and upheld the original judgment.
The elaboration of Shanghai High People’s Court on the distribution of burden of proof in computer software patent infringement cases, and balancing the litigation rights of both parties in the litigation procedure, will provide a significant reference for subsequent trials of technology patent cases.
On 23 September, 2020, another patent infringement case in which Zhong Lun represented Sogou went to trial, and is currently awaiting a second-instance verdict. Previously, Zhong Lun represented Sogou in the case and won the first-instance verdict, in July 2019, when the Beijing Intellectual Property Court rejected all of Baidu’s claims.
The disputes date back to 2015. In October and November of that year, Sogou initiated a patent infringement lawsuit to Beijing Intellectual Property Court, Shanghai Intellectual Property Court and Shanghai High People’s Court based on its patents in the field of input method, accusing Baidu’s “Baidu input method” product of infringing its 17 patents, with the total amount of litigation subject matter up to RMB260 million.
In October 2016, Baidu counterclaimed before Beijing Intellectual Property Court, alleging that “Sogou Pinyin Input” and “Sogou Mobile Input” infringed on 10 technical patents of Baidu Input, and demanding RMB100 million from Sogou. As this series of cases has attracted wide attention from the industry and the public, it is known as “the first case of internet patent in China”.
Staples industry anti-dumping investigation
CATEGORY: Anti-dumping;
LEGAL COUNSEL: East & Concord Partners and VVGB Advocaten represented the staples industry in China.
KEY POINTS: The European Commission initiated an anti-dumping investigation concerning staples originating from China in December 2019. On 17 August 2020, the European Commission terminated the investigation without measures.
According to East & Concord, the key stage of responding to the case occurred during the Spring Festival holidays, and the worst period of covid-19. Against all the odds, the lawyers overcame difficulties and worked together with the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) and various companies, actively collecting company data and industry information, and building a strong defence against the complainant’s allegations. In the end, the complainant withdrew the complaint because it could not prove that the imports of the products concerned had caused injury to the EU industry, and the European Commission then terminated the investigation.
This is one of the few cases in EU anti-dumping history to be terminated at the stage of the preliminary determination. The success of the case encourages Chinese companies to respond to foreign trade remedy investigations in the current torrid climate of international trade.
Starbucks files criminal action against counterfeiters
CATEGORY: Trademark infringement
LEGAL COUNSEL: Baker McKenzie FenXun acted as legal counsel for the plaintiff.
KEY POINTS: Starbucks, a leading global coffee retailer, filed criminal action against six criminal suspects for manufacturing and selling counterfeit fake coffee products in Guangdong, Fujian and Jiangsu provinces.
In 2019, the Public Security Bureau (PSB) in Wuxi City, Jiangsu province conducted raid actions against a factory, three warehouses and the target’s residence in Guangzhou, and two warehouses in Xiamen, in January 2019.
The PSB seized a large amount of counterfeit Starbucks products, packaging materials and manufacturing tools. The value of the seized finished counterfeit Starbucks VIA coffee products amounted to RMB1.16 million, and the illegal turnover of the principal criminals amounted to RMB7.24 million. Three criminal suspects were arrested in the raids and the other criminal suspects were arrested in supplemental raids.
The court judgment was issued in December 2019. The three principal criminals were sentenced to four-and-a-half years imprisonment. The other criminals were also sentenced to a fixed-term imprisonment with probation, and all six defendants received fines totalling more than RMB10 million.
Tencent sues 4 over copyright, unfair competition
CATEGORIES: Copyright dispute; unfair competition
LEGAL COUNSEL: Fairsky Law Office represented Shenzhen Tencent Computer System (Tencent). Dentons Law Offices represented Zhina Network Technology (Zhina). Wang Jing & GH Law Firm represented Zhejiang Shangshi Network Technology (Shangshi).
KEY POINTS: In December 2017, Tencent sued Zhina, Shangshi, Shanghai Kingnet Technology and Changsha Qili Network Technology in Changsha Intermediate People’s Court, claiming that the game “Rage of Arad”, operated by the four defendants, infringed the copyright of the plaintiff’s game, “Dungeon and Fighters”, and constituted unfair competition. In May 2019, the court made a first-instance judgment, fully supporting the plaintiff’s claim and awarding RMB50 million, the maximum compensation allowable in China’s online game infringement cases.
In September 2020, Hunan High People’s Court made a second-instance judgment, changing the damages and reasonable expenses to RMB30 million.
This case’s first decision was reportedly not only the highest amount for a judgment in 2019, but also the highest amount of compensation in infringement litigation in the domestic gaming industry to date. After the judgment was changed in the second instance, the compensation amount in the case is now equal to the Tai Chi Panda v Hua Qian Gu game copyright infringement, and still the highest amount of compensation among domestic online game infringement litigations.
Tonkolili’s dispute over marine cargo contract
CATEGORY: Maritime dispute
LEGAL COUNSEL: Wincon Law Firm served as legal counsel to Tonkolili Iron Mine, African Railway and Port Services
KEY POINTS: Iron ore mined in Sierra Leone could not be loaded directly onto large ocean-going vessels due to port conditions, but was instead loaded onto transshipment vessels with shallow drafts, which were then transported to the larger ocean-going vessels moored at the anchorage for shipment.
In 2015, Tonkolili Iron Ore, African Railways and Port Services entered into a co-operation agreement and a cargo transshipment contract with the three defendants for iron ore transshipment services. In order to ensure the efficiency of iron ore transshipment, the contract agreed on the transshipment capacity of the vessels and the related liability for breach of contract.
After the commencement of the co-operation between the parties, the transshipment efficiency of the vessels was far below the contractual agreement for various reasons, and after repeatedly replacing and modifying the vessels and improving the process, still fell far short of the contractual requirements. By the end of 2017, the defendant ceased to operate all transshipment vessels, which, coupled with the long-term lack of transshipment capacity of the previous transshipment vessels, caused huge losses for the plaintiff.
According to Wincon, the total subject matter of the case was about RMB454 million. The facts of the case were extremely complicated and all occurred offshore, spanning a period of about three years and involving the performance of transshipment contracts for more than 70 ocean-going vessels.
Unique case over shareholder marriage disclosure
CATEGORY: Civil litigation
LEGAL COUNSEL: Zhong Lun Law Firm represented Dai Lin and Liu Liang.
KEY POINTS: In April 2017, the Shanghai Supervisory Bureau of the China Securities Regulatory Commission imposed administrative penalties on Dai Lin and Liu Liang, the second and third-largest shareholders of Shanghai Youjiu Games, for failing to comply with their information disclosure obligations in a timely manner, after they registered their marriage to form a concerted party relationship.
This information disclosure violation is the first case in which the failure to disclose the registration of a shareholder’s marriage constituted an information disclosure violation, and was then administratively punished. It attracted wide attention from the media and the capital market. After the penalty decision was made, a large number of investors filed civil claims for compensation for securities misrepresentation against Dai Lin and Liu Liang, demanding that the couple bear civil liability for compensation, with a cumulative claim amount of about RMB46.9 million.
Zhong Lun represented Dai Lin and Liu Liang in the lawsuit and fully expressed their views on the relationship between administrative and civil liability, transaction causation and loss causation involved in the case, and eventually succeeded in persuading the court to rule that Dai Lin and Liu Liang were not liable for the investors’ investment losses.
This case was the first case in which a court in China decided to clearly distinguish between the materiality element and the reliance element, after the Minutes of the National Working Conference on the Trial of Civil and Commercial Cases by Courts (Minutes) came into effect.
On the basis that the minutes make it clear that the misrepresentation which has been administratively punished should be considered a violation with materiality, the court further clarified that administrative liability for misrepresentation is different from civil liability, that the act of being administratively punished does not necessarily constitute civil tort, and that whether the act of securities misrepresentation constitutes civil tort should still be reviewed in accordance with the Judicial Interpretation of Misrepresentation, and in conjunction with the elements of tort liability.
US anti-dumping investigation on China fabricated steel
CATEGORY: Anti-dumping investigation
LEGAL COUNSEL: Hiways Law Firm and Jincheng Tongda & Neal advised three Chinese fabricated structural steel producers. Dentons represented scaffolding exporters to achieve product exclusion in the anti-dumping investigation.
KEY POINTS: From February 2019 to February 2020, the US launched simultaneous anti-dumping and countervailing investigations into prefabricated structural steel in China, Mexico and Canada, with China having the highest amount involved, at US$841.7 million. On 25 February 2020, the US International Trade Commission voted 3-2 to find that imports of steel from China, Canada and Mexico did not cause the US domestic industry substantial harm or threat. The US will terminate the investigation, and will not impose anti-dumping and countervailing duties measures on steel components from China.
Hiways and Jincheng Tongda & Neal responded to the US Department of Commerce and the US International Trade Commission’s investigation into the imposition of anti-dumping and countervailing duties on Chinese steel products, and won in the industry injury defence.
Jincheng Tongda & Neal says it was not easy for the Chinese side to achieve victory against the backdrop of strong interference from the applicant, and the US-China trade war. The successful outcome of this case not only protects the interests of the entire steel components industry, but also enhances the confidence of Chinese enterprises to actively respond to international trade remedy investigations.
Hiways says the victory was the result of Chinese enterprises making full use of the US laws and mechanisms, reasonably adopting the strategy of responding to the lawsuit, and defending professionally. It is also a classic case of Chinese structural steel enterprises joining hands with relevant foreign interest teams to overcome trade protectionism.
Dentons represented seven scaffolding exporters in their joint defence, helping them to obtain separate tariff rates, and to exclude scaffolding products from the scope of the investigation.
Wang Jing sues WeRide
CATEGORY: Dispute with shareholders
LEGAL COUNSEL: Harneys was Cayman Islands counsel to Wang Jing and Guo Rongrong, the shareholders of WeRide Inc. Travers Thorp Alberga acted for WeRide as Cayman Islands legal counsel. Carey Olsen represented the majority shareholders of WeRide Inc. against a winding-up petition.
KEY POINTS: This was a multi-faceted, high-value dispute between the shareholders of WeRide Inc, a Cayman incorporated entity, and the holding company of a group of companies (the WeRide Group) set up to develop self-driving cars for the Chinese market.
The dispute centred on: The circumstances in which Wang and Guo’s substantial shareholdings in WeRide Inc were diluted; the removal of Wang, a tech industry leader in China, from his position as CEO of WeRide Inc; and the issuance of a limited number of shares to senior management, granting special voting powers to them at the expense of other shareholders.
Proceedings in the Cayman Islands commenced with an application by Wang and Guo for Norwich Pharmacal Order (NPO) relief against WeRide Inc and its registered office provider, Maricorp Services (NPO is an order for disclosure against a third party who has been identified as holding information that will enable an applicant to plead a case, trace assets or to bring proprietary claims). These proceedings were discontinued by consent order dated 30 December 2019.
On 15 January 2020, Wang and Guo issued a petition seeking the winding up of WeRide Inc on just and equitable grounds, on the following bases: The business of WeRide had been conducted in breach of Wang and Guo’s legitimate expectations; and the company’s affairs had been conducted in a manner which was oppressive to minority shareholders of the company due, in particular, to the dilution of Wang and Guo’s shareholdings and the issue of special shares that effectively stripped their shares of any meaningful voting rights.
The winding-up proceedings were settled on confidential terms in May 2020. Harneys says the myriad of applications before the Californian and PRC courts concerning trade secrets and defamation made this a highly complex piece of cross-border litigation.
Yuanquan, Huajian and Guosen Securities’ fund contract dispute
CATEGORIES: Contract dispute; funds
LEGAL COUNSEL: Landing Law Offices and Dentons Law Offices represented Yuanquan.
KEY POINTS: On 1 December 2015, Yuanquan, Huajian and Guosen Securities signed a fund contract stipulating that Yuanquan shall subscribe 15 million shares of the fund in the case, and the fund shall invest in Hanzhong infrastructure construction project undertaken by the 13th Engineering Bureau of China City Construction Group (CCCC) in the form of an entrusted loan.
It was agreed that at the maturity of the loan, the 13th bureau of CCCC would return the entrusted loan, and the investment scope of the fund could be changed in writing upon mutual agreement among the parties to the fund contract.
During the performance of the fund contract, Huajian changed the investment policy of the fund without the consent of Yuanquan, and changed the borrower of the fund from the 13th bureau of CCCC to Hanzhong Cultural Tourism Investment Group. Guosen Securities, as the custodian, performed the transfer operation at the investment instruction of the manager.
Later, when the actual borrower, Hanzhong Cultural Tourism Investment Group, failed to repay all the loans as agreed, Huajian did not distribute the fund property according to the priority stipulated in the fund contract, and Guosen Securities still provided co-operation.
On 11 February 2020, after comprehensively examining the facts of the case, the arbitral tribunal found that Huajian failed to carry out investment operations as agreed in the fund contract, failed to disclose the change of investment target to Yuanquan, and the compensation announcement was legal and effective. Thus, Huajian should be liable for compensation to Yuanquan.
The arbitral tribunal found that Guosen Securities failed to carefully review the transfer instructions, failed to effectively supervise the investment operation of Huajian, and failed to properly perform the custodian’s supervision obligations provided in law and the contract. Therefore, it should bear the liability for breach of contract, and both Huajian and Guosen Securities should bear joint and several liability to Yuanquan.
Landing says that in recent years, the number of “explosions” in private funds has increased dramatically, and disputes over rights protection of fund investors are the most prominent dispute type to be resolved in the financial field in recent years. This case has an important impact on redefining the responsibilities of fund custodians, and properly balancing the interests of investors, managers and custodians.
BRI joint project rejuvenates overland exports
CATEGORY: Cross-border transport; exports
LEGAL COUNSEL: AllBright Law Offices acted as lead counsel to the project.
KEY POINTS: Xi’an International Land Port Investment Development Group has signed an agreement with Volvo Cars in August 2020 to export its cars using the freight train link.
Volvo Cars is a luxury car brand with exports to US and European market at a rate of almost 40%. Xi’an Land Port Group is a state-owned enterprise mainly focusing on international logistics, portside trade, port construction and operation.
The project involves more than 10 Asian and European countries along the China-European freight train route, including Kazakhstan, Russia, Belarus, Poland, Germany and Belgium, and has helped Volvo achieve a shift in transport from sea freight to the China-European freight train with higher efficiency.
This deal is a win-win international project under Belt and Road Initiative, which contributes to trade development between China and European countries.
Consortium invests in Turkey road projects
CATEGORIES: Overseas acquisition; construction and infrastructure
LEGAL COUNSEL: Global Law Office and Clifford Chance represented the Chinese consortium. Grandall Law Firm acted as the PRC legal counsel to Jiangsu Expressway. Baker McKenzie and Esin Attorney Partnership advised Turkey company ICA.
KEY POINTS: In December 2019, a six-party consortium – China Merchants Highway, China Merchants United Development, Zhejiang Hu-Hang-Ningbo, Jiangsu Ning-Hu Expressway, Sichuan Cheng-Yu Expressway and Anhui Wan-Tong Expressway – signed a joint acquisition of a 51% equity interest and shareholder loans in the Third Bridge and North Ring Expressway in Istanbul, Turkey, plus their operating and maintenance companies. The total amount of the project is about US$688 million, and the delivery was completed in March 2020.
The Bosphorus Third Bridge over the sea, and the Northern Ring Road Motorway, are important transport links in Turkey, being the only freight connection between Europe and Asia. This project is the largest infrastructure M&A transaction in Turkey to date, the largest cross-border investment project by China in Turkey, and the first overseas highway M&A project by China.
According to Global Law Office, the project is a complex transaction. Five of the six-party consortium are listed companies, including three A+H-listed companies. The transaction involves a series of legal issues such as internal approvals, government filings, connected transactions, information disclosures, investment paths and transaction structure designs, commercial terms arrangements, etc., for each of the six-party consortium.
CRRC Zhuzhou Locomotive acquires overseas enterprise
CATEGORIES: M&A; transport
LEGAL COUNSEL: Grandall Law Firm acted as legal counsel to CRRC Zhuzhou. Freshfields advised Vossloh Group.
KEY POINTS: On 29 May 2020, the acquisition of the locomotive business segment of Vossloh Group by China Railway Zhuzhou Electric Locomotive was successfully delivered in Düsseldorf, Germany. This acquisition is the first successful acquisition of an overseas rail transport equipment complete-vehicle enterprise by a Chinese enterprise, and is a milestone event for Chinese enterprises to enter the European rail transportation equipment manufacturing market.
As the lead legal adviser to the buyer, Grandall provided legal services for the entire transaction, including: overall co-ordination with overseas law firms in Germany, France and Sweden; completing legal due diligence and anti-monopoly and compliance investigations; designing the legal structure of the transaction; drafting negotiating and amending the transaction documents; obtaining domestic and overseas approvals; drafting, negotiating and amending the closing documents; and assisting in completing the closing actions.
During the whole process of risk analysis and management, the lead counsel’s comprehensive co-ordination and risk control capabilities in complex cross-border transactions were fully demonstrated.
Financing of wind power project in Kazakhstan
CATEGORIES: Project financing; energy
LEGAL COUNSEL: Sunshine Law Firm acted as legal counsel to China Power International Development. GRATA International was the Kazakhstan legal counsel.
KEY POINTS: In October 2020, China Power International Development, a subsidiary of State Power Investment Corporation, , and a syndicate of banks – including the Asian Infrastructure Investment Bank (AIIB), the European Bank for Reconstruction and Development, and the Industrial and Commercial Bank of China – formally signed a financing agreement for a 100MW wind power project in Zanatas, Kazakhstan. The signing, led by the ADB-AIIB syndicate, provides financing of about US$100 million, and marks the formal implementation of financing for the project.
This is the first renewable energy project put into operation from the list of China-Kazakhstan capacity co-operation, and will be the largest wind power project put into operation in Kazakhstan. The project, located in the Zanatas region of Jambul province in southern Kazakhstan, was put into operation in July 2019, and achieved wind power connection to grid power on 30 September 2020.
Ghana infrastructure boosted by Belt and Road
CATEGORIES: Financing; infrastructure
LEGAL COUNSEL: Tian Yuan Law Firm acted as legal counsel to Power Construction Corporation of China.
KEY POINTS: The project is a major infrastructure project for Africa under the Belt and Road Initiative, with a total planned investment of about US$2 billion for rural and urban roads, schools and municipal facilities. The commercial contract for part of the urban roads, and the master projects support agreement for the repayment of the financial budget of the Government of Ghana, were signed by the leaders of the two countries during the Beijing Summit of the Forum on China-Africa Co-operation in early September 2018.
It is expected that the road and bridge work that have commenced will be fully completed by 2021, and that Ghana will have a fully functioning road network by then. Ghana, the host country of the project, is trapped in public debt constraints imposed by the International Monetary Fund and has taken the innovative step of using its state-owned bauxite sales revenue as the main source of repayment, and setting up an escrow account for the bauxite sales revenue as a credit enhancement measure, as the government is not in a position to provide sovereign guarantees and is not in a position to raise debt directly from the fiscal budget.
The project was financed by the main contractor, CEC International Engineering, with a 15-year deferred payment term for the Ghanaian government, refinancing in the form of factoring of accounts receivable by China Construction Bank’s Beijing Branch, and medium to long-term seller’s credit insurance by China Export and Credit Insurance Corporation.
The financial model was innovatively changed from a discounted assignment of receivables claims to a buy-lending model of interest payment without principal repayment during the construction period, in accordance with the preference of the Ghanaian government, which maximally bridged the risk control requirements of domestic financial institutions, the funding arrangements for project construction, and the repayment budget arrangements of the Ghanaian government’s Ministry of Finance.
Gwadar International Airport project in Pakistan
CATEGORIES: Infrastructure; aviation
LEGAL COUNSEL: Anli Partners acted for China Civil Aviation Airport Construction Group.
KEY POINTS: This project is the largest aid project by China, and involves the jurisdiction of Pakistan. The project includes the construction of a new airport flight area and terminal area, equipped with necessary production support rooms and public facilities and necessary air traffic control works, as well as the construction of corresponding hospitals, schools and family areas.
Upon completion, the new Gwadar International Airport will become a modern landmark in the Gwadar region, and will be of strategic importance to the development of Gwadar. As a landmark project in the China-Pakistan Economic Corridor, the airport will be of great significance to the successful implementation of China-Pakistan Economic Corridor and the construction of the Belt and Road Initiative in South Asia.
The management project was awarded by the Ministry of Commerce, and the management project contractor was a consortium of China Civil Aviation Airport Construction Group and Beijing China Enterprise Construction and Development Supervision and Consulting.
Kazakhstan Boguty Tungsten mine’s equity
and debt financing project
CATEGORIES: Debt finance; mining
LEGAL COUNSEL: Global Law Office served as lead counsel to the project. GRATA International was Kazakhstan legal counsel.
KEY POINTS: Jiaxin International Resources Investment, which is jointly operated by Jiangxi Copper Investment Company and Ever Trillion International (Hengzhao International), recently signed contracts with CRCC International Investment Group and CCECC, both subsidiaries of China Railway Construction Corporation, a Chinese central SOE, as strategic investors for the equity financing of a tungsten mine project co-operation development in Kazakhstan.
Jiaxin International Resources Investment entered into financing contracts with China Commerce Bank for the project financing of the RMB1.5 billion construction of the project, and insurance from Sinosure to cover political risks.
According to Global Law Office, this matter involved large overseas mineral resources and sizable outbound investment, which needed comprehensive legal services across borders and practice areas.
Red Sea tourism mega project in Saudi Arabia
CATEGORY: Tourism
LEGAL COUNSEL: Pinsent Masons advised CGGC International.
KEY POINTS: This Red Sea project is a land and property development by the Saudi government expected to increase Saudi’s GDP by US$5.86 billion per year, and it will cover 11,000 square metres of islands, beaches, desert, mountains and volcanic areas.
The project to be developed by CGGC sets market precedents for future projects. Once completed, the Red Sea locations will be the first tourist area in the region to be powered entirely by renewable energy. A project of such scale, and being entirely powered by renewable resources, is unique, and plays an important role in China’s Belt and Road Initiative. All utilities of the project will be delivered in one agreement, which is also an unprecedented contractual approach.
Pinsent Masons says that, given the significance and the complexity of the project, and with many cross-border parties involved, the deal structure is highly complicated, and so the law firm has formed a cross-border team from Beijing, Shanghai and Dubai offices.
Shanghai Power invests in Turkey thermal power plant
CATEGORIES: Financing; joint venture; energy
LEGAL COUNSEL: King & Wood Mallesons’ PRC and Australian teams acted as PRC and English counsel to Shanghai Power and the borrower. Sunshine Law Firm acted as legal counsel to EMBA Power Generation and Mirze Rencber was the Turkish legal counsel to the project.
KEY POINTS: In April 2019, a financing loan agreement for the 2×660MW supercritical coal-fired power plant project in Hunutlu, Turkey, was signed. The power plant project is being developed and operated by the newly setup EMBA Power Generation Turkey, with Shanghai Power as the main investor in this project.
This deal is the largest direct investment project by China in Turkey, with a total investment of about US$1.7 billion, and is a key project combining China’s Belt and Road Initiative and Turkey’s “Middle Corridor” plan. According to Sunshine Law Firm, the project will use advanced power generation technology and will have better emissions than EU standards, with strict protection of local history and natural beauty.
Yunnan Investment Group invests in Cambodia
CATEGORIES: Infrastructure; aviation
LEGAL COUNSEL: Dentons acted for China Export and Credit Insurance Corporation.
KEY POINTS: The Siem Reap Airport build-operate-transfer (BOT) project is located in Siem Reap province, Cambodia, with an estimated total investment of US$726 million.
Project investors Yunnan Investment Holding Group, Yunnan Overseas Investment, and Yunnan Airport Group signed a BOT agreement with the Cambodian government for a total of 50 years for the construction and operation of the project, with the overall project being handed over to the Cambodian government at the end of the operation period.
During the operation period, the investor has full rights to operate and use the airport, and to charge for various facilities and services. The investor is insured by China Export and Credit Insurance Corporation.
