We salute the exciting transactions of the past year as China reopens and the Year of the Rabbit begins
In what has been another challenging year, the legal market has shown great resolve and imagination. At home and abroad, a wealth of representative deals have demonstrated lawyers’ wisdom and work ethic. Some deals have turned the tide, some have saved the day, and some have offered hope for the coming year.
Backed by our independent observation and continued coverage of China’s legal market, we have selected the deals that stood out as our Deals of the Year 2022 from a massive submission database of Chinese and international law firms, taking into account factors that included overall significance, complexity, innovative nature and deal size. Qualified deals must have been closed or have made significant progress between 1 November 2021 and 31 October 2022.
Despite a slowdown in global financing activity, the winning capital markets deals reflect several important trends in which various commercial entities are actively looking for ways forward. Investors’ expectations for new energy and environmental and social governance (ESG) remain high, with both companies in related sectors and green financing being highly sought out.
Due to regulatory uncertainty in overseas listings, and with deepening IPO registration system reform in the A-share market, Chinese companies have looked inward to raise capital in domestic markets as Shanghai and Shenzhen topped global rankings of funds raised in IPOs in 2022.
Some companies, eyeing European capital, took the opportunity to go public in Switzerland; and to address mounting regulatory concerns, issuers are increasingly hiring additional special legal advisers on data and compliance matters for IPOs in Hong Kong and elsewhere.
Among the winning domestic deals, bankruptcy restructurings such as Tsinghua Unigroup and Nanjing Construction Group demonstrated the growing maturity of the country’s bankruptcy system in the context of industrial upgrade and transformation, raising expectations for a more vibrant economy with improved market exit mechanisms.
For cross-border transactions, we selected a number of deals related to real estate companies as demonstrative of how businesses could consider debt restructuring to buy valuable time during the most challenging situations.
From our selected disputes and investigations, we hope to show that: The amount of compensation awarded in Chinese intellectual property cases has increased significantly, which allows both homegrown and foreign companies to have a much greater incentive to defend their rights; Chinese companies going abroad now have a stronger awareness and ability to respond to trade remedy investigations internationally; after the Supreme People’s Court issued its updated judicial interpretation of misrepresentation, capital market intermediaries have become more responsible gatekeepers, and investors were also able to effectively defend their rights through court proceedings with clearer judgments and rules.
The winning deals and cases are presented to you in four sections: Capital market deals; Domestic deals; Cross-border deals; and Disputes and investigations. In each section, the deals or cases are listed in alphabetical order, to avoid presumptions of ranking.
- Anhui Transportation REIT raises USD1.6bn
- Aquila SPAC debuts in Hong Kong
- Asia Innovation’s SPAC listing on NYSE
- BeiGene’s USD3.2bn IPO on Star Market
- Burning Rock Biotech’s UK direct listing
- CALB’s USD1.3bn Hong Kong listing
- CATL raises USD6.7bn in private placement
- CCB’s green bond under China-EU initiative
- China Mobile Communications’ A-share listing
- CICC’s carbon futures ETF in Hong Kong
- CNOOC’s USD4.4bn A-share listing
- CTG Duty Free’s USD2bn Hong Kong IPO
- ECARX SPAC listing on Nasdaq
- First A-listed companies make Swiss GDR offering
- Fubon’s three ETFs under new OFC
- Guojin CRCC REIT raises USD687m
- Huaxia CCCC REIT’s USD1.3bn listing
- Huaxin Cement converts B shares to H shares
- Hygon’s USD1.5bn SSE listing
- Intesa increases stake in Bank of Qingdao
- Jinko Solar’s USD1.4bn Star Market IPO
- KE Holdings’ Hong Kong dual-primary listing
- Leapmotor’s USD800m HK listing
- Li Auto’s USD2bn follow-on offering
- Li Ning’s USD1.3bn top-up placing
- LianBio offers shares on Nasdaq
- MingYang Smart Energy offers GDR in UK
- NaaS merges with RISE, lists on Nasdaq
- New Frontier Health privatisation
- NIO’s listing by introduction in HK, Singapore
- Penghua Shenzhen Energy REIT’s SZSE listing
- Prenetics merges with SPAC, lists in US
- Range Intelligent’s backdoor listing on SZSE
- SenseTime’s USD740m Hong Kong listing
- Shanghai Pharmaceuticals’ USD2bn private placement
- Silicon Motion Technology’s take-private offer
- Tianqi Lithium raises USD1.7bn in Hong Kong
- Tims China lists via SPAC on Nasdaq
- United Imaging Healthcare’s USD1.6bn listing
- Yili’s USD1.7bn private placement
- Zhongtai Group issues FTZ offshore bonds
- ByteDance’s USD1.5bn acquisition of Amcare Healthcare
- CCB sets up first housing rental fund
- CCB’s perpetual bond issue mechanism
- CDB’s USD53.3bn infrastructure fund
- CGN Wind Energy raises USD4.4bn
- China Avionics merges with AVIC
- China Huarong’s USD6.3bn recapitalisation
- China Life’s debt investment plan
- China Yangtze Power’s asset restructuring
- China’s first state-owned IP securitisation product
- CPID buys USD1.1bn in clean energy assets
- Fangyuan and 19 others restructure
- Far East Horizon pioneers sustainable panda bond
- GAC Aion’s series A financing
- GD acquires Chint New Energy projects
- Genertec acquires Baoshihua Medical Group
- Great Wall Wealth debt investment scheme
- Huadian Fuxin completes capital increase
- JD Property’s mandatory acquisition of China Logistics
- Jiangsu Chengxing Phosph-Chemicals’ reconciliation
- Jinshan Binhai tourism resort established
- Linklogis’ innovative securitisation on Tongbao
- M&A of Longyuan Power and Pingzhuang Energy
- Massive Jiangxi project to improve major rivers
- National pipeline group acquires subsidiary equity
- NCG substantive consolidation
- Puyang Lubao acquires energy stake
- Restructure of N-Securities
- SG Automotive spurs minority holders to action
- Shanghai Airport undergoes restructuring
- Shanghai Airport, Eastern Air Logistics JV
- Shenyang Dairy’s restructuring
- Shudao Group companies reorganisation
- Trust bank product a first
- Tsinghua Unigroup’s restructuring
- XCMG’s massive machinery merger with Xuzhou
- Zhuzhou Huachen’s restructuring
- Abogen Biosciences series C, C+ financing
- Allianz’s debt investment for Tianhe Airport expressway
- AMD’s USD35bn acquisition of Xilinx
- Atucha III nuclear power plant project in Argentina
- AVIC Composite JV with Evonik subsidiaries
- Bosai invests in Malaysia circular economy project
- BPEA’s sale of HCP Packaging to Carlyle
- Cell C’s restructuring and recapitalisation
- Chinachem and ESR cold storage JV
- CMOC’s financing in Brazil mine
- Coca-Cola’s subsidiary disposal in mainland China
- CSGI secures landmark Chile power project
- Energy China EPC of wind power in Uzbekistan
- EQT’s USD7.5bn merger with BPEA
- ESR purchase of logistics assets from DLJ
- Evergrande’s restructuring of massive offshore debt
- Ganfeng Lithium’s acquisition of Lithea
- Great River acquisition, take private of Dragon Crown
- Green loan for Everbright Financial Leasing
- Hong Kong Airlines’ debt restructuring
- Huayou Cobalt’s Zimbabwe lithium acquisition
- IDEG launch of digital asset funds
- INEOS-Sinopec asset transactions and JV
- J&T Express USD1bn acquisition of Best
- JD Logistics acquires Deppon for USD1.4bn
- JD Property’s USD800m series B financing
- Link REIT’s big sustainability-linked loan
- Luckin Coffee debt restructuring
- M&G’s design application through Hague system
- Mengniu incentive scheme for onshore employees
- Modern Land restructuring of offshore notes
- Omnix OFC first to re-domicile in HK
- PDSTI investment in Icon Aircraft
- Pioneering roles in Saudi EV project
- R&F’s restructuring of 10 offshore bonds
- Redco’s tender offer and consent solicitations
- RiseSun’s scheme of arrangement in BVI
- Royalty-backed financing of Yisheng Biopharma
- Samson Paper’s cross-border restructuring
- Shanghai Port debuts LNG services
- Shimao secures USD1.5bn loan from UOB
- Tsingshan’s restructure after LME nickel crisis
- Unifrax acquisition of shares in Luyang
- USD9.1bn loan to Amur GCC in Russia
- Wallaby Medical’s acquisition of Phenox, Femtos
- Wanda’s transfer Legendary stake to Apollo
- Wise Road’s acquisition of ASE Technology
- AstraZeneca, Aosaikang patent infringement dispute
- AVA, Wittco cargo delivery dispute
- Baiyue Media, Zhongcheng dispute over film release
- Blahnik wins long copycat TM battle
- Covid swab patent litigation before US ITC
- Cross Fire sues Crisis Action for copyright infringement
- Cross-professional collaboration on Dyson crackdown
- Dismissal of class action against RLX
- Dragan Kokotovic, Shanghai Enwo labour dispute
- First criminal conviction for counterfeit service trademarks
- FocalTech, Sunvolve patent application dispute
- Fuguiniao bonds’ misrepresentation of liability
- GAMECO, Orient Thai Airlines lien dispute
- GE enforces HKIAC award in mainland China
- Golden Arches environmental public interest litigation
- Goodix sues WaveTouch over malicious IP suits
- Guangzhou rural bank, Sichuan Trust dispute
- Hitachi, Evergrande commercial acceptance bill disputes
- Iflytek, Xuanting Entertainment copyright dispute
- iQIYI, Youku, Tencent sue video platforms for copyright
- Jiayan, Bytedance right to communication to the public dispute
- Jiushengcheng, Shengbaili unfair competition dispute
- Joyland, ZJU Jiuzhi investment contract dispute
- Kingtom Aluminio response to US EAPA action
- Migu, Emumo unfair competition dispute
- ‘Milan’ acquires secondary TM meaning
- Qihoo 360 privatisation-related Cayman proceedings
- Raumplus trademark infringement
- Reignwood, Shanghai Shipyard contract dispute
- Shaanxi Aerospace shakes off civil litigation
- Shanda Yuanfeng enforces Chinese judgment in US
- Sina privatisation-related Cayman proceedings
- Solar companies quash Indian anti-dumping probe
- Spin Master’s invention patent infringement
- Stahlwerk OEM trademark infringement
- Star48, Huang Tingting talent agency contract dispute
- Sunnsy Group corporate control dispute
- Tencent sues Lizhi over copyright infringement
- Transtrue Technology’s corporate control dispute
- Tsingtao Brewery stocks ownership dispute
- Uqee, Perfect World trademark dispute
- Vanke, Jinhui, Qiu contract dispute
- WeMade sues 37 Interactive for copyright infringement
- Xiashun’s foil gets lowest EU tax rate
- Zhangzidao Group liability dispute
- Zhongchuang Environmental corporate control dispute
Anhui Transportation REIT raises USD1.6bn
CATEGORIES: Fund establishment; infrastructure REIT
LEGAL COUNSEL: Llinks Law Offices acted as the fund manager’s counsel while Jingtian & Gongcheng acted as the infrastructure project’s counsel.
KEY POINTS: The CICC Anhui Transportation Holding REIT, with Anhui Transportation Holding as the original equity owner, was listed on the Shanghai Stock Exchange (SSE), raising RMB10.9 billion (USD1.6 billion). The deal was the largest Chinese REIT in the past two years.
The core asset of the product is a part of the Anhui section of the G50 Shanghai-Chongqing National Highway, which has been open for more than 10 years and tends to have a stable traffic flow. The trait meets the requirement of low-yield risk for the underlying assets of public REITs.
The successful closing of the deal effectively revitalised the existing assets, secured sufficient investment and construction funds for the motorway and further enhanced the capital operation capability.
Aquila SPAC debuts in Hong Kong
CATEGORIES: SPAC; Hong Kong listing
LEGAL COUNSEL: Freshfields advised the issuer on Hong Kong and US law, while Maples Group advised on Cayman Islands law. Linklaters acted as Hong Kong and US counsel to the joint sponsors and underwriters.
KEY POINTS: Blank cheque company Aquila Acquisition raised HKD1 billion (USD128 million) on the Hong Kong IPO, becoming the first SPAC listing in the city after the HKEX launched such a regime. CMB International and Morgan Stanley acted as joint sponsors for this transaction.
Aquila Acquisition’s prospectus said that it planned to focus on Asian technology-enabled companies, especially China’s “new economy” industries such as green energy and life sciences, as well as advanced technology and manufacturing industries.
The introduction in Hong Kong of SPACs, on 1 January 2022, came at a time when they were gaining traction in the US, and the HKEX hoped this momentum could carry into Hong Kong as the new financial regime took effect.
Asia Innovation’s SPAC listing on NYSE
CATEGORIES: US listing; SPAC; internet
LEGAL COUNSEL: JunHe and Kirkland & Ellis advised Asia Innovations Group, while Maples Group advised the special purpose acquisition company (SPAC). White & Case acted as Cayman Islands counsel to both.
KEY POINTS: Asia Innovations Group was listed on the New York bourse after a merger with SPAC Magnum Opus Acquisition, a deal representing an equity valuation of USD2.5 billion and indicated as the largest consumer-internet SPAC merger in 2022. The transaction came amid a SPAC IPO downturn in the US, with the country’s watchdog increasing scrutiny.
BeiGene’s USD3.2bn IPO on Star Market
CATEGORIES: Star Market; biotechnology
LEGAL COUNSEL: Fangda Partners acted as the issuer’s counsel. JunHe advised underwriters on domestic law while Davis Polk advised on international law. Walkers acted as Cayman Islands counsel to an institutional investor.
KEY POINTS: Biotechnology company BeiGene raised RMB22.2 billion (USD3.3 billion) on the listing on the Star Market, billing the largest pharmaceutical IPO in the world and on the Star Market. The company became a listed trio in the US, Hong Kong and Mainland China.
As a result of six rounds of financing, BeiGene has a fragmented shareholding with no controlling shareholder or effective controller. The prospectus indicated that no single shareholder of the company could control or have a decisive influence on the resolutions of the general meeting.
Burning Rock Biotech’s UK direct listing
CATEGORIES: London listing; biotechnology
LEGAL COUNSEL: Cleary Gottlieb acted as the issuer’s counsel.
KEY POINTS: Burning Rock Biotech’s American depositary shares (ADS) were allowed to trade on the London Stock Exchange (LSE) and be listed by way of direct listing without IPO. This transaction was the first of its kind on the LSE that listed ADS that continued to be listed and traded on the Nasdaq, with those ADS being fully fungible with the ADS listed on the LSE. Custodial and depositary links were established between two European International central securities depositories and the US Depository Trust Company to facilitate the cross-market transfers of the ADS associated with secondary market trading.
CALB’s USD1.3bn Hong Kong listing
CATEGORIES: Hong Kong listing; lithium battery
LEGAL COUNSEL: Jia Yuan Law Offices advised CALB on Hong Kong law and PRC law, while Stephen Peepels and V&T Law Firm advised on international sanctions law and PRC intellectual property law, respectively. Clifford Chance advised on Hong Kong law, JunHe acted as PRC counsel, and Haiwen & Partners acted as PRC intellectual property counsel to the sole sponsor and the underwriters.
KEY POINTS: China Aviation Lithium Battery (CALB), The third-largest domestic lithium battery manufacturer, has debuted on the Stock Exchange of Hong Kong Limited (SEHK), raising HKD10.1 billion (USD1.3 billion), ranking it as the third-largest IPO on the city’s bourse in 2022. The IPO attracted 15 cornerstone investors, including one of the world’s top electric vehicle (EV) battery components suppliers, Tianqi Lithium.
CATL raises USD6.7bn in private placement
CATEGORIES: Follow-on offering; lithium battery
LEGAL COUNSEL: Llinks Law Offices advised the issuer, while Jingtian & Gongcheng advised the overseas underwriters.
KEY POINTS: The world’s largest EV battery maker, Contemporary Amperex Technology (CATL), raised RMB45 billion (USD6.7 billion) by offering 109 million new shares to 22 institutional investors in a private placement. The proceeds were used to build up four lithium battery plants.
Although CATL cut more than 20% of their original placement size after a query from the Shenzhen Stock Exchange (SZSE), the overwhelming response from investors benefitted from a global trend to promote the use of EVs in a bid to cut down carbon emissions from fuel vehicles. Lithium is a core element of green batteries.
CCB’s green bond under China-EU initiative
CATEGORIES: Green bonds
LEGAL COUNSEL: Linklaters advised China Construction Bank (CCB) on English and Hong Kong law, while MdME Lawyers advised on Macau law, and Global Law Office advised on PRC law. Allen & Overy advised the joint lead manager on English and Hong Kong law, while King & Wood Mallesons advised on PRC law.
KEY POINTS: The USD500 million three-year green notes, issued by CCB in Hong Kong and Macau, marked the first green bond issuance under the Common Ground Taxonomy – Climate Change Mitigation initiative between China and the EU. The fundraising targeted clean traffic and energy projects in the Greater Bay Area (GBA).
China Mobile Communications’ A-share listing
CATEGORIES: A-share listing; telecommunications
LEGAL COUNSEL: Haiwen & Partners advised the issuer on PRC law, Sullivan & Cromwell advised on the US and Hong Kong law, and Harneys advised on British Virgin Islands (BVI) law. King & Wood Mallesons advised the joint sponsor and the lead underwriter on PRC law.
KEY POINTS: China Mobile Communications raised RMB48.7 billion (USD7.7 billion) in the IPO on the SSE. The final transaction size reached RMB56 billion, inclusive of the over-allotment option. This makes it the largest A-share listing project in the past 10 years and the first red-chip corporate on the main board of A-share exchanges.
CICC’s carbon futures ETF in Hong Kong
CATEGORIES: ETF; carbon futures
LEGAL COUNSEL: Deacons advised CICC.
KEY POINTS: The first carbon futures exchange traded fund (ETF), CICC Carbon Futures ETF, debuted in Hong Kong, enabling investment in futures contracts of carbon emission permits traded in the EU. Hong Kong Exchanges and Clearing Limited (HKEX) said the product, which tracked the Intercontinental Exchange EU allowance carbon futures index, extended coverage of Hong Kong-listed commodity ETFs to carbon credits and opened up new opportunities for investors to participate in the reduction of carbon emissions in a convenient and cost-effective way.
CNOOC’s USD4.4bn A-share listing
CATEGORIES: A-share listing; energy
LEGAL COUNSEL: DeHeng Law Offices advised the issuer on domestic law, while Clifford Chance and Davis Polk advised on international law. AllBright Law Offices advised the underwriters.
KEY POINTS: Chinese oil giant China National Offshore Oil (CNOOC) raised RMB28.1 billion (USD4.4 billion) on the main board of the SSE. Fundraising increased RMB4.2 billion after an over-allotment option was fully exercised. This deal is the second-biggest A-share offering in 2022, and is also a large-scale listing project after China expanded a pilot scheme to allow red-chip companies to list their shares domestically.
CTG Duty Free’s USD2bn Hong Kong IPO
CATEGORIES: Hong Kong listing; retail
LEGAL COUNSEL: Linklaters advised the issuer on Hong Kong and US law, while Haiwen & Partners advised on PRC law. Freshfields acted as Hong Kong and US counsel to the joint sponsors and underwriters, while Jia Yuan Law Offices acted as PRC counsel.
KEY POINTS: China Tourism Group Duty Free (CTG Duty Free), the world’s largest travel retailer, has raised USD2.07 billion from its IPO in Hong Kong, becoming the city’s biggest listing in 2022. The secondary listing sold about 103 million shares at HKD158 each; its primary listing was on the SSE.
CTG Duty Free remained the world’s largest travel retailer in 2021, with earnings of EUR9.37 billion (USD10.14 billion), twice the next-ranked competitor, South Korea’s Lotte Duty Free.
ECARX SPAC listing on Nasdaq
CATEGORIES: De-SPAC; US listing; automobile
LEGAL COUNSEL: Skadden advised ECARX on US law and Maples Group advised on Cayman Islands law, while Han Kun Law Offices advised on PRC law. Orrick advised the SPAC on US law, Cederquist advised on Swedish law, Walkers advised on Cayman Islands law and Zhong Lun Law Firm advised on PRC law. King & Wood Mallesons advised the joint financial consultants on PRC law.
KEY POINTS: Automotive technology company ECARX finished its Nasdaq listing via a merger with US SPAC COVA Acquisition, valued at about USD3.82 billion. The deal was the largest Asian de-SPAC, the largest cross-border M&A by a Chinese company, and the largest M&A in the Chinese auto industry.
ECARX also received USD300 million in cash held by COVA Acquisition in trust, and additional financing of USD45 million from strategic investors.
First A-listed companies make Swiss GDR offering
CATEGORIES: Swiss listing; GDR
LEGAL COUNSEL: Niederer Kraft Frey, Clifford Chance and Llinks Law Offices acted as counsel for the issuer, Gotion High-tech, while Baker McKenzie and Haiwen & Partners acted as counsel to the underwriters. Linklaters acted as counsel to the depositary bank.
Baker McKenzie and Kingson Law Firm acted as counsel for issuer GEM, while Niederer Kraft Frey, Clifford Chance and Jingtian & Gongcheng were counsel to the underwriters. Linklaters acted as counsel to the depositary bank.
Vischer, Grandway Law Offices and Linklaters advised the issuer, Ningbo Shanshan. Niederer Kraft Frey, Tian Yuan Law Firm and Clifford Chance advised the underwriters. Baker McKenzie acted as counsel to the depositary bank.
Advestra and Kangda Law Firm were advisers to Keda Industrial Group. Niederer Kraft Frey, King & Wood Mallesons and Linklaters advised the underwriter. Baker McKenzie acted as counsel to the depositary bank.
KEY POINTS: The four A-listed companies – Keda Industrial Group, Ningbo Shanshan, GEM and Gotion High-tech – were the first to trade global depository receipts (GDRs) on the SIX Swiss Exchange on 28 July, after a new GDR scheme between China and Switzerland took effect earlier that day. The deals were the first of this type to apply the scheme since the CSRC expanded the China-Switzerland Stock Connect programme in February 2022.
The new EV battery maker Gotion High-tech raised USD685 million, making it the second-largest share sale on the SIX in 2022. GEM, Ningbo Shanshan and Keda Industrial Group raised USD346 million, USD319 million and USD173 million, respectively.
Fubon’s three ETFs under new OFC
CATEGORIES: ETF
LEGAL COUNSEL: Deacons acted for Fubon Fund Management.
KEY POINTS: Fubon Fund Management, a subsidiary of Taiwan Fubon Asset Management, set up a new open-ended fund company in Hong Kong to launch three ETFs oriented towards the Taiwan equity market, and track an index related to Shanghai, Shenzhen or Hong Kong-listed companies including Fubon ICE FactSet Taiwan Core Semiconductor Index ETF, Fubon FTSE Taiwan RIC Capped Index ETF, and Fubon Hang Seng Shanghai-Shenzhen-Hong Kong (Selected Corporations) High Dividend Yield Index ETF.
The Fubon ICE ETF is a rare semiconductor-thematic ETF in Hong Kong, and the first listed ETF in the city that focuses on the Taiwan semiconductor industry.
Guojin CRCC REIT raises USD687m
CATEGORIES: Fund establishment; infrastructure REIT
LEGAL COUNSEL: Zhong Lun Law Firm acted as fund manager’s counsel.
KEY POINTS: The Guojin China Railway Construction (CRCC) REIT, managed by Gfund Management, was listed on the SSE, raising RMB4.8 billion (USD687 million), ranking it the third-largest Chinese REIT in 2022. As the first REIT product issued from western China, its fundraising is of great significance in promoting the country’s western development strategy, and accelerating the construction of the twin-city economic circle in the Chengdu-Chongqing region.
The core asset of the product is the Chongqing section of the Yusui Expressway, which enjoys a concession. Its management company is the first highway company of the CRCC in Chongqing.
Huaxia CCCC REIT’s USD1.3bn listing
CATEGORIES: Fund establishment; infrastructure REIT
LEGAL COUNSEL: Han Kun Law Offices acted as fund manager’s counsel.
KEY POINTS: China’s first state-owned highway REIT, China Communications Construction (CCCC) REIT, raised RMB9.4 billion (USD1.3 billion) on the SSE, the runner-up among Chinese REIT products in 2022. The REIT is managed by China Asset Management.
The Wuhan-Shenzhen Expressway’s Jiayu-Tongcheng section is the core asset of the Huaxia CCCC REIT, and is seen as a high-quality asset with a steady cash income and less economic risk.
As a Hong Kong-listed company, CCCC asked for a spin-off listing in preparation for the product, and was granted a waiver by the HKEX from the requirement to give due consideration to the interests of existing shareholders in conducting the divestment. Such a method is the first for a China REIT product.
Huaxin Cement converts B shares to H shares
CATEGORIES: Listing transfer; listing by way of introduction
LEGAL COUNSEL: Shu Jin Law Firm acted as the issuer’s domestic counsel, while Clifford Chance acted as international counsel. Grandall Law Firm acted as the sole sponsor’s domestic counsel, while Fangda Partners acted as international counsel.
KEY POINTS: Huaxin Cement transferred its 735 million China B shares to the SEHK by way of introduction, making it the first Shanghai-listed company to convert B shares into H shares, and the fourth such case since 2012.
B shares refer to equity shares listed on China’s exchanges settled in foreign currency. As the B shares on the SSE are denominated in US dollars, the cash option foreign exchange issue is more complex than the Hong Kong dollar denomination on the SZSE.
Huaxin Cement’s solution to legacy B-share issueBy Ma Yunyan and Shi Zhiheng, Shu Jin Law Firm |
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Hygon’s USD1.5bn SSE listing
CATEGORIES: Star Market; semiconductor
LEGAL COUNSEL: Zhong Lun Law Firm and DeHeng Law Offices acted as counsel to the issuer and sponsor, respectively.
KEY POINTS: Hygon Information Technology, a high-performance computing manufacturer, completed its RMB10.8 billion IPO on the Star Market, making it the second domestic central processing unit (CPU) company to go public in China. The deal ranked as the fourth-largest A-share IPO in 2022.
The company has 12 self-developed core technologies in CPU and deep computing unit (DCU) chip design, covering areas such as processor core microarchitecture design, chip security, verification and packaging. Its technology is based on the x86 complex instruction set computer, and its main competitors are Microsoft, Intel and ADM.
Intesa increases stake in Bank of Qingdao
CATEGORIES: Foreign investment; banking
LEGAL COUNSEL: Dentons advised Intesa Sanpaolo on PRC law. King & Wood Mallesons acted as counsel to the Bank of Qingdao.
KEY POINTS: Italy’s largest bank, Intesa Sanpaolo, increased its shareholding in the Bank of Qingdao via allotting A and H shares amounting to HKD5.13 billion (USD657 million).
The three-jurisdiction cross-border investment involved legal links such as share placement, issuance of additional shares, subscription of A shares and H shares, as well as foreign exchange investment, industrial investment, approval by regulatory authorities and other legal aspects.
The deal also involved the dual approval lines of the China Banking and Insurance Regulatory Commission (CBIRC) and the China Securities Regulatory Commission (CSRC), and was subject to the dual supervision of the securities regulatory authorities of Hong Kong and China.
Jinko Solar’s USD1.4bn Star Market IPO
CATEGORIES: Star Market; secondary listing; photovoltaics
LEGAL COUNSEL: King & Wood Mallesons acted as PRC counsel while Carey Olsen acted as BVI and Cayman Islands counsel to the issuer.
KEY POINTS: Jinko Solar’s secondary listing on the Star Market raised RMB10bn (USD1.4bn), ranking it fifth in the Chinese capital market in 2022. Its indirect controlling shareholder, JinkoSolar Holding, was listed on the NYSE in 2010.
Jinko Solar is one of the world’s leading photovoltaic modules as its shipments have been ranked among the top five in the world since 2014, with 14 global production bases in China, the US, Malaysia and Vietnam. By the end of March 2022, the cumulative module shipments of the company had exceeded 100GW. Due to its outstanding performance, Jinko Solar has formulated many international and domestic industry standards including those of the International Electrotechnical Commission (IEC).
KE Holdings’ Hong Kong dual-primary listing
CATEGORIES: Dual-primary listing; listing by way of introduction; internet
LEGAL COUNSEL: KE Holdings was advised by Freshfields, Skadden, Han Kun Law Offices and Harneys on Hong Kong, US, PRC and Cayman Islands law, respectively. Joint sponsors were advised by Davis Polk on Hong Kong and US law, while Jingtian & Gongcheng advised on PRC law.
KEY POINTS: The US-listed property platform, KE, completed a dual-primary listing via introduction on the SEHK with weighted voting rights, the first time a Chinese company returned to Hong Kong under this combination.
The sudden death of founder Zuo Hui in 2021 posed obstacles to KE’s Hong Kong listing, leading to KE’s negotiation with shareholders and regulators for five months to settle on co-founder share conversion, shareholding ratios, market value and economic interests.
Leapmotor’s USD800m HK listing
CATEGORIES: Hong Kong listing; electric vehicles
LEGAL COUNSEL: Clifford Chance acted as counsel on Hong Kong and US law, Grandway Law Offices acted as the PRC legal counsel, Han Kun Law Offices advised on PRC data security law, and Pillsbury advised on US export law to Leapmotor. For the joint sponsors and underwriters, Simpson Thacher advised on Hong Kong and US law, while Jingtian & Gongcheng advised on PRC law.
KEY POINTS: Chinese EV maker Leapmotor Technology’s rare move to engage legal advisers on PRC data security and US export law in its Hong Kong IPO pointed to a growing need to scrutinise compliance in these areas. The company’s IPO on the HKEX raised USD800 million.
To cope with the growing number of data-related regulations in recent years, there is an increasing need to have a PRC data security law adviser for companies holding large amounts of important data before going public. The engagement of legal advisers on PRC data security law has been on the increase since February in 2022 in several Hong Kong prospectuses, but Leapmotor’s listing was the first to succeed.
Li Auto’s USD2bn follow-on offering
CATEGORIES: Follow-on public offering; automobile
LEGAL COUNSEL: Han Kun Law Offices, Skadden and Maples Group advised the issuer on PRC, US and Cayman Islands law, respectively. Davis Polk and King & Wood Mallesons advised the underwriters on the US and PRC law, respectively.
KEY POINTS: Li Auto completed a USD2 billion at-the-market offering (ATM offering) on the Nasdaq. The offering is the first ATM offering of a dual primarily listed company in the US and Hong Kong, with one of the largest placements in Asian enterprises.
Each American Depositary Share (ADS) issued in the transaction represents two class A ordinary shares and the net proceeds will be used for research into next-generation EV technology.
Li Ning’s USD1.3bn top-up placing
CATEGORIES: Follow-on public offering; consumer
LEGAL COUNSEL: LC Lawyers acted as Hong Kong counsel to Li Ning, while Allen & Overy acted as Hong Kong counsel to the placing agent.
KEY POINTS: Sportswear manufacturer Li Ning sold 120 million new shares at HKD87.50 (USD11.20) apiece, raising HKD10.5 billion from a top-up placement involving major shareholder Viva China. The deal also combined a complex fund financing. The fundraising helped to tap the group’s overseas expansion as well as to renovate its facilities.
The completion of the placing and the subscription by Viva China constituted a material sale and acquisition under the rules of the HKEX’s Growth Enterprise Market (GEM). Ensuring that the subscription could not fail after completion of the placing was an essential caveat of the transaction.
LianBio offers shares on Nasdaq
CATEGORIES: US listing; biotechnology
LEGAL COUNSEL: Ropes & Gray advised the issuer on US Federal Securities and New York State law, Zhong Lun Law Firm advised on PRC law, and Travers Thorp Alberga advised on Cayman Islands law. Cooley acted as US Federal Securities and New York State counsel, while Commerce & Finance Law Offices acted as PRC counsel to the underwriters.
KEY POINTS: Biotech company LianBio raised USD325 million in a Nasdaq IPO, one of the largest biotech IPOs in 2021 and the first US listing with a predominantly Chinese presence after July 2021, the same month that triggered Chinese regulators’ data security investigation into US-listed Didi.
LianBio’s prospectus specifically clarified the fact that it does not hold personally identifiable data and does not use a variable interest entity (VIE) structure. The company’s headquarters are in Princeton, US, and Shanghai, operating primarily through its Chinese subsidiary.
MingYang Smart Energy offers GDR in UK
CATEGORIES: London listing; GDR; clean energy
LEGAL COUNSEL: Tian Yuan Law Firm and Linklaters advised on domestic and international law, respectively. JunHe and Clifford Chance advised on domestic and international law to the underwriters.
KEY POINTS: Ming Yang Smart Energy Group, a wind turbine manufacturer, started its global depositary receipt (GDR) trading on the Main Market of the LSE via the Shanghai-London Stock Connect scheme. The deal raised USD706 million and was the first of this type to apply the scheme after being amended in February. It was also the first private enterprise in China to issue GDRs.
Ming Yang Smart Energy Group was ranked seventh among global turbine manufacturers in 2021 by BloombergNEF. It is currently developing the world’s most powerful offshore turbine.
NaaS merges with RISE, lists on Nasdaq
CATEGORIES: US listing; reverse takeover
LEGAL COUNSEL: Skadden, Jingtian & Gongcheng, and Harneys advised NaaS Technology on US, PRC and Cayman Islands law, respectively. Kirkland & Ellis, Haiwen & Partners, and Maples Group advised RISE Education Cayman on US, PRC and Cayman Islands law, respectively.
KEY POINTS: US-listed company RISE Education Cayman completed a reverse takeover merger with NaaS Technology, a Chinese EV charging service provider.
This transaction came amid an education market crisis in China as the “double reduction” policy cracked down on private education companies and caused RISE profits to plummet. RISE has been defined as a “public shell” by Nasdaq as it sold all its assets at the end of 2021.
The transaction involved a complex deal structure as an all-stock merger between a US-listed company and a private Cayman Islands company with PRC operations.
New Frontier Health privatisation
CATEGORIES: Privatisation; de-SPAC; medical
LEGAL COUNSEL: Davis Polk and Maples Group acted as US and Cayman Islands counsel, respectively, to New Frontier Health. Simpson Thacher, Global Law Office and Ogier acted as US, PRC, and Cayman Islands counsel, respectively, to the buyer consortium. Kirkland & Ellis and Latham & Watkins advised single investors.
KEY POINTS: New Frontier Health, operator of the premium China healthcare services provider United Family Healthcare, finished the USD1.58 billion going-private acquisition by a buyer consortium.
This is the first case of a delisting following a listing by way of a SPAC. Given the increasing number of de-SPAC transactions in the US, this project provides a legal structure that can be used as a reference for future IPOs of the same type, and to further explore the privatisation model.
The transaction also included a USD500 million dissident shareholder action, subject to a determination of the fair value of its shares under section 238 of the Cayman Islands Companies Law, for the purposes of the privatisation merger.
NIO’s listing by introduction in HK, Singapore
CATEGORIES: Hong Kong listing; Singapore listing; listing by way of introduction
LEGAL COUNSEL: In the Hong Kong listing, Skadden advised NIO on Hong Kong and US law, while Han Kun Law Office and Maples Group advised on PRC and Cayman Islands law, respectively. Simpson Thacher acted as Hong Kong and US counsel, while Commerce & Finance Law Offices acted as PRC counsel for the joint sponsors.
In the Singapore listing, WongPartnership advised the issuer on Singapore Law, Skadden advised on US law, while Han Kun Law Offices and Maples Group acted as PRC and Cayman Islands counsel. Allen & Gledhill, Simpson Thacher, and Commerce & Finance Law Offices advised the joint issue managers on Singapore, US and PRC law.
KEY POINTS: Chinese EV maker NIO was listed on the SEHK and Singapore Exchange by way of introduction without raising funds to become a triple-listed company in Hong Kong, Singapore and the US. This is also the first time a Chinese company decided to return to home markets via a listing by way of introduction since the US-China trade tensions began.
Companies listed by way of introduction are not allowed to issue new shares or raise funds within six months. Only existing shares are allowed for trading.
NIO previously explained that this listing decision was “to provide corporate investors with an alternative transaction location, mitigate geopolitical risks, and expand the investor base … without diluting the interests of existing shareholders”.
Penghua Shenzhen Energy REIT’s SZSE listing
CATEGORIES: Fund establishment; REIT; energy
LEGAL COUNSEL: Han Kun Law Offices acted as fund manager’s counsel.
KEY POINTS: China’s first public energy REIT, Penghua Shenzhen Energy REIT, offered shares on the SZSE, raising RMB3.54 billion (USD524 million). The product was managed by Penghua Fund Management and the proceeds were used for setting up Shenzhen Energy Group’s green projects.
The core asset of the REIT is the group’s Eastern Power Plant, which uses clean liquefied natural gas (LNG) as fuel, has one of the largest installed capacities, and is one of the most advanced and efficient centralised natural gas-fired power plants in Shenzhen.
Due to the central government’s “Dual Carbon” target of capping CO2 emissions, the REIT was well received by investors, with a 109 times subscriber ratio in the offline offering.
Prenetics merges with SPAC, lists in US
CATEGORIES: US listing; de-SPAC; biotechnology
LEGAL COUNSEL: Skadden and Mourant acted as international counsel and Cayman Islands counsel to Prenetics, respectively. Kirkland & Ellis and Appleby acted as international counsel and Cayman Islands counsel, respectively, to the SPAC. Shearman & Sterling acted as international counsel to the placement agents.
KEY POINTS: Prenetics, a Hong Kong-based genetics and diagnostic health testing company, was listed on the Nasdaq after a merger with Artisan Acquisition, a blank cheque company backed by the Hong Kong tycoon, Adrian Cheng, the third-generation heir of New World Development. The deal heralded the USD1.25 billion valuation of Prenetics, becoming the first Hong Kong unicorn to list on the Nasdaq.
Artisan Acquisition’s merger agreement said Prenetics would receive USD459 million in cash after the transaction, including USD339 million fundraising of the SPAC, and USD120 million from private investment in public equity (PIPE) financing and forward purchase agreement.
Prenetics drove business during the outbreak by providing nucleic acid testing to Premier League players and staff, as well as passengers at Hong Kong International Airport and London Heathrow Airport.
Range Intelligent’s backdoor listing on SZSE
CATEGORIES: Star Market listing; reverse takeover
LEGAL COUNSEL: Zhong Lun Law Firm advised Precise, while King & Wood Mallesons advised Range Intelligent’s major shareholders.
KEY POINTS: Database centre Range Intelligent and A-share listed food packaging company Precise finished a RMB19.6 billion (USD2.94 billion) restructuring.
Range Intelligent completed a RMB13.6 billion reverse takeover by Precise with the Precise sale of all assets and debts valued at RMB602 million. Range Intelligent exchanged its shares with the debts of Precise and at that stage effectively became a publicly traded company.
The application for the reverse takeover was the first after the CSRC amended rules in 2019 to allow backdoor listing on Shenzhen’s Growth Enterprise Market. The restructuring involved an additional RMB4.7 billion in financing.
SenseTime’s USD740m Hong Kong listing
CATEGORIES: Hong Kong listing; technology
LEGAL COUNSEL: Clifford Chance advised the issuer on Hong Kong and US law, King & Wood Mallesons advised on PRC law, BGA LAW advised on Cayman Islands law, and Hughes Hubbard & Reed advised on US export control law. Slaughter and May advised the sponsors and underwriters on Hong Kong and US law, while Zhong Lun Law Firm advised the same on PRC law.
KEY POINTS: SenseTime halted its Hong Kong IPO after the US Treasury Department placed it on the “Non-SDN [specially designated nationals] Chinese Military-Industrial Complex Companies List” on 10 December 2021, prohibiting US investors from trading in its securities and derivatives. The company had planned to complete a global offering on the same day.
While it was thought that the IPO would be significantly delayed, SenseTime completed the Hong Kong public offering refund, replacement of cornerstone investors, re-registration of a prospectus, restart of issuance pricing, and public offering in just a week.
The company’s second IPO eventually raised HKD5.78 billion (USD 740 million) and became the first “AI stock” in Hong Kong.
Shanghai Pharmaceuticals’ USD2bn private placement
CATEGORIES: Private placement; pharmaceuticals
LEGAL COUNSEL: Grandall Law Firm and Freshfields acted as PRC and Hong Kong counsel, respectively, for Shanghai Pharmaceuticals.
KEY POINTS: Shanghai and Hong Kong-listed Shanghai Pharmaceuticals raised RMB13.98 billion (USD2 billion) in a non-public offering of A shares to Yunnan Baiyao Group and Shanghai Tanjong Enterprise Consulting Services, a subsidiary of Shanghai Industrial Investment. The 2022 transaction is the largest private placement in the A-share pharmaceutical industry to date.
Shanghai Pharmaceuticals is a large pharmaceutical industry group listed in both Shanghai and Hong Kong as one of the Fortune 500 companies. The company’s main business covers industry, commerce and retail. Yunnan Baiyao Group has a century-old Chinese brand name and focuses on pharmaceutical manufacturing, new drug research and development, pharmaceutical distribution services, and Chinese medicine resource development.
Silicon Motion Technology’s take-private offer
CATEGORIES: Privatisation; technology
LEGAL COUNSEL: Latham & Watkins and K&L Gates advised Silicon Motion. Wilson Sonsini acted as the acquirer’s counsel. Paul Hastings acted as the financial adviser’s counsel.
KEY POINTS: The US-listed Silicon Motion Technology, a NAND flash controller developer for solid-state storage devices, closed a USD3.8 billion take-private acquisition by MaxLinear, a leading provider of radio frequency (RF), analogue, and mixed-signal integrated circuits for broadband.
Upon completing the acquisition, MaxLinear became one of the top 10 fabless (outsourced fabrication) semiconductor suppliers with a corporate value of USD8 billion.
This cross-border privatisation case needed to tackle many sophisticated issues, such as corporate/M&A, securities law, executive compensation, employment and benefits, antitrust and regulatory, finance, data privacy, data and technology transactions, regulatory export control, and tax.
Tianqi Lithium raises USD1.7bn in Hong Kong
CATEGORIES: Hong Kong listing; lithium battery
LEGAL COUNSEL: Latham & Watkins advised the issuer on Hong Kong and US law. Zhong Lun Law Firm, Clayton Utz, and Carey Abogados advised the issuer on PRC, Australian and Chilean law, respectively. The listing underwriters turned to Clifford Chance on Hong Kong and US law, JunHe on PRC law and Allens on Australian law.
KEY POINTS: One of the world’s top suppliers of rechargeable battery components for EVs, Tianqi Lithium, debuted on the HKEX as the second-largest share sale in 2022.
Tianqi’s prospectus said 70% of the funds raised from the listing would be used to repay debts, which included USD3.5 billion in syndicated loans from the acquisition of the world’s second-largest lithium producer, Chilean company Sociedad Quimica y Minera, and fees from its Western Australian investment in Talison Lithium.
Tims China lists via SPAC on Nasdaq
CATEGORIES: de-SPAC; US listing; catering
LEGAL COUNSEL: Morrison & Foerster, Zhong Lun Law Firm and Appleby advised the SPAC on US, PRC and Cayman Islands law, respectively. Kirkland & Ellis, Han Kun Law Offices and Maples Group acted as US, PRC and Cayman Islands counsel, respectively, to Tims China. Latham & Watkins acted as one of the major shareholder’s counsel.
KEY POINTS: The Chinese arm of coffeehouse chain Tim Hortons (Tims China) started to sell its shares on the Nasdaq after closing a merger with blank cheque company Silver Crest Acquisition at a valuation of USD1.4 billion. Due to significant tax complications, the deal used a “reverse de-SPAC” structure, which was a first-of-its-kind in Asia, to ensure no tax liability would arise upon listing completion.
Prior to listing, Tims China lured important investors such as Cartesian Capital Group, Restaurant Brands International, Tencent, Sequoia Capital and Eastern Bell Capital. The company said its revenue in the first six months of 2022 had increased more than 70% to RMB404 million (USD55 million) year on year.
United Imaging Healthcare’s USD1.6bn listing
CATEGORIES: Star Market listing; medical technology
LEGAL COUNSEL: Llinks Law Offices advised the issuer, while Zhong Lun Law Firm acted as counsel to the main underwriters.
KEY POINTS: United Imaging Healthcare debuted with a USD1.6 billion IPO, the biggest listing on the SSE’s Star Market and the third-largest in China in 2022. The deal was also the third-largest IPO, following SMIC and BeiGene, since the launch of the Star Market in 2019.
United Imaging Healthcare is the leading diagnostic imaging equipment manufacturer in China, and competes with overseas peers such as General Electric, Siemens and Philips.
The localisation of medical devices has been one of the most active legal areas in China in the past few years, as the central government encouraged purchasing of domestic medical devices instead of imported ones in government procurement.
Yili’s USD1.7bn private placement
CATEGORIES: Private placement; consumer
LEGAL COUNSEL: Tian Yuan Law Firm acted as the issuer’s counsel.
KEY POINTS: China’s largest competitive private placement in the consumer sector of the A-share market saw Yili Group issuing 318 million shares to 22 specific targets, raising RMB12.5 billion (USD1.7 billion). The deal had the most subscribers in total, the lowest issue discount, and the highest subscription multiple.
The issue targets included Barclays, Goldman Sachs, UBS, Hillhouse Group, a fund arm of Hillhouse Group, and others from various fields such as insurance, public funds, private equity funds, foreign investors and securities.
Zhongtai Group issues FTZ offshore bonds
CATEGORIES: Bonds; free trade zone
LEGAL COUNSEL: Kangda Law Firm advised the issuer on PRC law while Fangda Partners advised on international law. AllBright Law Offices acted as domestic counsel while JunHe acted as international counsel to the underwriters.
KEY POINTS: The first midwestern free trade zone (FTZ) offshore bonds issued by Zhongtai Group debuted on the ChongWa Financial Asset Exchange in Macau, offering the first tranche of RMB760 million (USD113 million) with a 4% coupon rate.
The bonds were the first to bring in a foreign investor as it introduced the Bank of Communications’ Singapore branch. The transaction adopted the co-operation model of “Interbank Standby Certificate + Overseas Trustee of Bank of Communications Trust”, which combined traits of FTZ bonds and creatively provided a new solution for the practice of FTZ offshore bond trusts.
DOMESTIC01
ByteDance’s USD1.5bn acquisition of Amcare Healthcare
CATEGORIES: M&A; healthcare
LEGAL COUNSEL: Haiwen & Partners advised Warburg Pincus (one of the sellers), Han Kun Law Offices advised ByteDance, and JunHe advised CPP Investment Board, another one of the sellers. Commerce & Finance Law Offices acted as the legal counsel to Amcare Healthcare.
KEY POINTS: ByteDance unit Xiaohe Health bought Amcare Healthcare, a private hospital group specialising in the treatment of women and children, for RMB10 billion (USD1.5 billion) in June 2022.
Amcare Healthcare is the first organisation to be qualified in both Beijing and Tianjin for assisted reproduction. With the promotion of relevant policies, China’s assisted reproduction industry is seeing rapid development. The transaction was a crucial step for ByteDance to cross over to healthcare and enter the assisted reproduction industry.
DOMESTIC02
CCB sets up first housing rental fund
CATEGORIES: Fund establishment; real estate
LEGAL COUNSEL: Zhong Lun Law Firm advised China Construction Bank on establishment and investment of the funds.
KEY POINTS: On 8 November 2022, China’s first housing rental fund was officially established in Beijing, which was wholly funded by China Construction Bank with a fundraising scale of RMB30 billion (USD4.5 billion).
The fund has already invested in its first batch of projects, including more than 20 key projects under promotion, and the total asset size has exceeded RMB10 billion. The fund will increase the supply of market-based long-term rental housing and affordable rental housing.
Zhong Lun Law Firm participated in the proposal discussion of the fund establishment, and assisted in the document signing and project implementation.
DOMESTIC03
CCB’s perpetual bond issue mechanism
CATEGORIES: Bond issuance; banking
LEGAL COUNSEL: Jincheng Tongda & Neal served as legal counsel to China Construction Bank, the issuer.
KEY POINTS: China Construction Bank (CCB) issued the first batch of RMB40 billion (USD5.9 billion) in domestic perpetual bonds in 2022, adopting an innovative issuance mechanism of “basic issuance size + excessive issuance” for the first time, with a basic issuance size of RMB30 billion and an excessive issuance of RMB10 billion, which lowered the issuance risk and achieved a comprehensive balance of issuance size and coupon rate.
Jincheng Tongda & Neal provided legal services to China Construction Bank throughout the bond’s issuance.
DOMESTIC04
CDB’s USD53.3bn infrastructure fund
CATEGORIES: Fund establishment; infrastructure
LEGAL COUNSEL: Lantai Partners advised the China Development Bank (CDB) for the project.
KEY POINTS: CDB established an infrastructure investment fund with total capital of RMB360 billion (USD53.3 billion) and supported more than 800 construction projects, including major ones for transportation, energy, water conservancy, municipalities, industrial upgrading infrastructure and other fields, easing the fundraising difficulties for many major projects. Pre-project finance was officially proposed for the first time, which has far-reaching implications for the project fund system.
Lantai Partners assisted CDB in completing the proposal approval, establishment and first placement of the infrastructure investment fund within one month, and designed various transaction structures and supporting risk mitigation measures for different placement measures.
DOMESTIC05
CGN Wind Energy raises USD4.4bn
CATEGORIES: Financing; energy
LEGAL COUNSEL: Grandall Law Firm advised CGN Wind Energy, the financier. JunHe advised Jianxin Fund and Zhongxin Fund of China Guoxin Holdings, one of the investors. Tian Yuan Law Firm advised the industrial fund established by China Chengtong Holdings’ Tongying Fund, another investor.
KEY POINTS: CGN Wind Energy successfully introduced 14 strategic investors through the China Beijing Equity Exchange, raising RMB30.5 billion (USD4.4 billion) mainly for the development and construction of wind power and photovoltaic reserve projects, and the development of new businesses such as energy storage, integrated smart energy, power sales, and value-added services.
The project set a number of new records, including the largest equity financing project in the domestic new energy and power sector; the largest equity financing project of the year for a domestic non-listed company; and the highest amount of capital raised by a capital increase project in the property rights market.
DOMESTIC06
China Avionics merges with AVIC
CATEGORIES: M&A; aviation
LEGAL COUNSEL: Jia Yuan Law Offices acted as counsel for China Avionics Systems (Avionics), while Jingtian & Gongcheng advised AVIC Electromechanical Systems (AVIC Electromechanical).
KEY POINTS: China Avionics Systems acquired AVIC Electromechanical Systems in an all-share deal. The plan for Avionics to absorb and merge with AVIC was released on 28 September 2022. Avionics will issue A shares to the conversion shareholders of AVIC Electromechanical to exchange for their shares.
After completion, Avionics will take over all assets, liabilities, businesses, personnel, contracts and other rights and obligations of AVIC Electromechanical. The transaction amount is RMB48.9 billion (USD7.3 billion), while Avionics will raise matching funds of up to RMB5 billion, making it the largest M&A project in the domestic A-share market in 2022. The transaction also constituted a major asset restructuring on the SSE, SZSE and SEHK.
The transaction involved legal procedures in mainland China and Hong Kong, making it necessary to ensure that various approvals and information disclosure meet the requirements of the above-mentioned three exchanges simultaneously.
The need to set up share repurchase and cash compensation schemes that balance the interests of dissenting shareholders and the company, as well as properly handle the cancellation of treasury shares without any precedent reference, added to the difficulty of the transaction.
DOMESTIC07
China Huarong’s USD6.3bn recapitalisation
CATEGORIES: Asset management
LEGAL COUNSEL: East & Concord Partners advised CITIC Group and other investors on PRC law. Baker_McKenzie_FenXun served as the international adviser to CITIC Group. Clifford Chance and Haiwen & Partners acted as the international and PRC counsel to China Huarong Asset Management, respectively.
KEY POINTS: China Huarong Asset Management raised RMB42 billion (USD6.3 billion) in fresh capital selling domestic and H shares to five strategic investors: CITIC Group, China Insurance Investment, China Cinda Asset Management, China Life Insurance and ICBC Financial Assets Investment. The transaction, the biggest of its kind, was completed on 30 December 2021.
DOMESTIC08
China Life’s debt investment plan
CATEGORIES: Debt investment; insurance
LEGAL COUNSEL: Zhonglun W&D Law Firm advised China Life Asset Management.
KEY POINTS: The RMB4 billion (USD590 million) transaction was structured as an indirect investment in the equity of China Communications Construction’s core subsidiaries, achieved by investing insurance capital into the company’s debt-for-equity swap plans. This project needed to simultaneously select a number of underlying companies and investment structures that met the requirements for insurance fund investment in terms of compliance, safety and stability.
Zhonglun W&D Law Firm says the transaction encouraged insurance asset management institutions to raise funds by issuing insurance asset management products to support economic structural transformation and market-based debt-to-equity swaps, reducing the leverage ratio of enterprises and facilitating the development of the real economy.
DOMESTIC09
China Yangtze Power’s asset restructuring
CATEGORIES: Asset restructuring; energy
LEGAL COUNSEL: Zhong Lun Law Firm advised China Yangtze Power on the restructuring. Dentons China advised China Three Gorges Corporation, one of the sellers.
KEY POINTS: China Yangtze Power’s restructuring plan was approved by the CSRC. The company intended to acquire 100% of Jinshajiang Yunchuan Hydropower Development by issuing shares and paying cash, and raising matching funds through a non-public issuance.
The consideration for the transaction amounted to RMB80.5 billion (USD11.9 billion), making it the largest asset restructuring project for A-share listed companies of 2022 at the time.
Through the restructuring, China Yangtze Power will own all the power generation assets of six hydropower stations on the Yangtze River, including Three Gorges, Gezhouba, Xiangjiaba, Xiluodu, Baihetan and Wudongde, realising the centralised management and operation of large hydropower assets.
Zhong Lun Law Firm provided legal services from the transaction proposal justification, due diligence of underlying assets, drafting and revision of transaction agreements and other documents, preparation and assistance for review at the meeting.
DOMESTIC10
China’s first state-owned IP securitisation product
CATEGORIES: Securitisation of intellectual property
LEGAL COUNSEL: Sunhold Law Offices acted as a legal adviser to SDIC Taikang Trust, the issuing carrier management institution.
KEY POINTS: An initial RMB100 million (USD14 million) of Tianyin Bohua-Binhai New Area Intellectual Property Directional Asset-Backed Medium-term Notes was issued in the China interbank bond market. The issue was organised and promoted by Tianjin Intellectual Property Bureau and Binhai New Area Intellectual Property Bureau, and led by the Bank of Tianjin, the Intellectual Property Operation Centre of Bohai Chemical Industry Group and the Beijing Intellectual Wealth Group.
The project is the first IP securitisation product of state-owned enterprises, the first IP asset-backed sci-tech innovation note issue, and the first asset-backed note based on a secondary licence model of IP in the China interbank bond market.
DOMESTIC11
CPID buys USD1.1bn in clean energy assets
CATEGORIES: M&A; new energy
LEGAL COUNSEL: JunHe acted as legal adviser to China Power International Development (CPID).
KEY POINTS: CPID, the Hong Kong-listed subsidiary of state-owned State Power Investment, also its largest national integrated power generation operator, completed its share and cash acquisition of the assets of China Power New Energy Development (CPNE), a subsidiary of State Power Investment, on 28 October 2022. According to JunHe, the RMB7.45 billion (USD1.1 billion) deal was the largest clean energy asset injection transaction on the Hong Kong stock market in the past 10 years. The project involved 23 new energy companies in 18 cities from 12 provinces, with a total installed clean energy capacity of 2.16GW, covering a wide range of clean energies. Upon completion of this acquisition, the proportion of CPID’s installed clean energy capacity will increase by about 3.32%, which will advance its clean energy transition goal.
The transaction faced challenges due to different requirements of local market regulators, the need for government consent to change the shareholding in green power generation build-operate-transfer (BOT) projects, as well as time constraints in the cross-border exchange of documents and differences in local anti-epidemic policies. JunHe co-ordinated all parties and helped CPID complete the first asset delivery batch within six months.
DOMESTIC12
Fangyuan and 19 others restructure
CATEGORIES: Restructuring; non-ferrous metals
LEGAL COUNSEL: JunHe acted as the bankruptcy administrator.
KEY POINTS: On 9 June 2022, the Dongying Intermediate People’s Court ruled that Dongying Fangyuan Nonferrous Metals and 20 other companies carry out a substantial merger and reorganisation on the grounds that they could not pay off due debts and were obviously insolvent.
According to JunHe, the amount of creditors’ claims in this case exceeded RMB30 billion (USD4.5 billion) and involved more than 480 creditors. Among the creditors, 66 were financial institutions, with claims amounting to more than RMB29 billion, and nearly half of the financial institution creditors were foreign-funded financial institutions. Through two selection rounds, CICC Lingnan was determined to be the restructuring investor.
DOMESTIC13
Far East Horizon pioneers sustainable panda bond
CATEGORIES: Bond issuance
LEGAL COUNSEL: Tian Yuan Law Firm advised Far East Horizon, while JunHe advised Standard Chartered Bank, the joint lead underwriter, on PRC law.
KEY POINTS: Far East Horizon issued the first sustainability panda bond in China’s domestic interbank market, marking the first successful issuance since the China Interbank Market Dealers Association launched the pilot for social responsibility bonds and sustainable development bonds for overseas entities in November 2021.
The bond was issued in line with China’s Green Bond Standards, with 100% of proceeds invested in green and social projects jointly underwritten by the Agricultural Bank of China and Standard Chartered Bank as lead underwriters, and evaluated and certified by United Equator, a professional evaluation and certification body for green bonds in China.
The issuance, according to Tian Yuan, was a groundbreaking attempt to utilise the financial market to support the national sustainable development strategy. It improved on the market structure of Chinese GSS bonds, expanded enterprises’ ESG financing channels, optimised ESG financing costs, and contributed to the unity of domestic and overseas standards for green and sustainable financial products, which is expected to attract international ESG investors to the Chinese market.
Panda bonds are traditionally RMB-denominated bonds issued by non-Chinese borrowers and sold in mainland China. Far East Horizon is the first domestic qualified issuer of panda bonds in the financial leasing industry.
DOMESTIC14
GAC Aion’s series A financing
CATEGORIES: Financing; automotive
LEGAL COUNSEL: Zhong Lun Law Firm and Han Kun Law Offices acted as legal advisers to co-lead investors, PICC Capital Equity Investment and China Structural Reform Fund, respectively. JunHe served as legal adviser to GAC Aion in the series A financing.
KEY POINTS: On 20 October 2022, GAC Aion, a developer and manufacturer of intelligent network-connected new energy vehicles, officially completed its series A financing, bringing in 53 strategic investors to raise RMB18.3 billion (USD2.7 billion) and marking the largest single private placement financing in the domestic new energy vehicle industry to date.
GAC Aion has an annual production capacity of 400,000 vehicles and a steady output and sales ranking among the top three in the industry. The valuation of RMB103.2 billion after completing the capital increase puts it on top of the list of currently unlisted domestic EV companies.
DOMESTIC15
GD acquires Chint New Energy projects
CATEGORIES: M&A; energy
LEGAL COUNSEL: King & Wood Mallesons advised Guodian Ningbo Wind Power Development.
KEY POINTS: Guodian Ningbo Wind Power Development, a wholly owned subsidiary of GD Power Development, acquired 512MW of distributed photovoltaic capacity from Chint New Energy. This project involved one target company and 81 project companies, including 201 distributed photovoltaic power stations, with a transaction price of RMB1 billion (USD150 million).
King & Wood Mallesons says that this project is China’s largest industrial/commercial distributed photovoltaic M&A transaction.
Due diligence on the project faced significant challenges due to changes in China’s regulatory policies on distributed photovoltaic plants, the complex application of construction compliance management principles and national renewable energy subsidy policies, and local subsidy policies. The seller’s failure to restructure the 81 project companies under one equity platform company also added to the difficulty of the transaction.
DOMESTIC16
Genertec acquires Baoshihua Medical Group
CATEGORIES: M&A; healthcare
LEGAL COUNSEL: Jingtian & Gongcheng advised Genertec, and King & Wood Mallesons advised Baoshihua Medical Group.
KEY POINTS: Genertec acquired Baoshihua Medical Group for about RMB5 billion (USD745 million) in February 2022. Jingtian & Gongcheng said the deal was the largest and most significant M&A in China’s healthcare industry for the year. As a result of the deal, Genertec has become one of the largest integrated high-end healthcare providers in China, with 330 healthcare facilities and more than 46,000 beds.
DOMESTIC17
Great Wall Wealth debt investment scheme
CATEGORIES: Asset management; urban renewal
LEGAL COUNSEL: Hai Run Law Firm advised Great Wall Wealth Insurance Asset Management.
KEY POINTS: Great Wall Wealth was entrusted to invest insurance funds in the Shenzhen Dachong Urban Renewal Project undertaken by China Resources Group, with a total product size of RMB7 billion (USD1 billion) for the two phases.
This is the first time China Resources Group worked with insurance fund products, and the first carbon-neutral green financial insurance debt plan of Great Wall Wealth under which certified environment friendly buildings will be built.
The project is the largest urban redevelopment project in Shenzhen and the largest project under construction by China Resources nationwide, with a total investment of nearly RMB50 billion. The investment scheme required due diligence of the entire project and eliminating the non-compliant businesses, which placed high demands on the lawyers’ expertise in real estate, insurance fund investment and financing.
Hai Run said the transaction spanned a long period and there was a change in the product arranger. Due to the firm’s good work, the borrower continued to assign legal work to Hai Run after the change.
DOMESTIC18
Huadian Fuxin completes capital increase
CATEGORIES: Restructuring ; new energy
LEGAL COUNSEL: King & Wood Mallesons acted as legal adviser to Huadian Fuxin Energy.
KEY POINTS: After two rounds of major restructuring, Huadian Fuxin Energy has now become one of the largest new energy power generation companies in China. It received RMB15 billion (USD2.2 billion) in fresh capital from 13 strategic investors on 7 December 2021. The funds raised will be mainly invested in wind power and photovoltaic projects with an estimated total installed capacity of 15 million kilowatts, accelerating China Huadian’s green transformation.
DOMESTIC19
JD Property’s mandatory acquisition of China Logistics
CATEGORIES: M&A; logistics
LEGAL COUNSEL: Han Kun Law Offices advised JD Property on PRC law and Kirkland & Ellis acted as its offshore counsel. Maples Group advised JD Property on Cayman Islands law.
KEY POINTS: After buying the equity of the major shareholders of Hong Kong-listed China Logistics Property, JD Property made a mandatory offer to acquire the remaining shares. The transaction was completed in July 2022, and the now wholly owned unit delisted.
Kirkland & Ellis says the total consideration was about HKD16.4 billion (USD2.1 billion), making it the largest acquisition of a Hong Kong-listed real estate company by a third party.
DOMESTIC20
Jiangsu Chengxing Phosph-Chemicals’ reconciliation
CATEGORIES: Restructuring; chemicals
LEGAL COUNSEL: Haiwen & Partners acted as a legal adviser to Jiangsu Chengxing Phosph-Chemicals for the pre-reconciliation. Jiangsu Mousheng Law Firm and Juhexin Law Firm acted as the bankruptcy administrator.
KEY POINTS: After being issued with a warning that its shares were at risk of being delisted, and in the face of mounting operating difficulties, Jiangsu Chengxing Phosph-Chemicals opted for an out-of-court restructuring and in-court reconciliation to successfully resolve its issues. Jiangsu Chengxing Phosph-Chemicals is principally engaged in the production and distribution of fine phosphorous chemical products.
It is the first reconciliation case of a listed company in Jiangsu province, and only the second in China, and is also the first bankruptcy case in China where the court directly accepted the application for reconciliation of a listed company, as well as being the first domestic reconciliation case of a listed company that was reconciled and executed successfully without needing to suspend trading.
DOMESTIC21
Jinshan Binhai tourism resort established
CATEGORIES: Joint ventures; tourism
LEGAL COUNSEL: Jincheng Tongda & Neal advised Shanghai Jinshan New District Construction & Development.
KEY POINTS: Shanghai Jinshan New District Construction & Development and the Jinshan district government, in co-operation with Shanghai Fosun High Technology Group (Fosun Hi-tech) and Shanghai Forte Land, are developing the Jinshan Binhai International Cultural Tourism Resort, with a total planning area of about 8.1 square kilometres and a total investment of about RMB50 billion (USD7.4 billion).
The expected construction period is seven to eight years and the project is listed as one of the “10 leading major projects” during the Shanghai 14th Five-Year Plan period.
On 7 February 2022, Fosun Hi-tech and the Jinshan government signed an investment co-operation agreement for the core area of Shanghai Jinshan Binhai tourism resort.
The project involved multiple legal issues including joint ventures, financing, construction, land auctions, spatial planning and urban design. In order to assist Fosun Hi-tech and companies of Shanghai Jinshan New District in their joint ventures, Jincheng Tongda & Neal introduced a “unanimous consent” mechanism for important matters, a “balance of equity and debt” for the payment of funds, and co-ordinated the opinions of more than 10 authorities, including the Municipal Bureau of Planning and Natural Resources, Justice Department and Development and Reform Commission, to balance their demands and compliance requirements through the design of terms.
DOMESTIC22
Linklogis’ innovative securitisation on Tongbao
CATEGORIES: Commercial paper; blockchain
LEGAL COUNSEL: Hansheng Law Offices provided legal counsel to Hwabao Trust, the trustee of the securitisation project.
KEY POINTS: Shenzhen Qianhai Lianyirong Commercial Factoring, a subsidiary of Linklogis, reported to the Interbank Market Dealers Association and received formal feedback on establishing the first phase of its 2022 No. 1 Tongbao Targeted Asset-Backed Commercial Paper, with a total proposed fundraising of RMB2 billion (USD300 million).
The project is an innovative asset securitisation product on the Tongbao platform, adopting the blockchain technology of Tongji University’s Wutong chain to empower high-quality core enterprise credit penetration to multi-level suppliers and alleviate the financing problems of small, medium and micro enterprises.
Compared with other ABS or ABN, the transaction structure of this project achieved a significant breakthrough in terms of the segregation of underlying assets and collection of recoveries.
DOMESTIC23
M&A of Longyuan Power and Pingzhuang Energy
CATEGORIES: M&A; energy
LEGAL COUNSEL: Zhong Lun Law Firm advised Pingzhuang Energy. King & Wood Mallesons and Clifford Chance acted as domestic and overseas counsel, respectively, to Longyuan Power. Commerce & Finance Law Firm acted as the legal adviser to CICC, the finance consultant of Longyuan Power.
KEY POINTS: Longyuan Power merged with Pingzhuang Energy by issuing A shares to all shareholders of Pingzhuang Energy and purchasing its assets sold to a subsidiary of CHN ENERGY Investment Group.
After the completion of the transaction, Longyuan Power became a listed company with A and H shares, and Pingzhuang Energy was delisted and cancelled its legal personality. The transaction consisted of a share exchange and merger, asset sale and cash purchase, with a total transaction value of more than RMB10 billion (USD1.5 billion).
DOMESTIC24
Massive Jiangxi project to improve major rivers
CATEGORIES: Integrated management; hydraulic engineering
LEGAL COUNSEL: Ganshang Law Firm acted as consultant to Jiangxi Ganfu Weilv Improvement Company.
KEY POINTS: The integrated water management project, called the Comprehensive Improvement Project of the Lower Reaches of Gan-Fu Rivers, had the highest investment, largest scale and most up-to-date features of such a project in Jiangxi province to date, with a total estimated investment cost of RMB17 billion (USD2.5 billion). The project is being carried out in three phases, with the first phase having commenced on 28 December 2021.
The legal landscape of this project is complex, with two integrated water management engineering works for each of the rivers, also a system connecting both, following a PPP construction model that involves many parties including the government, various investors and financiers, as well as all those who must carry out the work and operate the systems after completion.
Gangshang used a creative model of “local government special bonds + market-based financing” to solve the project’s funding problem.
DOMESTIC25
National pipeline group acquires subsidiary equity
CATEGORIES: M&A; pipeline transportation
LEGAL COUNSEL: Zhong Lun Law Firm acted as legal adviser to China Oil & Gas Pipeline Network (PipeChina).
KEY POINTS: PipeChina simultaneously acquired the partial equity of its subsidiary, United Pipeline, from 11 shareholders including New China Life Insurance, Baoshan Iron & Steel, and Youngor Group, at an equity value of more than RMB70 billion (USD10 billion).
Challenges to the transaction included the number and types of counterparties, involving state-owned enterprises, private enterprises, Sino-foreign joint ventures and institutions, as well as the requirement for multiple counterparties to complete their deals on the same day, and the involvement of non-public agreements for transferring state-owned property rights under different authorities.
DOMESTIC26
NCG substantive consolidation
CATEGORIES: Restructuring; construction
LEGAL COUNSEL: Zhong Lun Law Firm, AllBright Law Offices, Fadedongheng Law Firm and Grandall Law Firm acted as legal counsels for the special debt restructuring and the court-appointed joint administrators. Dentons China provided legal services to Zijin Trust.
KEY POINTS: The court approved the substantive consolidation restructuring plan of Nanjing Construction Group and 24 other companies, and Zijin Trust was selected to set up a bankruptcy service trust to pay creditors.
This restructuring project was the first case in China to successfully use out-of-court debt restructuring, pre-reorganisation and judicial reorganisation procedures to resolve the debt risks of a large-scale construction enterprise, and it is also the first typical case of applying pre-restructuring procedures in Nanjing.
The Nanjing Construction Group, a large private construction enterprise group in Jiangsu province, had a debt crisis in late 2018 to the tune of RMB130 billion (USD19.3 billion) confirmed after review, involving more than 100 financial institutions and 2,000 natural person creditors in China.
DOMESTIC27
Puyang Lubao acquires energy stake
CATEGORIES: M&A
LEGAL COUNSEL: AllBright Law Offices advised Shanxi Puyang Lubao Energy Technology, the acquiring entity. King & Wood Mallesons advised Shanxi Jinliu Energy, the acquired entity.
KEY POINTS: Puyang Lubao, a consortium of Hebei Puyang Iron & Steel and Shanxi Lubao Group, successfully acquired 68.4% of the equity of Shanxi Jinliu Energy at a transaction price of RMB10.2 billion (USD1.5 billion), setting a new high for M&A restructuring of energy enterprises in Shanxi Province in recent years.
Shanxi Jinliu Energy, as the receiver of the assets, debts and equity of the former Liansheng Group in bankruptcy restructuring, has a large and diversified business and its mineral resources are predominantly high-quality coking coal.
The counterparties of this acquisition are essentially 15 limited partnerships formed by more than 400 creditors of the former Liansheng Group through debt-to-equity conversion, of which the financial institution creditors held over 52% equity of Shanxi Jinliu Energy. The transaction’s outcome directly affected the interests of these creditors.
DOMESTIC28
Restructure of N-Securities
CATEGORIES: Restructuring; securities
LEGAL COUNSEL: Dentons China advised Compass Technology Development. Grandall Law Firm, DeHeng Law Offices and Liaoning Tongwen Law Firm were administrators of N-Securities.
KEY POINTS: Compass Technology Development, as a reorganisation investor, invested RMB1.5 billion (USD222 million) in N-Securities to settle its debts and acquire 100% of its equity. After completion of the restructuring, Compass Technology Development plans to raise funds of up to RMB3 billion to invest in its wholly owned subsidiary, N-Securities. This project is the first bankruptcy restructuring of a securities company since implementation of the Enterprise Bankruptcy Law on 1 June 2007.
Dentons China assisted Compass Technology Development in drafting the restructuring plan within the statutory period (six months), and completed all internal and external decision-making and approval procedures such as major asset restructuring, administrative licensing and approval of the restructuring plan within three months. The firm also successfully completed payment of restructuring investment and the transfer of control of N-Securities, creating a successful case of market-based restructuring of a financial institution.
DOMESTIC29
SG Automotive spurs minority holders to action
CATEGORIES: Corporate governance; automotive
LEGAL COUNSEL: AnJie Broad Law Firm acted as legal adviser to Shenzhen Zhongneng Green Qihang No. 1 Investment Enterprise, and other small and medium-sized shareholders.
KEY POINTS: SG Automotive proposed to purchase the technology of two discontinued car models from a wholly owned subsidiary of its major shareholder, Huatai Automobile Group, for RMB132 million (USD19.7 million) in September 2021. The transaction was challenged by securities regulators and opposed by Dandong, Liaoning province-based SG Automotive’s minority stakeholders, who called a general shareholder meeting after their objections were ignored.
The case was the first example in the domestic market where minority shareholders have, on their own initiative, made their own announcements through the Shanghai Stock Exchange and successfully convened a shareholders’ meeting, according to AnJie Broad Law Firm.
The minority shareholders of SG Automotive successfully convened a general meeting on 5 May 2022 on their own, bypassing the board of directors and the supervisory board, and completely reshuffling the board.
DOMESTIC30
Shanghai Airport undergoes restructuring
CATEGORIES: Restructuring; aviation
LEGAL COUNSEL: AllBright Law Offices acted as legal adviser to Shanghai Pudong International Airport.
KEY POINTS: Shanghai Airport purchased a number of assets from its controlling shareholder, including 100% of the equity of Shanghai Hongqiao International Airport, 100% equity of Shanghai Airport Group Logistics Development and related assets of the fourth runway of Shanghai Pudong International Airport by way of issuing shares at a transaction price of RMB19.1 billion (USD2.8 billion), making it the largest reorganisation of Shanghai state-owned assets in the past seven years, while raising matching funds of not more than RMB5 billion.
AllBright Law Offices said the difficulties of the transaction included, in some cases, separation of properties and land use rights, special interest arrangements between minority shareholders of certain subsidiaries that may lead to disputes over control of the company after the transaction, and the compliance risks of target companies due to an excessively high proportion of labour dispatch.
DOMESTIC31
Shanghai Airport, Eastern Air Logistics JV
CATEGORIES: Joint venture; logistics services
LEGAL COUNSEL: Boss & Young Attorneys at Law advised Shanghai Airport Group and China Eastern Airlines Logistics on filing the operator concentration of their joint venture. Commerce & Finance Law Offices advised China Eastern Airlines Logistics.
KEY POINTS: Shanghai Airport Group and China Eastern Airlines Logistics plan to establish a JV to engage in intelligent cargo terminal services at Pudong International Airport. According to Boss & Young Attorneys at Law, the business of the JV at Pudong International Airport overlaps and deeply interconnects with the business of Shanghai Airport Group and China Eastern Airlines Logistics.
Due to this the market concentration of the business is high, and the transaction triggered competition concerns from the General Office of State Administration for Market Regulation. The anti-monopoly declaration on the operator concentration of this project was finally approved with conditions, which is the first conditional case not involving foreign investment since the implementation of China’s Anti-Monopoly Law.
DOMESTIC32
Shenyang Dairy’s restructuring
CATEGORIES: Restructuring; dairy
LEGAL COUNSEL: Jincheng Tongda & Neal advised Yuexiu Huishan. Zhong Lun Law Firm acted as a co-administrator. Dentons China advised the creditors’ committee.
KEY POINTS: In September 2022, the Shenyang Intermediate People’s Court approved the bankruptcy restructuring plan of Shenyang Dairy, which had a large number of creditors and liabilities of more than RMB5 billion (USD740 million), all involving complex legal relationships. Yuexiu Huishan, the holding platform established after the successful restructuring of Huishan Dairy, participated as a reorganiser in the restructuring.
The innovative “sale + liquidation + trusteeship operation” model proposed by Jincheng Tongda & Neal facilitated smooth restructuring and may also serve as a reference for other troubled companies.
DOMESTIC33
Shudao Group companies reorganisation
CATEGORIES: Reorganisation
LEGAL COUNSEL: ZHH & Robin advised ShuDao Railway Operation and Management Group and Sichuan ShuDao Urban & Rural Investment Group.
KEY POINTS: The reorganisation and integration of ShuDao Railway Operation and Management Group and Sichuan ShuDao Urban & Rural Investment Group were crucial to ShuDao Investment Group’s reorganisation, involving a railway section and a new urban construction along the transportation route, as well as related diversified industries.
The integration of ShuDao Railway Operation and Management Group involved about RMB20 billion (USD2.9 billion). Sichuan ShuDao Urban & Rural Investment Group has total assets of more than RMB40 billion, land reserves of more than 334 hectares and a total estimated investment of about RMB140 billion in key projects both under construction and completed.
ShuDao Investment Group was restructured from Sichuan Transportation Investment Group and Sichuan Railway Investment Group, and is a Fortune 500 company.
ZHH & Robin conducted due diligence on more than 70 integrated enterprises in total, formulated work plans respectively based on their different legal status and business fields, and provided special guidance on major matters such as debt disposal and employee reassignment.
DOMESTIC34
Trust bank product a first
CATEGORIES: Service trusts
LEGAL COUNSEL: Merits & Tree Law Offices acted as the sole legal adviser to Minmetals International Trust Company.
KEY POINTS: Minmetals International Trust Company has pioneered the establishment of the Wu Jiaoxing Wealth Management Service Trust. It is the industry’s first administrative service trust product, which aims to be a “trust bank” to serve the public. The number of clients has reached 6,000, and the settlement value exceeds RMB10 billion (USD1.5 billion).
Merits & Tree Law Offices pointed out that at the time of this project’s establishment, there were no laws and regulations on “service trusts” in China, so the design of the relevant transaction and compliance structures, and the use of financial technology in the deal were all groundbreaking.
DOMESTIC35
Tsinghua Unigroup’s restructuring
CATEGORIES: Bankruptcy restructuring; integrated circuits
LEGAL COUNSEL: Merits & Tree Law Offices advised on the operator concentration filing for this transaction. JunHe advised the offshore bondholders. Dentons China advised the Financial Institutions Debt Committee. King & Wood Mallesons acted as bankruptcy administrator.
KEY POINTS: Led by Zhilu Capital and Jianguang Asset ‒ a consortium including Great Wall Asset, Hubei Science and Technology Investment, Zhuhai Huafa, and Hebei Industry and Investment Corp ‒ jointly built a restructuring investment platform company to take over 100% of the equity of the reorganised Tsinghua Unigroup at a price of RMB54.9 billion (USD8.2 billion), and settle debts with cash and shares, and debt retention, with an expected settlement rate of 95% to 100%.
There are nearly 300 companies in the Tsinghua Unigroup system, with domestic and overseas operations in a number of jurisdictions, as well as more than 50,000 employees.
The core business sectors involved by the parties to the transaction included, but were not limited to, the design and manufacture of electronic components, and the R&D of electronic terminals. The industries involved were numerous and diverse, including education, insurance, natural gas and semiconductors, all of which made it more difficult to accurately define the markets involved and conduct a competitive analysis of industries. In-depth knowledge of merger control regimes in various jurisdictions was required to facilitate a smooth M&A process.
DOMESTIC36
XCMG’s massive machinery merger with Xuzhou
CATEGORIES: M&A; equipment manufacturing
LEGAL COUNSEL: AllBright Law Offices advised XCMG Construction Machinery on PRC law, while Bird & Bird was its offshore legal adviser.
KEY POINTS: XCMG Construction Machinery merged with Xuzhou Construction Machinery by issuing shares to the target and other shareholders with a value of RMB38.7 billion (USD5.7 billion). It is the largest M&A transaction in China’s equipment manufacturing industry to date. Through this transaction, XCMG will list its core business assets.
AllBright Law Offices says that the project involved the design of the transaction proposal, the state capital approval procedures, the protection mechanism for dissenting shareholders of listed companies, the filing of operator concentration and the securities regulator approval procedures. The deal provides a reference for other state-owned enterprises to carry out large-scale restructuring transactions.
DOMESTIC37
Zhuzhou Huachen’s restructuring
CATEGORIES: Bankruptcy restructuring; real estate
LEGAL COUNSEL: Yingqi Law Firm was an administrator in the restructuring of Zhuzhou Huachen Real Estate Development.
KEY POINTS: Zhuzhou Huachen Real Estate Development and 12 other affiliated enterprises were consolidated and reorganised, which involved more than RMB16.8 billion (USD2.5 billion) in assets, RMB17.9 billion in debts and more than 16,000 property purchasers in the areas of Changsha, Zhuzhou and Ningxiang.
Yingqi Law Firm says that the case sets a record of high efficiency in handling large bankruptcy cases in Hunan province, verifying more than 12,000 assets, reviewing more than 1,300 claims and reducing more than RMB3 billion in claims within 90 days. The case was selected as one of the Top 10 Classic Cases by the High People’s Court of Hunan province in 2021.
Abogen Biosciences series C, C+ financing
CATEGORIES: Financing; pharmaceuticals
LEGAL COUNSEL:Han Kun Law Offices acted as Abogen’s sole counsel. JunHe, AnJie Broad Law Firm and Linklaters advised investors in the series C financing. Fangda Partners advised Softbank Vision Fund, the lead investor in the series C+ financing.
KEY POINTS: Abogen Biosciences, a clinical-stage biotechnology company advancing mRNA-based therapeutics for the treatment of cancer and infectious diseases, completed its USD720 million series C financing and USD300 million series C+ funding.
The C round was led by, among others, Temasek, Invesco Developing Markets, GL Ventures and Yunfeng Capital, while the C+ round three months later was led by Softbank Vision Fund, with participation from Chimera Abu Dhabi, Fortune Ocean and Jinyi Capital. The C round is notable for being one of the largest private biotech funding rounds ever, and easily the largest for a Chinese mRNA vaccine developer.
Proceeds were used to accelerate clinical development of Abogen’s mRNA vaccine candidate against covid-19. Abogen’s first covid-19 vaccine has been granted emergency use approval in Indonesia, while a newer version targeting certain Omicron variants has been approved for clinical trials in the United Arab Emirates. According to a paper co-authored by Abogen’s founder, the company aims for a vaccine capable of remaining stable at ambient temperatures for a week or more, which could help get supplies to rural areas that lack cold chain infrastructure.
Allianz’s debt investment for Tianhe Airport expressway
CATEGORIES: Asset management; infrastructure
LEGAL COUNSEL: DOCVIT Law Firm advised Allianz.
KEY POINTS: Allianz Insurance Asset Management (AIAA), a wholly owned subsidiary of Allianz, the largest insurance company in Europe, secured RMB970 million (USD143 million) in debt investment for Wuhan Airport Expressway Development, with a guarantee from Wuhan Ecological Environment Investment and Development, maturing in six years.
The investment will be used for the repayment of financial institution borrowings in connection with the rerouting of the Wuhan Tianhe Airport expressway, as well as to supplement working capital. The rerouting aims to provide easier access to the airport for traffic, relieving pressure on the road network of the Hubei provincial capital.
AIAA is the first wholly foreign-owned insurance asset management company established in China, following the Sino-EU Investment Agreement in 2020, which made such entities possible.
AMD’s USD35bn acquisition of Xilinx
CATEGORIES: M&A; semiconductor
LEGAL COUNSEL: Skadden advised Xilinx, while Latham & Watkins advised Advanced Micro Devices (AMD).
KEY POINTS: In a seismic exchange in the semiconductor sector, AMD acquired Xilinx, a fellow Nasdaq-listed, US-based integrated circuit producer. Announced in 2020, the acquisition was concluded in February 2022 after regulatory approvals were obtained, with the last major hurdle to clear being a nod from the State Administration for Market Regulation, China’s antitrust authority.
The regulator’s approval, however, came with conditions. In particular, AMD and Xilinx must not force tie-in sales of products or discriminate against customers that purchase one set of products but not another. The enlarged entity should ensure flexibility and programmability of field programmable gate arrays (FPGAs), first invented by Xilinx, and that their development methods are compatible with ARM-based processors.
Finally, the combined firm is required to ensure that its graphics processing unit (GPU) and FPGA products sold to China are interoperable with products in the Chinese market.
Atucha III nuclear power plant project in Argentina
CATEGORIES: Construction; energy; Belt and Road
LEGAL COUNSEL: King & Wood Mallesons advised China National Nuclear Corporation (CNNC).
KEY POINTS: CNNC and Nucleoeléctrica Argentina entered into an engineering, procurement and construction (EPC) contract for the development of the USD8 billion, 1.2GW Atucha III nuclear power plant. The facility will use the Hualong One third-generation reactor technology, which is fully designed and developed by China and which has an initial service life of 60 years.
Once completed, it will be the first nuclear power project in Latin America employing the Chinese technology, and will help to alleviate the electricity shortage in Argentina. Hualong One has the potential to save 8.2 million tons of CO2 and 3.1 million tons of coal.
The execution of the EPC contract took place as the two countries celebrated their 50 years of bilateral diplomatic relations, following Argentine President Alberto Fernández’s February 2022 trip to Beijing and the country’s formal joining of the Belt and Road network.
AVIC Composite JV with Evonik subsidiaries
CATEGORIES: Joint venture; aviation
LEGAL COUNSEL: Grandall Law Firm advised AVIC Composite.
KEY POINTS: AVIC Composite, a wholly owned subsidiary of AVIC Aviation High-Technology, partnered with Yuhua Rongtou Linkage (Xiamen) and two of Evonik subsidiaries in China, Evonik Operations and Evonik China, to set up AVIC-Evonik Composite Technology (Shanghai), a polymethacrylimide (PMI) foam joint venture.
With a 51% indirect shareholding through its subsidiaries, the Aviation Industry Corporation of China (AVIC) is the de facto controller of the JV. Due to its lightweight and heat-resistant attributes, PMI foam is a major material used in the exterior structures of aircraft, helicopters and space vehicles.
According to Grandall, the project faced political and economic challenges, especially with AVIC included in the US entity negative list. To navigate the complicated and fickle international policy landscape, the parties also negotiated on licensing of technologies, utilities and other services in order to localise raw material supply and maintain technical stability.
Bosai invests in Malaysia circular economy project
CATEGORIES: Project financing; Belt and Road
LEGAL COUNSEL: ZHH & Robin advised Bosai Mining on PRC law.
KEY POINTS: Chongqing-based Bosai Mining invested RMB17.5 billion (USD2.6 billion) to set up a circular economy electrolytic aluminium project in the Malaysia-China Kuantan Industrial Park (MCKIP).
The project is expected to bring in annual sales of RMB35 billion, create 5,000 local jobs, and add 10 million tonnes of cargo capacity and 150,000 TEUs to the Kuantan Port. Using green processing and recyclable energy technologies, the project will fill a gap in Malaysia’s alumina and electrolytic manganese production, while the majority of coke, alumina, silicon-manganese alloys and other produce will be sold back to China.
The MCKIP is one of two industrial parks jointly established by China and Malaysia for trade co-operation, the other being in Guangxi, China. Bosai’s project is the largest investment project in the MCKIP.
BPEA’s sale of HCP Packaging to Carlyle
CATEGORIES: M&A; private equity; cosmetics
LEGAL COUNSEL: Weil acted as lead counsel to BPEA. Kirkland & Ellis advised Carlyle, while Walkers served as BVI and Cayman Islands counsel to Carlyle.
KEY POINTS: Baring Private Equity Asia (BPEA) completed its sale to Carlyle of 100% of HCP Packaging, a global leader in the design, development and manufacture of cosmetics packaging. BPEA acquired HCP from TPG Capital in 2016.
HCP, based in Shanghai, is a global leader in the design, development and manufacture of packaging for cosmetics, with production and manufacturing facilities across China, the US, Mexico and Europe. Its clients include leading cosmetics, skincare and fragrance brands, such as Estée Lauder, L’Oréal and Shiseido.
Weil, which also advised BPEA in the 2016 acquisition, considers the sale “one of the most significant secondary buyouts in recent years”.
Cell C’s restructuring and recapitalisation
CATEGORIES: Restructuring; telecommunications
LEGAL COUNSEL: Mayer Brown acted as UK legal counsel to China Development Bank (CDB), a lender. Webber Wentzel advised the CDB on South African law. Linklaters advised certain creditors on UK law. DLA Piper advised certain creditors on South African law. White & Case advised the Industrial and Commercial Bank of China (ICBC) on UK and South African law.
KEY POINTS: Cell C, the fourth-largest mobile operator in South Africa, completed its financial restructuring and recapitalisation, concluding its three-year turnaround plan after piling up debts of ZAR8 billion (USD460 million).
Some of Cell C’s lenders will convert their loans into shares in the business, and Blue Label Telecoms, a Johannesburg Stock Exchange-listed firm that owns 45% of Cell C, plans to buy its prepaid airtime to help inject capital into the cell phone service provider.
According to Mayer Brown, the restructuring was complicated due to the large number of stakeholders involved, and the necessity to maintain both regulatory compliance and political sensitivity.
Chinachem and ESR cold storage JV
CATEGORIES: Joint venture; real estate; logistics
LEGAL COUNSEL: Slaughter and May advised Chinachem, Mayer Brown advised ESR, and Carey Olsen advised the five lenders on BVI and Cayman Islands law.
KEY POINTS: Chinachem Group, a leading Hong Kong property developer, entered into a JV with ESR, the largest real estate manager in the Asia-Pacific region, to develop a seven-storey cold storage and logistics facility in Kwai Chung, Hong Kong, expected to be completed in 2027.
United Overseas Bank, Sumitomo Mitsui Banking Corp, Mitsubishi UFJ Financial Group, OCBC Wing Hang Bank and CITIC Bank made capital commitments totalling HKD14 billion (USD1.8 billion).
Demand for logistics space is high in Hong Kong, and the proposed facility addresses a gap in the market. For the next four years, no new supply of cold logistics is expected, while about a million square feet of cold storage space will be converted into data centres.
CMOC’s financing in Brazil mine
CATEGORIES: Structured financing; mining
LEGAL COUNSEL: White & Case and Dias Carneiro Advogados advised CMOC Group. Baker–McKenzie FenXun acted for the leading financier, China Construction Bank.
KEY POINTS: CMOC Group, the world´s second-largest miner of niobium, used in rockets, jet engines and high-end magnets, secured a USD600 million bridge and pre-export financing (PXF) arranged by China Construction Bank and provided by a syndicate of Chinese and international lenders.
The term facility is backed by receivables from CMOC’s niobium exports from Brazil, and the proceeds will be used primarily to fund export activities of CMOC’s subsidiary within the country.
The transaction stands out as one of the largest financings for niobium mining, as well as one of the largest structured commodity finance deals. The PXF term of five years also ranks as one the longest of its kind internationally.
Coca-Cola’s subsidiary disposal in mainland China
CATEGORIES: M&A; food & beverages
LEGAL COUNSEL: Dorsey acted as the lead counsel to Coca-cola. Slaughter and May advised Swire Beverages, a subsidiary of Swire Pacific, while Fangda Partners was Swire’s PRC counsel. Kirkland & Ellis advised China Foods, while JunHe acted as its PRC counsel.
KEY POINTS: Following an agreement in July, Coca-Cola sold its preparation and packaging operations for non-aerated beverage including enhanced water, juice, tea, dairy drinks and coffee in mainland China to subsidiaries of Swire Pacific and China Foods.
In particular, Swire obtained the equity interests in six bottling subsidiaries of Coca-Cola Bottlers Manufacturing (CCBM) in Nanning, Hangzhou, Foshan, Wuhan, Dongguan and Suzhou, while China Foods obtained five subsidiaries based in Yingkou, Jinan, Changsha, Shijiazhuang and Chengdu.
The transaction is expected to improve Coca-Cola’s production and management efficiency in China and leverage the synergy in the supply chain, while distribution and retail of involved brands, such as Minute Maid and Costa Coffee, remain unaffected.
One of the innovative features of the transaction, according to Slaughter and May, is that it has been structured in a way to minimise fund flow, with the considerations to be offset against distributions made by CCBM after the commencement of its subsequent winding-up.
CSGI secures landmark Chile power project
CATEGORIES: Financing; energy; Belt and Road
LEGAL COUNSEL: Eversheds Sutherland acted as the lead international legal adviser to China Southern Power Grid International (HK) (CSGIHK). Dentons China advised China Southern Power Grid. Arteaga Gorziglia was the local Chilean counsel to CSGIHK. Barros & Errázuriz was the Chilean local counsel to the consortium. Clifford Chance acted as lead counsel to ISA. Claro & Cia was the lead counsel to Transelec.
KEY POINTS: CSGIHK, an international investment platform of China Southern Power Grid, formed a consortium with Latin American energy giant ISA and Transelec, the leading transmission company in Chile. Against intense competition, the group won the more than USD2 billion bid for the design, construction, operation, maintenance and financing of the Kimal-Lo Aguirre project in Chile, the first high-voltage direct current (HVDC) power transmission system and the largest transmission project in the country.
The project will connect the northern part of Chile, and its clean-energy power generation, to the central, economic heart of the country, extending over 1,500km and significantly improving the operational efficiency and reliability of Chile’s transmission networks.
Eversheds Sutherland, who advised CSGIHK on the investment structure, due diligence, financing, regulatory review and sanction-related issues, found it a challenge to balance the distinct business focuses and risk appetites of the procurer and the consortium members, being themselves sophisticated and experienced players in the industry.
Energy China EPC of wind power in Uzbekistan
CATEGORIES: Construction; energy; Belt and Road
LEGAL COUNSEL: Pinsent Mason advised Energy China.
KEY POINTS: China Energy International Group entered into an engineering, procurement and construction (EPC) contract with ACWA Power, Saudi Arabia’s largest private sector power and water entity, for the construction of two wind power plants in Bukhara, Uzbekistan. With a combined capacity of 1,000MW and value of about USD2 billion, it is one of the largest wind projects in Central Asia.
China is the second-largest trade partner for Uzbekistan. The project is believed to play an important role both in China’s Belt and Road Initiative and Uzbekistan’s efforts to improve its energy mix by increasing its renewable energy capacity.
EQT’s USD7.5bn merger with BPEA
CATEGORIES: M&A; private equity
LEGAL COUNSEL: Paul Weiss, Simpson Thacher and Mannheimer Swartling advised Baring Private Equity Asia (BPEA). Kirkland & Ellis advised EQT. Maples Group acted as BVI and Cayman Islands counsel for EQT.
KEY POINTS: Stockholm-based EQT, one of the world’s biggest private market firms, completed its EUR6.8 billion (USD7.5 billion) merger with Hong Kong-based BPEA. Under the terms of the deal, BPEA received 191.2 million new ordinary EQT shares and EUR1.6 billion in cash. EQT funded the transaction with cash and the net proceeds from a EUR1.5 billion sustainability-linked bond issuance in April 2022.
The combined entity, BPEA EQT, is a global leader in active ownership strategies, combining BPEA’s strong presence in Asia and EQT’s expertise in areas such as sustainability and digitalisation. The transaction has been referred to by Maples Group as one of the largest deals in the alternatives space to date.
ESR purchase of logistics assets from DLJ
CATEGORIES: M&A; logistics; real estate
LEGAL COUNSEL: Global Law Office advised ESR and a leading global institutional investor. Oldham Li & Nie acted as Hong Kong legal counsel to ESR, while Walkers advised ESR on BVI and Cayman Islands law, and Kieran Bhogilal Shah advised ESR on Seychelles law. Allen & Overy and Patrick Chu Conti Wong Lawyers were DLJ’s offshore counsel. AnJie Broad Law Firm and Jincheng Tongda & Neal acted as DLJ’s PRC counsel.
KEY POINTS: ESR, the largest real estate manager in the Asia-Pacific, acquired an 11-asset portfolio from US-based DLJ Real Estate Capital Partners for RMB4.4 billion (USD656 million).
The portfolio, consisting of logistics and industrial assets spanning 550,000 square metres of gross floor area cross the Yangtze River Delta ‒ including Shanghai, Kunshan, Suzhou, Taicang and Hangzhou ‒ is the largest of its kind sold in the “greater Shanghai” area.
Evergrande’s restructuring of massive offshore debt
CATEGORIES: Debt restructuring; real estate
LEGAL COUNSEL: Kirkland & Ellis and Harneys advised the bondholders. Sidley Austin represented Evergrande.
KEY POINTS: Evergrande, the embattled property giant with USD300 billion in liabilities, came under fire from an ad hoc group of bondholders for failing to have “substantive engagement” over its restructuring plan. The creditors are connected to about USD19 billion of offshore liabilities that Evergrande was deemed to have defaulted on in late 2021.
The group’s subsequent engagement of Harneys, an offshore law firm, indicated a serious consideration of legal action. Evergrande set up a risk management committee to head the restructuring.
While a formal restructuring plan is yet to be announced, various proposals have circulated, including conversion of debts into new bonds, extension of the repayment timetable, and swapping of a portion of creditor’s rights for stakes in Evergrande’s two Hong Hong-listed units, Evergrande Property Services Group and China Evergrande New Energy Vehicle Group.
After years of massive expenditure leading up to its missed debt payments, including an aggressive expansion into the new energy vehicle sector and Ocean Flower Island, an artificial archipelago resort off Hainan, Evergrande is widely seen as a banner example of the recent liquidity woes plaguing China’s property industry. Debt restructuring was prevalent among leading property players in 2022, and a number of similar cases have been selected in Deals of the Year.
Ganfeng Lithium’s acquisition of Lithea
CATEGORIES: M&A, new energy
LEGAL COUNSEL: Baker–Mckenzie FenXun advised GLF International, a subsidiary of Ganfeng Lithium. Harneys acted as Ganfeng’s BVI legal counsel. Mayer Brown advised LSC Lithium, parent of Lithea.
KEY POINTS: Ganfeng Lithium, China’s largest lithium compounds producer, through its wholly owned subsidiary GLF International, acquired 100% equity interests in the Argentina-focused Lithea from the Toronto-based LSC Lithium for USD962 million. Lithea’s main assets include the mining rights to two salt lakes in Argentina able to produce lithium carbonate, a key material for batteries used in EVs. The mining rights to the salt lakes will remain with Lithea.
According to Fastmarkets NewGen, global lithium production surged by 36% year-on-year in 2021. Argentina is notable for having the largest proven lithium reserves in the world. The acquisition comes amid a global rush to secure lithium resources as demand soars for EVs, and Chinese enterprises’ pursuit of gaining access to more resources for producing critical battery metal.
Great River acquisition, take private of Dragon Crown
CATEGORIES: M&A; privatisation; logistics
LEGAL COUNSEL: Tiantai Law Firm advised Great River on Chinese law. DLA Piper and Slaughter and May acted as Hong Kong counsel for Great River, with the former focusing on due diligence and the latter on compliance with SEHK delisting rules. Conyers advised Great River on Cayman Islands law, while Ogier advised it on due diligence under BVI and Cayman Islands law.
KEY POINTS: Great River Smarter Logistics (Hong Kong), an indirect subsidiary of Guangdong Great River Smarter Logistics, completed the privatisation of Dragon Crown Group by way of a voluntary general offer, followed by compulsory acquisition by way of cash at HKD1.6 billion (USD200 million). Dragon Crown delisted from the Stock Exchange of Hong Kong in August 2022.
The transaction marked the first time an A-share company had acquired a Hong Kong-listed company via a general offer and completed the privatisation, which also constituted its own material asset restructuring. Laws of a number of jurisdictions including mainland China, Hong Kong, the BVI and the Cayman Islands, had to be closely followed.
Green loan for Everbright Financial Leasing
CATEGORIES: Banking & finance; ESG
LEGAL COUNSEL: JunHe was the legal counsel for the consortium.
KEY POINTS: A consortium led by Sumitomo Mitsui Banking Corporation (SMBC) and comprising Silicon Valley Bank, DBS Bank and E.SUN Bank provided Everbright Financial Leasing with RMB800 million (USD118 million) in green loans. Proceeds will be used for the placement of wind power assets by Everbright Financial Leasing, for which CCXGF, a third-party professional agency, issued green certification.
This was the first public market RMB-denominated green syndicated loan in China’s domestic leasing industry. Previous green loans of domestic financial institutions were issued to Hong Kong and other overseas markets, making it also the first time the domestic green credit regulations were applied to a loan.
Hong Kong Airlines’ debt restructuring
CATEGORIES: Restructuring; aviation
LEGAL COUNSEL: Latham & Watkins acted as the global legal adviser to Hong Kong Airlines. Walkers advised Hong Kong Airlines on BVI and Cayman Islands law. Zhong Lun Law Firm advised Hong Kong Airlines on PRC law. K&L Gates advised Hong Kong International Aviation Leasing, one of the largest creditors and critical lessors in the restructuring. Stephenson Harwood advised an aircraft lessor and creditor based in mainland China. Clifford Chance advised certain lessors and a borrower. Allen & Overy advised an ad hoc group of USD683 million senior perpetual securities on Hong Kong and UK law. Kobre & Kim provided legal services to certain members of the ad hoc group.
KEY POINTS: Hong Kong Airlines completed its USD6.2 billion debt restructuring, which dealt with more than 90% of its financial and operating liabilities across Hong Kong, mainland China and the UK; the introduction of HKD3 billion (USD384 million) of new equity investment; and the revamping of its fleet and corporate structure. The restructuring plan was heard before courts in the UK and Hong Kong.
Like many others in the industry, Hong Kong Airlines was hit hard by the pandemic and the resulting travel curbs, grounded flights and a series of layoffs. The bankruptcy reorganisation of its parent company, HNA Group, further complicated matters.
In December 2022, the restructuring plan was approved by courts in Hong Kong and London, in time for the airline to benefit from the lifting of most travel restrictions between Hong Kong and mainland China, as well as the rest of the world.
Huayou Cobalt’s Zimbabwe lithium acquisition
CATEGORIES: M&A; mining; Belt and Road
LEGAL COUNSEL: Jingtian & Gongcheng, Morgan Lewis, MinterEllison, and Scanlen & Holderness advised Huayou Cobalt on Chinese, Singaporean, Australian and Zimbabwean law, respectively. King & Wood Mallesons and Manokore Attorneys, a member of DLA Piper Africa, advised Prospect Resources.
KEY POINTS: Huayou Cobalt, a Zhejiang-based lithium-ion battery material producer, acquired 100% of the world-class Arcadia lithium project in Zimbabwe from Prospect Resources, an Australian listed company, and the local minority shareholders for USD422 million.
Huayou Cobalt subsequently invested USD300 million in the Arcadia mine, with plans to build a processing plant and deliver the first batch of lithium-bearing minerals in 2023. Arcadia, located outside Harare, the capital of Zimbabwe, is considered one of the world’s largest hard-rock lithium resources.
Completion of the transaction was preceded by due diligence performed across three jurisdictions, which, according to Jingtian & Gongcheng, lead counsel to Huayou, proved challenging as knowledge of various local laws and businesses, listing rules and regulatory environments were needed to connect legal advice to the commercial aspects of the undertaking.
IDEG launch of digital asset funds
CATEGORIES: Fund establishment; digital assets
LEGAL COUNSEL: Tiang & Partners acted as international lead counsel for IDEG Asset Management. Carey Olsen advised IDEG on BVI and Cayman Islands law.
KEY POINTS: IDEG, a global digital asset manager domiciled in the Cayman Islands, launched three new digital asset funds – the Ethereum Enhanced Portfolio, IDEG Renaissance SP, and IDEG DeFi Tracker SP – within the space of one month.
The Ethereum Enhanced Portfolio is an actively managed fund tracking the price of Ether (ETH). The Renaissance SP is a mixed basket of digital assets that holds public chain, decentralised finance (DeFi), metaverse, Bitcoin and ETH. The DeFi Tracker SP covers the decentralised finance space.
Counsel were responsible for the legal and regulatory aspects of the rapid-fire launches, including the formation and registration of the BVI-approved manager of the funds.
INEOS-Sinopec asset transactions and JV
CATEGORIES: Joint venture; energy
LEGAL COUNSEL: Slaughter and May advised INEOS on international law. JunHe advised INEOS on PRC law. King & Wood Mallesons advised Sinopec.
KEY POINTS: Three back-to-back deals with a combined value of USD7 billion were struck between UK chemical giant INEOS and Sinopec in July 2022.
The first deal saw INEOS buy 50% of Sinopec subsidiary SECCO Petrochemical, including 15% from Sinopec and 35% from Sinopec Shanghai Gaoqiao Petrochemical, for RMB10.5 billion (USD1.6 billion).
Sinopec then bought a 50% stake in INEOS Styrolution Advanced Materials (Ningbo), an ABS plastic venture. Separately, the two giants set up a JV to build a high-density polyethylene plant in Tianjin.
J&T Express USD1bn acquisition of Best
CATEGORIES: M&A; logistics
LEGAL COUNSEL: Han Kun Law Offices represented J&T Express. King & Wood Mallesons advised Best.
KEY POINTS: Indonesia-based J&T Express acquired the China express delivery business of Best, a Hangzhou-headquartered rival, for RMB6.8 billion (USD1 billion).
The acquisition came amid a price war started by J&T in 2019, when it entered the Chinese express delivery market, which was already saturated on the back of the country’s rapid e-commerce expansion. J&T slashed its service price to as low as RMB1, prompting competitors, including the Alibaba-backed Best, to follow suit. Both companies were subsequently penalised by authorities for unfair competition through improper pricing.
The deal, described by Han Kun as a milestone in China’s logistics industry, is structured as a carve-out transaction. Defined as the sale of a subsidiary, division or other part of a larger business, carved-out transactions are usually complex as the lack of standalone financial statements can make valuation difficult, and the “disposed” and “retained” portions of the business often remain interdependent.
JD Logistics acquires Deppon for USD1.4bn
CATEGORIES: M&A; antitrust; logistics
LEGAL COUNSEL: Shihui & Partners represented JD Logistics. DeHeng Law Offices advised Deppon.
KEY POINTS: JD Logistics, the Hong Kong-listed subsidiary of e-commerce giant JD.com, acquired Deppon Logistics, a Shanghai-listed courier, by taking a 99.99% equity stake in Deppon Holdco, which held 66.5% of the issued shares of Deppon Logistics, for RMB9 billion (USD1.4 billion). The deal also triggered a general offer for all the remaining issued shares of Deppon Logistics.
With JD.com dual-listed on the Nasdaq and SEHK, JD Logistics listed on the SEHK and Deppon listed on the SSE, the transaction needed to satisfy disclosure and insider information confidentiality requirements across all three capital markets.
The combination of two leading logistics players drew much regulatory attention. As some of Deppon’s businesses are not allowed to be undertaken by foreign-owned companies, Shihui was required to demonstrate to regulators that, although JD Logistics was an overseas listed company, the transaction did not breach policies on foreign investment. Shihui also made a successful application for a simplified procedure, facilitating the merger filings.
JD Property’s USD800m series B financing
CATEGORIES: Financing; PE/VC
LEGAL COUNSEL: Shihui & Partners advised JD Property on PRC law, while Orrick advised on international law. Latham & Watkins represented Hillhouse Investment and Warburg Pincus, while Walkers advised them on BVI and Cayman law. JunHe advised CPE, one of the investors. Han Kun Law Offices advised investors on PRC law.
KEY POINTS: JD Property, a subsidiary of JD.com and the infrastructure asset management and integrated service platform within the group, raised USD800 million from its series B financing. Investors were led by Hillhouse Investment and Warburg Pincus, both existing shareholders, as well as an undisclosed leading global institutional investor.
JD.com remains the principal shareholder of JD Property. JD Property said the proceeds would be used to support expansion and enhance its infrastructure property management capabilities. The funding round gave the company a valuation of USD8 billion.
The transaction is one of the largest equity financing deals in infrastructure asset management in 2022.
Link REIT’s big sustainability-linked loan
CATEGORIES: Financing; real estate
LEGAL COUNSEL: Slaughter and May advised Link Asset Management
KEY POINTS: Link Asset Management, the manager of Link Real Estate Investment Trust (Link REIT), the largest REIT in Asia, entered into a HKD12 billion (USD1.5 billion) sustainability-linked loan (SLL) facility with 16 banks including Bank of China, DBS, ICBC and Bank of America. The SLL was the largest of its kind among the real estate sector and REITs in Asia upon its completion.
The SLL is directly tethered to Link’s environmental, social and governance strategies and targets. By linking interest rate reductions to sustainability performance targets, Link stands to save borrowing costs if it achieves these targets through its portfolio in Hong Kong and mainland China.
Luckin Coffee debt restructuring
CATEGORIES: Restructuring; food &beverage
LEGAL COUNSEL: Harneys advised Luckin Coffee on Cayman Islands law, while Davis Polk advised it on US law. Campbells acted for the “light touch” joint provisional liquidators from Alvarez & Marsal, while DLA Piper advised them on US law. Carey Olsen and Quinn Emanuel Urquhart & Sullivan advised the bondholders.
KEY POINTS: Luckin Coffee completed restructuring its debts and concluded bankruptcy proceedings, allowing it to resume normal operations. The beverage retail chain secured approval from both the court and creditors for its plan to restructure USD460 million in 0.75% convertible senior notes due 2025 by way of a scheme of arrangement, under which note holders will receive USD320 million in cash plus new bonds.
Luckin also reached a USD175 million settlement of shareholder class-action claims, following a high-profile accounting fraud in 2020 involving the fabrication of retail sales that resulted in a USD180 million penalty payment to the SEC, a temporary halt of trading on the Nasdaq, and changes in top management. A USD250 million capital investment from Centrium Capital and Joy Capital, both PE firms in China, in April 2021 helped Luckin get back on its feet.
M&G’s design application through Hague system
CATEGORIES: Intellectual property
LEGAL COUNSEL: King & Wood Mallesons advised M&G Stationery.
KEY POINTS: M&G Stationery, a Shanghai-listed manufacturer and supplier of writing tools, stationery and related products, completed an international design application through the Hague system with the largest number of selected country combinations. This was accomplished on the same day the Hague route became an option.
The Hague Agreement Concerning the International Registration of Industrial Designs came into effect in China on 5 May 2022, three months after the instrument of accession was deposited to the World Intellectual Property Organisation. Through the Hague system, China’s industrial and creative design rights holders can apply to register and distribute their designs overseas, while foreign rights holders can also apply for design registration in China.
As the Hague system was new in China, there was no precedent of Chinese entities or individuals making such an application. Consequently, the application plan, selection of country combinations and submission method were mapped out based on M&G’s own product characteristics, after King & Wood Mallesons researched and conducted interviews with well-known overseas companies about their applications.
Mengniu incentive scheme for onshore employees
CATEGORIES: Financing; employee incentives
LEGAL COUNSEL: Ogier acted as the BVI and Cayman counsel to Mengniu Dairy. Sullivan & Cromwell advised Mengniu on UK and Hong Kong law. Carey Olsen advised the China Merchants Bank (CMB) on Cayman Islands law, while Fangda Partners advised on PRC and Hong Kong law. Linklaters advised CMB International Securities and BOCI Asia on UK and Hong Kong law.
KEY POINTS: Mengniu Dairy, a leading manufacturer and distributor of dairy products in China, set up an employee incentive scheme worth HKD4.9 billion (USD630 million) in connection with the issue of convertible bonds.
The scheme is structured to benefit Mengniu’s onshore employees in mainland China using a bankruptcy remote structured finance vehicle. It is the first structured finance employee incentive scheme to benefit onshore employees of a Hong Kong-listed Chinese company.
CMB International Securities set up an orphan SPV to purchase the convertible bonds issued by Mengniu and placed by BOCI Asia, and issue repackaging notes backed by the convertible bonds to Mengniu’s onshore employees through the Qualified Domestic Institutional Investors (QDII) scheme.
As part of the scheme, CMB acted as the arranger, original lender and agent in the HKD3.8 billion loan facility to Eaglets International Financial Products. Mengniu, the parent company of Eaglets, provided a guarantee in favour of the bank.
Modern Land restructuring of offshore notes
CATEGORIES: Restructuring; real estate
LEGAL COUNSEL: Sidley Austin and Maples Group advised Modern Land. Kirkland & Ellis acted as counsel for the bondholder committee.
KEY POINTS: Modern Land, a green residence-focused real estate developer, secured approval for the restructuring of USD1.34 billion of offshore notes, which was implemented through a scheme of arrangement in the Cayman Islands, with parallel recognition under chapter 15 of the US Bankruptcy Code.
The restructuring means Modern Land will eliminate USD1.5 billion of debt in default since October 2021. The restructuring consideration consists of a cash redemption of USD23 million and the issuance of five tranches of new notes. The new notes, to be listed on the Singapore Exchange, will mature between 2023 and 2027.
In July 2022, US courts granted chapter 15 recognition of Modern Land’s scheme of arrangement as a foreign main proceeding. That clarified for many offshore-incorporated businesses considering, or in the process of launching, similar restructurings that a US bankruptcy court can recognise a foreign scheme of arrangement, and provide for a valid discharge and compromise of debt obligations governed by US law.
Omnix OFC first to re-domicile in HK
CATEGORIES: Fund establishment
LEGAL COUNSEL: Deacons advised Omnix Capital.
KEY POINTS: Omnix Capital, a Hong Kong-based investment manager, completed the re-domiciliation of its standalone fund in the Cayman Islands to Hong Kong as an open-ended fund company (OFC). Omnix Asia Fund Limited OFC became the first fund to re-domicile to Hong Kong since the financial hub enacted the relevant regime in November 2021.
The relocation, according to Deacons, will enable the fund to save maintenance costs while maintaining its track record and legal continuity. Costs associated with the move will also be eligible for an SFC grant scheme that covers the majority of local service provider fees.
PDSTI investment in Icon Aircraft
CATEGORIES: M&A; aviation
LEGAL COUNSEL: Gibson Dunn advised Shanghai Pudong Science and Technology Investment (PDSTI). Sidley Austin was counsel to Icon Aircraft.
KEY POINTS: PDSTI obtained unconditional approval from the Committee on Foreign Investment in the United States (CFIUS) in February 2022 for its 2017 investment in Icon Aircraft, a US manufacturer of recreational amphibious aircraft. Due to that investment, PDSTI holds 47% of Icon and has the right to appoint a majority of its board.
In June 2021, five US-based Icon minority shareholders filed a derivative lawsuit against PDSTI and its affiliates, among others, in the Delaware Court of Chancery, alleging that the defendants are working to expropriate Icon’s assets to China. Before PDSTI could move to dismiss, the same shareholders reported PDSTI’s non-notified 2017 transaction to the CFIUS, commencing a months-long process. Effectively, the shareholders weaponised the CFIUS national security process.
Despite heightened US scrutiny of Chinese investment in recent years, and concerted efforts by these shareholders to urge the CFIUS to order forced divestiture, PDSTI and Icon successfully obtained unconditional approval without any mitigation measures, after a thorough and comprehensive review and investigation by the CFIUS.
Pioneering roles in Saudi EV project
CATEGORIES: Construction; new energy; Belt and Road
LEGAL COUNSEL: Pinsent Masons advised the Shanghai Institute of Mechanical & Electrical Engineering (SIMEE).
KEY POINTS: The SIMEE was engaged to design and develop one of the first EV manufacturing complexes in Saudi Arabia for Ceer, which became the country’s first homegrown EV brand when it was unveiled in November 2022. Foxconn, the Taiwan-based contract manufacturing giant, is one of Ceer’s partners in the project, with the first EV cars due to hit Middle Eastern and North African markets from 2025.
Saudi Arabia, the world’s biggest oil exporter, is looking to reduce its dependence on hydrocarbons and the EV plant is seen as part of that goal as well as other development objectives under the Saudi Vision 2030.
R&F’s restructuring of 10 offshore bonds
CATEGORIES: Restructuring; real estate
LEGAL COUNSEL: Sidley Austin advised R&F Properties. Linklaters acted as the international legal adviser to the lead solicitation agent JP Morgan Securities and co-solicitation agent Arta Global Markets while JunHe advised on PRC law.
KEY POINTS: Guangzhou-headquartered R&F Properties received approval from its offshore bondholders to restructure its outstanding debt, including 10 tranches of offshore bonds amounting to USD4.9 billion. The bonds, due between 2022 and 2024, were regrouped into three amortisation notes maturing in 2025, 2027 and 2028, respectively.
The old bonds have been written off and delisted, while new notes worth USD5.1 billion were listed on the Singapore Exchange. Reportedly the largest restructuring of public real estate debt in Asia to date, the deal granted R&F four years of breathing room.
The transaction was implemented through a consent solicitation for proposed waivers and amendment, which required holders of all 10 series of original notes to be on board.
Redco’s tender offer and consent solicitations
CATEGORIES: Debt restructuring; real estate
LEGAL COUNSEL: Sidley Austin advised Redco Properties Group. Conyers advised Redco on BVI and Cayman Islands law. JunHe was Redco’s lead counsel on PRC law. White & Case advised the dealer manager on US law, while Commerce & Finance advised the dealer manager on PRC law.
KEY POINTS: Redco, a leading property developer in China, launched and successfully completed a USD904 million tender offer for its existing 8.0% senior notes due 2022, 11.0% senior notes due 2022 and 13.0% senior notes due 2023; consent solicitation with respect to certain proposed amendments to the above-mentioned 11.0% and 13.0% senior notes; and the concurrent consent solicitation with respect to certain proposed amendments to its outstanding 10.5% senior notes due 2023 and 9.9% senior notes due 2024.
The transaction was critical to Redco’s liability management exercise, allowing the company to extend the maturity of senior notes with original principal payment obligations in 2022. The tender offer, according to Sidley Austin, was done concurrently with the extension of certain other debt obligations to provide Redco with a more stable capital structure.
RiseSun’s scheme of arrangement in BVI
CATEGORIES: Debt restructuring; real estate
LEGAL COUNSEL: Harneys advised RiseSun on BVI law. Sidley Austin acted as the onshore legal counsel for RiseSun. DeHeng Law Offices advised RiseSun on PRC law. Tian Yuan Law Firm advised Haitong International Securities, the dealer manager of RiseSun.
KEY POINTS: RiseSun Real Estate Development implemented a scheme of arrangement to restructure its USD780 million in offshore notes issued on the Singapore Exchange. With the scheme coming into effect in March 2022, RiseSun became the first Chinese real
estate company to complete an offshore restructuring of its debt since 2016.
After RiseSun defaulted on two tranches of notes, RongXingDa, the offshore note issuer of RiseSun, obtained permission from the Eastern Caribbean Supreme Court to convene a creditors’ meeting, during which the proposed scheme of arrangement garnered 98% support, the highest among recent comparable Chinese real estate schemes.
The scheme, launched just 60 days after it received sanction, released both RongXingDa and RiseSun from their obligations under the existing notes, which were exchanged for a cash payment and new notes with extended maturities.
Royalty-backed financing of Yisheng Biopharma
CATEGORIES: Financing; life science
LEGAL COUNSEL: Sidley Austin advised R-Bridge Healthcare Fund, while Maples Group acted as Cayman Islands counsel for the fund. Clifford Chance advised Yisheng Biopharma.
KEY POINTS: Private equity R-Bridge Healthcare Fund struck a USD40 million royalty-backed financing for Yisheng Biopharma, the first deal of its type in China’s biopharmaceutical industry.
Royalty-backed financing, a trade-off between equity investment and bond investment, has traditionally seen more action in the oil, gas and mining industries. The lack of market precedence in the biopharmaceutical field, according to Sidley Austin, added to the complexity in tailoring a royalty deed compatible with Yisheng’s tax requirements.
CBC Group, the parent company of R-Bridge Healthcare Fund, is the largest healthcare-focused private equity player in Asia, and the only investment fund in China that provides royalty-backed financing.
Samson Paper’s cross-border restructuring
CATEGORIES: Restructuring; industry
LEGAL COUNSEL: Jones Day advised Samson Paper on Hong Kong law. Harneys and Walkers advised Samson Paper on Bermuda law, and Dentons China advised it on PRC law. Seyfarth Shaw advised the investor on Hong Kong law.
KEY POINTS: Samson Paper, the Hong Kong-headquartered paper manufacturer and supplier, resumed trading on the Hong Kong stock exchange after the company´s shares were suspended for a year-and-a-half.
The company completed its USD385 million restructuring across Bermuda, mainland China and Hong Kong, involving capital and business reorganisation, the issue of new securities, and entry into a scheme of arrangement, which was notable for being the first to be sanctioned by a Hong Kong court following further revision after creditor approval.
During the restructuring, the Hong Kong court, based on a co-operation mechanism between Hong Kong and mainland courts in relation to mutual recognition of insolvency processes, granted an order for the issuance of a letter of request to the Shenzhen Intermediate People’s Court for dealing with Samson’s assets in Shenzhen. It was the first time such a grant was made since the mechanism took effect in May 2021.
Shanghai Port debuts LNG services
CATEGORIES: Joint venture; shipping
LEGAL COUNSEL: Wintell & Co advised Shanghai International Port Group (SIPG). Herbert Smith Freehills advised Avenir LNG.
KEY POINTS: In March 2022, Shanghai Port completed the first ship-to-ship liquefied natural gas (LNG) simultaneous refuelling operation at a Chinese port, becoming the third port in the world with LNG bunkering capabilities after Rotterdam and Singapore.
The upgrade was made possible by the establishment of Shanghai SIPG Energy Service (SSES), a joint venture between SIPG and Shenergy Group, and the importing of Avenir Allegiance, the world’s largest LNG bunkering vessel, from UK-based Avenir LNG. Under a long-term co-operation agreement between Avenir and SSES, Avenir will handle the global marketing of LNG bunkering services in Shanghai Port.
After some deliberation, Wintell proposed the execution of a sale and purchase agreement between Avenir and SSES, separate from Avenir’s original shipbuilding and delivery contract for the vessel. The parallel execution of two contracts is designed to improve negotiation efficiency compared with a novation agreement, the traditional go-to method in shipping contracts.
Shimao secures USD1.5bn loan from UOB
CATEGORIES: Restructuring; refinancing; real estate
LEGAL COUNSEL: Sidley Austin advised Adventure Success, while Appleby acted as its BVI and Cayman Islands counsel. Stephenson Harwood advised the United Overseas Bank (UOB).
KEY POINTS: Singapore-based UOB settled its dispute with Shimao, one of China’s largest real estate developers, by buying out original syndicated loan facilities to Adventure Success, a subsidiary of Shimao, and replacing them with new facilities with a value of about USD1.5 billion.
Shimao is undergoing offshore debt restructuring amid challenging conditions facing the Chinese property market. In July, UOB sued Shimao over its alleged breach of certain terms under the original 2017 loan facility agreement with UOB and other lenders, including the Bank of Communications, ICBC, HSBC and Hang Seng Bank. UOB has now bought out full rights to the original loan. The restructured loan will fund the ongoing construction and preserve the value of the Tai Wo Ping (TWP) project in Kowloon, Hong Kong. The loans were also structured to be ring-fenced from Shimao’s holistic offshore debt restructuring, but still permit the TWP project to form part of the asset package as a supplemental credit enhancement for the restructured debts.
Sidley Austin advised on various equitisation transactions prior to the loan restructuring to balance creditor interests.
Tsingshan’s restructure after LME nickel crisis
CATEGORIES: Restructuring; metals
LEGAL COUNSEL: Linklaters was UK counsel for the bank consortium. CMS China advised the Bank of China, the lead PRC bank, while Clifford Chance advised Macquarie Bank and Norton Rose Fulbright advised the Industrial and Commercial Bank of China. Reed Smith advised the debtor group.
KEY POINTS: Tsingshan Holding Group, a stainless steel and nickel giant, reached a standstill agreement with a bank consortium that included JPMorgan and Standard Chartered in March, under which the banks would not make margin calls or close out Tsingshan’s nickel positions, while allowing for the provision of a new secured credit facility.
Tsingshan found itself at the centre of a high-profile crisis when it was caught holding a large short position on nickel when sanctions against Russia over its invasion of Ukraine sent prices of the metal soaring more than threefold. The London Metal Exchange briefly halted nickel dealings and Tsingshan faced billions of dollars in losses.
With the restructuring, Tsingshan successfully avoided insolvency or court action.
Unifrax acquisition of shares in Luyang
CATEGORIES: M&A; industry
LEGAL COUNSEL: Llinks Law Offices advised Unifrax Asia-Pacific, while Haiwen & Partners acted as PRC legal counsel for Morgan Stanley Securities (China), the sole financial adviser of Unifrax.
KEY POINTS: Unifrax Asia-Pacific, the Hong Kong-based subsidiary of the global speciality materials multinational, acquired shares in Luyang Energy-Saving Materials through a partial tender offer for RMB2.7 billion (USD398 million).
The offer raised Unifrax’s stake in Shenzhen-listed Luyang to 53% from 28%. On completion, it was the largest A-share partial tender offer completed in 2022 at that time, as well as the largest single foreign-to-domestic investment in the speciality chemicals segment of the A-share market.
Insights on Unifrax’s strategic investment in LuyangBy Selena She and Zhang Zhengyi, Llinks Law Offices |
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USD9.1bn loan to Amur GCC in Russia
CATEGORIES: Project financing; chemicals
LEGAL COUNSEL: Linklaters and DeHeng Law Offices provided legal advice for the lending consortium. White & Case advised Amur Gas Chemical Complex (Amur GCC).
KEY POINTS: A consortium comprising Chinese, Russian and international banks provided USD9.1 billion in loans to Russia’s Amur GCC project. The loans, maturing in 2035, consisted of: USD2.6 billion from international banks, covered by SACE and Euler Hermes, export credit agencies in Italy and Germany, respectively; and USD6.5 billion issued by Chinese and Russian banks.
Amur GCC ‒ owned by Sibur, the largest integrated petrochemicals company in Russia, and Sinopec ‒ is set for launch in 2024 and will produce 2.3 million tonnes of polyethylene and 400,000 tonnes of polypropylene a year, which would make it one of the world’s largest natural gas polymer plants.
Sinopec, who indirectly holds 40% equity in Amur GCC, signed a debt repayment commitment in proportion to its shareholding as a guarantee, for which DeHeng issued its legal opinions and memorandum, in addition to assisting the consortium with Chinese law-related proceedings and obtaining approvals from Chinese authorities.
Wallaby Medical’s acquisition of Phenox, Femtos
CATEGORIES: M&A; medical devices
LEGAL COUNSEL: Han Kun Law Offices advised Wallaby Medical on PRC law. YPOG advised Wallaby on German law. Wilson Sonsini acted as Wallaby’s international counsel. Skadden advised the seller group, while King & Wood Mallesons advised the lender group.
KEY POINTS: Wallaby Medical, a global developer of neurovascular intervention products for treating strokes, acquired Phenox, a global innovation and technology leader in the neurovascular space, for about EUR500 million (USD543 million). The acquisition also included the German company’s Femtos unit, an incubator for advanced medical technologies focusing on the development and manufacture of next-generation neurovascular devices to treat strokes.
The deal was one of the largest cross-border transactions in the medical device industry globally in recent years, enabling the combined company to become a world leader in a wide range of neurovascular technologies and solutions. Wallaby funded the transaction with proceeds from its latest series D funding, details of which were not disclosed.
Wanda’s transfer of Legendary stake to Apollo
CATEGORIES: M&A; entertainment
LEGAL COUNSEL: Han Kun Law Offices and K&L Gates advised Wanda on PRC and US law, respectively. Paul Weiss acted as US legal counsel for Legendary Entertainment.
KEY POINTS: Wanda, the Chinese real estate and investment conglomerate founded in Dalian, sold a minority share in Legendary Pictures to Apollo, a global private equity firm, for USD770 million. The deal saw Legendary regain operational, strategic and creative control of the company, while Wanda remained a majority shareholder.
Legendary Pictures has produced critical or box office successes such as Interstellar (2014), Jurassic World (2015) and BlacKkKlansman (2018). In 2021, Legendary had its most profitable year on record, with productions such as Dune and Godzilla vs. Kong.
The deal is a follow-up to Wanda’s USD3.5 billion purchase of Legendary in 2016, the largest cross-border entertainment acquisition by a Chinese company.
Wise Road’s acquisition of ASE Technology
CATEGORIES: M&A; semiconductors
LEGAL COUNSEL: DLA Piper advised Wise Road Capital, while Baker McKenzie and King & Wood Mallesons advised ASE Technology.
KEY POINTS: Wise Road Capital, a Beijing-based technology-focused global private equity fund, entered into a sale and purchase agreement with Kaohsiung-based semiconductor giant ASE Technology, under which ASE, the world’s biggest chip-packaging and testing service provider, sold shares and equity interests in its subsidiaries GAPT and ASE (Kun Shan), to Wise Road for USD1.46 billion.
GAPT directly or indirectly holds 100% equity interests in four subsidiaries in Hong Kong, Weihai, Suzhou and Shanghai. According to DLA Piper, the transaction was complicated by tightened market regulation in Taiwan to protect sensitive technologies.
Dispute01
AstraZeneca, Aosaikang patent infringement dispute
CATEGORIES: Patents; judicial review
LEGAL COUNSEL: In the second-instance proceedings before the Supreme People’s Court (SPC), Global Law Office and Zhibang Law Firm represented AstraZeneca, and Grandall Law Firm represented Aosaikang Pharmaceutical. In the first-instance proceedings, JunHe represented AstraZeneca.
KEY POINTS: In reviewing an application for withdrawal of an appeal, the SPC found that a reverse payment agreement between a brand name drug manufacturer and a generic drug manufacturer might violate anti-monopoly laws, and proactively initiated the first judicial review of such an arrangement, clarifying the rules for anti-monopoly risk review on similar agreements in China.
Previously, patent settlement agreements were effectively exempt from anti-monopoly scrutiny in China. The case sparked a heated discussion in the country’s pharmaceutical industry and was also selected by the SPC as one of its 50 exemplary intellectual property cases in 2021.
The patent in question was for a certain diabetes drug, which was transferred to AstraZeneca by the original patent owner, Bristol-Myers Squibb (BMS), in 2014 and expired in March 2021.
In 2011, Jiangsu Vcare PharmaTech filed to have the patent invalidated. Later, Vcare entered into a settlement agreement with BMS where Vcare would withdraw its invalidation filing and BMS and its successor patent owner would undertake not to pursue Vcare and its related party, Aosaikang Pharmaceutical, for their actions with the patent in question since 2016.
Subsequently, Vcare complied with the agreement to withdraw the invalidation filing, and Aosaikang filed for registration, manufacture, use, offering for sale and sale of the drug after the agreed date.
In April 2019, AstraZeneca sued Aosaikang before the Nanjing Intermediate People’s Court on the grounds that Aosaikang’s actions constituted patent infringement, which was dismissed by the court. AstraZeneca appealed to the SPC and then withdrew the appeal as it had reached a settlement with Aosaikang.
Dispute02
AVA, Wittco cargo delivery dispute
CATEGORIES: Supply chain; commodities
LEGAL COUNSEL: Wang Jing & Co represented the seller, AVA Petroleum Services.
KEY POINTS: In a cross-border oil-product sale and purchase transaction, after unsuccessful communication with the downstream buyer, Wittco, Wang Jing & Co promptly filed a lawsuit and preserved the goods, prompting the buyer to sit down and negotiate. The parties eventually reached a settlement. Due to the covid pandemic, the buyer and the end buyer were unable to take delivery of the goods in time, resulting in huge storage costs and breach of contract fees, and affecting the execution of the seller’s other transactions.
Wittco’s failure to pick up the bitumen mixture stored in the seller’s leased tanks in time incurred significant heating and storage fees. The wharf then sent letters urging the seller to settle its account, and did not allow the seller to load other goods into the tanks, which prevented the seller’s goods under other transactions from being discharged as scheduled, resulting in high ship demurrage fees. During this period, the buyer also transferred ownership of the goods to a third party.
Such cross-border commodity transactions are usually closely interlocked, and a break in a transaction at one point will trigger a series of defaults. As a result, disputes often involve multiple parties and outstanding matters under various contracts, placing high demands on lawyers’ legal timing and ability in handling complex cases on multiple fronts.
Dispute03
Baiyue Media, Zhongcheng dispute over film release
CATEGORIES: Copyright; domain names
LEGAL COUNSEL: Ruizhixuan Law Firm represented the plaintiff, Baiyue Media, Chuanda Law Firm represented the defendant, Zhongcheng Industry, and Chang Tsi & Partners represented the third party, Alibaba Cloud.
KEY POINTS: Zhongcheng Industry did not file in a timely manner for cancellation of the internet content provider (ICP) licence for its website after the expiration of the domain name. This was registered by others and used to direct traffic to a website that released a film to the public without the permission of Baiyue Media, the owner of the rights to the film.
The actual infringer was difficult to identify, so Baiyue sued Zhongcheng, as the ICP licence filer, for infringement of copyright in the People’s Court of Chengdu Hi-Tech Industrial Development Zone.
Chengdu Shihang Software Development and Alibaba Cloud, as the agent and service provider for domain name registration, respectively, were added as co-defendants by Zhongcheng Industry.
During the proceeding, Alibaba Cloud explained to the court the rules behind domain names and the difference between domain names and websites, and the fact that domain name registration is a different process to website building and ICP filing. The court listed Shihang and Alibaba as third parties and rejected the plaintiff’s claims.
In its judgment, the court ruled that ICP filing/registration information was prima facie evidence with presumptive effect, and if there was sufficient evidence to prove that the filing entity was not the actual operator of the website in dispute, such information alone should not be used to identify the filing entity the infringer.
Dispute04
Blahnik wins long copycat TM battle
CATEGORIES: Trademarks; footwear and apparel
LEGAL COUNSEL: Wanhuida Intellectual Property represented Manolo Blahnik before the Supreme People’s Court (SPC), while DLA Piper acted as the exclusive adviser to the shoe designer.
KEY POINTS: Manolo Blahnik successfully invalidated through a retrial proceeding the registration of the trademark “MANOLO&BLAHNIK (马诺罗·贝丽嘉)” filed in class 25 by a Chinese squatter in 1999, based on the designer’s name right and the bad faith of the registrant, putting an end to a 22-year trademark battle. The decision will pave the way for Manolo Blahnik’s entry into the Chinese market.
The case exhausted almost every available remedial route, including the opposition, review of opposition, two instances of administrative suits, invalidation and ensuing administrative suits, which all failed. The retrial decision turned the table for the renowned shoe designer in his decades-long battle against the copycat.
The SPC found that the registration of the mark violated article 31 of Trademark Law 2001, as it contained the full name “MANOLO BLAHNIK”, and the plaintiff could not make a reasonable explanation to justify the creation of the mark. The registration of the mark infringed Manolo Blahnik’s name right and should be invalidated. After successive unfavourable decisions, in 2020, a retrial application was filed on behalf of Blahnik before the SPC. Wanhuida assisted Blahnik in collecting new evidence in Hong Kong and mainland China about the fame of the Manolo Blahnik brand, and in conducting an in-depth investigation on Fang and his business to gather evidence of his bad faith and to prove that he was a player in the footwear industry.
Dispute05
Covid swab patent litigation before US ITC
CATEGORIES: International trade; section 337 investigation
LEGAL COUNSEL: Covington represented seven Chinese companies including Wuxi NEST Biotechnology, Changfeng Medical Industry and Huachenyang (Shenzhen) Technology, that manufacture a special type of swab used in covid testing.
KEY POINTS: Covington secured an important victory before the US International Trade Commission (ITC) on behalf of its Chinese clients in an administrative proceeding initiated by Italian swab maker Copan Italia and its affiliated Copan Industries. The success defending against alleged patent infringement in violation of section 337 of the US Tariff Act ensured they were able to access the US market during the pandemic, and served the public interest.
Copan filed a complaint alleging that certain flocked swabs and testing products imported into the US and sold there by Chinese companies infringed its patents in the country. The case raised significant public interest because Copan sought to block a major source of the specialised swabs used in covid testing from the US market.
Following a five-day evidentiary hearing, the administrative law judge ruled that the Chinese companies did not infringe the patents in question and found that the design of one of the companies’ swabs actually was designed around Copan’s flocked swab patents. The initial determination also overturned a significant portion of Copan’s “domestic industry” contentions and evidence, which is a required element for companies to bring section 337 cases in the US.
In recent years, the number of Chinese companies involved in 337 investigations before the ITC has remained high, and with a low success rate for them. However, this situation is changing, as exemplified by this case.
Dispute06
CrossFire sues Crisis Action for copyright infringement
CATEGORIES: Copyright; games
LEGAL COUNSEL: In the first and second-instance proceedings, DeHeng Law Offices represented the plaintiff, Tencent, the exclusive agent and rights holder for the CrossFire game in mainland China. King & Wood Mallesons represented the main defendants, including Gog Games and Hero Games, the developer, operator and distributor of the game Crisis Action.
KEY POINTS: In the five-year copyright and unfair infringement lawsuit between CrossFire and Crisis Action over six game maps and certain props, the Guangdong Provincial High People’s Court modified part of the first-instance ruling of the Shenzhen Intermediate People’s Court. The High Court found that four, rather than six, of the maps constituted infringement, while the remaining maps and other game elements in dispute did not constitute infringement or unfair competition, and revised the amount of damages awarded to the defendant from RMB45 million (USD6.6 million) to RMB25 million.
The case was the first of its kind in China regarding the legal nature of game maps and the determination of infringement, and has received a great deal of attention from the industry. In its initial claim, Tencent sought RMB98 million in damages, the largest sum sought in a game-related case.
The legal characterisation of the game maps involved in this case and the criteria for determining whether they were infringed represented uncharted legal territory. There were no precedents in Chinese courts, or even examples to draw on from judicial authorities in other countries and regions to adjudicate on the specific issue of game maps.
The second-instance judgment of this case was groundbreaking in identifying first person shooting (FPS) game maps as graphic works, and ruling that rehashing game maps constitutes infringement, which protects the spatial layout structure of such maps for the future.
Meanwhile, the judgment fully considered prior works and calculated the profits from infringement at a finer granularity, which not only strictly protected copyright but also took into consideration the incentives for industry innovation.
Dispute07
Cross-professional collaboration on Dyson crackdown
CATEGORIES: IP enforcement
LEGAL COUNSEL: Gowling represented Dyson Technology, and JunZeJun Law Offices assisted in issuing legal documents.
KEY POINTS: Following a report from a member of the public who had purchased a suspected counterfeit Dyson hairdryer online, Gowling worked closely with Dyson, the Yixing Public Security Bureau (PSB) and investigators, leading to the imprisonment of 16 people and the destruction of two counterfeit manufacturing centres and five counterfeit selling centres in Dongguan and Guangzhou.
Based on the law firm’s intensive evidence gathering and general work on the case, the Yixing PSB carried out raids in Dongguan, Guangzhou, Shenzhen, Shanghai, Shaoguan and other cities. After the raids, the Yixing PSB also tracked down and destroyed the counterfeiters’ other online and physical shops with sales and illegal profits involved amounting to over RMB80 million (USD12 million).
In addition, Gowling also worked closely with Alibaba’s offline professional team and effectively stopped the circulation of widespread counterfeit goods in the mainland China market. The case was selected as one of the Alibaba Anti-Counterfeiting Alliance’s (AACA) annual candidate cases.
Through close “cross-professional” co-operation among the law firm, the e-commerce platform and law enforcement agencies, the case broke through the boundaries of geographical jurisdiction and disrupted the cross-regional circulation of counterfeit goods, as well as the source of production and numerous sellers, making it a standout in the field of IP protection in China.
Dispute08
Dismissal of class action against RLX
CATEGORIES: Class action; securities
LEGAL COUNSEL: Skadden represented RLX Technology and Paul Weiss advised the underwriters, while Wolf Haldenstein Adler Freeman & Herz and Scott+Scott Attorneys at Law acted as counsel to the lead plaintiffs.
KEY POINTS: The US District Court for the Southern District of New York granted RLX Technology’s motion to dismiss all claims made in a securities class action against the company seeking to recover damages on behalf of all shareholders who allegedly suffered losses as a result of the company’s alleged misstatements. The lawsuit sought hundreds of millions of US dollars in damages.
RLX is a leading e-vapour company in China. Two months after the company’s US IPO, Chinese regulators proposed national regulations classifying e-cigarettes, including RLX’s products. The plaintiffs alleged that RLX failed to warn that regulators were preparing to introduce “imminent” proposed regulations, and misrepresented the attendant risks in violation of the US Securities Act of 1933.
Skadden said the case was particularly challenging as it involved questions regarding the company’s duty to predict fast-changing Chinese regulations, a topic that has become particularly relevant to numerous Chinese companies across all industries in recent years.
The court held that RLX’s cautionary language contained in its offering documents regarding the prospect of more stringent regulations on e-cigarettes protected it from liability, wording that “would not have left any reasonable investor with the impression that, as to enhanced regulation of e-cigarettes in China, the future [was] settled, or unattended by contingency”.
Dispute09
Dragan Kokotovic, Shanghai Enwo labour dispute
CATEGORIES: Labour contract dispute
LEGAL COUNSEL: Jin Mao Law Firm represented the plaintiff, Dragan Kokotovic.
KEY POINTS: In a labour contract dispute over a foreign football coach’s claim for unpaid wages against a Chinese club, the Supreme People’s Court (SPC), after reviewing the validity of the arbitration agreement in question, revoked the first-instance judgment against the plaintiff on the grounds that the People’s Courts did not have jurisdiction over the matter. The SPC sent the case for a retrial, where the parties eventually settled after the first-instance court’s mediation efforts.
As the former Shanghai JuJu Sports Football Club had not paid in accordance with the labour contract, the Serbian coach applied to the FIFA Players’ Status Chamber to resolve the dispute, and obtained an “arbitration award” requiring JuJu Sports to pay the salary.
JuJu Sports was then dissolved during the period of the ruling and changed to a catering company, Shanghai Enwo Catering Management, and so the chamber’s ruling could not be enforced through the football industry mechanism.
Jin Mao filed a lawsuit with the Shanghai Xuhui District People’s Court, demanding payment from Enwo. However, the court held that the agreement clearly excluded the People’s Court’s jurisdiction, and dismissed Kokotovic’s claim.
The plaintiff appealed and Jin Mao submitted that going to the People’s Court was Kokotovic’s only legal recourse. The case was eventually handed over to the SPC, which opined that the case should be subject to the jurisdiction of the People’s Court and a substantive hearing.
Jin Mao says that after this case, players and coaches of dissolved (or near-dissolved) clubs can directly file claims for unpaid wages and other legal rights with the court where the defendant is located, and that court should conduct a substantive hearing.
Dispute10
First criminal conviction for counterfeit service trademarks
CATEGORIES: Trademarks; IP enforcement
LEGAL COUNSEL: Lusheng Law Firm represented LEGO.
KEY POINTS: After Lusheng collected the evidence and reported the counterfeiting of trademarks, the Shanghai Municipal Procuratorate instituted a prosecution against an education company and its operator for passing the firm off as an authorised LEGO Education learning centre. Following a trial before the Shanghai Third Intermediate People’s Court, both the company and the operator were convicted of counterfeiting a registered trademark and fined RMB200,000 (USD29,500) and RMB60,000, respectively. The operator also received a one-year prison sentence, suspended for one year.
This was the first criminal conviction for counterfeiting service trademarks in China, following amendment XI to the Criminal Law, which for the first time included service marks and came into effect in March 2021.
The operator displayed forged authorisation letters in the store to cheat customers and recruit students. Lusheng followed up on the criminal proceedings throughout, providing verifications and legal opinions in terms of “identical trademarks”, “the same type of service”, and the calculation of the offence, which were adopted by both the prosecutor and the court to help secure a conviction.
Dispute11
FocalTech, Sunvolve patent application dispute
CATEGORIES: Patents; employment invention
LEGAL COUNSEL: In a series of disputes, DeHeng Law Offices represented the plaintiff, FocalTech.
KEY POINTS: The Supreme People’s Court (SPC) held that the inventions involved in this case were all employment inventions, and that the right to patent application belonged to the research and development (R&D) entity FocalTech, which supported and protected the company’s innovation efforts and property rights.
In 2013, the plaintiff began to develop a fingerprint identification technology, and one of the defendants, as senior deputy general manager of FocalTech in charge of the company’s technical R&D, presided over these projects. When FocalTech had almost completed the chip design and decided to carry out trial production, the defendant handed over a number of technologies to a university classmate, a third party, who applied for a patent in his own name to the China National Intellectual Property Administration.
Subsequently, the classmate transferred many of the technologies to Shenzhen Yageng Electronic Technology, another third party in the case in which the defendant had an equity interest. In July 2014, the defendant signed a non-compete agreement with FocalTech. From August to October 2015, Yageng transferred the patents in question to Sunvolve, which was created and controlled by the defendant.
FocalTech filed a patent application right dispute with the Shenzhen Intermediate People’s Court on the grounds that the patents in question were employment inventions, and the relevant rights and interests should be attributed to FocalTech, which was supported by the court of first instance.
Later, the defendant appealed to the Intellectual Property Court of the SPC, and was rejected. While it was difficult to obtain direct evidence of the defendant’s infringement, DeHeng provided a large amount of mutually corroborating circumstantial evidence, which convinced the presiding judges at all levels of courts.
Dispute12
Fuguiniao bonds’ misrepresentation of liability
CATEGORIES: Capital markets; misrepresentation
LEGAL COUNSEL: In several successive court proceedings, Hui Ye Law Firm represented the plaintiffs of multiple bondholders including Colight Asset Management, Goldstate Capital Fund Management, Chang’an Fund Management, China Fund Management and China Re Asset Management. Fangda Partners, King & Wood Mallesons, Zhong Lun Law Firm and Global Law Office represented KPMG, a defendant, while King & Wood Mallesons separately also represented Guotai Junan, also a defendant.
KEY POINTS: After former Chinese shoemaker Fuguiniao Group defaulted on RMB800 million (USD118 million) of bonds, a number of creditors who suffered investment losses filed lawsuits against the paper’s auditor on the grounds that the intermediaries had failed to exercise due diligence and should be jointly and severally liable for the alleged misrepresentation of the issuer.
The Beijing Second Intermediate People’s Court found that KPMG was at fault and liable for the plaintiffs’ investment losses, but only supported about 3% of their claims for each case. These cases are currently being heard by the Beijing High People’s Court in the second instance. In addition, two other bondholders also added Guotai Junan, the lead underwriter of the bonds, as a co-defendant along with KPMG in subsequent lawsuits, which are under way.
According to Hui Ye, in past securities misrepresentation cases, the bond issuer was generally named as the first defendant, while intermediaries were named as second defendants. However, knowing that the bond issuer in the case had gone bankrupt and was objectively unable to bear the liability, the firm took a pioneering step of suing only the intermediaries, avoiding the cumbersome procedural requirements in the bankruptcy proceedings.
The accounting firms involved in previous securities misrepresentation cases were all domestic institutions, whereas KPMG, one of the Big Four international accounting firms, was involved in such litigation for the first time as a defendant in a bond misrepresentation case.
Dispute13
GAMECO, Orient Thai Airlines lien dispute
CATEGORIES: Aviation; Greater Bay Area
LEGAL COUNSEL: ETR Law Firm represented the claimant, Guangzhou Aircraft Maintenance Engineering Company (GAMECO).
KEY POINTS: After obtaining full support from the arbitration tribunal of CIETAC for GAMECO in its claim for repayment of debts from the respondent, Orient Thai Airlines (OTC), and clarifying their debt relationship, GAMECO decided to continue via arbitration to ascertain its lien on four aircraft and entitlement to priority payment of the proceeds of the auction and sale for these assets, which was ultimately upheld by the CIETAC tribunal.
Previously, GAMECO, which provided maintenance services for six of the respondent’s aircraft, applied for arbitration for repayment of more than RMB46 million (USD6.8 million) in various fees owed to it by the respondent, and had declared a lien on four of the aircraft during the CIETAC proceeding.
This case sets an example for future similar disputes to confirm and resolve disputes over aircraft-related debt by way of a lien, as there exists a gap in both legislation and judicial practice in China on whether and how to apply the current legal regime of liens to civil aircraft.
In 2009, ETR’s lead partner in the case also advised in the first international aircraft lien case in the country.
Dispute14
GE enforces HKIAC award in mainland China
CATEGORIES: Cross-border enforcement
LEGAL COUNSEL: In court proceedings in mainland China, Hui Zhong Law Firm represented the former GE Transportation (Shenyang), now a Wabtec company.
KEY POINTS: After attempting to enforce a HKIAC award by filing a claim for compensation in mainland China, which was dismissed by the Liaoning High People’s Court, the court of first instance, GE appealed to the Supreme People’s Court (SPC), which ultimately upheld its claim for RMB54 million (USD7.9 million).
In 2011, GE filed and won an arbitration against A-Power Energy Generation Systems for outstanding payments that exceeded USD300 million. As A-Power’s ultimate controller, Lyu Jinxiang, had transferred the company’s assets to related parties in bad faith, A-Power had no assets to be enforced.
For more than 10 years after the award was rendered, GE initiated enforcement proceedings against A-Power in multiple jurisdictions. In 2016, it filed a lawsuit against Lyu and A-Power’s related parties with the Liaoning High People’s Court for damages, which was not upheld by the court.
According to Hui Zhong, the difficulty of the case was that the dispute involved extremely rare circumstances where the law firm had to pierce the corporate veil of multiple entites and individuals before the SPC via methods in corporate personality denial such as “forward piercing”, “reverse piercing” and “horizontal piercing” to pursue liabilities of Lyu and serveral A-Power’s related companies that had jointly transferred A-Power’s assets.
The SPC found that these entites abused the independence of their legal person’s identity, constituting a joint tort, as a result of which all of them were liable jointly and severally, for A-Power’s liabilities under the HKIAC award.
It is one of the few cases where the corporate veil has actually been successfully pierced and accepted by the court, which will serve as an important reference for future cases.
Dispute15
Golden Arches environmental public interest litigation
CATEGORIES: Environmental public interest litigation
LEGAL COUNSEL: JunHe represented Golden Arches (China) in the first and second instance proceedings.
KEY POINTS: In response to an environmental public interest litigation brought by the Green Volunteer League of Chongqing against Golden Arches, the rebranded McDonald’s China, for its free distribution of disposable tableware and plastic bags on its takeaway platform, the Shanghai High People’s Court upheld the first instance decision and dismissed all of the plaintiff’s claims.
The Green Volunteer League of Chongqing asserted that Golden Arches’ business model of providing cutlery and plastic bags posed a significant risk to the environment, and that the case was therefore of great importance in determining environmental standards for the fast food industry as a whole.
By explaining to the court that the efforts made by Golden Arches to protect the environment, and the compliance of its business model, JunHe succeeded in its argument that the limited number of plastic products had to be used under existing technical conditions.
In practice, environmental public interest litigations are heard on the principle of “reversal of proof”. According to the relevant judicial interpretations, the plaintiff only needs to bear the initial burden of proof to prove that the defendant has acted in a prejudicial manner or that there is a risk of prejudice, and does not need to prove that prejudice has already occurred. Therefore, Golden Arches bore an extremely heavy burden of proof in the case.
Dispute16
Goodix sues WaveTouch over malicious IP suits
CATEGORIES: Patent; malicious litigation; jurisdiction
LEGAL COUNSEL: JunZeJun Law Offices represented Goodix, while An Tian Zhang & Partners represented WaveTouch.
KEY POINTS: Goodix filed a lawsuit against UK company WaveTouch in the Shenzhen Intermediate People’s Court for damages on the grounds that WaveTouch had brought patent lawsuits against it in bad faith in the Dusseldorf Court, in Germany, and the Beijing Intellectual Property Court, hurting its business reputation. The case is currently being heard by the Shenzhen court.
WaveTouch, during the filing of its reply, filed an objection to the jurisdiction of the case, requesting that the case be transferred to the Beijing Intellectual Property Court for trial, which was rejected by the Shenzhen court. WaveTouch, therefore, appealed to the Supreme People’s Court (SPC), which upheld the Shenzhen court’s first instance decision.
JunZeJun said that the SPC’s ruling pioneered a change in the general principle of jurisdiction over malicious litigation damages disputes, clarifying that the local court where the location of the property available for enforcement of foreign subjects could have jurisdiction over such disputes.
The patents in question were fingerprint identification solutions. During the proceedings, Goodix had successfully invalidated two of WaveTouch’s patents of the same family.
Upon investigation, JunZeJun found that WaveTouch had no research and development capabilities, and that the inventor of the company’s patent application in Germany was not known in the field, and had not published any articles or attended professional conferences. During the proceedings in Germany, WaveTouch created non-existent technical solutions by means of photoshop to the court in Dusseldorf, but Goodix and Huawei managed to expose its creation of false evidence by providing the court with the original patent drawings.
Dispute17
Guangzhou rural bank, Sichuan Trust dispute
CATEGORIES: Trust dispute
LEGAL COUNSEL: Zhenghan Law Firm represented the plaintiff, Guangzhou Rural Commercial Bank, while Tahota Law Firm represented the defendant, Sichuan Trust.
KEY POINTS: After being informed that Sichuan Trust had not fulfilled its commitments in respect of the trust scheme to which the plaintiff subscribed, and that it was unable to recover its substantial investment because the trust company was unable to liquidise assets, Guangzhou Rural Commercial Bank filed a lawsuit with the Guangzhou Intermediate People’s Court seeking compensation from Sichuan Trust for its investment loss of RMB621 million (USD91.6 million) plus interest, which was subsequently dismissed by the court of first instance. On appeal, the Guangzhou High People’s Court reversed the outcome of the first-instance judgment and ruled that Sichuan Trust was liable for the RMB621 million.
The second-instance judgment established the trustee’s liability and obligations, and had a significant impact on the trust industry. Previously, most cases of this kind had, as in the first instance, been ruled against the investors because the trust scheme had not been able to be liquidated at the time of the dispute, and the investors’ losses were deemed uncertain.
According to Zhenghan, the case was extremely difficult to prove. There was not enough transparency in the trust investments, making it more difficult for investors to judge the authenticity of the information provided by the trust company, and to detect any improper performance of its management obligations.
Dispute18
Hitachi, Evergrande commercial acceptance bill disputes
CATEGORIES: Commercial acceptance bill; jurisdiction
LEGAL COUNSEL: Jiaxuan Law Firm represented Hitachi (China).
KEY POINTS: As an important supplier of the real estate giant, Evergrande Group, Hitachi has a long history of issuing electronic commercial acceptance bills, a type of credit receivable, as Evergrande’s payment for equipment and installation with Evergrande, and since 2021, with a large amount of Evergrande’s debts overdue, such bills between the two companies also became overdue, involving an amount of RMB600 million (USD88.5 million). After being entrusted by Hitachi, Jiaxuan quickly filed cases across the country and, by means of a flexible litigation strategy, recovered a large amount of money in the early stages, which greatly relieved the pressure on the operations of Hitachi.
According to Jiaxuan, as the defendants of the bills involved were scattered throughout 14 provinces across China, the firm promptly adjusted its litigation strategy and endeavoured to change the centralised jurisdiction of the series of cases from Guangzhou to local courts, so as to maximise the purpose of “local trial and local enforcement”.
In addition, as there were legislative gaps for the electronic commercial acceptance bills, and different local courts had different understandings of various issues, Jiaxuan first determined the rules of adjudication for these gaps in several courts with centralised jurisdiction, and then sought to apply these rules of adjudication to other local courts, achieving high judicial efficiency.
Dispute19
Iflytek, Xuanting Entertainment copyright dispute
CATEGORIES: Copyright
LEGAL COUNSEL: Guantao Law Firm represented Iflytek, while Ronly & Tenwen Partners represented Xuanting Entertainment Information Technology.
KEY POINTS: Xuanting Entertainment, a subsidiary of China’s largest online literature platform, China Literature, filed a copyright infringement lawsuit against Iflytek for a mobile application developed by Iflytech to provide users with free book searches and listening to books through artificial intelligence (AI) real-time voice synthesis technology.
The Hefei HDT Industrial Development Zone People’s Court and the Hefei Central Court both ruled, in first and second instances, that Iflytek did not infringe Xuanting’s copyright of the books involved.
Guantao argued that the AI voice synthesis technology would only generate voice output on its server according to the user’s request, and the text-to-speech (TTS) software did not store audio files in advance, rendering the resulting audio stream not fixed on any tangible material carrier, therefore the TTS technology did not infringe the right of reproduction as stipulated in the Copyright Law.
The case also involved a dispute as to whether the transcoding technology was infringing, making it the first in the field of mobile applications copyright cases. According to Guantao, Iflytech’s victory in the case means that it will no longer be constrained by the risk of possible infringement of transcoding technology in the development of its products, and can devote more resources to the research and development of new products.
Dispute20
iQIYI, Youku, Tencent sue video platforms for copyright
CATEGORIES: Copyright; Short videos
LEGAL COUNSEL: Ronly & Tenwen Partners represented iQIYI, Youku, Tencent.
KEY POINTS: In response to the large number of infringing video clips uploaded by users of films and TV dramas on short-video platforms such as Douyin and Kuaishou, which seriously diverted the viewers of video websites that included iQIYI, Youku and Tencent, causing them losses, the websites filed hundreds of copyright disputes against short-video platforms across the country, and 37 cases have been taken in by courts in Nanjing, Suzhou and Shanghai.
The amount of compensation awarded so far has exceeded RMB10 million (USD1.4 million), with most of the cases awarded more than RMB1 million each, effectively safeguarding the websites’ legitimate rights and interests. The websites are the copyright owners of films and TV dramas, and rely on subscriptions and advertisements as main sources of income.
The series of cases has reached RMB500 million for the amount in dispute, and Ronly & Tenwen has gathered evidence regarding more than 600 works. According to the law firm, the difficulty of the cases centred on whether the short video platform could be found to have edited, collected and recommended the infringing clips to users based on the presentation of the videos, and whether they could be found to have known, or should have known, about the infringing clips. Then the platforms could be held liable for helping infringement.
Ronly & Tenwen argued that pre-established topics, search result rankings, associative keywords, and artificial intelligence recommendations for related works on these platforms should all be taken into consideration to determine whether the platforms knew, or should have known, about users’ infringement.
Dispute21
Jiayan, Bytedance right to communication to the public dispute
CATEGORIES: Copyright
LEGAL COUNSEL: In the second-instance proceeding, SGLA Law Firm represented Jiayan Culture Communication, and Jifang Law Firm represented Bytedance.
KEY POINTS: Regarding a large number of plagiarised articles from Jiayan on a news platform under Bytedance, Jiayan filed lawsuits against the publishing user and publishing platform for two of its articles, and won both the first and second-instance proceedings.
According to SGLA, the difficulty of the case was to break through the “safe harbour principle” quoted by ByteDance, i.e., it used the argument that it was only a network service provider of information storage space to defend itself from legal liability.
The law firm found that a number of different infringing articles had been distributed to different sections of Toutiao, a news aggregator platform of Bytedance, and argued that ByteDance’s text classification algorithm technology had essentially filtered and recommended these articles, which was also a disguised “editing” act, making it no longer just a network service provider of information storage space, but also involved in substantive content management of the articles in question. This opinion was adopted by the courts.
The second-instance court held that technological neutrality does not provide a necessary justification for technological profiteering, and that the safe harbour principle cannot be the basis for online platforms to avoid legal responsibility. With the change of operation models of online platforms and the development of text classification algorithm technology, the online service providers of user content sharing platforms are no longer mere technical service providers providing information storage space, and are far more than a mere “bona fide gatekeeper” of the information storage space, as they acquire part of the copyright of works on the platform free of charge through a user agreement.
How to break ‘safe harbour principle’ to protect creators’ rightsBy Yan Xiang and Wu Liyuan, SGLA Law Firm |
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Dispute22
Jiushengcheng, Shengbaili unfair competition dispute
CATEGORIES: Trademark squatting; unfair competition
LEGAL COUNSEL: In the second-instance proceeding, Jincheng Tongda & Neal and Guangpu Law Firm represented two plaintiffs, Chongqing Jiushengcheng Waterproof Material and Shenyang Jiushengcheng Economic Trade, respectively. K&H Law Firm represented the defendant, Chongqing Shengbaili Waterproof Building Materials.
KEY POINTS: After finding out that the defendant Shengbaili used “劳亚尔” as its product trademark, the two plaintiffs filed a lawsuit with Chongqing First Intermediate People’s Court, arguing that Shengbaili’s actions infringed their long-registered trademark “劳亚尔” and constituted unfair competition, which was supported by the court. The first-instance judgment was upheld by Chongqing High People’s Court (CHPC) on appeal.
The case was selected by the Supreme People’s Court as one of the 50 exemplary intellectual property cases in 2021.
The CHPC held that considering the alleged infringer invoked trademark rights as a justification defence, the court must conduct the necessary review of the basis of its rights, making a reasonable judgment as to the scope and depth of judicial protection and a systematic and comprehensive determination of the alleged infringement.
The court ruled that as a business with a similar scope of activities and with a very high degree of geographical proximity to Jiushengcheng, it was unlikely that Shengbaili was completely ignorant of the trademark, which was well known in the industry; Shengbaili’s application for registration of the “劳亚尔” trademark in Class 19 for similar goods and using it on its Class 1 products was “an attempt to use a trademark right not obtained in good faith to get a free ride on the business reputation of Jiushengcheng’s trademark, and its conduct is not justified”.
Dispute23
Joyland, ZJU Jiuzhi investment contract dispute
CATEGORIES: PE/VC; contract dispute
LEGAL COUNSEL: Ronly & Tenwen Partners represented Joyland Assets, and TianTong Law Firm represented ZJU Jiuzhi Investment Management.
KEY POINTS: Joyland Assets won its lawsuit with the Shanghai Financial Court against private equity fund ZJU Jiuzhi Investment Management, on the grounds that the defendant failed to prepare for the plaintiff’s exit from its investment in accordance with their agreement. The plaintiff recovered 100% of the principal invested in a settlement during the second-instance proceeding on ZJU Jiuzhi’s appeal to Shanghai High People’s Court. More than 300 investors have so far recovered the full amount of their investment capital, totalling about RMB300 million (USD44 million).
Originally, through the private equity funds managed by ZJU Jiuzhi, Joyland agreed to have its funds invested in the listed company’s private placement projects, and to realise the exit of the investment at maturity through the direct distribution of project proceeds.
According to Ronly & Tenwen, one of the difficulties in the case was to determine whether the manager had adequately fulfilled its managerial duties and fiduciary obligations under its multi-layered investment structure, and whether it had sufficient control over the operation and liquidation of the underlying assets. When collecting evidence, the firm went through thousands of emails to find traces that indicated ZJU Jiuzhi’s failure to comply with its disclosure obligations.
The Shanghai Financial Court adopted the opinion of Ronly & Tenwen and ruled that the “investment of funds into the subordinate structured products” was different from what was commonly understood as “investment in equity projects”.
Dispute24
Kingtom Aluminio response to US EAPA action
CATEGORIES: International trade; EAPA investigation
LEGAL COUNSEL: Dentons China and Morris Manning & Martin represented Kingtom Aluminio.
KEY POINTS: Of the three adverse findings in its Enforce and Protect Act (EAPA) investigations initiated against Kingtom Aluminio, The US Customs and Border Protection (CBP) unwound one and overturned another. Chinese-owned, Dominican Republic-based Kingtom Aluminio, the largest overseas supplier of aluminium extrusions to the US, successfully returned to that market.
This is the first time that the US CBP has taken the initiative to petition the US Court of International Trade for a new ruling in the judicial review process of an EAPA investigation involving Chinese companies, and ultimately overturned its original ruling, finding no tax evasion by a Chinese overseas investment company.
According to Dentons China, since 2016 the US CBP initiated 68 EAPA investigations, of which 62 were China-related, making EAPA investigation the trade remedy action with the strongest enforcement and widest impact on China-related products in the US, behind only the anti-circumvention investigation by the US Department of Commerce.
Dispute25
Migu, Emumo unfair competition dispute
CATEGORIES: Unfair competition; online music
LEGAL COUNSEL: Tahota Law Firm represented Migu Music.
KEY POINTS: In the second-instance proceeding, the Sichuan High People’s Court found that Emumo Xiami had set up a link to the URL of the source files of Migu Music’s library of songs on its mobile application without permission. The court found that Xiami was essentially using the songs in Migu’s library for free through technical means, and transferring the cost of expanding the library to Migu, reducing the commercial benefits that Migu could obtain by attracting and retaining users. It ruled that Xiami’s operators, Taobao and AliMusic, engaged in unfair competition.
As the first case of unfair competition for online music platforms, the case attracted widespread attention from the industry. It was also the first unfair competition case for online practices decided by the court applying the Supreme People’s Court’s judicial interpretation of the Anti-Unfair Competition Law.
In early 2019, Migu discovered during its daily monitoring that Xiami was providing free songs from Migu’s music library to Xiami’s mobile application users by embedding the URLs of the audio files of Migu’s songs in its application codes. An investigation of the data confirmed that the number of “stolen” songs amounted to about 180,000, involving works by many well-known artists, such as Jay Chou.
Tahota said that although the case involved musical works, it would be very difficult to resolve the dispute through a copyright infringement suit, as Migu did not hold exclusive copyright over the 180,000 songs. The firm chose to file a lawsuit for unfair competition with the Chengdu Intermediate People’s Court, the court of first instance.
Milestone unfair competition ruling: Migu v Taobao, AlibabaBy Huang Chunhai and Luo Juan, Tahota Law Firm |
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Dispute26
‘Milan’ acquires secondary TM meaning
CATEGORIES: Trademark
LEGAL COUNSEL: Wanhuida Intellectual Property represented Milan Wedding Photography.
KEY POINTS: In the second instance, the Beijing High People’s Court ruled that the trademark “米兰” (“Milan”), registered by Milan Wedding Photography, had acquired secondary meaning through extensive use, and was unlikely to cause confusion between it and the Italian city, thus ruling to maintain the registration.
The case was selected by the Supreme People’s Court as one of the 50 exemplary IP cases in 2021, providing a good reference for future practitioners to assess the registrability of a trademark that is either a geographical name or has a geographical name component in China.
In 2019, a natural person initiated an invalidation action against the contested mark with China National Intellectual Property Administration (CNIPA), contending that it was a famous geographic name in Italy and should not be registered as a trademark, which was backed by the CNIPA. Milan Wedding Photography, therefore, filed an administrative lawsuit with the Beijing Intellectual Property Court, but the court upheld the CNIPA invalidation decision. The company then appealed to the Beijing High Court.
Article 10(2) of the Trademark Law sets out that a foreign geographical name known to the public shall not be used as a trademark unless such name has another meaning.
The Beijing High Court held that the above-mentioned provision aimed to avoid the monopolisation of public resources by trademark owners containing geographical names and to prevent the public from misidentifying and making purchases by mistake, and therefore should judge whether the trademark at issue constituted a geographical name as a whole, and that it was not appropriate to directly invalidate the trademark simply because it contained a geographical term.
Dispute27
Qihoo 360 privatisation-related Cayman proceedings
CATEGORIES: Privatisation; offshore jurisdictions
LEGAL COUNSEL: Harneys, Kirkland & Ellis, Latham & Watkins and Dechert represented Qihoo 360 Technology, while Walkers represented the dissenters.
KEY POINTS: The post-privatisation proceeding before the Grand Court of the Cayman Islands between Qihoo 360 and hedge funds who dissented from Qihoo’s take-private merger and delisting from the New York Stock Exchange in 2016 settled after a 16-day trial involving disclosure of a large volume of material.
This was the first trial of a Cayman Islands company that had delisted from the New York Stock Exchange and successfully relisted in the A-share market prior to the trial of the fair value proceedings in the offshore jurisdiction. The company successfully relisted on the Shanghai Stock Exchange two years after completing the USD9.3 billion take-private transaction by way of a backdoor listing.
In January 2019, investors of the US-listed entity filed a securities class action in New York claiming Qihoo misled them into accepting the merger price when seeking the take-private approval by failing to disclose material information. The securities class action is ongoing.
Qihoo was subject to numerous interlocutory applications up to the Cayman Court of Appeal, ranging from discovery applications, interim payment and appointment of forensic experts. This was only the second time the Grand Court had ordered forensic investigations on Chinese sovereign soil before, and never to this scale.
Dispute28
Raumplus trademark infringement
CATEGORIES: Trademark
LEGAL COUNSEL: Hiways Law Firm represented the German high-end furniture brand, raumplus.
KEY POINTS: After repeatedly sending letters requesting Delu Furniture (Nantong) and Delu Furniture (Shanghai) to stop infringement, raumplus sued in the Suzhou Intermediate People’s Court, requesting that both companies be ordered to stop the infringement and unfair competition, and pay compensation. The court and the Jiangsu High People’s Court both upheld the plaintiff’s claim for RMB50 million (USD7.4 million) in full.
This is an exemplary case where an internationally renowned high-end brand in the course of Sino-foreign co-operation encountered IP infringement, with the largest amount of compensation awarded to a foreign company in China to date for a trademark infringement case.
According to Hiways, the case was groundbreaking in applying the evidence presentation order system and the obstruction of evidence production rule, which made the determination of damages more reasonable and practical, reduced the burden of proof on the right holder, and successfully applied the punitive damages provision of the Trademark Law.
Dispute29
Reignwood, Shanghai Shipyard contract dispute
CATEGORIES: Shipping and maritime; guarantee
LEGAL COUNSEL: Duan & Duan, Des Voeux Chambers and Reed Smith represented Reignwood Group.
KEY POINTS: The dispute on a contract of guarantee between Reignwood Group and Shanghai Shipyard has recently made significant progress.
Shanghai Shipyard agreed to build an oil drilling vessel for Opus Offshore of Bermuda. Due to alleged significant defects, Opus rejected the vessel and refused to make payment. Shanghai Shipyard claimed the final instalment from Reignwood under a guarantee provided.
Reignwood commenced proceedings in the Singapore courts, winning leave to begin arbitration of the dispute, which commenced with the London Maritime Arbitrators Association. Meanwhile, Shanghai Shipyard commenced proceedings against Reignwood under the guarantee in the Commercial Court in London, which held that Reignwood was entitled to refuse payment pending the outcome of arbitration between Opus and the builder.
On Shanghai Shipyard’s appeal, the UK’s Court of Appeal overturned the Commercial Court’s decision and found that as the guarantee was a demand guarantee, Reignwood was liable to pay following the demand. Reignwood appealed to the UK’s Supreme Court and the case is now waiting for the final judgment.
The UK Supreme Court will be a significant decision that should clarify the legal principles applicable to the interpretation and effect of guarantees of payments or refunds due under shipbuilding, onshore and offshore construction contracts.
According to Duan & Duan, the dispute involves complicated court proceedings in multiple jurisdictions, with an involved amount of USD1.6 billion.
Dispute30
Shaanxi Aerospace shakes off civil litigation
CATEGORIES: Litigation strategy
LEGAL COUNSEL: Jiaxuan Law Firm represented Shaanxi Aerospace Power Hi-Tech.
KEY POINTS: After being sued by Jiangsu Hengtong Intelligent Interaction of Things at the Suzhou Intermediate People’s Court for non-payment of goods and failure to receive the goods in accordance with the sales contract, Shaanxi Aerospace Power High-Tech delayed the civil litigation process by initiating an objection to the court’s jurisdiction, took the opportunity to collect evidence that the transaction being sued was actually part of criminal activity and that the company was caught in a scam, and reported the case to the public security authorities, repeatedly communicating with them to facilitate the successful filing of criminal registration of the case.
After that, Shaanxi Aerospace applied to the court for dismissal of the civil case, which was granted by the court on the grounds that a criminal case had been filed, thus removing it from civil litigation.
While performing sales contracts with upstream and downstream companies Jiangsu Hengtong and Chongqing Hengxunlian Supply Chain Management, respectively, Shaanxi Aerospace found out that the business under the contract was in fact a carefully designed scam, and that Chongqing Hengxunlian’s managers and its controller had been arrested by the public security authorities, and were under investigation in several cities.
The scam in question shook the A-share market, with more than a dozen listed companies and state-owned enterprises caught up in it. During the process of collecting evidence, submitting evidence and defence pleadings, Jiaxuan Law Firm kept communicating with the presiding judge that the upstream and downstream companies had formed a closed loop of criminal activities, and that the transactions between Jiangsu Hengtong and Shaanxi Aerospace could not be treated as a separate civil dispute, thus convincing the court to ultimately dismiss the civil suit on the grounds that the case was part of a suspected criminal offence.
Dispute31
Shanda Yuanfeng enforces Chinese judgment in US
CATEGORIES: Cross-border enforcement
LEGAL COUNSEL: Jincheng Tongda & Neal and Katten Muchin Rosenman advised Yancheng Shanda Yuanfeng Equity Investment Partner on China and US law, respectively.
KEY POINTS: In January 2022, the US District Court for the Central District of Illinois issued a summary judgment in favour of Shanda Yuanfeng seeking recognition and enforcement of a Chinese court judgment in the US. This is one of the few cases in which a valid Chinese judgment has been recognised and enforced by a US court.
In December 2019, the Yancheng City Intermediate People’s Court issued a judgment in support of Shanda Yuanfeng’s claim in an equity transfer dispute, which Shanda Yuanfeng then applied to the Chinese courts for enforcement in March 2020. As the persons subject to enforcement were all US citizens and had no valid assets available for enforcement in China, in July of the same year, Shanda Yuanfeng commenced proceedings in the US to seek recognition and enforcement of the Chinese judgment.
Jincheng Tongda & Neal assisted and co-operated with US lawyers to convince the US court that the motion Shanda Yuanfeng made met the requirements of the Uniform Foreign-Country Money Judgments Recognition Act, and issued a legal opinion explicating the Chinese laws and legal practice, to explain to the US court the effective judgment of the Chinese court was rendered under an impartial tribunal and the due process of law, and the Chinese judgment was final, conclusive and enforceable under Chinese laws and regulations.
Dispute32
Sina privatisation-related Cayman proceedings
CATEGORIES: Privatisation; Cayman proceedings
LEGAL COUNSEL: Harneys acted as Cayman Islands counsel to Sina Corporation. Carey Olsen, Ogier, Mourant and Collas Crill were Cayman Islands counsel to the dissenters, while Gibson Dunn served as US counsel to the special committee and Skadden advised the buyer group on US law.
KEY POINTS: Sina Corporation’s dissenting shareholder proceedings in the Cayman Islands to determine the fair value of its shares for the taking-private merger under section 238 of the Companies Act have made some major progress, where a new and important point of Cayman Islands law in relation to the determination of the valuation date was decided in Sina’s favour.
This will be the largest section 238 litigation to date in the Cayman Islands, both by value and number of dissenters. Sina was one of the first Chinese internet companies to be listed in the US and is the majority shareholder in Weibo, the Chinese equivalent of Twitter.
In a two-day hearing, Harneys successfully argued that the valuation was on the date of the extraordinary general meeting as opposed to the date of the closing of the merger, a date when Weibo’s share price was higher and a driver of value for the dissenting shareholders.
In addition, Harneys argued that Sina ought to be permitted to seek approval for cross-border data transfer under the newly enacted data laws in mainland China, the Data Security Law and the Personal Information Protection Law, which the judge expressed his sympathy for. This is the first time such an argument has been run in relation to disclosure in the Cayman Islands.
Dispute33
Solar companies quash Indian anti-dumping probe
CATEGORIES: International trade; anti-dumping
LEGAL COUNSEL: Hiways Law Firm and Jincheng Tongda & Neal each represented multiple Chinese companies including Trina Solar and Jiangsu Huaheng New Energy.
KEY POINTS: India’s Ministry of Commerce and Industry in November 2022 terminated the anti-dumping investigation against imports of photovoltaic cells and modules from China, Vietnam and Thailand.
Against a backdrop of China-India trade tensions, in May 2021, India’s Directorate General of Trade Remedies (DGTR) launched an anti-dumping investigation into imports of photovoltaic cells and modules from the three countries and imposed anti-dumping measures following a complaint by the Indian Solar Energy Manufacturing Association (ISMA). About USD1.1 billion worth of imports were involved during the investigation period.
According to Hiways, considering the heavy workload with a huge amount of data and materials required for the questionnaires from the DGTR and the large number of companies involved in the case, the firm applied for a one-month extension of the response time for two of the questionnaires. On the day of the deadline for the submission, the DGTR refused the extension.
Advised by Hiways, two of the Chinese companies, Trina Solar and Jiangsu Huaheng New Energy, then filed a petition in India’s high court to set aside the DGTR’s decision. The court ruled that the DGTR would consider the Chinese parties as co-operating companies and subsequently they received the questionnaire, but were given only seven days to respond. Through the close co-operation of the legal team and the companies, the questionnaire was submitted on time.
Faced with the robust response of the Chinese solar companies and the inability of India’s domestic industry to meet demand, the ISMA formally withdrew its complaint in July 2022.
Dispute34
Spin Master’s invention patent infringement
CATEGORIES: Patent; obstruction of evidence
LEGAL COUNSEL: Lusheng Law Firm represented Spin Master in the first and second-instance proceedings.
KEY POINTS: The Supreme People’s Court (SPC) sustained the first-instance decision and ruled that the “Bakugan Hunter” toy product, developed by Guangzhou Lingdong Creative Culture Technology, fell within the scope of protection of the “Bakugan” patent owned by Spin Master, and constituted a patent infringement, and granted RMB15.5 million (USD2.2 million) compensation to Spin Master from Lingdong and three other defendants, one of the highest compensation awards to foreign patent owners in China to date.
In order to delay the infringement litigation process, the defendants made several invalidation requests with the China National Intellectual Property Administration against the “Bakugan” patent, but Lusheng successfully defended the patent’s validity.
Obstruction of evidence is common in infringement litigation. Many infringers refuse to submit financial data during the first-instance proceeding, and when they receive an unfavourable first-instance judgment, they submit some self-commissioned audit reports in the second-instance proceeding.
However, the SPC calculated the defendant’s illegal profits based on the online sales numbers, and the sales percentages between online sales and offline sales provided by an industry report. This is the first time that the courts adopted such a method. The case was an effective exploration to solve the difficulties of obstruction of evidence.
Dispute35
Stahlwerk OEM trademark infringement
CATEGORIES: Trademark squatting; OEM
LEGAL COUNSEL: Wanhuida Intellectual Property represented Zhejiang Laoshidun Technology, and Yingke Law Firm represented the retrial applicant, Chen Dongping.
KEY POINTS: Zhejiang Laoshidun Technology, the Chinese original equipment manufacturer (OEM) manufacturer of Stahlwerk Schweissgeräte, a leading German welding equipment supplier, won the trademark infringement retrial proceeding initiated by an ex-business associate, Chen Dongping, and bad-faith squatter of the Stahlwerk trademark in China.
The Zhejiang High People’s Court dismissed the retrial application on the ground that the execution of trademark rights was unjustified and breached the good-faith principle. The trademark squatter later initiated an unsuccessful prosecutorial supervision procedure. The case was selected as one of the top 10 IP cases of Zhejiang courts in 2021 by the Zhejiang High People’s Court.
In 2019, 4,381 Stahlwerk welders exported by Laoshidun destined for Germany were intercepted by Ningbo Customs. Shenzhen Stahlwerk, owned by Chen, then brought a civil suit before the Beilun District Court of Ningbo on the ground of trademark infringement, requesting cessation, destruction of infringing goods and damages of RMB3.5 million.
The trial court held that Laoshidun had fulfilled the reasonable duty of care for the OEM trademarks, and given that the preemptive trademark registration of Shenzhen Stahlwerk was of low distinctiveness and popularity, the use of the STAHLWERK mark on the alleged infringing products by Laoshidun was unlikely to cause confusion with the public and therefore did not constitute similar trademarks in the sense of the Trademark Law.
Dispute36
Star48, Huang Tingting talent agency contract dispute
CATEGORIES: Entertainment law
LEGAL COUNSEL: Tiansun Law Firm represented Shanghai Star48 Culture Media Group, and Shenyang Jingyuan Law Firm represented Huang Tingting.
KEY POINTS: In a dispute between Star48 and Huang, the Shanghai Hongkou District People’s Court consolidated the lawsuits filed by the two parties against each other and rendered a first-instance judgment, finding that the talent agency contract signed between the two parties was dissolved, and Huang paid RMB3.5 million (USD515,000) to Star48 for breach of contract. Huang later appealed to the Shanghai No.1 Intermediate People’s Court, where the first-instance judgment was sustained.
Both parties proposed to terminate the contract, but whether both parties had the right to do so was an important element of the court’s consideration. The court held that the talent agency contract in question was a commercial contract with distinctive industry characteristics, and that the artist did not enjoy the right to rescind unilaterally at will. In this case, in the absence of agreement between the two parties, Huang’s request to rescind could not be established.
According to Tiansun, the case lasted for nearly three years and attracted wide public attention in the entertainment industry due to the status and influence of the agency and Huang’s popularity in China.
Dispute37
Sunnsy Group corporate control dispute
CATEGORIES: Corporate control dispute
LEGAL COUNSEL: AllBright Law Offices advised the claimant, Chen Zongqing. Stevenson Wong & Co also provided legal support.
KEY POINTS: In February 2022, a final award was rendered in the Sunnsy Group corporate control dispute by CIETAC, upholding all of the claimant’s arbitration claims and confirming that the loan agreement signed in 2015, between Chen as the investor and the employee representatives of Shandong Shanshui Cement Group, was a contract for the purchase of the equity in China Shanshui Investment Company and not a loan contract in nature, bringing to an end to the arbitration process that had lasted four-and-a-half years.
From the ownership reform when Sunnsy was a state-owned enterprise to its subsequent listing in Hong Kong, the interests of the former management, the investors and the local government were highly intertwined. However, all parties gradually realised that the control of Shanshui Investment had become a key weight in controlling Sunnsy. It was against this backdrop that Chen filed an arbitration application with CIETAC in 2017, expecting to gain more equity.
According to AllBright, the legal team made a number of meaningful attempts in the face of the absence of some legal mechanisms, such as initiating escrow proceedings in Hong Kong for a mainland China arbitration for extraterritorial assets injunction.
Dispute38
Tencent sues Lizhi over copyright infringement
CATEGORIES: Copyright; audiobook
LEGAL COUNSEL: In the second-instance proceeding, Co-effort Law Firm represented Shenzhen Tencent Computer System, while Dentons China and Daopeng Law firm represented Lizhi Inc.
KEY POINTS: Tencent filed a successful lawsuit against Lizhi with the Shanghai Pudong New District People’s Court, arguing that the defendant had provided the audiobooks to which the plaintiff had rights without permission, and seeking RMB5 million (USD735,000) in compensation for economic losses after Lizhi failed to promptly remove the sci-fi audiobook titled The Three Bodies Problem uploaded by several users on its platform. On Lizhi’s appeal, the second-instance judgment of the Shanghai Intellectual Property Court upheld the first-instance judgment. The compensation amount of RMB5 million amount was the highest award in China for copyright infringement of a single literary work to date.
As a Hugo Award-winning work of science fiction, The Three Bodies Problem is well recognised by the public. According to Co-effort, the determination in the case of the audio platform’s liability for infringement and its adherence to the values of strict protection of intellectual property rights, and greater compensation in determining the damages awarded, will all help to regulate the broadcasting of audiobooks.
Dispute39
Transtrue Technology’s corporate control dispute
CATEGORIES: Corporate control dispute
LEGAL COUNSEL: TianTong Law Firm and Hylands Law Firm represented the actual controller of Transtrue Technology.
KEY POINTS: A dispute over an equity transaction in a listed company, Transtrue Technology, sparked a bitter battle for control of the company between the actual controller and the founder, which at one point affected the company’s listing status. The legal team assisted the parties to reach a settlement by buying more time for mediation with flexible litigation strategies in the midst of court proceedings, ultimately returning the listed company to regular governance.
At the heart of the conflict between the parties was the equity transferor’s demand for payment from the transferee, and the transferee’s refusal to pay as he felt he had not truly gained control.
The legal team encouraged the actual controller to truthfully disclose to investors the difficulties in corporate governance, which aroused a high degree of concern in the capital market, causing regulators to urge all parties to remain rational and restrained.
During the court proceedings, the legal team presented to the court the substance of the transfer of control behind the equity transaction, restored the overall background of the transaction, called for a comprehensive trial, and persuaded the judge to extend the time limit of the trial to give the parties more time to meditate.
Ultimately, a package settlement was reached between the parties, with balanced arrangements for equity, control and the board of directors.
Dispute40
Tsingtao Brewery stocks ownership dispute
CATEGORIES: SOE ownership reform
LEGAL COUNSEL: AllBright Law Offices represented Tsingtao Brewery Co.
KEY POINTS: China Jianyin Investment filed a lawsuit with the Qingdao Intermediate People’s Court seeking confirmation that the 746,088 shares of Tsingtao Brewery, currently held by Tsingtao Brewery Group, should belong to it and requesting that Tsingtao Brewery and Tsingtao Brewery Group assist in the share transfer process, all of which was dismissed by the court.
Tsingtao Brewery reformed its shareholding in 1993, with a non-readable shares reform in 2006. Incorrect registration of the shareholding ratio occurred during the company’s restructuring and going public process, which led to the dispute.
The price of the shares involved at the time of the judgment had reached close to RMB100 (USD15) per share, and the amount involved was nearly RMB75 million.
AllBright argued that, on the premise that China Construction Bank’s (CCB) Qingdao branch had not acquired the disputed equity, China Jianyin Investment, as the successor of the shares, was also not entitled to the disputed shares, and not qualified to make any claims towards the disputed shares. The argument was upheld by the court.
Dispute41
Uqee, Perfect World trademark dispute
CATEGORIES: Trademark
LEGAL COUNSEL: Global Law Office represented Perfect World.
KEY POINTS: Perfect World won a retrial before the Supreme People’s Court (SPC) of an administrative dispute over the invalidation of the trademark “葵花宝典”. Authorised by author Louis Cha Leung-Yung, Perfect World has the right to produce, launch and operate games based on Cha’s novels, such as Xiao Ao Jiang Hu.
Without authorisation, Shanghai Uqee Network, an online game company, applied for the registration of the trademark of “葵花宝典” ‒ contained in Cha’s work Xiao Ao Jiang HuI ‒ and launched and operated an online game named “葵花宝典”.
Perfect World filed a request for invalidation of the “葵花宝典” trademark, which the China National Intellectual Property Administration (CNIPA) upheld.
Upon Uqee’s appeal, however, the courts of first and second-instance proceedings held that the “commercialised rights and interests” were not part of the “prior rights” protected by the Trademark Law and revoked the CNIPA’s invalidation decision.
In the retrial proceeding before the SPC, Global submitted a great deal of evidence to clarify that “commercialised rights and interests” should be a general designation and reference to a class of rights and interests that ought to be protected according to the law but have not been given a legal name by the law.
The SPC for the first time ruled on what elements of a work can be prohibited from being registered as trademarks without authorisation, other than the name of a work or the name of a character, and gave corresponding instructions. The case has a significant impact on the scope of work authorisation and industry rules in the entertainment industry.
Dispute42
Vanke, Jinhui, Qiu contract dispute
CATEGORIES: Real estate; contract dispute
LEGAL COUNSEL: TianTong Law Firm represented China Vanke.
KEY POINTS: Jinhui Group and Qiu Jinbiao co-operated with Vanke 10 years ago to develop a land project located on a core commercial site in the Nanshan district of Shenzhen (now valued at more than RMB20 billion [USD2.9 billion]). As Jinhui and Qiu were unable to undertake a number of obligations such as demolition and compensation for the residents, the entire project was transferred to Vanke. However, with rising property prices in Shenzhen, Jinhui and Qiu attempted to break the transfer agreement, suing to rescind the agreement on the grounds of manifest injustice since 2016.
After losing the case before the Guangdong High People’s Court and the Supreme People’s Court, they resorted to “suicide bankruptcy” in an attempt to reclaim the project by having the bankruptcy administrator exercising its right to terminate the contracts.
Vanke sued on its own initiative after receiving a notice of terminating the transfer agreement from the administrator, requesting the court to confirm that the administrator’s letter of termination did not actually have an effect, which was upheld by the court.
TianTong prepared multiple visualisation charts to better demonstrate to the court that the main obligations of the agreement involved were fulfilled.
Dispute43
WeMade sues 37 Interactive for copyright infringement
CATEGORIES: Copyright
LEGAL COUNSEL: DeHeng Law Offices represented two plaintiffs, WeMade and ChuanQi IP. Zhong Yin Law Firm represented the third plaintiff, Actozsoft. JunZeJun Law Offices represented the two defendants, 37 Interactive Entertainment and Shanghai Guanhang Network Technology.
KEY POINTS: After comparison, the Guangzhou Internet Court concluded that two games, The Legend of Mir and King City Heroes, did not constitute substantial similarity and dismissed all of the plaintiffs’ claims. This was the first non-infringement declaration litigation heard by the Guangzhou Internet Court, and involved a highly publicised dispute over the copyright of The Legend of Mir in the game industry.
The Legend of Mir is a multiplayer online role-playing game developed in 2000 by WeMade and Actozsoft, with wide popularity in the Chinese gaming market. King City Heroes is a role-playing mobile game developed by 37 Interactive Entertainment in 2019.
In determining whether the two games in question constituted substantial similarity, the court relied on the Berne Convention for the Protection of Literary and Artistic Works to find that The Legend of Mir was a class of film-like work. After eliminating designs in the public domain, prior designs of others and limited expression designs, the court compared the two games in five aspects including scenes, characters and battle modes, and ultimately found that the two games did not constitute substantial similarity, and that 37 Interactive Entertainment did not infringe copyright.
Dispute44
Xiashun’s foil gets lowest EU tax rate
CATEGORIES: International trade; anti-dumping investigation; anti-subsidy investigation
LEGAL COUNSEL: Global Law Office and Mayer Brown represented Xiamen Xiashun Aluminium Foil.
KEY POINTS: Xiamen Xiashun Aluminium Foil, one of the largest producers of aluminium foil in China, received the lowest composite duty rate of 16.1% among all the Chinese respondents in December 2021, in the EU’s recent antidumping and anti-subsidy investigation against flat-rolled aluminium originating from China.
Global said that they assisted the company on multiple fronts including answering the investigation questionnaire, filing the comments, defending the surrogated value, conducting remote verification, etc.
In recent years, various countries and regions around the world have initiated anti-dumping, anti-subsidy and guarantee measures against aluminium foil and strip products from China.
Dispute45
Zhangzidao Group liability dispute
CATEGORIES: Misrepresentation
LEGAL COUNSEL: Zhong Lun Law Firm represented Zhangzidao Fishery Group and its directors, supervisors and senior executives. Shize Law Firm, Fangguang Law Firm and Landing Law Offices represented the investors.
KEY POINTS: In the securities misrepresentation liability litigation filed by nearly 1,000 investors against Zhangzidao, some investors claimed that the exposure date of misrepresentation was the day the company’s share price dropped continuously after the release of a major suspension announcement by Zhangzidao.
Zhong Lun argued that there was no relevance between the content of the above-mentioned announcement and the misrepresentation found in the administrative penalty decision on Zhangzidao, and the fall in share price after the announcement was caused by non-systemic risk factors such as a severe natural disaster suffered by the company. The firm proposed that the exposure date should be the date of the announcement of the investigation by the China Securities Regulatory Commission, which was accepted by the courts of both the first and second instances.
The court ultimately ruled that Zhangzidao was liable for 30% of the investors’ losses, significantly reducing the liability of the listed company. The trial of the case coincided with a comprehensive revision of the judicial interpretation of misrepresentation, and Zhong Lun was the first to improve its defence in light of the new rules, achieving an accurate application of the new judicial interpretation.
Dispute46
Zhongchuang Environmental corporate control dispute
CATEGORIES: Corporate control dispute
LEGAL COUNSEL: AllBright Law Offices represented Luo Honghua and Luo Xiangbo, the former controlling shareholders of the listed company Xiamen Zhongchuang Environmental Technology. Far & Wide Law Firm represented Xiamen Kunna Trading Company, the second-largest shareholder of Zhongchuang, and its de facto controller, Liao Zhengzong. W&H Law Firm represented the appellant.
KEY POINTS: The Luo couple filed a civil claim with the Xiamen Intermediate People’s Court against the Kunna trading company and its de facto controller Liao for breaching a public commitment and seeking control of Zhongchuang Environmental, which was upheld by the court, and also by the Fujian High People’s Court on Liao’s appeal.
AllBright said that, after thorough analysis, the firm proposed not to base the lawsuit on the commonly accepted cause of action for tort, but rather on the claim for breach of contract as the basis for compensation.
It is generally accepted that a breach of public commitment is an act of securities fraud, and a tort action should be brought. However, considering that the shareholders who brought the motion to remove the Luo couple from the board of directors at the extraordinary general meeting were the third-largest shareholders of the company, not the defendants Kunna company and Liao, who only voted in favour of the motion, it would be difficult to prove that they had the subjective intent to seek control of the company for the plaintiffs, and that they had carried out the act of seeking control of the company.
