On December 29, 2024, the Shanghai Bar Association released the list of “2024 Shanghai Outstanding Dispute Resolution Cases by Lawyers”. Three cases represented by Zhenghan Law Firm were selected, including 1 outstanding case and 2 nominated cases, making the firm the one with the largest number of selected cases.
This selection aims to accelerate the construction of Shanghai as an international legal service center, enhance the quality and level of legal services in the dispute resolution field, and showcase lawyers’ professional capabilities and innovative achievements in litigation, arbitration, mediation, settlement and other aspects. Seven judges from Fudan University, Shanghai Jiao Tong University, East China University of Political Science and Law, Shanghai Arbitration Commission, Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Center) and the Shanghai Bar Association finally selected 10 outstanding cases and 10 nominated cases for the “2024 Shanghai Outstanding Dispute Resolution Cases by Lawyers”.
Selected Outstanding Case
First Financial Test Case
This case is the first test case heard in accordance with the Provisions of the Shanghai Financial Court on the Financial Market Case Testing Mechanism. It was jointly applied for and initiated by Shanghai Clearing House Co., Ltd. (hereinafter referred to as “Shanghai Clearing House”), Bank of Communications Co., Ltd., Shanghai Pudong Development Bank Co., Ltd., Industrial Bank Co., Ltd. and Société Générale (China) Co., Ltd., to test the legality of the default disposal rules of Shanghai Clearing House’s central counterparty clearing business and the rationality of its disposal acts.
As the agent for the applicants, Zhenghan Law Firm participated in the whole process of the first test case. On the aforementioned disputed issues, it successively submitted multiple legal documents including the Applicants’ Petition, Applicants’ Evidence and Materials, Response to the Counterclaim, Relevant Laws and Rules of Overseas CCPs, and Applicants’ Agent Opinions and Attachments (all published on the official website of the Shanghai Financial Court), and fully presented professional opinions during the trial. In response to the aforementioned key issues, the Shanghai Financial Court conducted in-depth argumentation and issued a Judicial Opinion in accordance with the Provisions of the Shanghai Financial Court on the Financial Market Case Testing Mechanism to respond in detail.
The outcome of this case is of great significance for Shanghai Clearing House, as a financial market infrastructure, to improve its rules. In the form of case testing, the Shanghai Financial Court issued a judicial opinion, which not only provides clearer rule expectations for market participants in the futures and derivatives market, but also promotes compatibility with international practices in the financial market, so as to effectively prevent systemic financial risks and safeguard the institutional opening-up of the financial market.
This case won the Second Prize of Financial Innovation Achievement Award in the 2021-2022 Shanghai Financial Innovation Award by the Shanghai Municipal People’s Government, was selected in the 2022 Market Report released by the Global Association of Central Counterparties (CCP12) (the first annual case from China selected by the association), and was listed among the Top Ten Innovative Work Achievements of Shanghai Courts in 2023. It has been widely reported by media, including mainstream media such as CCTV and Yicai, as well as official media such as the Information Office of the Shanghai Municipal People’s Government and the People’s Court Daily.
Further Reading:
First in China: Judicial Opinion of Financial Market Test Case Publicly Announced
Zhenghan Law Firm Participates in the Trial of the First Financial Market Case Testing Case
Zhenghan Law Firm Participates in China’s First Financial Market Test Case
4 Highlights to Understand the Brand-New “Case Testing Mechanism”
Shanghai Financial Court First Issued the Provisions on the Financial Market Case Testing Mechanism
Selected Nominated Case
12 Billion Yuan Equity Transfer Dispute
In August 2019, Shanshan, on behalf of all buyers, and Zhongjing, on behalf of all sellers, jointly signed a Framework Agreement, stipulating that Shanshan would acquire approximately 14% of the equity of Huishang Bank held by Zhongjing at a price of about 12.1 billion yuan. The Framework Agreement provided that the buyer shall pay the deposit before the specified deadline; after receiving the deposit, the seller shall submit the materials required for approval to the buyer, who shall file an equity transfer application with Huishang Bank; upon approval by Huishang Bank and the regulatory authorities, both parties shall go through the transfer procedures; and the buyer shall pay the remaining transaction amount before the settlement date.
After the signing of the Framework Agreement, Shanshan paid the deposit as agreed. After both parties submitted the transaction approval procedures to Huishang Bank, which originally scheduled a board meeting to review the transaction proposal, Zhongjing called Huishang Bank, stating that Shanshan had clearly indicated to it that it could not pay the remaining amount as agreed, and the equity transfer proposal was not suitable for submission to the meeting. Huishang Bank then withdrew the aforementioned proposal. Shanshan did not pay the remaining transaction amount to Zhongjing before the settlement date.
Zhongjing filed a lawsuit on the ground that Shanshan’s failure to perform the payment obligation on time constituted a breach of contract, claiming that Shanshan should compensate it for various losses of over 6 billion yuan. The case involved a huge subject amount and complex legal relationships. Before Zhenghan Law Firm was entrusted, the case had been heard multiple times, and Shanshan was in an unfavorable situation where it might be found in breach of contract and ordered to pay huge compensation. After accepting the agency, Zhenghan Law Firm put forward a subversive claim that “the contract was not effective due to failure to submit for approval, and Shanshan had no obligation to pay the equity transfer payment and shall not be liable for breach of contract compensation”. The case went through first instance at the Shanghai Financial Court, second instance at the Shanghai Higher People’s Court (affirmed), and retrial review at the Supreme People’s Court. Except for the finding that both parties were at fault in terms of fault liability, the agency opinions put forward by Zhenghan Law Firm on the nature and validity of the agreement, especially the “principle of reviewing the split performance of a package transaction”, were basically adopted by the courts, fundamentally reversing Shanshan’s previous unfavorable situation. Ultimately, Zhongjing’s sky-high claim of over 6 billion yuan against Shanshan was completely dismissed by the court. Due to its complexity, innovativeness and typicality, this case was selected as a “China Business Law Journal 2023 Outstanding Deal”.
Further Reading:
Selected Nominated Case
Multi-Jurisdictional Hong Kong Litigation with Mainland Coordination and Management
Client S signed a series of sales contracts with the counterparty N and carried out trade transactions for up to three years. Although the transactions were nominally sales contracts, they might involve multiple transaction models. The contradictions and disputes between the two parties lingered for a long time until 2023, when N suddenly filed a lawsuit with the High Court of Hong Kong, claiming against Client S for repayment of funds on multiple causes of action such as fraud and breach of contract.
This case involves multiple jurisdictions, including: Chinese Mainland (subsequent agreements stipulate the application of Chinese law, and Client S is an overseas trade platform of a Chinese Mainland state-owned enterprise), Hong Kong, China (Client S is a Hong Kong company), and Japan (N is a Japanese company). As the leading law firm, Zhenghan Law Firm represented and assisted the client in forming a strong Hong Kong legal team and a Japanese legal team, comprehensively responded to all claims raised by N, and successfully achieved a favorable outcome for the client.
Although the lawsuit was initiated in the High Court of Hong Kong, this case is essentially an overseas dispute encountered by a Chinese Mainland state-owned enterprise. How to coordinate the legal teams in the Mainland and Hong Kong became the client’s main demand and focus. To this end, as the leading law firm, Zhenghan Law Firm assisted the Mainland client in going global, and successfully selected a highly suitable team of Hong Kong solicitors and barristers, laying a foundation for the subsequent handling of the case. Meanwhile, considering that Mainland lawyers are more familiar with such complex sales contract disputes with certain financing attributes, and a large number of case facts and evidence materials occurred/formed in the Mainland, Zhenghan Law Firm took the lead in investigating a large number of case facts, assisted and discussed with the Hong Kong legal team to formulate a highly effective strategic plan according to the case situation and the client’s pain points. For some Japanese law matters, it also assisted the client in engaging a Japanese legal team to handle them. In response to the double actionability under Hong Kong law, Zhenghan Law Firm provided a complete and comprehensive analysis of causes of action to support the claims of the Hong Kong team. Ultimately, the client successfully achieved a strategic victory, and the Master of the High Court of Hong Kong made an oral ruling in favor of the client’s objection application.
This case is a typical example of foreign-related legal services escorting enterprises “going global”, where a Mainland law firm provides one-stop services for the client. The client only needs to connect with the Mainland law firm, and the subsequent communication with lawyers in other jurisdictions, strategy formulation and other matters are all handled and managed by the Mainland law firm. This case is also an active practice of Zhenghan Law Firm in response to the opinions on accelerating the construction of Shanghai as an international legal service center. Zhenghan Law Firm has always taken an international vision and the enhancement and deepening of cross-border legal service capabilities as key priorities, and is actively building a law firm with world-class international standards.
Zhenghan Law Firm is nationally renowned for its leading dispute resolution practice. It has long represented clients in a large number of complex and high-stakes commercial cases, cross-border dispute resolution matters, as well as market-oriented asset and debt restructuring cases including insolvency proceedings, providing professional dispute resolution services to major financial institutions, listed companies, government authorities and renowned enterprises. The firm has consecutively been awarded titles such as National Excellent Law Firm, Shanghai Top Ten Law Firm, and Chambers Band 1 in Corporate/Commercial. It has also received prestigious awards including China Business Law Journal’s “Outstanding Law Firm” in the fields of “Domestic/International Dispute Resolution” and “Banking & Finance”. Adopting a LockStep partnership model, Zhenghan Law Firm has built an integrated, professionally divided legal team to meet and exceed client service requirements.