On 23 August 2024, the Court of First Instance of the High Court (“Court“) in ING Bank N.V. v Industrial and Commercial Bank of China Limited [2024] HKCFI 2220 dismissed the defendant’s application for proceedings to be stayed in favour of Xi’an Intermediate People’s Court (“Xi’an Court“) on the ground of forum non conveniens (“FNC“).
The judgment contained a helpful summary of the principles governing FNC challenges and in particular where foreign law is said to apply to the matters in dispute.
Background
The plaintiff, a well-known international bank and one of Europe’s largest, was the vendor’s banker in a series of international sale of goods transactions with a total value of around US$171 million. The defendant is one of the largest banks in the world.
The payment terms for the transactions were DP (documents against payment) at sight. Pursuant to this arrangement, the documents of title and other commercial documents were delivered by the plaintiff (as the remitting bank) to the High-Tech Industries Sub-Branch of the defendant (“HTI-SB“) (as the collecting bank) for collection of the purchase price from the purchaser. The International Chamber of Commerce (“ICC“) Uniform Rules for Collections 522 (“URC“) were incorporated into the contract between the plaintiff and the defendant.
The plaintiff claimed that the defendant acted contrary to the collection instructions given to its branch HTI-SB and released the documents to the purchaser without collecting the purchase price. The defendant denied that it was required to act in accordance with the vendor’s direct instructions and relied on course of dealings and applied for proceedings to be stayed in favour of Xi’an Court.
Principles on FNC
The Court applied the test of FNC summarised in SPH v SA [2014] 17 HKCFAR 364 at [51] as follows:-
(a) The single question to be decided is whether there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of an action, ie, in which the action may be tried more suitably for the interests of all the parties and the ends of justice?
(b) In order to answer this question, the applicant for the stay has to establish that first, Hong Kong is not the natural or appropriate forum (‘appropriate’ in this context means the forum which has the most real and substantial connection with the action) and second, there is another available forum which is clearly or distinctly more appropriate than Hong Kong. Failure by the applicant to establish these two matters at this stage is fatal.
(c) If the applicant is able to establish both of these two points, then the plaintiff in the Hong Kong proceedings has to show that he will be deprived of a legitimate personal or juridical advantage if the action is tried in a forum other than Hong Kong.
(d) If the plaintiff is able to establish this, the court will have to balance the advantages of the alternative forum with the disadvantages that the plaintiff may suffer. Deprivation of one or more personal advantages will not necessarily be fatal to the applicant for the stay if he is able to establish to the court’s satisfaction that substantial justice will be done in the available appropriate forum.
The Court’s Analysis
Appropriate Forum
As a first step, the Court looked for the forum which has the most real and substantial connection with this action taking into account the following factors:
Governing Law
The defendant asserted that Chinese law governed the relationship between the plaintiff and defendant and so the issue of governing law was also a key issue in the application. Nonetheless, the Court agreed with the plaintiff that (a) the Court would not make a final decision on proper law, which may be revisited at trial; (b) the Court would consider the proper law to assess the appropriate forum; and (c) if there is a good arguable case that Hong Kong law is the proper law, then it should follow that Hong Kong court is the appropriate forum.
In determining whether Hong Kong has the closest and most real connection with this action, the Court considered the following factors:
After evaluating the above factors, the Court believed that there is a good arguable case that Hong Kong law is the proper law because Hong Kong has the closest and most real connection with this action.
Accordingly, although the Court accepted that the Xi’an Court is perfectly capable of dealing with international transactions of the present type, the Court concluded that Hong Kong is the appropriate forum which has the most real and substantial connection with this action and it was not satisfied that Xi’an Court is clearly or distinctly more appropriate forum to hear this action.
Takeaways
This case provides helpful guidance on the jurisdictional disputes and conflict of law issues where the parties have not incorporated a jurisdiction or governing law clause in their contracts as is common in documentary credit and collection arrangements between trade finance banks.
Jurisdiction disputes of this nature can often be avoided by incorporation of suitably drafted jurisdiction or arbitration and governing law clauses in transaction documents.
Please see full judgment here.
George Tong and Ada Luk, our partners in our Corporate Team, have contributed to the Practice Note for Thomson Reuters’ Practical Law Global, outlining the statutory requirements to keep and maintain registers and other records for private limited companies incorporated in Hong Kong. The note can be accessed here: Company Records and Registers in Hong Kong
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* Reproduced from Practical Law with the permission of the publishers. For further information, please visit www.practicallaw.com.
We are pleased to announce Ada Luk and Iris Cheng’s promotion to Partners at MinterEllison LLP. The promotion of Ada and Iris brings the firm’s number of Partners to 21.
Ada and Iris have shown unwavering commitment to our firm’s growth. Please join us in extending heartfelt congratulations to both Ada and Iris on reaching this significant career milestone.
For the third year, MinterEllison LLP is pleased to have hosted a 2-day work shadow programme in partnership with ARCH Community Outreach Careers Programme on 8-9 August. The Programme aims to empower local secondary school students to believe in themselves with an opportunity to learn about different career paths from professionals in different industry, in preparation for their university applications.
During their time with us, two students gained firsthand exposure to the day-to-day work of a solicitor, attended court hearings, and had meaningful discussions with our lawyers on career planning.
Our Consultant Katherine U, Paralegal(Pending Admission) Alan Sham, and trainee solicitor Matthew Lau led the initiative, which is part of our on-going commitment to community engagement and fostering the next generation of legal professionals.
The Hong Kong government has introduced a new “patent box” tax incentive through the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024. This new ordinance officially came into effect on 5 July 2024, allowing taxpayers to apply for the incentive retroactively from the 2023/24 year of assessment.
Under this new regime, qualifying profits derived from eligible intellectual property (IP) will be subject to a concessionary tax rate of 5%, significantly lower than Hong Kong’s standard profits tax rate of 16.5%. Eligible IP includes patents, copyrighted software, and new plant variety rights. Notably, eligible IP registered worldwide can qualify for the incentive, provided the profits are sourced in Hong Kong.
To benefit from the tax concession, the eligible IP must be primarily developed by the taxpayer. If the research and development (R&D) process involves acquiring IP or outsourcing R&D activities, the proportion of profits eligible for the concessionary rate may be reduced. Additionally, enterprises will need to obtain local registration for their non-Hong Kong patent and plant variety right to enjoy the concession, a requirement that will come into force two years after the implementation of the “patent box” tax incentive.
The key amendments are summarized as follows:
The Commerce & Economic Development Bureau stated that this regime encourages enterprises to increase their R&D activities and promotes IP trading, thereby strengthening Hong Kong’s competitiveness as a regional IP trading center. The government views this initiative as a crucial step in enhancing the city’s overall innovation and technology landscape.
For access to the full text of the Ordinance, please refer to the following: https://www.gld.gov.hk/egazette/english/gazette/file.php?year=2024&vol=28&no=27&extra=0&type=1&number=17
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