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The First Time Chinese Court Recognizes Singapore Bankruptcy Judgment

Sun, 26 Jun 2022
Categories: Insights

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Key takeaway:

  • In August 2021, Xiamen Maritime Court ruled, based on the principle of reciprocity, to recognize order of the High Court of Singapore, which designated an insolvency officeholder (see In re Xihe Holdings Pte. Ltd. et al. (2020) Min 72 Min Chu No. 334 ((2020)闽72民初334号)), marking the first time that a Chinese court has recognized a Singapore bankruptcy judgment.
  • This case provided an example of how Chinese courts recognize foreign insolvency judgments based on the principle of reciprocity under the Enterprise Bankruptcy Law of China.
  • A reciprocal relationship can be considered to have existed between China and Singapore in bankruptcy matters. In other words, it is fair to say that the Singapore judgments or rulings that Chinese courts can recognize based on reciprocity are no longer limited to money judgments in commercial cases stated in MOG.
  • In terms of the insolvency officeholder appointed by corporate creditors’ meetings, rather than by a foreign court, the Chinese court shall examine and confirm his/her identity and capacity in accordance with the laws at the place of incorporation of the foreign company.

On 18 Aug. 2021, Xiamen Maritime Court ruled, based on the principle of reciprocity, to recognize the order of the High Court of Singapore, which designated an insolvency officeholder (See In re Xihe Holdings Pte. Ltd. et al. (2020) Min 72 Min Chu No. 334 ((2020)闽72民初334号)).

To our knowledge, it is the first time that a Chinese court has recognized a Singapore bankruptcy judgment, which provides an example of how Chinese courts recognize foreign insolvency judgments based on reciprocity.

Furthermore, Xiamen Maritime Court did not refer to the China-Singapore Memorandum of Guidance on Recognition and Enforcement of Money Judgments in Commercial Cases (the “MOG”) in its ruling, which confirms to some extent that the MOG is only applicable to money judgments in commercial cases, excluding bankruptcy (insolvency) matters.

I. Case overview

Xihe Holdings (Pte) Ltd (“Xihe”) was the defendant in a lawsuit heard by Xiamen Maritime Court. In the lawsuit, Xihe was ordered to go through the process of insolvency and reorganization pursuant to Order No. HC/ORC 6341/2020 and Order No. HC/ORC2696/2021 granted by the High Court of Singapore, and Paresh Tribhovan Jotangia (“Jotangia”) was appointed as the insolvency officeholder of Xihe.

Thereafter, Jotangia applied to Xiamen Maritime Court to confirm his capacity as the insolvency officeholder and to further confirm that he might engage Chinese lawyers for Xihe as an insolvency officeholder.

Xiamen Maritime Court holds that the application involves the recognition and enforcement of the foreign bankruptcy judgment, and based on the principle of reciprocity, it recognizes the aforesaid ruling made by the High Court of Singapore, thereby recognizing the capacity of Jotangia as the insolvency officeholder.

II. Case facts

The plaintiff, Fujian Huadong Shipyard Co., Ltd., filed a lawsuit in Xiamen Maritime Court against Ocean Tankers Pte Ltd, Xihe Holdings (Pte) Ltd and Xin Bo Shipping (Pte) Ltd. (“Xin Bo”). The lawsuit involves a dispute over a vessel maintenance contract. Xihe and Xin Bo are hereinafter collectively referred to as “Defendants”.

On 13 Nov. 2020, pursuant to the ruling of the High Court of Singapore, the defendant, Xihei, went through the process of insolvency and reorganization and Jotangia was appointed as its insolvency officeholder.

On 19 Mar. 2021, the defendant, Xin Bo, appointed Jotangia as its insolvency officeholder at its creditors’ meeting.

Accordingly, Jotangia acted as the insolvency officeholder of both Defendants.

Jotangia, as insolvency officeholder, appointed a Chinese lawyer to act as the agent ad litem of the two Defendants in the case involving the aforesaid vessel maintenance contract dispute.

Jotangia applied to Xiamen Maritime Court to confirm his capacity as the insolvency officeholder and to further confirm that he might engage Chinese lawyers for Xihe as an insolvency officeholder.

On 18 Aug. 2021, Xiamen Maritime Court ruled to recognize the ruling of the High Court of Singapore in respect of the insolvency officeholder of Xihe and accordingly recognized Jotangia as the insolvency officeholder of Xihe.

In addition, Xiamen Maritime Court confirmed the legality of the appointment of Jotangia as the insolvency officeholder of Xin Bo at the creditors’ meeting of Xin Bo in accordance with Singapore’s 2018 Insolvency Restructuring and Dissolution Act, and accordingly confirmed Jotangia as the insolvency officeholder of Xin Bo.

III. Court views

1. It confirms the insolvency officeholder appointed by the Singaporean court in relation to the recognition and enforcement of judgments.

Firstly, issues concerning the recognition and enforcement of foreign bankruptcy judgments shall be governed by the Enterprise Bankruptcy Law of China.

Pursuant to the Paragraph 2 of Article 5 of the Enterprise Bankruptcy law of China, where a legally effective judgment or ruling on a bankruptcy case made by a foreign court involves the debtor’s property within the territory of China, and an application or request for recognition and enforcement of the judgment or ruling is filed with the court, the court shall examine the application or request in accordance with the international treaty concluded or acceded to by China or with the principle of reciprocity. Where the court deems that the act does not violate the basic principles of Chinese laws, does not impair the sovereignty, security and public interests of China, and does not impair the legitimate rights and interests of the creditors within the territory of China, it shall rule to recognize and enforce the judgment or ruling.

The requirements for Chinese courts to recognize and enforce bankruptcy judgments of foreign courts are basically the same as those for recognizing other civil and commercial judgments of foreign courts in accordance with the PRC Civil Procedure Law (CPL).

Secondly, it confirms the insolvency officeholder appointed by the foreign court and in other words, it recognizes the applicable judgment or ruling of the foreign court.

By applying for confirmation as the insolvency officeholder of Xihe, Jotangia is in effect applying to the Chinese court for recognition of the order of the High Court of Singapore to appoint him as the insolvency officeholder.

Therefore, the Chinese court should consider the application in accordance with the Enterprise Bankruptcy Law mentioned above.

Thirdly, China and Singapore have formed a reciprocal relationship in the recognition and enforcement of civil and commercial judgments, including bankruptcy judgments.

In January 2014, the High Court of Singapore made a judgment No. [2014]SGHC16, recognizing and enforcing the civil judgment made by Suzhou Intermediate People’s Court of Jiangsu Province, China (See Giant Light Metal Technology (Kunshan) Co Ltd v Aksa Far East Pte Ltd [2014] SGHC 16).

On 9 Dec.  2016, the Nanjing Intermediate People’s Court of Jiangsu Province affirmed the reciprocal relationship between China and Singapore based on the aforementioned case, and accordingly recognized the judgment made by the High Court of Singapore. It’s also the first time that a Chinese court has recognized a foreign judgment based on the principle of reciprocity (See Kolmar Group AG v. Jiangsu Textile Industry (Group) Import & Export Co., Ltd., (2016) Su 01 Xie Wai Ren No. 3 ((2016)苏01协外认3号)).

On 2 Aug. 2019, the Wenzhou Intermediate People’s Court of Zhejiang Province once again recognized the judgment made by the High Court of Singapore (See Oceanside Development Group Ltd. v. Chen Tongkao & Chen Xiudan (2017) Zhe 03 Xie Wai Ren No. 7 ( (2017)浙03协外认7号)).

For a detailed discussion, see an earlier post ‘Again! Chinese Court Recognizes a Singapore Judgment’.

In addition, on 10 June 2020, Judge Vinodh Coomaraswamy of the High Court of Singapore, made an order, affirming the ruling on insolvency proceedings, “(2016)01 Po No. 8 ((2016)01破8)”, made by Nanjing Intermediate People’s Court of Jiangsu Province.

Thus, in accordance with the principle of reciprocity, Chinese courts may recognize and enforce the civil judgments and rulings meeting specific conditions, including bankruptcy ones, which are rendered by Singaporean courts.

2. It confirms the appointment of the insolvency officeholder at the creditors’ meeting of the company, subject to the governing law.

In accordance with Paragraph 1 of Article 14 of China’s Law of the Application of the Law on Foreign-related Foreign Relations, the laws at the place of registration shall apply to such matters as the capacity for civil rights, capacity for civil conduct, organizational structure, and shareholders’ rights and obligations of a legal person and its branch(es).

Therefore, in terms of the insolvency officeholder appointed by corporate creditors’ meetings, rather than by a foreign court, the Chinese court shall examine and confirm his/her identity and capacity in accordance with the laws at the place of incorporation of the foreign company.

Accordingly, Xiamen Maritime Court determined that the laws of Singapore should apply. To this end, it ascertained Singapore’s 2018 Insolvency Restructuring and Dissolution Act (the “Act”) and examined the legality of the appointment of insolvency officeholders by corporate creditors’ meetings under the Act.

IV. Our comments

In July 2021, one month prior to this case, a Chinese court recognized a Singaporean judgment, which involved loan disputes, based on reciprocity. The court mentioned the MOG in its ruling. (See our earlier post “Chinese Court Recognizes Singaporean Judgment Again: No second Treaty But Only Memorandum?”.)

Whereas in this case, Xiamen Maritime Court did not mention the MOG because the MOG is only applicable to money judgments in commercial cases, excluding bankruptcy matters.

However, it does not affect the Chinese court’s decision to form a reciprocal relationship with Singaporean counterparts over judgments, other than money judgments, in commercial cases.

As can be seen from this case and the foregoing ruling granted by the High Court of Singapore in 2020, affirming China’s bankruptcy proceedings, a reciprocal relationship can be considered to have existed between China and Singapore in bankruptcy matters.

In other words, the judgments or rulings that Chinese courts can recognize based on reciprocity are no longer limited to money judgments in commercial cases stated in MOG. MOG is also not the exclusive resource that we may look into on the recognition and enforcement of judgments between China and Singapore.

 

 

 

 

Contributors: Guodong Du 杜国栋 , Meng Yu 余萌

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