Securities & Futures Commission V China Metal Recycling (Holdings) Limited: Regional Conflict of Laws, Judicial Recognition and Hong Kong-China Cross-Border Insolvencies

Abstract

Using the recently adjudicated landmark case in Hong Kong of Securities and Futures Commission v China Metal Recycling (Holdings) Limited as a launching board the author discusses and analyzes the complexities surrounding cross-border (corporate) insolvencies (“CBIs”) between Hong Kong and Mainland China (“HK-China CBI”). Going forward, HK-China CBI will have a direct bearing on decisions made by Hong Kong and Chinese courts; since they are already increasingly requested to adjudicate on the same issues during a corporate insolvency, a new mechanism is called for in order to provide a practical and economically viable resolution to the regional conflict of laws issue arising from Hong Kong and Mainland China having different insolvency laws in spite of Hong Kong being a part of Mainland China, although a special administrative region within it. A new mechanism should focus on the judicial recognition of judgments and court orders concerning insolvencies of companies with establishments in both Hong Kong and Mainland China; and if a new mechanism is properly implemented, it can more effectively and holistically facilitate resolution of the regional conflict of laws issue that typically arise during the insolvency procedure of a Hong Kong-listed company with subsidiary companies located in Mainland China. Without such a mechanism in place, the provisional liquidators (“PLs”) appointed in Hong Kong will need to devise a more convoluted resolution method in order for them to be approved by the Chinese court before they can take control of the Chinese subsidiary companies. Moreover, without a new mechanism, there will be duplication of insolvency procedures and costs and there may be incentives for forum shopping.