No results.

InsightsCase Highlights

Cross-Border Insolvency and Keepwell Dispute Resolution: Nuoxi Capital Ltd v Peking University Founder Group Co Ltd

21 Dec 2021

Cross-Border Insolvency and Keepwell Dispute Resolution: Nuoxi Capital Ltd v Peking University Founder Group Co Ltd

In Nuoxi Capital Ltd v Peking University Founder Group Co Ltd [2021] HKCFI 3817, Mr Justice Harris held that keepwell disputes should be determined in Hong Kong in accordance with the contractual exclusive jurisdiction clause, notwithstanding the Court recognising the keepwell provider’s Mainland insolvency proceedings.

As the determination of the disputes would involve some Mainland law issues, his Lordship would welcome coordination with the Mainland court.

Harris J’s Decision is momentous and ground-breaking in far-reaching implications, learned in reasoning, and pragmatic in outcome. It provides a golden opportunity for practical cross-border restructuring and dispute resolution cooperation between the courts in Hong Kong and on the Mainland.

The material facts

Peking University Founder Group Co Ltd (“PUFG”) was incorporated on the Mainland, an investment holding company, and part of a conglomerate with diverse businesses.

The PUFG group issued bonds through BVI subsidiaries (“Issuers”), and the bonds were guaranteed by Hong Kong subsidiaries (“Guarantors”).

The bonds were also backed by Keepwell Deeds between PUFG, the Issuers and the Guarantors. In brief, the Keepwell Deeds required PUFG to cause each of the Issuers and Guarantors: (1) to have a consolidated net worth of at least US$1 at all times, and (2) to have sufficient liquidity to ensure timely payment by each of the Issuers and Guarantors of any amounts payable under the bonds. The Keepwell Deeds were expressly governed by English law and contained an exclusive jurisdiction clause in favour of the Hong Kong courts.

In February 2020, on the application of a bank, the specific Beijing court issued an order that PUFG should commence reorganisation pursuant to the Enterprise Bankruptcy Law (“Mainland Reorganisation”), and appointed administrators (“Administrator”) to oversee PUFG’s reorganisation.

The Issuers and Guarantors defaulted on the bonds. They themselves were wound up in their own respective jurisdictions and liquidators of them were appointed.

The Issuers and Guarantors (all in liquidation) in turn claimed that PUFG had defaulted on its obligations to them under the Keepwell Deeds.  They first lodged claims to the Administrator in Beijing on the basis of the Keepwell Deeds.  Such claims were rejected by the Administrator. They then issued proceedings against PUFG in Hong Kong (“Writ Actions”).

In response, PUFG applied to stay the Writ Actions on the basis that the Issuers and Guarantors had submitted proofs of debt in the Mainland Reorganisation.

Further, the Administrator requested the Hong Kong court to recognise and assist the Mainland Reorganisation by staying the Writ Actions.

Harris J’s decision

Mr Justice Harris held that:

(1) The Writ Actions would not be stayed.

(2) The Court would recognise the Mainland Reorganisation, but would not impose a stay on the Writ Actions.

(3) Before proceeding further with the Writ Actions, the Court would welcome a coordination with the Beijing court as “it may be possible for the courts to agree the way in which the issues are to be determined, with the Hong Kong court dealing with issues of construction of the Keepwell Deeds” (at [70]).

His Lordship reasoned as follows.

First, the Court would enforce the exclusive jurisdiction clause unless there were strong reasons for not doing so. The Court would not deprive a party’s right to rely on the exclusive jurisdiction clause unless a compelling reason was demonstrated.

Second, PUFG could not demonstrate a compelling reason for the Court to depart from the exclusive jurisdiction clause just because the Issuers and Guarantors submitted proofs of debt in the Mainland Reorganisation. There is a distinction between a creditor seeking adjudication of a dispute only and a creditor seeking to recover in a debtor’s foreign insolvency. The submission of a proof of debt does not prejudice a creditor seeking adjudication of a dispute in a jurisdiction which is not the insolvency jurisdiction.

Third, the Hong Kong court would be better placed than the Beijing court to determine issues of English law, and the Hong Kong court’s judgment on the substantive dispute would be expected to carry weight in the Mainland court.


This Decision is undoubtedly the most momentous and ground-breaking cross-border insolvency decision issued by the Hong Kong court in a generation. It paves the way for a seamless cooperation between the Hong Kong and Mainland courts in the management of large insolvencies, consistent with the cooperation spirit enshrined in The Supreme People’s Court’s Opinion on Taking Forward a Pilot Measure in relation to the Recognition of and Assistance to Insolvency Proceedings in the Hong Kong Special Administrative Region.

Supported by many authorities cited in the judgment, Mr Justice Harris’s approach demonstrates how mature insolvency systems deal with potential conflict between jurisdictions.

As his Lordship pointed out, the Mainland cross-border insolvency regime is still in a nascent state. This judgment thus provides the best teaching materials for everyone interested in cross-border insolvency in the Greater China region.

Indeed, the Decision can be described as a landmark decision wherein the principle of “one country two systems” is enshrined.

Patrick Fung SC and Look Chan Ho acted for the Issuers and Guarantors in this case, and co-authored this article.

Jose Maurellt SC and Tom Ng acted for PUFG and the Administrator.