A Fund Management Company v. A New Energy Company in the Case of Bond Default

In 2015, a fund management company ("Company A") purchased a three-year bond issued by a new energy company ("Company B") of RMB 300 million at an annual interest rate of 7.8%. Company B's affiliate, a Hong Kong-listed company ("Company C") and the actual controller of Company B ("Z") provided a joint guarantee. However, upon the expiration of three years, the issuer was unable to cash the bond in full. Even one year after the extension, the issuer was still unable to cash the bond. By the end of 2020, the issuer has only cashed part of the principal and interest, with the remaining outstanding principal exceeding RMB 190 million.

In August 2021, Company A appointed an attorney, David Li and an attorney, Zhang Yan, to handle the Case.

After investigation, both Company B and Company C are in operation difficulties and in heavy debts. It is said that Z has been taken compulsory measures or been serving a sentence because of his suspected criminal offence, but the details are unknown. It will be very difficult to help the bondholders recover their losses.

In September 2021, the attorneies applied for arbitration to the Shanghai Arbitration Commission on behalf of the Principal. After the arbitration case was filed, the commission was unable to serve the arbitration document on Z due to not knowing his contact information and consequently delayed in establishing the arbitration tribunal. After the formal establishment of the arbitration tribunal, Company B raised an objection to jurisdiction, claiming that the Shanghai Arbitration Commission has no jurisdiction over the case. The court dismissed Company B's objection. However, due to the failure to serve the document on Z, the arbitration tribunal delayed the hearing. Later, Company A made an inquiry about Z's real estate in Hong Kong and notified the arbitration tribunal to serve the document on the address of it in Hong Kong. Z engaged lawyers to participate in the arbitration. The arbitration hearing then continued.

The Respondents' lawyers responded from various perspectives, including denying the Claimant's right to arbitration, denying the validity of the guarantee of Company B and disapproving of Z's signature on the guarantee documents. David Li and other attorneys on behalf of the Claimant made forceful rebuttals to all of these arguments.

In June 2024, the arbitration tribunal finally made a ruling, almost entirely adopting the opinions of the Agent and supporting the Claimant's claim. The Respondents' total payment, including but not limited to debt principal and interest, attorney fees and arbitration fees, exceed RMB 237 million.