Chinese Supreme Court Issues Key Summary of Bond Dispute Cases

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The Chinese Supreme Court has just issued a key summary of legal cases involving bond disputes.

The Chinese Supreme Court recently issued the “Minutes of the Conference on the Trials of Bond Dispute Cases by National Law Courts” (全国法院审理债券纠纷案件座谈会纪要).

State media said that the publication of the Minutes is for the purpose of “correctly handling contractual, rights infringement and bankruptcy civil commercial cases that arise because of the issuance and transaction of corporate bonds, enterprise bonds, and non-financial enterprise bonds; unifying application of the law and protecting the rights and interests of bond investors.”

The Minutes are an “important judicial result” of the Conference on the Trials of Bond Dispute Cases by National Law Courts that was held on 24 December 2019, and will be “of benefit to optimising bond dispute trial procedures, unifying the application of the law, further smoothing out rule-of-law based remedy channels and raising the efficiency of judicial remedies.”

Key contents of the Minutes include:

  1. Clarification of issues such as bond trustees qualifying as litigants, and bond holders independently or jointly filing lawsuits;
  2. Provisions on the handling of bond dispute cases, as well as jurisdiction and litigation methods, in order to “achieve comparatively centralised case jurisdiction and trials.”
  3. Calling for full use of bondholders meetings as a deliberation platform, and respecting the effectiveness of resolutions lawfully produced by such meetings.
  4. Provisions on issues including the scope of default liability, calculation of losses for fraudulent issuance of bonds and false statements, and causal relationship defences, in order to “lawfully raise the cost of legal breaches on bond markets.”
  5. Provisions on the duties of bond trustees, bond underwriters and service institutions, and clarification of the combination of liability and fault extents.
  6. Clarification of the duties of bankruptcy administrators with regard to ongoing information disclosure and prompt confirmation of creditor’s rights.

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