Jun He faces court challenge in Sino-Forest court battle with domestic rivals

Chinese firm Jun He is being sued by two domestic rivals, Commerce & Finance and Jingtian & Gongcheng, over its adviser role in the Sino-Forest’s independent investigation.

Commerce & Finance and Jingtian & Gongcheng have launched a suit against Jun He in the Third Intermediate People Court of Beijing, requesting that it cough up RMB150m (£15m) for allegedly defaming their right of reputation. The dispute centres on questions over the Chinese legal qualification belonging to a Jun He partner, and whether his legal opinion should be valid.

The dispute arises from Jun He’s role as the PRC adviser to the independent committee (IC) appointed by the board of the now collapsed Sino-Forest Corporation from 2011 and 2012. At the time the once Toronto-listed Chinese forestry company faced allegations of fraud by US short-selling firm Muddy Waters.

The company denied the allegations and formed the IC to conduct an independent investigation. The committee subsequently appointed PricewaterhouseCoopers (PwC), Canadian counsel Osler, Hoskin & Harcourt, Hong Kong counsel Mallesons Stephen Jaques (now King & Wood Mallesons) and PRC counsel Jun He as independent advisers for the investigation.

The two claimants are currently the subject of a major lawsuit in Canada over their roles in numerous capital markets transactions by Sino-Forest in Canada (14 October 2013). Eleven international financial institutions, including Credit Suisse Securities and Banc of America Securities, filed a statement of claim against the two Beijing-based firms in Ontario Superior Court of Justice on 31 May 2013, alleging negligence and breach of duty.

The 11 companies were the underwriters in these transactions. Jingtian & Gongcheng acted as the PRC legal counsel to Sino-Forest and Commerce & Finance acted as the PRC legal counsel to the underwriters. The 11 companies are currently defendants of several class actions in Canada and in the US. 

According to the website of Chinese newspaper Global Times, Commerce & Finance and Jingtian & Gongcheng believed that the 11 financial institutions’ decision to file claims against them for “negligent misrepresentation” and “breach of duty” was based on the Chinese legal opinion provided by Jun He’s corporate partner Kirk Tong.

In court documents, the two claimants alleged that Tong was not admitted to practice PRC law and didn’t receive legal education in China. Therefore, the two firms claimed that the legal opinion issued by Jun He to the IC was not valid and it was illegal for non-PRC quailed lawyer to provide PRC legal advice.

In a statement, Jun He noted that the firm has not been served with the complaint and any defamation claims against the firm are unfounded.

“There have been recent media reports that Jingtian & Gongcheng (“Jingtian”) and Commerce & Finance (“C&F”) have filed suit against Jun He in Beijing alleging defamation. So far, we have not been served with the complaint, and we do not know what actually is being alleged. Until that occurs, it would be imprudent for us to try and comment in any detail on the case. However, we do wish to state from the start that any defamation claims against us are unfounded. Neither Jun He nor any of its lawyers have defamed Jingtian or Commerce & Finance,” the firm said.

“As time goes on, and the precise nature of this case becomes clearer, we will likely have more to say. Until then, we ask for your patience and that you reserve judgment. We are confident that as time goes on and the matter is clarified, we will ultimately be exonerated,” the firm pleaded.

It is one of the first cases in which leading Chinese law firms are suing each other and in which the dispute relates to the qualification of a Chinese lawyer.

Jun He’s top rival King & Wood Mallesons in China also faced similar allegation. Last year, the firm’s Shanghai capital markets partner Stanley Cha was accused of illegally practising PRC law as he is a US citizen (14 May 2012). The firm took off Cha’s name from its website after the accusations.