Bribery Fund Flow Ordered to Be Disclosed: Hong Kong Court of Appeal Supports China Gold Hong Kong's Disclosure Relief Application

On December 2, the Hong Kong Court of Appeal delivered a judgment in the case of China National Gold Group Hong Kong Limited (hereinafter referred to as "China Gold Hong Kong") versus The Hongkong and Shanghai Banking Corporation Limited (hereinafter referred to as "HSBC"). The court overturned the lower court's decision to dismiss China Gold Hong Kong's application for Norwich Pharmacal relief against HSBC, supporting China Gold Hong Kong's request for HSBC to disclose the flow of suspected bribery funds.

This judgment relates to an international arbitration case currently faced by China Gold Hong Kong. The origin of the dispute dates back more than a decade. In 2013, China Gold Hong Kong signed an agreement with Global Mining LP and Gerald Metals LLC (collectively referred to as the "Gerald Parties") to acquire a 65% equity stake in Soremi Investments Ltd (hereinafter referred to as "SIL"). SIL is a company registered in the British Virgin Islands and holds the Soremi project located in the Republic of Congo, Africa.

In November 2020, the Gerald Parties initiated arbitration in Hong Kong, demanding that China Gold Hong Kong return the acquired SIL shares and claiming substantial compensation. After nearly three years of arbitration proceedings, the arbitral tribunal issued four partial awards between February 2023 and August 2024, all unfavorable to China Gold Hong Kong. In September 2024, the British Virgin Islands court appointed a provisional receiver to take over SIL.

However, publicly available information indicates that in April 2024, China Gold Hong Kong received a report alleging that Tong Junhu, then one of the chief negotiators for the Soremi project, was suspected of accepting bribes from the Gerald Parties while representing China Gold Hong Kong in negotiations.

Based on publicly available information, as early as around May 2013, before China Gold Hong Kong signed the agreement with the Gerald Parties, Tong secretly participated in negotiations for a "Consultancy Agreement" between SIL and a Chinese company named "Beijing Kehong." This agreement was ostensibly for providing market and policy consultation services to the Gerald Parties but is suspected of having been set up as a channel for bribe payments.

The payments under this agreement were not made directly to Tong or Beijing Kehong but were transferred to the account of a UK company named Kehong Investment Ltd. This company was established on November 1, 2013, wholly owned by an individual named Cai, and had been filed for years with the UK Companies House as a "dormant company" with no actual business records.

On April 21, 2014, Gerald Holdings LLC paid US$1.5 million to the account of Kehong Investment Ltd at the Hong Kong branch of HSBC. Subsequently, Beijing Kehong issued invoices for two payments of US$250,000 each in April 2015 and one invoice for US$750,000 in March 2017, all directed to the bank account of Kehong Investment Ltd (the account was later changed to the Beijing branch of Bank of East Asia).

On November 25, the official website of the Jinhua Municipal Supervisory Commission in mainland China announced that the Commission for Discipline Inspection of China National Gold Group Co., Ltd. and the Jinhua Municipal Supervisory Commission of Zhejiang Province had conducted a disciplinary review and supervision investigation into Tong Junhu's suspected serious violations of discipline and law, and that Tong Junhu's suspected criminal issues had been transferred to the procuratorial organs for review and prosecution according to law. The announcement specifically mentioned that Tong Junhu, during the process of China National Gold Group carrying out overseas M&A projects, used his position to seek benefits for others and illegally accepted huge amounts of money. This suggests that the Soremi project acquisition transaction might involve undisclosed circumstances.

Following the discovery of Tong Junhu's related violations, China Gold Hong Kong initiated a series of new lawsuits regarding the Soremi acquisition case, including requesting HSBC to disclose the flow of suspected bribery funds. Previously, the Hong Kong lower court had dismissed China Gold Hong Kong's application, after which China Gold Hong Kong appealed to the Hong Kong Court of Appeal. The December 2 judgment by the Hong Kong Court of Appeal, ordering HSBC to disclose the flow of suspected bribery funds in response to China Gold Hong Kong's request, represents a milestone development.

As the flow of bribery funds becomes clearer, will more details about the acquisition case be uncovered, and will it have a substantive impact on the disputes currently faced by China Gold Hong Kong? We will continue to follow the story.