Case: successful dispute in international arbitration HKIAC — Convertible Loan, Lost Profit, Piercing the Corporate Veil
- Client & Context
- Challenge
- Solution
- Result
- Team
- Insights & What Other Clients Should Know
- Contact a lawyer for further information
Client & Context
A Cyprus-based company (the investor) approached us for legal support in connection with a dispute against a US company (the debtor) arising out of a convertible loan agreement for the development and publishing of mobile games. The debtor received investments in the amount of USD 600,000 but, upon the due date, refused to repay the investment, and to distribute revenue share from the monetization of mobile games, and to deliver converted shares under the agreement.
The dispute was subject to arbitration at HKIAC in Hong Kong, with English law as the governing law of the contract.
Challenge
The REVERA team was tasked with recovering from the debtor the full amount of the investments (principal debt), the share of revenue from game monetization over the entire publishing period (lost profit), as well as interest accrued on the debt. The total claim amount in arbitration was approximately USD 2 million.
Prior to commencing arbitration, we sent, on behalf of the investor, a pre-arbitration letter and a notice of termination of the contract due to a repudiatory breach and repudiation thereof. The debtor and its founders effectively ceased all communication and explicitly stated that they would not perform the contract, which under the applicable law amounts to a repudiation of the contract.
Solution
The REVERA team initiated arbitration at HKIAC, promptly secured the appointment of a sole arbitrator, and filed applications to join third parties as co-respondents (the debtor’s shareholders) to pierce the corporate veil, as well as applications for interim measures prohibiting the transfer of the games on publishing platforms.
Result
Within 11 months of filing the claim, the arbitrator rendered a final award: our client’s claims were satisfied, the principal debt in full (100%), while claims for lost profit and interest were partially granted in the amount of approximately 30–40%.
The arbitrator also ordered the respondents to bear all arbitration costs, including registration and arbitration fees, as well as the claimant’s legal fees in full.
Team
The REVERA Arbitration team (Kamal Tserakhau, Aliaksandr Struzhko) – our experts in international commercial arbitration.
Insights & What Other Clients Should Know
International arbitration is not always a complex and costly process. In cases where the respondent remains procedurally inactive, proceedings can be managed in a highly efficient manner in terms of both time and costs. Therefore, even if the debtor insists that arbitration will cost you “hundreds of thousands” practice shows otherwise: even such reputable institutions as HKIAC offer flexible and cost-effective procedures that can significantly reduce arbitration costs.
In addition, it is recommended to assess in advance the prospects of debt recovery and the possibility of reaching the end beneficiaries through the corporate veil.
If you face a dispute in international arbitration, entrust the legal job to REVERA.
Contact a lawyer for further information
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