Clifford Chance
Enforcement of debt securities in a global note structure - testing the “no look through” principle
10 July 2024
Investors of debt securities in a global note structure may face obstacles in directly enforcing against the relevant issuers at times of default, not least because only the holder of the global note has standing to enforce against the relevant issuers before the global note is converted into definitive notes to be registered in the names of individual or discrete investors. Contractually, each party typically only has rights against its own counterparty (referred to in the case law as the "no look through" principle). The issuers in default, however, may be uncooperative in procuring such conversion. In the Hong Kong case, China Ping An Insurance Overseas (Holdings) Ltd v. Luck Gain Ltd and Others1, despite the applicability of the “no look through” principle, the Hong Kong court allowed a discrete investor to rely on a separate subscription agreement with the issuer to compel such conversion and directly enforce against the issuer. Whilst this case was decided on its specific facts and contractual terms, it sheds light on the operation of the "no look through" principle in practice.
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