| As one of the most popular investment methods, private equity investment plays animportant role in international financial markets. In recent years, Valuation AdjustmentMechanism (VAM) frequently appears in this field, however, the differences in laws andregulations of different countries affect the validity of the agreement. On behalf of bothinvestment and financing parties of the financing agreement, gambling agreements in manydomestic investment activities have been well executed, until the incident of the "Thee firstVAM case of China" happens. This case heard by Lanzhou Intermediate People’s Court,Gansu Province High People’s Court and the Supreme Court drew a high degree of concernin the industry. The nature of VAM in China has been more confusing since the courtsabove defined the nature of the gambling agreement differently. Although the SupremeCourt’s decision is the final judgment, whose definition and the application of the law onthe legal relationship in this judgment is correct? Therefore, this thesis will focus on thegambling agreement between PE and Target Company, elaborate the concept, legalrelationship and illegality under the current legal framework, with its outlook for futuregradual legalization.Firstly, through a detailed analysis of the concept of the agreement on gambling, thisthesis restored its origin as a value adjustment mechanism. At the same time, through theanalysis of the needs and interests on both sides of investment and financing parities, thethesis summed up the root causes and the double-edged sword effects of the existence ofthe gambling agreement, laid the foundation to expand discussion in this thesis. Secondly, by finishing discussion in the first case of an agreement on gambling, thisthesis clarifies the facts of this case and the controversial issues, and summarized thedifferent legal concepts defined by of the Lanzhou Intermediate People’s Court, GansuProvince Higher People’s Court and the Supreme Court to clarify the important issues ofthe study discussed in this article, namely the legality of the agreement on gamblingbetween private investment fund and the target company.Subsequently, the thesis mainly focused on the analysis of the legal nature of thegambling agreement and comments issued by the Supreme Court judgment. Based onresearch of constitutive requirements element such as subject, object and content, weclarify the legal relationship in this agreement. As an unnamed contract, this thesis selecteda comparative study methods on many similar contracts, come to a conclusion of theagreement on gambling as a typical aleatory contract and an untypical option contract.Most importantly, this thesis through discussing court decisions in depth, pointed out thefallacies of the Supreme Court Judgment and the reality of the gambling agreement underexisting legal framework.Finally, from the perspective of Actuality Law, this thesis provided a detailed analysisof the illegality of gambling agreement between PE and Target Company under theprovisions of existing laws. At the same time, by using the method of value analysis andvia finding the balance between contract freedom and contract justice with analysis on theeconomical principles, this thesis demonstrated future vision on the legality of this type ofthe agreement on gambling... |
