GILS Dispute Resolution: China
CHINA
CASE №1:
With the expert assistance of GRATA International China lawyers, a leading construction enterprise in the People's Republic of China, being a member of Consortium agreement (Client) in the project for the reconstruction of a section of the road of the republican significance successfully overcame substantial legal challenges related to the failure of Bank CenterCredit JSC to fulfil its obligations to pay under the bank guarantee, following the non-fulfillment of contractual obligations by another consortium partner.
Due to the failure of one of the parties to the Consortium Agreement to fulfil its obligations under the agreement, the Client applied to the Bank with a request to pay the amount of the bank guarantee in the amount of approx. USD 9.5 million, to which the Bank refused.
In case of filing a monetary claim, for instance, to recover amounts under a bank guarantee, the state fee for legal entities is 3% of the claim amount, but no more than 20 000 MCI (approximately USD 166 000). For non-monetary claims, the state fee is 0.5 MCI (approximately USD 5).
In this regard, GRATA International has chosen the strategy of filing a non-monetary claim in court to recognize the refusal to perform obligations under the bank guarantee as illegal and to compel execution, and only in the event of 1. the satisfaction of non-monetary claims by the court, 2. and the Bank's failure to fulfil its obligations under a court decision on a non-monetary claim that has entered into legal force, 3. to file a monetary claim in the court.
To address this issue, the Client, under the legal support of GRATA International China, initiated legal proceedings to challenge the Bank’s refusal as unlawful and to compel the performance of obligations under the bank guarantee. Despite the initial court ruling in our Client's favour, non-compliance by the Bank necessitated further legal action of a monetary nature to safeguard the Client’s rightful claims and interests.
The Specialized Interdistrict Economic Court of Astana city deliberated on this case and, on December 15, 2023, rendered a decision that predominantly favoured our client. Later on March 7, 2024, the Court of Appeal issued a decision to dismiss the Bank's appeal. The court ordered the Bank to pay the full amount under the bank guarantee, alongside a penalty, reimburse legal fees, and state duties. The total amount ordered for payment by the court is approximately USD 10 million.
The legal prowess and strategic litigation approach employed by GRATA International China lawyers were instrumental in substantiating the Bank's breach of obligations and the penalties accrued from the moment of the initial claim under the bank guarantee. This court decision mandated the enforcement of contractual commitments by the Bank.
Gulnur Nurkeyeva, Akzhan Sargaskayeva.
CASE №2:
This case centres around a dispute arising from a PPP contract for the construction and operation of a kindergarten in Astana signed between the Public Partner and the construction company (“Client” or “Private Partner”).
The primary issue in the dispute was the lack of essential engineering infrastructure, specifically a transformer substation and an electricity power cable line, on the plot provided. This led to significant project delays, increased costs, and loss of profit.
In addressing this legal challenge, the Private Partner was represented by GRATA International Beijing lawyers, whose expert legal representation was crucial in navigating the intricate legal landscape of the Republic of Kazakhstan, particularly in handling cases under the jurisdiction of the AIFC Court. The Court of First Instance of the AIFC, guided by the clauses of the PPP Contract and the laws of the Republic of Kazakhstan, undertook the consideration of the dispute.
The Private Partner, with the legal assistance of GRATA International China lawyers, argued that the land provided by the Public Partner for the construction of the kindergarten was deficient in critical engineering infrastructure as stipulated by the contract. This oversight by the Public Partner was deemed a breach of contract by the Private Partner, leading to increased Compensation of Investment Costs (CIC), additional investment costs, lost profits, and other losses due to non-performance.
The AIFC Court resolved that the Public Partner had failed to fulfil its obligations to provide the site within the stipulated time frame and to ensure the site was connected to the grid connection point.
GRATA International China’s representation was vital in securing a favourable outcome, which resulted in the AIFC Court upholding the claims of the Client, ordering the Public Partner to pay the Private Partner the sum of approx. USD 4 million.
Gulnur Nurkeyeva, Akzhan Sargaskayeva.
CASE №3:
In the arbitration case overseen by the China International Economic and Trade Arbitration Commission (CIETAC), a contractual dispute surfaced between Hong Kong Dragon Electronics Ltd. (the "Plaintiff" or the “Client”) and Korkem Telecom LLP (the "Defendant"). The core of the dispute centred on a sales and purchase agreement, under which the Plaintiff committed to supplying specific equipment. Despite receiving an initial advance payment from the Defendant, a remaining balance of USD 208 996 was not paid. Consequently, the Plaintiff initiated arbitration proceedings to recover the outstanding funds.
The Plaintiff’s interests were adeptly represented by GRATA International China.
The agreement in question did not specify an applicable law clause, leading the parties to agree on the application of the Laws of the People’s Republic of China (PRC) for adjudicating their case. The arbitration was held in Beijing, featuring detailed exchanges of evidence and thorough crossexamination processes.
The Plaintiff argued that the goods were delivered in complete compliance with the agreement’s terms. In contrast, the Defendant challenged the quality of the received goods, claiming they were substandard.
The arbitration tribunal, after careful consideration of the evidence and arguments presented, affirmed the validity of the agreement. It rejected the Defendant's arguments for contract termination due to the lack of substantial proof regarding the poor quality of goods.
The arbitration tribunal mandated the Defendant to pay the remaining balance of USD 208 996 and additionally compensate the Plaintiff for legal representation costs and arbitration fees, totaling USD 241 581.
This arbitration award was not only pronounced but also recognized and fully enforced in Kazakhstan.
This case underscores the pivotal role of expert legal representation in international arbitration and the enforcement of arbitral awards. GRATA International China’s expertise in navigating through complex legal and procedural nuances was instrumental in securing a favourable outcome for the Client.
Gulnur Nurkeyeva, Akzhan Sargaskayeva.
