From Rmb42 Million to Nothing: What Lessons Can We Learn from JV Disputes?

March 31, 2004 | BY

clpstaff &clp articles

Joint venture disputes are a fact of life in China. But they can be avoided with some careful planning to structure the joint venture contract to account for the common pitfalls in doing business in China.

By Bailey Xu Haworth & Lexon, Shanghai

In an important recent case heard by the Supreme People's Court,1 a foreign investor in an equity joint venture was found to be in breach of its obligations to make the fourth and fifth instalments of its capital contributions to the joint venture. As a result, the joint venture contract was terminated and the foreign investor's prior capital contributions, amounting to Rmb42.33 million, became forfeit. This decision was handed down by the Supreme People's Court of China on June 20 2003 and the final judgment was published in the Supreme People's Court gazette for the fourth issue of 2003. The ruling can be seen as guidance for similar cases in China. The methodology and legal grounds for the judgment have significant practical instructions for both foreign and domestic parties when they are dealing with joint venture contracts in China.

A Breach of Contractual Obligations

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