2025.04.16
JunHe recently assisted a Latin-American engineering contractor (hereinafter referred to as the "LATAM Company" or the "Client") in reaching a global settlement with a Chinese company (hereinafter referred to as the "Supplier") in a cross-border infrastructure-related procurement dispute. JunHe helped the Client to recover a significant amount of an advance payment of over one million US dollars.
The LATAM Company selected the Supplier as the material supplier for an infrastructure project. The transaction was based on a Proforma Invoice, under which the LATAM Company paid an advance payment equivalent to 20% of the total transaction price, amounting to more than one million US dollars. After the LATAM Company made the advance payment, the Supplier requested a price adjustment, citing significant fluctuations in the price of the raw materials. To avoid affecting the project’s schedule, the LATAM Company agreed to sign a supplementary Proforma Invoice with the Supplier and made an additional advance payment of over one hundred thousand US dollars. However, after the LATAM Company made the additional advance payment, the Supplier repeatedly delayed performance and demanded significant modifications to the transaction terms. Due to this, the LATAM Company had to terminate the transaction. A dispute arose over the refund of the advance payment when the Supplier refused to provide a refund. After several rounds of negotiations, the LATAM Company sought assistance from JunHe through its local counsel to resolve this dispute in China.
The LATAM Company and the Supplier had multiple rounds of communication through emails, WhatsApp messages and meetings regarding technical details, commercial terms, and price adjustments. Despite the complexity of the case, JunHe’s team quickly sorted out the factual background of the case and summarized the key points of the dispute. During a careful review and analysis of each document and piece of evidence related to the case, JunHe discovered that the Supplier had instructed the LATAM Company to pay the advance payment to its overseas affiliated company, which is a violation of China's foreign exchange control regulations. If the Supplier refused to refund the advance payment, it would constitute foreign exchange evasion, which is illegal and could be subject to administrative sanctions.
Based on a comprehensive analysis of the case, and under the Client's instructions, JunHe sent an attorney’s letter to the Supplier, pointing out its breach of contract and its violation of regulations in the transaction, demanding an immediate refund of the advance payment to avoid more severe legal consequences. After receiving the attorney’s letter, the Supplier contacted the LATAM Company, and proposed to resolve the dispute through settlement, and provided a draft settlement agreement. The Client then authorized JunHe to negotiate and discuss the terms and conditions of the settlement agreement with the Supplier. Despite a 13-hour time difference between China and Latin America, JunHe handled the negotiation of the settlement in an efficient manner and ensured timely communications with the Client. With JunHe's assistance, the parties eventually signed a settlement agreement, and the Client recovered the vast majority of the advance payment. It took less than three months for the Client to recover the advance payment after they had formally engaged JunHe, a process which efficiently resolved the cross-border dispute and effectively safeguarded the Client’s legitimate rights and interests.
The highlights of this case are:
1. Efficient Dispute Resolution: This was a cross-border transaction dispute and if it had been resolved through litigation, the Client would have had to initiate a lawsuit in China, which would have been time-consuming and inevitably resulted in high costs for rights protection. With a well-prepared dispute resolution strategy and efficient negotiations and communications, JunHe assisted the Client in reaching a settlement agreement quickly and obtaining a refund of its advance payment.
2. Multi-angle Dispute Resolution Thinking: During a careful review and analysis of the evidence, JunHe identified the Supplier’s regulatory violations in receiving the advance payment based on its profound understanding of China’s regulatory policies. JunHe analyzed the potential legal consequences of both refunding and refusing to refund the payment from the Supplier’s perspective, causing the Supplier to proactively make the refund to mitigate adverse legal risks.
3. Balancing Principles and Flexibility in Dispute Resolution: During the negotiation of the settlement agreement, both parties had significant disagreements over the wording and structure of certain clauses, leading to a deadlock. Leveraging its profound understanding of Chinese laws and judicial practices, JunHe adhered to principles on key issues concerning the Client’s core interests while advising the Client to make reasonable compromises on non-essential matters. JunHe also proposed wordings that were acceptable to both parties, balancing their interests and concerns. This approach facilitated a swift consensus and the successful signing of the settlement agreement.
With its thorough case analysis, precise and strategic handling of key dispute resolution issues, and efficient communication and negotiation skills, JunHe successfully helped the Client to resolve the cross-border dispute in a short period and at a low cost, effectively safeguarding its legitimate interests. The Client highly recognized and appreciated the efforts of the JunHe team in this important case.
Partner ZHENG, Yu led the JunHe team.
