Recently, King&Capital Law Firm represented a Chinese state-owned enterprise and secured a complete victory in a cross-border equipment procurement arbitration against a Spanish equipment supplier, with a claim amount exceeding 10 million yuan. The arbitral tribunal fully upheld all of the claimant’s arbitration claims, including confirmation of the contract termination, refund of the contract price already paid, payment of liquidated damages, and reimbursement of attorneys’ fees and arbitration costs.
The case was conducted in both Chinese and English and was heard by the China International Economic and Trade Arbitration Commission (CIETAC). The case was led by Attorney Shi Yedong of King&Capital Law Firm, with the participation of Attorneys Wang Ningxin and Liu Hangyu, as well as trainee attorney Li Jing’en.
Case Summary
The dispute in this case arose from a cross-border procurement transaction involving a large CNC floor-type boring and milling machining center. After delivery, multiple quality and technical issues emerged during installation, commissioning, and actual operation, rendering the equipment unable to meet the performance specifications and intended use stipulated in the contract. After repeated unsuccessful communications, the claimant initiated arbitration, seeking termination of the contract and holding the Spanish supplier liable for breach of contract.
This case combines the complexities of both cross-border commercial disputes and industrial equipment disputes, primarily involving the following aspects:
1. Factual and Technical Issues in Complex Industrial Equipment Disputes
The equipment in question is large-scale industrial machinery, and the dispute spans multiple dimensions, including equipment precision, operational stability, installation and commissioning, acceptance criteria, causes of defects, and the fulfillment of the contract’s purpose. These issues are highly specialized and require the “legal articulation of technical facts” within the arbitration proceedings.
Focusing on key stages such as equipment procurement, delivery, installation, commissioning, acceptance, fault reporting, and post-sales communication, the King&Capital Law Firm team systematically reviewed technical documents, communication records, and on-site materials to gradually construct a complete chain of facts linking equipment defects, breaches of contract performance, and the failure to achieve the contractual purpose.
Another challenge in this case stemmed from the fact that certain provisions in the relevant contract and technical agreements were rather general in nature. Consequently, it was not immediately clear whether the delivered equipment violated the contractual specifications, and in some instances, the equipment defects claimed by the claimant lacked a direct contractual basis. To strengthen the evidentiary support, the King&Capital Law Firm, drawing on international arbitration practice, employed the use of fact witnesses—an arrangement relatively uncommon in domestic commercial arbitration—and successfully persuaded the arbitral tribunal to allow the claimant’s fact witnesses to testify in person.
The team conducted thorough and meticulous preparations regarding witness selection, testimony preparation, explanations of hearing procedures, and the design of key questioning points. This enabled the arbitral tribunal to gain a more intuitive understanding of the actual manifestations of the equipment defects and their specific impact on the claimant’s production and operations, thereby providing crucial support for the determination of the facts of the case.
3. The Issue of Third-Party Arbitration
The issue of party standing was also one of the core disputes in this case. The claimant was not the formal buyer under the contract text but rather the end-user of the equipment in question, raising the issue of determining proper party standing in the arbitration proceedings.
Addressing whether the claimant had the right to initiate arbitration and exercise the buyer’s rights under the contract, the King&Capital Law Firm analyzed the transaction structure and performance process. By examining the claimant’s actual role in equipment procurement, payment, delivery, acceptance, and post-sale communications, the firm demonstrated its substantive status in the transaction. This analysis was further supported by the rules on agency, mandate, and contract interpretation under the Civil Code, as well as practices in foreign trade agency.
The arbitral tribunal ultimately recognized the applicant’s standing and confirmed its right to assert relevant claims under the contract in question.
4. Bilingual (Chinese-English) Proceedings and Application of the CISG
This case was conducted through bilingual (Chinese-English) proceedings. The transaction in question occurred between a Chinese buyer and a Spanish seller, and the dispute resolution involved both contract interpretation and agency rules under Chinese law, as well as the application of the United Nations Convention on Contracts for the International Sale of Goods (CISG).
During the hearing, the tribunal conducted a thorough examination of issues including party standing, contract interpretation, equipment defects, contract termination, and the basis for claims. The King&Capital Law Firm prepared legal documents and delivered oral arguments in both Chinese and English, systematically integrating and arguing the provisions of the Civil Code, foreign trade practices, technical facts regarding the equipment, and the CISG framework. Additionally, the firm presented a comprehensive argument regarding cross-border enforcement under the New York Convention in light of the award.
Significance of the Case
This case represents a typical cross-border equipment procurement arbitration involving multiple disputes, including the determination of technical facts, contract interpretation, and party standing. Despite uncertainties regarding contractual terms, transaction structure, and factual findings, the arbitration claims were ultimately upheld in their entirety, enabling the client to recover significant economic losses.
This case demonstrates that in highly technical commercial disputes, such as cross-border equipment procurement, the certainty of dispute resolution outcomes can be effectively enhanced through a systematic review of performance facts, effective articulation of technical issues, and accurate application of legal rules.
This case also demonstrates King&Capital Law Firm’s comprehensive capabilities in the fields of international arbitration and cross-border commercial dispute resolution. The firm’s International Practice Department will continue to provide professional, comprehensive, and efficient legal services to Chinese enterprises engaged in international transactions and cross-border dispute resolution.
