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Dongfeng Motor Served with a Request for Arbitration

On 18th February 2014, Dongfeng Motor Group Corparation (“Dongfeng Motor”), a leading Chinese automobile making company listed on the Stock Exchange of Hong Kong, announced that Dongfeng Commercial Vehicle Company (“Dongfeng Commercial”), one of its affiliated companies, had been served with a request for arbitration filed by a Brazilian company over a joint-venture dispute. Dongfeng Motor was also listed as co-respondent and requested to bear joint and several liability.

The reqeust for arbitration was filed at the London Court of International Arbitration (LCIA) according to the joint venture agreement. The Brazilian company alleged that Dongfeng Commercial failed to fulfill its obligations with regard to the establishment of the joint-venture company. It requested compensation of over RMB 4.3 billion, almost USD 700 million.

Although very liminted information is available, this case again illustrates once again the increasing exposure of Chinese companies going abroad. One particularly interesting aspect ist hat it seems that the joint venture agreement was never concluded and duly signed. However, this did not prevent the arbitration clause to produce effects and create the basis for a LCIA arbitration based on the principle of independence and separability of the arbitration agreement under the English Arbitration Act.

It remains to be seen whether Dongfeng Motors will raise jurisdictional objections. Dongfeng Motors announced that it planned to defend itself in the arbitration and publish information on the arbitration procedure in the future. We are awaiting further updates.

Written by Jin Bo


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- Pierre Tercier, Emeritus Professor, University of Fribourg and Honorary Chairman, International Court of Arbitration of the ICC

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The Book: Enforcement of Commercial Arbitral Awards in China 2013 4th ed.