Chinese Offshore Investment

China’s Avic plane maker ordered to pay US$70m to Dallas wind firm after bad blood in Cirrus takeover

PUBLISHED : Tuesday, 22 December, 2015, 8:10pm
UPDATED : Tuesday, 22 December, 2015, 11:37pm

Tang Energy Group, a Dallas-based clean energy company, has won a more than US$70 million arbitration award for breach of contract against China’s biggest state-owned aerospace and defence company, Aviation Industry Corporation of China (Avic).

The ruling by the International Centre for Dispute Resolution in Dallas provides a glimpse into the growing number of disputes between Western firms and Chinese companies doing business overseas.

Tang Energy argued Avic did not fulfil commitments to help fund a West Texas wind farm and develop a global wind energy business as part of a joint venture, Soaring Wind Energy.

“The case clearly displays the need for Chinese companies operating in the United States to understand the importance of binding contracts, corporate formalities and the rule of law,” Tang Chief Executive Patrick Jenevein III said in a statement.

“For US-China business partnerships to succeed, there must be a level playing field that supports equality and transparency.”

READ MORE: Chinese direct investment in US to top US$10 billion for third year in a row

Avic did not immediately respond to requests for comment.

Jenevein initially demanded about US$2.25 billion in damages based on projects AVIC had developed without Soaring Wind in other parts of the world.

The award represents a setback for Avic, which had initially invested US$350,000 to take a 50 per cent stake in the joint venture.

Chinese offshore non-financial investment increased 16 per cent to US$104.1 billion during the first 11 months of the year, China’s Ministry of Commerce said this month.

In the United States, Chinese firms completed more than US$9 billion in transactions in the first nine months of the year, according to statistics compiled by New York-based consultancy Rhodium Group.

Tang Energy started its relationship with Avic in 1996, establishing HT Blade, China’s largest wind turbine blade manufacturer, in 2001.

The Dallas-based company argued that it had brought to Avic the opportunity to buy Cirrus Industries, the Minnesota maker of composite aircraft and propeller blades. Avic allegedly used a different affiliate to buy Cirrus for US$210 million in 2011 after benefiting from Tang’s knowledge about the company.

The arbitration panel concluded that Avic operated as a “single unified entity”, rejecting Avic’s assertion that the joint venture agreement was made with a US-based subsidiary.

The Dallas arbitration award must be confirmed by the US District Court for the Northern District of Texas.