The Beijing Lawyers Association recently held the Second Belt and Road Foreign-Related Legal Services Exchange and released the Selected Outstanding Cases. An ICC arbitration arising from an international engineering contract dispute between a Chinese state-owned enterprise and an Argentine project owner was selected. GEN Law Firm partner Melissa Feng and counsel Hongxu Ding jointly represented the Chinese enterprise.

ICC Arbitration Concerning an International Engineering Contract Dispute Between a Chinese State-Owned Enterprise and an Argentine Project Owner

This matter arose from a photovoltaic power plant project in Argentina and concerned outstanding construction payments and an expected call on a performance guarantee. The Chinese state-owned contractor faced three challenges: the owner's refusal to pay the final contract balance, its call on the guarantee, and proceedings in a US court. The team coordinated foreign counsel and pursued an integrated strategy across parallel proceedings in the Chinese courts, the US courts, and an ICC arbitration. It obtained interim and final relief from the Chinese courts suspending payment under the guarantee, an ICC emergency arbitrator order, and a favorable final award. The counterparty was ordered to and did discontinue the US proceedings, the guarantee payment was enjoined, and the contractor recovered the construction payments.

Case Overview

In early 2018, a Chinese state-owned enterprise (the "Chinese Enterprise") entered into an EPC contract as general contractor for a photovoltaic power plant owned by an Argentine company (the "Argentine Owner"). The contract provided for an advance payment and deferred construction payments, with the final payment due upon project completion. The Chinese Enterprise also provided a performance guarantee. The plant achieved commercial operation in July 2019. At the owner's request, the Chinese Enterprise handed over the site and demobilized in early 2020. It then repeatedly requested the completion certificate and final payment, but the owner refused both on various grounds.

After the Chinese Enterprise sought final payment, the Argentine Owner requested an extension of the performance guarantee. When the Chinese Enterprise refused, the owner called the guarantee and, after payment was blocked, commenced proceedings in a US court to enforce it. Three sets of proceedings then ran in parallel: fraud and payment-suspension proceedings concerning the guarantee before the Chinese courts; guarantee litigation in the United States; and an ICC arbitration in Singapore under the EPC contract. The dispute spanned China, Singapore, Argentina, and the United States, and involved approximately USD 80 million.

Case Strategy and Key Issues

1. Overall Strategy

Upon instruction, the team developed an integrated strategy focusing on suspending payment under the guarantee, pursuing claims under the EPC contract, and defending the overseas litigation. It coordinated counsel and proceedings across jurisdictions; engaged with the issuing bank and preserved evidence of the owner's improper call and project performance; sought interim relief from the Chinese courts on the ground of a fraudulent call and pursued a final determination that the owner was not entitled to payment; and commenced ICC arbitration for the outstanding construction payments, interest, and costs. The team also initiated ICC emergency arbitrator proceedings seeking measures requiring the owner to suspend or discontinue the US guarantee litigation.

The principal challenges were:

1. Independent guarantees are payable on demand, and the threshold for suspending payment is high. The team therefore needed to establish that the call was fraudulent or manifestly unconscionable.

2. The guarantee dispute and the underlying EPC dispute were closely connected but legally distinct, requiring consistent facts, evidence, and positions across proceedings.

3. The Chinese court proceedings, US litigation, and ICC arbitration ran in parallel, requiring close coordination on procedural timing, jurisdiction, and interim relief.

4. The EPC contract imposed numerous stringent conditions on final payment, some of which were nearly impossible to satisfy. It was therefore difficult for the Chinese Enterprise to establish that every condition had been met.

The team reconstructed the record of performance, completion and handover, payment obligations, and the guarantee call, establishing a coherent evidentiary chain. It aligned the litigation and arbitration strategy with the contract, applicable law, and international arbitration practice, and worked with the Chinese Enterprise to structure the handover process. Through witness evidence and other proof of the owner's substantive acceptance and acknowledgment of completion, the team persuaded the tribunal that the project had been completed in substance and that the owner's contractual objective had been achieved. This established that the owner's refusal to make final payment and its call on the guarantee lacked factual and contractual grounds.

2. Outcome

The Chinese courts found fraud in the call on the independent guarantee, first granting interim relief and then issuing a final judgment enjoining the payment. In the ICC arbitration, the team obtained an emergency arbitrator order barring the counterparty from continuing the US guarantee litigation. The Argentine Owner subsequently discontinued those proceedings. The final ICC award upheld the Chinese Enterprise's claims and ordered the owner to pay the amounts due under the EPC contract, together with related costs. The owner paid the award in full. The combined strategy therefore prevented payment under the guarantee and secured full recovery of the outstanding construction payments.

Conclusion and Recommendations

This case underscores the importance of integrating dispute resolution planning with guarantee risk management from contract negotiation through project performance. Once a dispute arises, contractors should promptly preserve evidence of performance, completion, handover, payment demands, and any guarantee call. They should also assess at an early stage how contract arbitration, guarantee proceedings, and foreign litigation interact, rather than responding to each proceeding in isolation.

Multi-jurisdictional engineering disputes require a coordinated strategy across domestic courts, foreign courts, arbitral institutions, and local counsel. Emergency arbitration and other interim measures can protect assets, prevent improper calls, and preserve the prospects of recovery. Consistent positions and coordinated steps across proceedings are critical to protecting Chinese enterprises' interests in overseas projects.

The case's inclusion in the Outstanding Cases and Practices of the Second Belt and Road Foreign-Related Legal Services Exchange recognizes GEN's experience and capabilities in international construction disputes. GEN will continue to support Chinese enterprises participating in Belt and Road projects and other cross-border operations.