Recently, Zhihuan Law Firm received the [2021] China International Economic and Trade Arbitration Commission (CIETAC) CJZZ No. 1387 award. In the dispute over the construction contract between the applicant Zhengzhou Jinshui Wanda Investment Co., Ltd. (hereinafter referred to as Jinshui Wanda) and the respondent Beijing Aipu Power Co., Ltd.

　　Basic Case

　　1、 Background of the case

      In April 2014, Jinshui Wanda signed the Temporary Power Supply Construction Contract for Zhengzhou Jinshui Wanda Center with Aipu Power, and Aipu Power undertook the construction of the temporary power supply project for Zhengzhou Jinshui Wanda Center. The project has been completed and put into use.

      Both parties failed to make normal settlement due to disputes arising from performance. According to the evaluation of the third-party price appraisal agency, the actual construction of the power supply and distribution project on site was 20231843.08 yuan, and the municipal compensation cost was 5691518.26 yuan. Due to various reasons, some of the external power supply and distribution projects were abandoned. Jinshui Wanda proposed to reduce the repeated investment of 2739853.13 yuan. Jinshui Wanda believes that the project settlement amount is 23183508.21 yuan. Jinshui Wanda has paid 24043545.83 yuan for the power project of Aipu, and 860037.62 yuan has been overpaid.

      In February 2017, Jinshui Wanda issued the Official Letter on Confirmation of Contract Settlement of Zhengzhou Jinshui Wanda Center Temporary Power Supply Project (Zheng Jinshui Wanzi [2017] No. 10, referred to as the Official Letter No. 10), which stated that "up to now, our company has paid you 24043545.83 yuan of the project price under this contract, and 860037.62 yuan has been overpaid. This overpayment will be deducted from the cable recovery price of Yangjunliu substation and the project funds of other cooperation projects between your company and Wanda".

　　2、 Claimant

      During the performance of the contract, Jinshui Wanda urged for many times, but Epoch Power failed to submit the corresponding settlement materials. Jinshui Wanda entrusted a third party to evaluate the project involved, and the evaluation results were legal and valid.

      The power supply bureau of the external power distribution project from Yangjunliu to the switching post in the commercial area failed to accept the construction of Aipu Power in violation of the contract, resulting in a repeated investment of 2.7 million yuan, which should be reduced.

      Therefore, the project settlement amount is 23183508.21 yuan, Jinshui Wanda has paid 24043545.83 yuan, and the overpaid part of 860037.62 yuan should be returned.

 

　　3、respondent

      According to the official letter No. 10, even if there is an overpayment, since Aipu Power has not raised any objection to the use of discarded cables for deduction, the overpayment has been handled, and Jinshui Wanda has no right to require the return of the overpayment.

      The abandoned engineering cables are 8819 meters of 3 x 400 cables. After consultation, about 9 kilograms of copper per meter of cable is worth about 4 million yuan at the market price of about 50 yuan per kilogram. This amount was recovered and sold by Jinshui Wanda, but not returned to Aipu Power.

      The five visas issued by Aipu Power in the process of construction totaled 322059.48 yuan, which should be included but not included in the settlement, and should be settled together. Aipu Power paid about 200000 yuan of temporary electricity deposit to the power supply company, which has been deducted from the project progress payment made by Jinshui Wanda to Aipu Power, and has not been returned to Aipu Power.

      Therefore, the Claimant's arbitration claim was not agreed.

　　[Opinion of the arbitral tribunal and award]

　　The arbitration tribunal held that the Construction Contract is valid and binding on both parties. The focus of dispute is described as follows:

      1. Whether there is overpayment for the project in this case.

      The arbitration tribunal found that it was not inappropriate for the applicant to entrust a third person to conduct cost assessment when EpPower did not provide corresponding evidence to prove that the final settlement price was incorrect. A total of 322059.48 yuan for the five visas claimed by Aipu Power can be separately settled with Jinshui Wanda and will not be handled in this case; The evidence of temporary power deposit claimed by Aipu Power is insufficient.

　　According to the general practice of project construction material management, when the construction party provides materials for mobilization, the construction party and the supervisor will conduct on-site acceptance. There are strict on-site management measures for the mobilization and demobilization of materials, and the applicant's official letter No. 10 contains the meaning of cable recycling of Yangjunliu substation, which is recognized by the respondent. Therefore, the waste Yangjunliu substation cables will be taken over and controlled before recycling, disposal and realization, It is difficult to attribute the responsibility to the applicant or the respondent based on comprehensive consideration of the existing evidence in this case, so the arbitral tribunal determines that both parties have common responsibilities and obligations at its discretion.

　　3. Whether the debts of both parties are offset due to Official Letter No. 10.
      The meaning of "deduction" in Official Letter No. 10 means that the applicant was the first to issue the letter and the respondent recognized it. This is a new deduction agreement between the two parties on the payment method of overpayment of project funds. Such meaning is true and does not violate the law, and can be recognized as agreement offset. Compared with Aipu Power, Aipu Power is the debtor of "the return price of abandoned cables" and "other project construction funds". Jinshui Wanda recognizes the existence of such debts and has certain advantageous position and obligation to confirm such debts. However, the specific amount of such debts has not been confirmed by practical and sufficient evidence in this case, leading to the arbitration tribunal being unable to confirm whether the offset has actually been completed in this case, However, this only involves the specific performance of the two parties to the agreement set off, which does not deny the true intention and validity of the agreement set off. Before both parties reached a new agreement to change the agreed offset determined in Official Letter No. 10, the arbitration tribunal held that it was against the principle of good faith for the applicant to claim directly to the respondent to return the overpaid project funds, so it did not support such claims of Jinshui Wanda in this case.

　　4. Findings
      Reject the applicant's arbitration claim. This award is final and takes effect from the date of making it.

　　[Case Evaluation]

　　Although the object of action of this case is not large, the amount of evidence in the case is large, the duration of arbitration is long, and the time for making an award has been repeatedly postponed. It will take more than two years from the applicant's submission of an arbitration application on May 24, 2019 to the receipt of the award on June 9, 2021. During the process of representing the case, the agent communicated with the arbitration tribunal for many times, argued and grasped the following key points:

      1、 Sort out the evidence, study the evidence, sort out the facts and pulse of the case, and form defense ideas according to the evidence.
      After accepting the agency, gradually clarify the situation of the case according to the evidence and the statements of the relevant parties of Aipu Power. As a subordinate enterprise of Wanda Group, Zhengzhou Jinshui Wanda still cooperates with Aipu Power in other projects during arbitration. The repeated construction of some projects caused by Aipu Power in the construction process is due to some reasons, and has caused Aipu Power to operate at a loss in the project. In the face of the strong evidence of Jinshui Wanda, Aipu Power once wanted to settle with the other party, but Jinshui Wanda required that it must pay in full according to the arbitration request.
      The agent found that in the Official Letter on Confirmation of Contract Settlement of Zhengzhou Jinshui Wanda Center Temporary Power Supply Project (ZJSWZ (2017) No. 10) issued by Jinshui Wanda to Aipu Power, "this overpayment will be deducted from the cable recovery price of Yangjunliu substation and the project funds of other cooperation projects between your company and Wanda", Therefore, the defense idea of "overpayment has been handled through agreement, and Jinshui Wanda has no right to demand the return of Aipu Power" was formed.

      2、 Make a commitment in the trial to make Jinshui Wanda's intention of "deduction" in Official Letter No. 10 come into effect.
      No. 10 official letter was made unilaterally by Jinshui Wanda, which is an offer. The meaning of "deduction" in the text has not been agreed by Aipu Power in writing. Therefore, after consulting Aipu Power, the agent said in the court hearing that Aipu Power had no objection to the meaning of "deduction" in No. 10 official letter.

      3、 On the basis of the fact of Official Letter No. 10, an application for arbitration counterclaim was filed in due time, which aroused the attention of the arbitration tribunal and the balance of wrestling.
      In order to attract the attention of the arbitration tribunal to Official Letter No. 10, we put forward an application for arbitration counterclaim after the first court hearing on the basis of Official Letter No. 10 and the fact that there are indeed abandoned cables, requesting Jinshui Wanda to return the recovery amount of the abandoned cables. The provisional amount is 860037.62 yuan (consistent with the amount requested by the applicant). The reason is that Official Letter No. 10 indicates that Yang Junliu's cables have been recycled and sold by Jinshui Wanda, so they should be returned. In view of the cooperative relationship between the two parties, the applicant only claims to return 860037.62 yuan in this application, although the recovery price of discarded cables is more than 3 million yuan.
      At the same time, according to the Evidence Guidance of the China International Economic and Trade Arbitration Commission, a specific disclosure request was made to require Jinshui Wanda to disclose the financial data of the recovery and sale of abandoned cables, because this data determines the amount that can be deducted from the abandoned cables or the amount that Jinshui Wanda should return to Aipu Power, which is relevant to this case.
      After starting the counterclaim procedure, Jinshui Wanda made a counterclaim defense and adduced evidence, and both parties reached a new balance between the request and counterclaim. At the same time, although the arbitral tribunal did not support the counterclaim finally, it restarted the counterclaim procedure, prompted the arbitral tribunal to re-examine the importance of Official Letter No. 10, and formed a free heart of "the overpayment of the project has been deducted by agreement, and the arbitration request for returning the overpayment of the project is against the principle of good faith", on which the arbitral tribunal made an award in this case.

      Evaluator: Lawyer Huang Jibao, acting lawyer of Aipu Power Company in this case.