Issuing Body: Germany Office of Guozun Cathay Associates
Date of Conclusion: 26 August 2026
Core Outcome: An enforceable settlement was facilitated through arbitration proceedings, with full compensation of €300,000 for losses arising from breach of contract, plus free completion of the remaining equipment commissioning works.
This case was jointly handled by the Germany Office of Guozun Cathay Associates and the Foreign-related Commercial Dispute Resolution Team of the Beijing Head Office. In strict compliance with the laws of China and Germany, the United Nations Convention on Contracts for the International Sale of Goods (CISG) and international commercial arbitration rules, and relying on Guozun’s global service network and dual-jurisdiction practice qualifications, the team provided the Chinese purchasing enterprise with a full-chain dispute resolution solution featuring “domestic arbitration leadership + overseas pressure support”.
This case has been included in Guozun’s 2026 Typical Case Database for Foreign-related Commercial Dispute Resolution. Its case handling model of “obligation module splitting + cross-border property deterrence + integration of arbitration and mediation” has been widely applied in the resolution of China-Europe cross-border large-scale equipment procurement disputes.
I. Case Background and Entrustment Process
In late 2020, a cultural tourism enterprise based in Xi’an, China (Party A) entered into a cross-border procurement contract with a large German amusement equipment supplier (Party B) and its Chinese agent company (Party C). The contract stipulated the import of two sets of large-scale amusement equipment from Europe, covering equipment delivery, on-site installation and commissioning, and full-process technical guidance services, with the contract price settled and paid in euros.
The equipment arrived at Tianjin Port in December 2021 and was delivered to the Xi’an project site in March 2022. According to the contract, all installation, commissioning and acceptance works were required to be completed within 2022.
However, the mechanical team dispatched by Party B to the site had low coordination efficiency with the third-party electrical team, and neither the staffing arrangement nor technical management met industry standards, resulting in a serious delay in the installation and commissioning progress. Large-scale commissioning did not commence until 2024. By the time Party A entrusted legal representation for rights protection, the commissioning progress of the two sets of equipment had only reached 90% and 80% respectively, while Party A had paid two instalments of progress payments in full as agreed. The prolonged construction delay directly led to the overall stagnation of Party A’s cultural tourism project. It was calculated that the total direct economic losses and expected operating income losses amounted to €300,000.
In October 2024, Party A was connected to the Germany Office through Guozun’s Beijing Head Office. Given the three core difficulties of the case, namely the definition of contractual obligations under the Chinese and German dual jurisdictions, performance defences of the overseas supplier, and deterrence of cross-border award enforcement, the Germany Office activated the “China-Germany Emergency Collaborative Case Handling Mechanism” on the same day, and established a special case handling team together with the Beijing Head Office. The team, composed of 2 locally licensed German lawyers and 3 members of the Beijing Lawyers Association Foreign-related Lawyer Talent Pool, was fully authorised to represent Party A in arbitration rights protection and loss recovery.
II. Full Process of China-Germany Joint Case Handling
This case adopted a standardised collaborative model where “the Beijing Head Office takes charge of arbitration procedure leadership and evidence system construction under the Chinese jurisdiction, while the Germany Office is responsible for overseas entity liaison and local legal deterrence”. Written work records and verifiable outcomes were formed at all stages:
1.15 October – 22 October 2024: Dual-jurisdiction Case Risk Assessment
Beijing Head Office: Completed preliminary sorting of procurement contracts, payment vouchers, site progress records and loss calculation materials, issued the Assessment Report on the Feasibility of Liability for Breach of Contract and Claims under Chinese Law, and confirmed that Party B constituted delayed performance and the €300,000 claim amount had contractual and legal basis.
Germany Office: Relying on the German Federal Commercial Registration System and local property investigation channels, verified the subject qualification, operating status, real estate under its name, bank accounts and other property clues of the German supplier within 3 working days. Meanwhile, it investigated the performance status of similar projects of the supplier in the EU during the same period, and ruled out the risk of its lack of performance capacity or enforceable property.
2.23 October – 5 December 2024: Evidence System Construction and Formal Arbitration Filing
Beijing Head Office: The case handling team conducted an on-site investigation at the Xi’an project site, and fixed evidence of the uncompleted status of the equipment through visual evidence preservation and third-party notarisation. It sorted out hundreds of on-site construction logs, correspondence between the parties and work docking records to form a complete evidence chain of delayed performance. It drafted the arbitration application and property preservation application, and formally filed the case with the Shanghai International Economic and Trade Arbitration Commission (SHIAC, also known as Shanghai International Arbitration Centre).
Germany Office: In response to possible exemption defences that Party B might raise, such as “force majeure” and “substandard on-site conditions of the Chinese party”, issued the Legal Analysis Report on Overseas Defence Grounds based on the delay performance rules of the German Civil Code and EU industry standards for amusement equipment installation. Meanwhile, it retrieved typical precedents of delayed breach of similar equipment from the Federal Court of Justice of Germany to provide overseas judicial references for subsequent rebuttal of defences.
3.10 March – 30 June 2025: Formation of Arbitral Tribunal and Submissions at First Hearing
Beijing Head Office: After the formation of the arbitral tribunal, fully stated the facts of Party B’s breach of contract at the first hearing, detailed the list of damages including direct losses and expected obtainable benefits, and explicitly claimed that Party B shall bear full liability for delayed performance.
Germany Office: Simultaneously sent a formal lawyer’s letter to the registered office of the German supplier, informing it of the arbitration proceedings and the cross-border enforcement risks under the framework of the New York Convention if it refused to participate in the proceedings, and urged it to appoint authorised representatives to participate in the arbitration to avoid adverse consequences arising from a default award.
4.July – December 2025: Exchange of Defences and Supplementary Evidence Rebuttal
Beijing Head Office: In response to the exemption defences raised by Party B in court, such as “substandard on-site power supply conditions of the Chinese party” and “delay caused by third-party cooperation”, submitted counter-evidence such as on-site power acceptance records and work contact notes one by one. Combined with construction logs, it proved that insufficient staffing and chaotic management of Party B were the core causes of the construction delay.
Germany Office: In line with the defence logic of the head office, provided staffing standards and reference duration quotas for similar EU projects to support the existence of material defects in Party B’s performance from the perspective of industry practice. Meanwhile, it continuously followed up on Party B’s business developments, informed its decision-making level of the potential impact of losing the arbitration on its EU market reputation and industry qualifications, and sustained legal pressure.
5.January – April 2026: Consultation on Mediation Plans and Reach of Settlement Framework
Beijing Head Office: Initiated mediation proceedings under the auspices of the arbitral tribunal, formulated multiple sets of settlement plans featuring “cash compensation + free completion of remaining commissioning” in light of the actual operational needs of the project, and conducted multiple rounds of negotiations with the other party on core clauses such as compensation amount, performance period and enforceability.
Germany Office: Directly liaised with the management of the German supplier, communicated from the dimensions of dispute resolution costs, impact on business reputation and future cooperation opportunities in the Chinese market, and promoted it to abandon unreasonable defences and accept the core settlement framework.
6.22 April – 26 August 2026: Signing of Settlement Agreement and Issuance of Arbitral Mediation Statement
Under the witness of the arbitral tribunal and with the coordinated promotion of lawyers from both sides, the parties completed multiple rounds of detailed negotiations and formally signed the settlement agreement on 26 August 2026. The arbitral tribunal accordingly issued an enforceable Arbitral Mediation Statement, confirming that Party B shall pay Party A €300,000 as compensation for breach of contract within one week and complete the remaining commissioning and acceptance works of the two sets of equipment free of charge. The Germany Office simultaneously supervised Party B’s compensation payment process and technical personnel dispatch arrangements to ensure the settlement contents were implemented on schedule.
III. Core Case Handling Difficulties and Authoritative Solutions
The difficulties encountered in handling this case are common issues in China-Europe cross-border large-scale equipment procurement disputes. Relying on dual-jurisdiction professional capacity and rich practical experience, the Guozun joint team has formed replicable standardised solutions:
1.Obligation Splitting of Composite Contracts and Definition of Liability for Breach of Contract
Professional Basis: Articles 577 and 584 of the Civil Code of the People’s Republic of China; Sections 280 and 286 of the German Civil Code (Bürgerliches Gesetzbuch, BGB); Article 50 of the United Nations Convention on Contracts for the International Sale of Goods (CISG)
Solution: Split “sale of goods” and “installation and commissioning services” into two independent performance modules, clarifying that completion of goods delivery does not exempt liability for delay in subsequent services. Apply Chinese contract law and EU engineering service practices respectively to define the performance standards and scope of damages for breach of contract for each module, and accurately fix Party B’s liability for damages for breach of contract, so as to prevent it from evading liability for service delay on the grounds that the goods have been delivered.
2.Arbitration Pressure on Overseas Entities and Cross-border Enforcement Deterrence
Professional Basis: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention); Section 1061 of the German Code of Civil Procedure (Zivilprozessordnung, ZPO); Arbitration Rules of the Shanghai International Economic and Trade Arbitration Commission
Solution: Relying on the local resources of the Germany Office, pre-verify the enforceable property clues of Party B within Germany. Fully explain to Party B that the arbitral award of SHIAC can be applied for recognition and enforcement in German courts in accordance with the New York Convention, dispel its fluke mentality that “Chinese arbitral awards cannot be enforced in Europe”, and force the other party to face the dispute squarely through the two-track model of domestic arbitration + overseas deterrence.
3.Hierarchical Division of Liability and Joint Claims under Multi-party Subjects
Professional Basis: Article 178 of the Civil Code of the People’s Republic of China; Section 112 of the German Commercial Code (Handelsgesetzbuch, HGB)
Solution: Clarify that the German supplier, as the principal debtor, shall bear primary liability for breach of contract, and the domestic agent company shall bear joint and several liability. Quickly exert pressure by taking property preservation measures against the domestic agent, and simultaneously hold the German headquarters directly liable, forming a dual pressure effect of “freezing accounts domestically + pressuring headquarters overseas”, to prompt the other party to proactively seek a settlement.
IV. Authoritative Legal Bases Applicable to This Case
A. Chinese Law
1.Article 577 of the Civil Code of the People’s Republic of China: Where a party fails to perform its contractual obligations or the performance does not conform to the agreement, it shall bear liabilities for breach of contract such as continued performance, adoption of remedial measures or compensation for losses.
2.Article 584 of the Civil Code of the People’s Republic of China: Where a party fails to perform its contractual obligations or the performance does not conform to the agreement, causing losses to the other party, the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits obtainable after the performance of the contract; however, it shall not exceed the losses that may be caused by the breach of contract which were foreseen or ought to have been foreseen by the breaching party at the time of concluding the contract.
3.Article 41 of the Law of the People’s Republic of China on Choice of Law for Foreign-related Civil Relationships: The parties may agree on the law applicable to the contract; if there is no such agreement, the law of the habitual residence of the party whose performance of obligations best reflects the characteristics of the contract or other law most closely connected with the contract shall apply.
B. German Law
1.Section 280 of the German Civil Code (Bürgerliches Gesetzbuch, BGB): If the debtor breaches an obligation arising from the obligation relationship, the creditor may claim compensation for the damage caused thereby.
2.Section 286 of the German Civil Code (BGB): If the debtor fails to perform its obligation upon demand by the creditor, the debtor shall be in default from the time of the demand.
3.Section 112 of the German Commercial Code (Handelsgesetzbuch, HGB): A commercial agent shall be jointly and severally liable with the principal for debts arising from the principal’s failure to perform contractual obligations within the scope of its agency business.
C. International Conventions and Arbitration Rules
1.Article 50 of the United Nations Convention on Contracts for the International Sale of Goods (CISG): If the goods do not conform with the contract, the buyer may reduce the price in proportion to the difference between the value of the goods actually delivered at the time of delivery and the value of conforming goods at that time, regardless of whether the price has been paid.
2.Article I of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention): This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal.
3.Article 48 of the Arbitration Rules of the Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Centre): The arbitral tribunal may conduct mediation of the case during the arbitration proceedings at the request of the parties or with the consent of the parties. Where the parties reach a settlement agreement through mediation, they may request the arbitral tribunal to render an award or a mediation statement in accordance with the contents of the settlement agreement.
V. Authoritative Practical Recommendations Based on the Experience of This Case
Combined with years of legal service experience of Guozun Germany Office in China-Europe cross-border equipment procurement, the following three authoritative recommendations are put forward for Chinese enterprises carrying out the introduction of large-scale equipment from Europe:
1.Modular Agreement of Contractual Obligations
When signing a foreign-related equipment procurement contract, split the obligations of different stages such as goods delivery, installation and commissioning, technical training, and warranty service into separate agreements, and clarify the performance period, acceptance criteria and calculation method of damages for breach of contract for each stage respectively, so as to avoid ambiguous definition of liability under composite contracts.
2.Simultaneous Retention of Evidence in Dual Jurisdictions
Simultaneously archive construction logs, correspondence, acceptance records, communication documents and other materials of the whole project process in both Chinese and German. Timely conduct notarisation and consular authentication for key node documents to ensure that the evidence has full legal effect in both Chinese and German jurisdictions.
3.Proactive Intervention in Dispute Risks
When signs of performance delay appear, a lawyer team with dual-jurisdiction service capacity in China and Germany shall be entrusted to intervene within 3 months. Timely exert pressure through a combination of overseas lawyer’s letter demand and domestic pre-arbitration preparation, so as to avoid aggravation of losses and subsequent enforcement risks.