Litigation and Arbitration: a War, Not Just a Battle

Company A is a foreign enterprise whose business is the production of certain specialist machinery. In China, only approved entities which are on a list compiled by the department in charge are permitted to manufacture such machinery. Company B, a Chinese enterprise, is one such entity. To enter the Chinese market, company A signed a joint venture agreement with company B in 2007. Each company agreed to contribute capital to establish a joint venture to manufacture such machinery. They agreed that after the JV was set up, company B would liaise with the department in charge to get the JV put on the list of approved entities within a certain timescale, so that it could start production legally. Only after this would company A be obliged to make its capital contribution. If the JV did not get onto the list within that time, the agreement would automatically terminate.