DeHeng Advised a Chinese Company on Obtaining the Court's Stop Payment Order against the Bank's Letter of Guarantee for the Abu Dhabi Airport Project
2021-09-30
On September 21, 2021, representing a Chinese company, Mr. Jia Huaiyuan, Mr. Saeed and the partner local law firm won a case at the Abu Dhabi Court of Appeal, obtaining a stop payment order from the court against the bank's letter of guarantee for the Abu Dhabi airport project. The court ruling forbids the EPC contractor consortium of the Abu Dhabi airport project from claiming the bank guarantee and warranty guarantee (worth 71.49 million dirhams, equivalent to about RMB 128 million) against the client.
The bid winner of the Abu Dhabi airport project was a consortium of three contractors, and the final EPC contract amounted close to 20 billion dirhams (about RMB 36 billion). Then the above Chinese company signed a subcontract with an EPC contractor. After 10 years of construction, 98% of the project was completed despite repeated delays and budget changes, but the contract was terminated due to the combination of factors such as the EPC contractor consortium's incompetency, design flaws, bankruptcy of consortium members, COVID-19, and the bleak situation of aviation industry. Subsequently the EPC contractor also terminated the subcontract with the Chinese subcontractor.
After that, worried that its bank guarantee would be confiscated by the EPC contractor, the Chinese subcontractor hired a UK law firm and a local law firm in the UAE to apply to the court for stopping the payment of the bank guarantee and prohibiting the consortium from honoring the letter of guarantee. But the application was rejected by the court.
Later, the Chinese company hired Jia Huaiyuan as the legal counsel for stopping the payment of the bank guarantee. Mr. Jia and colleague Mr. Saeed reviewed the contract and relevant materials, analyzed the reasons for the rejection of the previous application, and established six reasons for filing another application. They applied to another court, stressing that the contract was terminated and the sub-contractor had substantially completed its work, in addition to the evidence collected by the previous two law firms. The application was formally submitted by the local law firm to the Abu Dhabi Court of Appeal.
On September 21, 2021, after careful consideration, the court issued the Stop Payment Order, prohibiting the EPC contractor from claiming the bank guarantee and warranty guarantee against the Chinese subcontractor, hence stopping the payment of the bank guarantee.
This was the second case of bank guarantee claim that DeHeng's Dubai Office won. It once again proved the professional competence and practical experience of Chinese lawyers in providing overseas legal services to Chinese companies and protecting their rights and interests.
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