Dentons Lawyer Secures Important Win in Case Reviewed by Supreme People’s Court

On July 21, a four-year contract dispute lawsuit between Dentons client Datang Baoding Thermal Power Plant, a subsidiary of the central state-owned enterprise Datang Corporation, and three other parties finally came to a successful end. Datang Baoding Thermal won a judgment by the Supreme People's Court after multiple rounds of litigation at the Baoding Intermediate People's Court (BIPC), the Hebei High People's Court (HHPC) and the Supreme People's Court. The opposing parties were Baoding Sanfeng Shenghuo Boiler Factory, Suning Xingye Bonding Company and Hebei Suning Hongguang Coal Transportation & Marketing Co., Ltd. 
Datang Baoding Thermal was advised by a Dentons China Dispute Resolution team led by Beijing-based Partner Xu Dang. This was the first case the Firm has handled for Datang since our selection to its law firm panel. After the first instance court ruled against it, Datang Baoding Thermal petitioned BIPC and HHPC successively for a review of the judgment, yet both court dismissed the application in the review procedures, which made the case almost irrefutable. Beijing Senior Partner Ma Jiangtao, head of Dentons' Litigation and Dispute Resolution team in China, was then appointed by Datang to handle the case. Mr. Ma immediately organized the litigation team, led by Mr. Xu. After reviewing the case files and by virtue of solid legal expertise and rich experience in litigation, the team found out the core dispute in this case and that the initial judgment was flawed, thus it was possible to get a revised judgment. 
This case was a dispute over the applicable law rather than over the facts. The focus was the effectiveness of the creditor's rights assignment agreement signed between the creditor (Hebei Suning Hongguang Coal Transportation & Marketing Co., Ltd.) and a third party (Baoding Sanfeng Shenghuo Boiler Factory) when the creditor's rights were already pledged and without consent of the pledgee, and the obligation of the debtor (Baoding Thermal) to the assignee when the debtor had fulfilled its debt obligations to the pledgee. On the basis of client's demands and facts of the case, our team provided positive and useful legal advices during the trial, and some of the opinions were directly adopted in the court's decision. The Supreme People's Court fully expounded the complex legal issues involved in this dispute, and expressed a clear opinion by its ruling, which would set a precedent for similar cases.
The Supreme People's Court held that: the provisions of Article 228 Section 2 of the Property Law of the People's Republic of China shall be interpreted and applied as mandatory rules on management rather than on effectiveness, thus it does not affect the validity of the assignment of claims agreement; however, under the premise that the accounts receivables are pledged, the pledgee's exercise of its right on the pledge can lead to the elimination of the creditor's rights (since the debts are liquidated). The assignee can only exercise of its right when the creditor's rights still exist. Additionally, as the Property Law has clearly stipulated the requirements on the registration of the pledge of the accounts receivables, the assignee shall bear the responsibility to check whether the creditor's rights are pledged; the assignor shall remain liable for the defect of creditor's rights before the assigned obligations are liquidated.
 The above-mentioned legal issue was very complex and controversial in the legal profession and there were no explicit legal provisions regarding how to settle such issue before. Based on a clear understanding of the issue, the Supreme People's Court corrected the erroneous application of law. The court's decision not only protected the legitimate rights and interests of the complainant, but also provided an orientation for respondents seeking legal remedies.
Despite great pressure and complicated legal issues, our lawyers successfully grasped the essence of this case by virtue of their effective work, expertise and rich experience. Our success in securing a win in such a case reviewed by the Supreme People's Court not only enhanced our reputation among SOE clients, but also demonstrated our great progress in professional development.