Joint venture disputes: tort or breach of contract?

Back in 1997, a joint venture contract was signed by and between an American individual, R, and two Chinese companies, B and C. An arbitration clause was included in the contract with China International Economic and Trade Arbitration Commission (CIETAC) as the agreed arbitration institution.

After the contract was signed, all parties invested as agreed. R became a minor shareholder in the joint venture. However, after several years of steady co-operation, disputes began to arise. In 2002, B applied to CIETAC for arbitration against R and C, seeking to terminate the contract and dissolve the joint venture. In 2003, the arbitral tribunal made an award in B’s favour, granting the termination of the contract and the dissolution and liquidation of the joint venture.

In 2006, R applied to CIETAC for arbitration, seeking compensation from B and C on his investment. He asserted that he was excluded from the liquidation because of the breach of contract by B and C. The tribunal dismissed his claims, holding that “the breach of contract” assertion lacked legal and factual basis.

In 2013, R applied again to CIETAC for arbitration against B and C, seeking remedies for B’s and C’s tortious acts. However, the tortious acts claimed by R were roughly the same as the 2006 “breach of contract” assertion. The tribunal dismissed R’s claims for lack of evidence and res judicata.

The authors, Chen Jian and Wang Yi, are director of CIETAC’s International Case Department and case manager of the International Case Department, respectively.