Seyfarth Synopsis: An environmental remediation technologies company is in the midst of litigation in Chinese courts over a $1.2 million contract to provide its technology to a Chinese company. According to the Chinese entity, the technology provider failed to deliver the unit in a “timeframe that was agreed.”

The West Mountain Environmental Corp. (WMT) had issued a press release in October 2016 that it had sold its first indirect thermal desorption technology (TPS) unit in China to Shanghai Hehui Environmental Technology, Co. Ltd. (Hehui). WMT valued the contract at approximately $1.2 million.

Historically, WMT had operated in China since 2012 and has treated, it claims, over 100,000 tons of contaminated soil and oil sludge using TPS technology. TPS’ patented indirect thermal desorption technology is “recognized in the industry as one of the most efficient and safest technologies for the removal of hazardous contaminants.” WMT asserts that TPS was one of the first western environmental remediation technologies successfully transferred to China which has been recognized as a top 100 environmental technology in the 3iPET Program supported by the Ministry of Environmental Protection.

This sale, WMT indicated, represented the first time that TPS technology had been used as part of a process to treat waste purified terephalic acid (PTA) sludge. “PTA is required for the manufacture of polyester fibre, polyethylene terephthalate (PET) bottle resin and polyester film and China is the largest producer of PTA at over 50 million tonnes per year.”

Now according to a recent WMT press release, it received notice that a lawsuit had been filed against it by Hehui, claiming that WMT failed to deliver the TPS unit in a “timeframe that was agreed.” As a consequence, a Chinese Court ordered that WMT’s bank accounts be frozen until a hearing is held on March 27, 2017 in Shanghai.

Subsequently WMT was informed by its Chinese legal counsel that its motion to remand its contract dispute with Hehui to arbitration in conformance with the terms of the contract between the parties was denied. The release indicated that Chinese Intermediate Court ruled that as the contract between the parties did not specify an arbitrator, so the Intermediate Court would hear the case. As a result of the ruling and based on the recommendation from Chinese legal counsel, WMT will file an objection of jurisdiction to the Intermediate Court on April 5, 2017, at which time an official hearing for the case will be set.

This case illustrates how very careful parties need to be in preparing contracts, especially in international cases. Deals in China may be especially complicated as the law varies in different provinces.