—— Dispute between Jiangsu Longyuan Zhenhua Marine Engineering Co., Ltd., and Shengzhi Wind Power Technology (Shanghai) Co., Ltd., and Zhongcheng Non-Financial Guarantee (Shenzhen) Co., Ltd. 

Key Word：Offshore wind power project; Lack of qualifications; Contract invalidity; Refund of advance payment; Guarantee invalidity 

Case Summary:

In June 2021, Jiangsu Longyuan Zhenhua Marine Engineering ., Ltd. (hereinafter referred to as "Longyuan Co., Ltd.") signed an Engineering Construction Contract with Shengzhi Wind Power Technology (Shanghai) Co., Ltd.(hereinafter referred to as "Shengzhi Co., Ltd."). for the installation of wind turbines for an offshore wind power project. The contract stipulated that Shengzhi Co., Ltd.. would provide vessel equipment to support Longyuan Co., Ltd.'s construction work. Zhongcheng Non-financing Guarantee(Shenzhen) Co., Ltd. (hereinafter referred to as "Zhongcheng Co., Ltd.")., commissioned by ShengzhiCo., Ltd., provided a guarantee to Longyuan Co., Ltd., which made a prepayment of 5 million RMB for the construction. In August of the same year, the vessel "Shengzhi 1" arrived at the offshore wind farm for construction purposes. However, it has been discovered that the actual configuration of the vessel did not meet the technical requirements. Despite the multiple assurances from Shengzhi Co., Ltd., "Shengzhi 1" remained to be unsuitable for the lifting requirements of offshore wind turbines. In September of the same year, Shengzhi Co., Ltd. applied for the contract termination to Longyuan Co., Ltd.. Both parties confirmed that, "Shengzhi 1" failed to meet the on-site construction conditions and no on-site construction was carried out until the wind turbine installation was completed. Due to Shengzhi Co., Ltd.'s failure to refund the payment, Longyuan Co., Ltd. filed a lawsuit to Nanjing Maritime Court, seeking to confirm the termination of the contract, requested that Shengzhi Co., Ltd. should refund the prepayment for the project, and pay the liquidated damages, and hold Zhongcheng Co., Ltd.’s responsibility for guaranteeing the refund by Shengzhi Co., Ltd..

Judgment:

Upon trial, the court determined that, in accordance with relevant legal provisions, those engaged in offshore wind turbine installation must possess the appropriate qualifications. As Shengzhi Co., Ltd. lacked the professional contracting qualifications and subcontracting qualifications required for offshore wind power engineering, the contract they entered into with Longyuan Co., Ltd. for the construction should be invalid. Consequently, the guarantee provided by Zhongcheng Co., Ltd. was also invalidated. Based on these findings, the court ordered Shengzhi Co., Ltd. to return the 5 million RMB advance prepayment made by Longyuan Co., Ltd. and rejected Longyuan Co., Ltd.'s other litigation requests. Neither party filed an appeal.

Significance:

Based on the goal of "dual carbon", the offshore wind power has become a crucial sector for promoting renewable energy development in China. The lawful regulation of the offshore wind power construction market is of paramount importance in ensuring the high-quality development of the marine economy. The engineering quality is the lifeblood of construction projects. Compared to onshore wind power, offshore wind power facilities have higher construction costs and greater construction complexity. Companies must possess the requisite qualifications and construction capabilities to undertake the offshore wind power, coastal, and nearshore construction projects. In this case, Shengzhi Co., Ltd. lacked the qualifications for offshore wind power engineering construction and the corresponding capability. During the construction process, Shengzhi Co., Ltd.'s construction platform was unable to meet the construction requirements, leading to the disruptions in the originally planned construction schedule and to render the contract unenforceable. Although the parties sought the termination of the contract, the court, on the basis of a comprehensive investigation of the facts, determined the invalidity of the contract according to the relevant law, and reasonably determined the rights, obligations and legal responsibilities of the parties. The handling of this case is of positive guiding significance in regulating the order of offshore wind power and other marine engineering constructions, helping market players to prevent and defuse risks, and creating a fair and orderly market competition environment.