Since January 2026, China International Economic and Trade Arbitration Commission (“CIETAC”) officially launched a regular publication of selected cases. Through its official website and WeChat official account, CIETAC will periodically and continuously publish representative arbitration cases, presenting arbitration “in action” with broad coverage and in-depth content, helping enterprises enhance risk prevention capabilities, promoting exchanges between China and the world in arbitration culture, and leading to an overall improvement in the credibility of arbitration. CIETAC will, through institutional innovation, unleash the energy of seventy years of arbitral practice and provide reliable solutions for global commercial dispute resolution with “China’s arbitration wisdom”.

China A Electric Power Design Institute (hereinafter the “Claimant”) and third party C Company formed a consortium to participate in the bidding for a coal‑fired power plant project in Country P. In November 2018, the project owner B Company (hereinafter the “Respondent”) issued a Letter of Intent to the consortium. Subsequently, the Respondent and the consortium signed a series of minutes of technical contract negotiation meetings. In December 2018, the Respondent and the consortium signed the EPC Contract and its relevant technical annexes, and continued negotiations on the offshore contract and onshore contract under the EPC Contract. However, the Respondent later suspended the signing of the offshore and onshore contracts on the ground that the electricity tariff of the project had not been approved by the authorities of Country P.

In December 2019, the Respondent obtained the tariff approval from the authorities of Country P. In June 2020, the Respondent issued the Letter on Inviting the Consortium to Arrange Personnel to Country P for Contract Negotiation to the consortium. By October 2020, the parties negotiated the technical and commercial terms proposed by the Respondent but failed to reach agreement. In December 2020, the Respondent signed another EPC Contract for the project with the third party D Company.

Starting from 19 March 2019, the Respondent continuously requested the Claimant to carry out preliminary work including on‑site investigation, cooperation in environmental impact assessment application, cooperation in tariff review application, and drafting of project plans. The Claimant funded and advanced the relevant work without receiving the advance payment as agreed in the contract.

The Claimant held that the Respondent’s conduct constituted a fundamental breach of contract, causing substantial losses to the Claimant, and thus initiated arbitration claiming compensation for the losses arising from its preliminary inputs.

1. Whether the Claimant, as a consortium member, is entitled to initiate arbitration independently, and which law shall apply to such determination?

2. What are the approaches to ascertaining English law in arbitration?

3. How to determine contract formation and claims under English law?

I.Whether the Claimant is Entitled to Initiate Arbitration Independently

The Respondent contended that the Contractor under the contract was a consortium formed by the Claimant and the third party, establishing a temporary partnership (without a commercial partnership entity) in relation to the EPC project. Pursuant to Article 970 of the Civil Code of the People’s Republic of China, which provides that partners shall conduct partnership affairs jointly in principle, and the consortium agreement stipulating that claims against the employer by the consortium shall be brought by the consortium, the Claimant was not entitled to independently initiate arbitration for compensation in respect of the preliminary work and expenses/expenditures of the consortium alleged by the Claimant.

The Claimant argued that the key criterion for determining whether the Claimant could bring arbitration claims independently was whether the scope of work of the Claimant and the third party as consortium members was severable. Article 1 of the consortium agreement clearly defined the division of work among consortium members; the survey and design work entrusted by the Respondent to the consortium was all completed by the Claimant, and the content of the Claimant’s arbitration claims did not cover the work of the third party. Accordingly, the Claimant was entitled to initiate arbitration independently.

1. Law Applicable to Determining the Claimant’s Standing

The arbitral tribunal first held that the issue of the Claimant’s standing was a matter of arbitration procedure, whose applicable law may differ from the substantive law applicable to the dispute. The tribunal held that Clause 15.1 of the EPC Contract, stipulating the governing law of the contract as the law of England and Wales, should be construed as the parties’ agreement on the applicable substantive law, whereas the procedural law applicable in international arbitration is the lex arbitri (law of the seat of arbitration) — namely, by selecting a place as the seat of arbitration, the parties impliedly consent to be bound by the arbitration law of that place.

The tribunal specifically cited the reasoning of the High Court of England and Wales in Union of India v. Mckonnell Douglas Corportation EWHC [1993] 2 Lloyd’s Law Rep. 48 (1992), holding that by choosing London as the “seat of arbitration”, the parties impliedly comply with English procedural law (or “external” relations), while the parties’ agreement to apply the relevant provisions of the Indian Arbitration Act, which is akin to arbitration rules, shall govern the internal relationships in the arbitral proceedings only to the extent that such application does not conflict with the mandatory provisions of English law.

The tribunal held that the parties expressly agreed in Clause 16.1 of the EPC Contract that the seat of arbitration was Beijing, China, and thus the procedural law applicable to the arbitration was the law of the People’s Republic of China.

2. Determination of Standing

Firstly, the tribunal invoked Article 14 of the Law of the People’s Republic of China on the Application of Law to Foreign‑Related Civil Relations, which provides that the civil rights capacity, civil conduct capacity and other matters of a legal person and its branches shall be governed by the law of the place of registration. In the present arbitration, the Claimant is a legal person registered in China, and thus its capacity to participate in arbitration as a civil subject shall be determined under Chinese law.

Secondly, the tribunal invoked the relevant provisions of Article 2 of the Arbitration Law of the People’s Republic of China and the Civil Procedure Law of the People’s Republic of China, which stipulate that contractual disputes arising between equal subjects (citizens, legal persons and other organizations) may be submitted to arbitration. There is no prohibition on a consortium member instituting an action or arbitration in its own name. Moreover, under Chinese judicial practice, if a consortium is unregistered and has no independent property or organizational structure, it is generally held that the consortium lacks standing to sue or arbitrate, and the companies or individuals forming the consortium shall be the parties.

Thirdly, as to the standing of a consortium member as contractor, whether a member may exercise the right of action in its own name (rather than in the name of the whole consortium) is generally determined by whether the rights and obligations of the consortium members are severable. In this case, the division of work among consortium members was clearly and specifically agreed, constituting a severable obligation consortium, and any member may exercise the right of action in its own name. Therefore, the tribunal held that the Claimant, as a qualified arbitration party, was entitled to initiate the arbitration.

II. Ascertainment of English Law

Given the parties’ agreement on the applicable substantive law in the EPC Contract, the tribunal first consulted the parties on the governing law of the contract via Procedural Order No. 1. After confirming English law as the applicable law, the tribunal further consulted the parties on the ascertainment of English law in Procedural Orders No. 2 and 3, and determined to ascertain the applicable law through:

• Submissions by the parties;
• Channels under international treaties in force for China;
• Relevant precedents and/or statutory provisions;
• Authoritative legal treatises;
• Expert opinions on foreign law.

After the parties filed evidence and written submissions, the tribunal rendered a list of key issues and required the parties to respond on the application of law to several key issues (including standing, contract formation, and quantum meruit in case of non‑formation) by providing precedents, academic writings or expert witnesses on foreign law.

As the Claimant submitted a written expert opinion on foreign law, the tribunal arranged for the English law expert witness to attend the hearing virtually in the pre‑hearing conference and Procedural Order No. 5. At the hearing, the Claimant’s English law expert witness testified and was cross-examined by both parties on the requirements for contract formation, certainty of agreement and other issues under English law as set out in the expert opinion. Meanwhile, in light of the parties’ divergent views on the ascertainment of applicable law, the tribunal further clarified requirements for the parties’ submission of precedents and academic writings, e.g., full text of cited precedents, Chinese translation (the procedural language of the case being Chinese) of specifically quoted passages from precedents or academic writings to be provided to the other party for cross‑examination.

III. Determination of Contract Formation and Claim Amount

The Claimant contended that the Letter of Intent issued by the Respondent to the consortium in November 2018 was binding as an acceptance and constituted grounds for contract formation. The EPC Contract, which specified core commercial terms including scope of works, total contract price and construction period and was signed by the authorized representatives of both parties, constituted a valid contract by itself. The Respondent’s long‑term request and acceptance of the Claimant’s performance of preliminary work after signing the agreement constituted actual performance of the contract, and its subsequent re‑tendering and contracting with a third party constituted a fundamental breach. The Claimant having completed the survey and design work under the contract, the Respondent should compensate the losses thereby caused to the Claimant.

The Respondent argued that the Letter of Intent merely expressed an intention to contract in the future and was not legally binding. The EPC Contract was only an umbrella agreement, which expressly provided that the complete contract documents must include the offshore and onshore contracts; such ancillary agreements were never signed, and the EPC Contract was unenforceable for lack of certainty, so no contract was formed. The Claimant’s alleged assistance/cooperation in the preliminary project stage was not performance of the EPC Contract in nature, but aimed at promoting and concluding negotiations and signing of the offshore and onshore contracts, and the expenses incurred by the Claimant to secure favorable contractual terms should be borne by itself.

1. Whether the Letter of Intent Has the Effect of Forming a Contract

The tribunal first noted the parties’ divergent translations and held that the proper Chinese translation of Letter of Intent was 意向书 (Yìxiàngshū).

On whether a successful bidder’s letter of intent has the effect of forming a contract, the tribunal, after citing judicial opinions in Turriff Construction Ltd v. Regalia Knitting Mills Ltd [1971] 9 BLR 20, A C Controls Ltd v. British Broadcasting Corporation, Quen’s Bench Division, (2002) 89 Con LR 52 [2002] EWHC 3132 and Durabella Ltd v. J.Jarvis & Sons Ltd (2001) 83 Con LR 145, held that a letter of intent is merely a written expression of an intention to enter into a contract on a future date; it is generally unenforceable unless it contains a clear intention to contract, unequivocal acceptance, and agreement on essential terms.

The letter of intent in this case explicitly stated: “While receiving this letter, you are kindly invited to commence negotiations for the technical part and commercial part of EPC contract with CIHC Pak Power Company Limited…” It merely invited the Claimant to commence contract negotiations, without the clear promissory language typically found in a letter of acceptance, such as "your quotation or tender is accepted" or "the contract is awarded to you". Therefore, the letter of intent issued by the Respondent to the consortium in this case cannot be deemed to have the legal effect of forming a contract.

2. Whether the EPC Contract Was Validly Concluded

The tribunal held that in determining whether the EPC Contract was validly concluded, it must analyze 10 key issues, including:

(1) Facts of technical and commercial negotiations between the parties after the Respondent issued the letter of intent;

(2) Legal effect of the parties’ signatures and seals on the EPC Contract;

(3) Main provisions of the EPC Contract;

(4) Express conditions precedent to effectiveness of the EPC Contract;

(5) Requirements for contract formation under English law and whether the contract satisfied such requirements;

(6) Whether the contract lacked completeness or not;

(7) Whether the contract was actually performed, and extra

The arbitral tribunal cited relevant authoritative works on English contract law, including Chitty on Contracts (32nd ed.), Keating on Construction Contracts (12th ed.), Hudson's Building and Engineering Contracts (14th ed.) and Construction Law (1st ed.), and referred to judicial holdings in McCutcheon v. Macbrayne (David) Ltd (1964) 1 W.L.R. 125, RTS Flexible System Limited v. Molkerei Alois Muller Gmbh & Company KG (UK Production) [2010] UKSC 14, and Mackie Motors (Brechin) Limited v. RCI Financial Services Limited [2023] EWCA Civ 476. Drawing on the above, the tribunal analyzed the 10 key issues and held as follows:

(1) The payment obligations and construction obligations agreed in the contract constituted legally recognized consideration;

(2) The parties formally signed the contract after multiple rounds of negotiations, which stated “effective upon signature”, and the Respondent accepted and utilized the Claimant’s work product for a long time, sufficient to prove a genuine intention to create legal relations;

(3) The contract clearly specified core commercial terms including scope of works, price, construction period and payment structure, with sufficient certainty;

(4) The Claimant, as a professional design institute, had the capacity to perform, and the agreement was commercially and technically feasible;

(5) The EPC Contract did not expressly make its formation conditional on the signing of the offshore and onshore contracts. In the absence of an express designation as an umbrella agreement in the EPC Contract, and in light of the Respondent’s denial of contract formation, the Respondent could not rely on the defense that the EPC Contract was an implied umbrella agreement.

(6) Accordingly, the EPC Contract satisfied the requirements for formation under English law and was legally binding.

3. Amount of Claim

The tribunal held that upon the Respondent’s signing of an EPC Contract with a third party, the Claimant was entitled to terminate the contract and claim damages. The tribunal accepted the opinions of the English law expert witness that “the common law rule on the measure of damages is to place the innocent party in the position if the contract had been performed”. The Respondent was liable to pay reasonable remuneration for the preliminary work partially performed by the Claimant. However, the Claimant’s claim for loss based on the design fees agreed in the consortium shall not be upheld.

Based on the evidence submitted by the Claimant, the tribunal analyzed the work completed and expectations of the Claimant, and partially upheld the Claimant’s claim by reference to the rates for survey and design work in the pricing schedule of the Claimant’s tender documents.