"The lawsuit is rejected, showing AMSC does not conform to legal provisions in filing the lawsuit against Sinovel in Hainan," said Ma Guangyu, an attorney of Beijing Jinghua law firm.
In reponse, AMSC president and chief executive officer Daniel McGahn said: "We are starting to see motion from the Chinese courts, and proceedings are getting underway as expected.
The Hainan court’s dismissal of our smallest case is not altogether unexpected, and we are appealing the ruling. We continue to have confidence in all of our cases and expect that our legal actions will yield a positive outcome."
This is the first decision made by Chinese courts over a series of lawsuits launched by AMSC against Sinovel.
In October 2011, Sinovel was added by Hainan first intermediate people’s court as a third party into an AMSC lawsuit against Dalian Guotong Electric Co. Ltd. and Huaneng Hainan Electric Power Generation Co. Ltd. over a computer software copyright dispute. In December, Sinovel was added as a defendant of the judicial action.
In response, Sinovel objected to its inclusion in the lawsuit to the Hainan court stating it was outside the court's juristiction. On 6 January, the Hainan court held a hearing over the objection.
Industry officials said Sinovel objected because the purchase contracts signed by it and AMSC contain a clause stipulating a requirement that the two parties submit all disputes that emerge in the course of implementing the contracts or relating to the implementation of the contracts to the Beijing Arbitration Commission — if they fail to solve them through negotiations.
Sinovel was the largest client of AMSC. The two parties started cooperation in 2006. According to AMSC statistics, Sinovel accounted for 67%, 70% and 68% of AMSC’s total sales from 2008-10.
In April, Sinovel refused shipment of AMSC components, alleging AMSC’s products and services failed to meet contractual demands.
In September, Sinovel filed a counterclaim to Beijing Arbitration Commission requesting the arbitration tribunal reject all the arbitration claims made by AMSC and rule AMSC to compensate Sinovel CNY 79.9 million ($12 million) for economic losses from breach of contract.