2012 Annual Report - ZTE

ZTE CORPORATIONMaterial Matters(I)MATERIAL LITIGATION, ARBITRATION AND GENERAL MEDIA QUERIES1. Material Litigation and ArbitrationDuring the year, the Group did not incur any material litigation or arbitration. Progress during the year of immateriallitigation and arbitration proceedings incurred prior to the year and other litigation and arbitration proceedingsincurred during the year are set out as follows:(1) In August 2005, an Indian consultant firm issued an arbitration notice to the Company to claim indemnityfor a total amount of approximately USD1.714 million in respect of advisory fees, agency fees and relateddamages. The consultant firm subsequently raised its total claim amount to approximately USD2.27 million.The case was heard before an arbitration court formed by International Chamber of Commerce (“ICC”) inSingapore during 25–28 July 2008. The Company was represented at all arbitration sessions. On 23 July2010, the arbitration court issued its arbitration award on the arbitration fees, legal fees and travel expensesrelating to the case and ruled that the Company should pay a total of USD1.323 million to the said consultantfirm. Subsequent to the consultant firm’s application to the High Court of Delhi in India on 28 September2010 for the enforcement of the arbitration award, the Company filed an objection to the enforcement of thearbitration award on the grounds that the said consultant firm no longer carried the status of a corporate.On 23 September 2011, the High Court of Delhi in India ruled to reject the said consultant firm’s applicationfor the enforcement of the arbitration award. It also ruled that the said consultant firm may re-submit itsapplication for the enforcement of the arbitration award after the restoration of its status as a corporate.Based on the legal opinion furnished by the legal counsel engaged by the Company and the progress ofthe case, the Directors of the Company are of the opinion that the aforesaid case will not have any materialadverse impact on the financial conditions and operating results of the Group for the current period.(2) In August 2006, a customer instituted arbitration against the Company and demanded indemnity in the amountof PKR762.98 million (equivalent to approximately RMB49,975,200). Meanwhile, the Company instituted acounterclaim against the customer’s breach of contract demanding for damages and payment of outstandingcontract amounts. In February 2008, the arbitration authorities issued its award ruling that an indemnity ofPKR328.04 million (equivalent to approximately RMB21,486,600) be paid by the Company. In accordancewith local laws, the Company had filed with the local court an objection against the arbitration award and acounter-claim against the customer’s breach of contract. Based on the legal opinion furnished by the legalcounsel engaged by the Company, the case will likely stand a prolonged period of litigation. There was nosubstantial progress of the case during the reporting period.Based on the legal opinion furnished by the legal counsel engaged by the Company and the progress ofthe case, the Directors of the Company are of the opinion that the aforesaid case will not have any materialadverse impact on the financial conditions and operating results of the Group for the current period.(3) Since April 2008, China Construction Fifth Engineering Division Corp., Ltd. (“China Construction FifthDivision”), an engineering contractor of the Company, had staged a slowdown in work followed by totalsuspension, as part of its move to demand the Company to increase the contract amount on the groundsthat raw material prices had increased. In September 2008, the Company instituted litigation with the NanshanDistrict People’s Court, pleading for the revocation of the contract and court order of the evacuation of thework sites by the defendant, as well as a penalty payment for work delay in the amount of RMB24.912million and damages of RMB11.319 million payable to the Company. The court handed down the first trialjudgement in July 2009, ruling that the contract between the Company and China Construction Fifth Divisionbe revoked and a penalty payment for work delay in the amount of RMB12.817 million be payable by China60