MOC urges Mexico to protect Chinese firms' interests

Overseas rail contracts in 2014 more than tripled

China's commerce ministry on Thursday said Chinese companies that have been involved in Mexico's suspended high-speed railway project have the right to claim compensation and urged the Mexican government to protect the legal interests of Chinese firms.

"Chinese enterprises had invested huge manpower and money into their bid for Mexico's high-speed train project and have the right to claim compensation for the losses caused by Mexico's unilateral decision," Zhou Zhencheng, a senior official of the Outward Investment and Economic Cooperation Department at the Ministry of Commerce (MOC), said at a press conference in Beijing on Thursday.

After announcing the suspension of the high-speed train project, the Mexican government should launch concrete measures to ensure the legal rights and interests of the Chinese enterprises involved, Zhou said.

Mexican Minister of Finance Luis Videgaray on January 30 announced the country would suspend the plan to build a high-speed rail link between Mexico City and the central industrial city of Queretaro. The reasons given were a tightening of government budgets due to falling oil prices, on which Mexico depends for much of its revenue.

A Chinese-led consortium, which included the China Railway Construction Corporation (CRCC), had previously been awarded the contract in November 2014. However Mexican authorities abruptly reversed its decision not long afterwards due to concerns about the transparency of the bidding process. The consortium had announced it would resubmit its $3.75 billion bid.

China's foreign ministry and the National Development and Reform Commission (NDRC), China's top economic planner, on Monday also urged the Mexican government to protect the legal interests of Chinese companies.

Chinese firms including CRCC should claim compensation as soon as possible with Chinese government support and propose a compensation amount based on the contract, Zhang Jianping, a research fellow with the Academy of Macroeconomic Research under the NDRC, told the Global Times on Thursday.

"The Chinese-led consortium signed a contract with Mexico after it won the bid, which contains dispute settlement items and could guide Chinese firms to protect their legal interests," Zhang said.

CRCC is negotiating with the Mexican government to claim compensation and is confident about the outcome, Yu Xingxi, board secretary of CRCC was quoted as saying in the Beijing Times on Tuesday. He refused to provide further details.

The firm could not be reached for comment by press time.

"The dispute settlement clauses in CRCC's contract will be the most important criterion for the company to protect its legal interests and set the compensation figure," Jing Yunchuan, a lawyer specializing in international economic disputes, told the Global Times on Thursday.

There is usually an international arbitration institution stipulated in contracts signed for international business, and if CRCC did not stipulate an international arbitration institution in the contract, the company could file a lawsuit in Mexico, Jing said.

Before CRCC files the lawsuit, the Chinese government could mediate and press the Mexican government to protect the legal interests of Chinese firms, Jing said.

Legal disputes will surface more often as Chinese enterprises further explore overseas markets to export railway technology, especially in developing markets, said Zhang Zhuting, a professor at the Transport Management Institute under the Ministry of Transport, adding that it's important for these firms to understand local policies and laws.

Although the impact of the Mexico project suspension will not be significant, Chinese exports of railway equipment and overseas investment are both expected to continue their rapid growth in 2015, Zhang told the Global Times on Thursday.

Zhou of MOC said the suspension of the high-speed train project in Mexico is an isolated case and Chinese enterprises are globally competitive in high-speed rail technology and operation.

The costs of China's railway technology are lower, according to MOC.

Records show that Chinese enterprises signed contracts for overseas railway construction worth $24.7 billion in 2014, three times higher than a year earlier. Chinese companies were involved in 348 overseas railways projects last year, 113 more than in 2013.

China exported $4.3 billion worth of railway equipment in 2014, up 22.6 percent from 2013, data from the General Administration of Customs (GAC) showed. Exports of railway and electric locomotives rose 13.3 percent, accounting for 57.7 percent of total railway equipment exports, customs data showed.