Chinese company ordered to pay K1.7bn fine


China State Construction Engineering Corporation Limited has been ordered to pay K1.7 billion to FISD Company Limited for breach of contract.

The High Court of Malawi Commercial Division in Lilongwe has delivered the ruling in a case in which Fisd Company Limited sued the Chinese company.

According to the ruling, FISD and the Chinese firm had an agreement that whenever China State Construction Engineering Corporation Limited get a contract in the period between September 11 2020 and June 2021, FISD would be roped in as a subcontractor.

China State Construction Engineering Corporation Limited then got contracts for construction of Mzuzu University library and Karonga Water Project. However, FISD was not subcontracted for the projects, forcing the Malawian company to seek court redress.

In court, China State claimed that the contract was illegal and had an invalid penalty clause. The company also said that there was no set timeframe for the contract.

In a ruling dated 15 September, 2021, High Court Judge Ken Manda said facts presented in court show that the Chinese company only wanted to use FISD as a figurehead for the purpose of winning government contracts in this country.

“In view of this, and also considering the fact that there is clearly frustration such that seemingly the parties cannot work together, the best option would be for the defendant to pay off the claimant the sums equivalent of Malawi kwacha of one million dollars [$1 million] for each of the two projects.

“I would, thus, declare that the defendant should pay the claimant the sum the equivalent in Malawi kwacha terms of two million dollars [$2 million], plus the costs of this action,” said Manda

Brad Chen from China State Construction Engineering Corporation Limited told the local media yesterday that the company has taken the matter to the Malawi Supreme Court of Appeal.

He added that China State has also obtained an order putting aside implementation of the High Court ruling.

Meanwhile, National Construction Industry Council has ordered China State Construction not to continue constructing the K7 billion library.

The order has been made because China State, which is a foreign firm, flouted the laws by not working in association with a Malawian firm for at least 30 percent of the works.