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Supreme Court Remands for Retrial: 20-Year Land Acquisition Battle Recovers Over 100 Million Yuan for Taiwan-Funded Enterprise

Zhenghan Law Firm represented a Shanghai-registered foreign-invested sports club and its offshore parent company registered in the British Virgin Islands (BVI) in a litigation against a town-level People’s Government. The dispute, spanning over twenty years and involving more than 2,000 mu of land, concerned a lease agreement with a total value exceeding 500 million RMB. Despite an unfavorable first-instance judgment where only partial claims were supported, the team successfully moved the Supreme People’s Court to remand the case for retrial. Following the retrial, the compensation amount was increased to approximately 150 million RMB (including principal and interest) and was recovered in full, effectively safeguarding the legitimate rights and reliance interests of the foreign-invested enterprise.

Case Overview

The roots of this dispute trace back to the beginning of this century. In 2001, an international sports industry group registered in the BVI and its wholly-owned subsidiary in Shanghai were invited through government investment attraction to sign a land lease agreement with the town. The agreement covered over 2,000 mu of agricultural land for developing sightseeing and leisure agriculture projects, such as flowers, trees, and turf. With government approval, a standard 18-hole golf course was constructed and put into operation, while the Phase II land was consistently used for ecological agricultural operations.

Following the State Council’s 2004 notice suspending the construction of new golf courses, relevant departments held a special coordination meeting and agreed to complete the formalities for the client’s project “under the framework of resolving historical issues.” In March 2006, both parties signed a “Master Land Use Agreement,” stipulating that the town government would be responsible for completing all land grant and expropriation procedures, ensuring that the lease term corresponded with the expropriation term, while the client would pay the land expropriation fees. Over the following decade, the client paid the expropriation fees and grant fees in full as agreed, paid millions of RMB in annual rent, obtained real estate title certificates for the granted portion of the land, and maintained normal operations.

In March 2016, the town government suddenly informed the client that the leased land in question was still classified as “basic farmland” and subsequently closed the golf course. Consequently, the client suffered massive losses, including replacement costs for ground structures and losses from membership card refunds.

Key Issues and Challenges

The core challenges of this case were: first, the dispute over contract validity—whether the land lease portion of the “Master Land Use Agreement” was void for violating mandatory provisions of the Land Administration Law, which directly determined whether the client could claim damages for breach of contract; second, innovation in legal theory—the need to argue, under the premise that the contract might be deemed void, that “clauses promoting contract effectiveness” should remain independently valid and that defects in validity should be rectified applying Article 16 of the Interpretation of the Contract Volume of the Civil Code; third, the allocation of fault liability—how to argue that the government should bear all or the vast majority of the fault in the event the contract was found void, rather than the usual practice of splitting it equally; fourth, the determination of the scope of losses—the legal characterization of membership refund losses (reliance interest vs. expectation interest) and the burden of proof for ground structure losses on Phase II land. Additionally, the case involved foreign elements (a BVI company), specific Taiwan-related issues, and a complex timeline spanning over twenty years, resulting in highly intertwined legal relationships.

Highlights of Representation

The team demonstrated exceptional legal expertise and strategic litigation planning. First, regarding the argument for contract validity, the team built a three-tiered system: the first tier argued that the contract was valid (land use was open-ended, the golf course was only one of the uses and not the sole purpose, and leasing agricultural land is not inherently illegal); the second tier argued that even if validity defects existed, they should be rectified (citing Article 16 of the Interpretation of the Contract Volume of the Civil Code to argue the government’s liability for failing to rectify in breach of the principle of good faith); the third tier argued that even if the contract was partially void, the “clauses promoting contract effectiveness” should remain independently valid.

Second, regarding litigation strategy, following the unfavorable first-instance judgment, the team appealed to the Supreme People’s Court. They precisely identified issues where basic facts were unclear, such as the failure to ascertain the value of ground structures on Phase II land and the failure to examine the validity of the “Master Land Use Agreement.” This successfully led the Supreme Court to vacate the original judgment and remand the case for retrial—a significant achievement for a case involving a provincial-level court’s first instance and a Supreme Court’s second instance. During the retrial phase, the team further uncovered evidence, using investigation orders to obtain key documents such as appraisal work papers for Phase II ground structures, thereby expanding the factual basis for damages. Furthermore, the team skillfully utilized audio recordings and meeting minutes where the government had repeatedly promised full compensation over the years, effectively debunking the defense that “statements made during mediation do not count.”

Key Points of the Judgment

Following the remand by the Supreme People’s Court, the Shanghai High People’s Court ruled that although the land lease portion of the “Master Land Use Agreement” was void for violating mandatory provisions of the Land Administration Law (due to the use of collective land for non-agricultural construction), the Xiaokunshan Town Government, as the lessor who had collected expropriation fees, should have played a leading role in processing land conversion procedures. Since the procedures for the leased land were never completed, the government was held primarily liable. After considering the actual performance of the case, the appraisal conclusions, and the degree of fault, the court determined that the government should bear the land investment losses and corresponding interest.

Case Insights

This case offers profound warnings for land cooperation models in the field of investment attraction. First, when participating in domestic land cooperation projects, foreign-invested enterprises should independently verify the actual status of land nature and use approval procedures, rather than relying solely on government promises or approval documents. Second, for cooperation arrangements involving the conversion of collective land, specific obligations, timelines, and consequences for breach regarding land procedures should be explicitly stipulated in the agreement to mitigate risks of contract invalidity. Third, although the argument for the independent validity of “clauses promoting contract effectiveness” was not directly adopted by the court, this legal theory holds significant value for future cases where a party fails to fulfill its procedural obligations in bad faith, leading to contract invalidity. Fourth, before and after major events such as government expropriation or demolition, emphasis should be placed on preserving key evidence such as recordings of negotiations and written promises; these materials are irreplaceable in restoring the truth and securing a favorable judgment during litigation.

Victory in Second Instance: Zhenghan Law Firm Helps SOE Resolve Twenty-Year Historical Dispute

This case involves a lease contract dispute arising from an old factory renovation, centered on issues such as the extension of a lease term beyond 20 years, unilateral renewal clauses, and massive liability for breach of contract. Facing an unfavorable first-instance judgment ordering 190 million RMB in compensation, approximately 88 million RMB in 24-month operating income, and extremely low occupancy fees, the lessor urgently commissioned Zhenghan Law Firm to represent them in the appeal. Zhenghan reconstructed the legal strategy around core disputes such as the lease term, the validity of renewal clauses, and liability for breach. Utilizing visualization methods, they successfully persuaded the second-instance court to rule that the extension of a rent-free period must not exceed the 20-year statutory maximum lease term. The court also confirmed the invalidity of the unilateral renewal and related high-penalty clauses, significantly adjusted the occupancy fee to market standards, and successfully reversed the unfavorable first-instance outcome, helping the client reduce actual losses by over 85 million RMB (provisional estimate).

Keywords: 20-year statutory lease term, invalidity of unilateral renewal clauses, increase in occupancy fees, case involving over 100 million RMB, victory in second instance

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I. Case Background

In 2003, a state-owned construction company (lessor) leased industrial land and factory buildings covering nearly 28,000 square meters to an industrial investment company (lessee), allowing the lessee to renovate and expand for commercial operations. The lease term was ten years, after which the renovated buildings were to be returned to the lessor free of charge; consequently, the rent was extremely low. However, over the next twenty-plus years, the parties signed a series of lease contracts, memoranda, and multiple supplemental agreements involving complex arrangements such as government land reclamation, rent-free period adjustments, changing the lease term to twenty years, adding a unilateral renewal right for the lessee upon expiration, and massive liability clauses for breach. The agreements established a unilateral renewal right for the lessee and extremely harsh high-compensation clauses for termination (such as compensation for the appraised value of renovated buildings and 24 months of operating income).

Around the expiration of the contract in 2023, a major dispute arose regarding renewal and site vacation, leading to litigation. The first-instance court ruled that after excluding and extending the rent-free periods, the lease contract should not terminate until February 2024, and the lessee was not in breach. Accordingly, the court ordered the lessor to pay a massive 190 million RMB in loss compensation, upheld the lessee’s right to receive 24 months of operating income (approx. 88 million RMB) as agreed upon lease expiration, and set the occupancy fee for the period of delayed vacation at the original contract’s extremely low rent (with slight annual increases, approx. 6 million RMB per year). The first-instance judgment left the state-owned construction company (lessor) in a desperate position: not only facing hundreds of millions in compensation but also anticipating an enforcement deadlock where the lessee would refuse to vacate due to the extremely low occupancy fee.

II. Key Points and Challenges

1. Complex historical legacy agreements and highly binding massive claim clauses

Multiple supplemental agreements signed over 20 years explicitly granted the lessee the right to unilaterally demand renewal under original conditions and stipulated that if the lessor reclaimed the property, they would face extremely high liabilities, including massive discounted compensation and two years of operating income.

2. Conflict in determining whether “rent-free period extensions” can exceed the statutory maximum lease term

The first-instance court excluded a total of 311 days of rent-free periods confirmed by both parties from the lease term and extended them, effectively pushing back the expiration of a contract that had already reached 20 years. Breaking this logic and proving the contract had expired was the core difficulty in terminating the lease relationship early.

3. The crisis of a severe inversion between occupancy fees and market value

Calculating occupancy fees based on the original contract rent, as the first instance did, not only severely deviated from objective market principles but also implicitly encouraged the lessee to breach the contract by overstaying to continue earning high profit margins. This caused the lessor’s actual economic losses to amplify over time.

III. Highlights of Representation

Zhenghan Law Firm was commissioned at a critical moment during the second instance. By precisely grasping the core threads of the case, they launched a “penetrative review” litigation strategy:

1. Reshaping lease term rules to terminate the contract early

The legal team keenly pointed out that the lessee had actually occupied and used the property during the rent-free period, which is essentially an inseparable part of the lease term. Any agreement to extend the rent-free period that causes the total lease term to exceed the 20-year statutory maximum under the Civil Code is invalid for violating mandatory provisions. This argument successfully persuaded the second-instance court to reverse the ruling, moving the contract termination date forward by nearly a year (to May 2023).

2. Striking at the root: Defeating automatic renewal and high liquidated damages

Regarding the basis for the 190 million RMB compensation in the first instance, the legal team hit the mark: the so-called “continuing cooperation according to existing agreed methods” is essentially equivalent to another 20-year renewal, which is invalid for violating the statutory limit. Since the renewal clause was invalid, the associated high-penalty clauses were also void from the start, effectively stripping away the basis for the other party’s unreasonable claims.

3. Restoring transactional fairness and significantly increasing occupancy fees

Through detailed case searches and comparisons with market rent standards, the team successfully proved that the first-instance reference to the original rent could not cover the lessor’s losses. They urged the second-instance court to adopt a unified calculation based on market assessment rent standards provided by a judicial appraisal institution. By significantly increasing the occupancy fee and moving up the contract termination date, they directly reduced the client’s losses by over 85 million RMB (provisional estimate) at the enforcement and settlement levels, completely turning the situation around.

IV. Key Points of the Judgment

The Shanghai No. 2 Intermediate People’s Court fully adopted Zhenghan Law Firm’s core arguments in its second-instance judgment, clarifying the following rules:

1. Although parties may agree on a rent-free period, the rent-free period does not detach from the lease relationship simply because rent is waived. Related extension agreements must not exceed the mandatory provision that “the lease term shall not exceed 20 years.”

2. Renewal clauses and related high-compensation clauses should be deemed invalid if they substantially violate the statutory maximum lease term. When a contract is invalid or cannot continue to be performed, relevant compensation should be based on residual value utilization under the lease relationship, rather than calculated according to the logic of expected real estate development returns.

3. While referencing the original contract rent to determine occupancy fees is a conventional approach, in cases where the original rent has clearly deviated from true market prices and cannot fully compensate the lessor’s losses, the occupancy fee for overstaying should be calculated according to market rent standards determined by an appraisal institution.

V. Case Insights

This case provides valuable guidance for resolving complex historical disputes in long-term commercial real estate and “lease-to-build” models. First, “rent-free period extensions” or “unconditional renewal” arrangements between commercial entities cannot cross the bottom line of the 20-year statutory maximum lease term; agreements exceeding this limit are absolutely invalid. Second, during the period of unauthorized occupancy after contract termination or invalidation, if the original rent significantly deviates from fair market value, the non-breaching party should dare to break convention and strongly advocate for occupancy fees based on market rent standards to cover actual losses. Third, when facing harsh or obviously unfair supplemental clauses formed during long-term cooperation, being adept at using mandatory legal provisions to conduct a penetrative review of their validity is a key breakthrough for reversing unfavorable trial outcomes.

Gazette Case of the Supreme People’s Court | Zhenghan Law Firm Assists Foreign Bank in Successfully Defending 100 Million Yuan Debt Claim, Final Appeal Victory Selected for Supreme Court Gazette

Zhenghan Law Firm represented an international bank and successfully litigated a complex cross-border financial loan and guarantee dispute at the Supreme People’s Court. Through a precise grasp of core issues such as the cross-jurisdictional application of law for principal and accessory contracts, the validity of mandatory provisions, and the ascertainment of foreign law, the firm ultimately resolved the cross-jurisdictional dispute over the principal and accessory contracts, overcame the key defense that the external guarantee was invalid due to lack of foreign exchange approval, and fully recovered hundreds of millions in loans for the client. The judgment of this case holds landmark significance for the determination of the validity of external guarantees.

I. Case Background

The mainland branch of an international bank provided a loan totaling hundreds of millions of Hong Kong dollars to an overseas company. This loan was secured by a mortgage guarantee provided by the domestic affiliate of the overseas company—a well-known wholly foreign-owned hotel—using its core property assets. The principal loan agreement was governed by the laws of the Hong Kong Special Administrative Region, while the domestic mortgage guarantee contract was governed by the laws of Mainland China. After the borrower defaulted, the bank filed a lawsuit demanding repayment of principal and interest from the borrower and claiming priority compensation rights over the mortgaged property.

II. Key Points and Challenges

This case is a typical “domestic guarantee for foreign loan” dispute, involving complex legal relationships spanning two major jurisdictions. The core points of contention and case difficulties were highly concentrated:

Crisis Over the Validity of the External Guarantee

The guarantor raised a core defense, asserting that as the mortgage guarantee in question was an external guarantee, it had not undergone registration procedures in accordance with national foreign exchange management regulations at the time of its establishment. They argued this violated China’s mandatory provisions and should be rendered invalid. [1] This constituted the greatest obstacle to the bank’s realization of its mortgage rights.

Conflict of Laws Between Principal and Accessory Contracts

The principal contract and the accessory contract chose two different laws, those of Hong Kong and Mainland China, as the governing laws. There are no direct provisions in laws or judicial interpretations regarding the separate agreement of different applicable laws for principal and accessory contracts. How to define the scope of application for both laws, and whether the validity of the accessory contract would be affected by the choice of law for the principal contract, was a major issue in the trial of this case.

Ascertainment and Application of Foreign (Regional) Law

As the principal contract was governed by Hong Kong law, it was necessary to accurately ascertain and apply Hong Kong’s statutory and case law regarding lending, interest, and liability for breach of contract in a mainland court. This placed extremely high demands on the representing lawyers’ cross-jurisdictional legal knowledge and experience.

III. Highlights of Representation

During the process of representing the bank in the first instance and the second instance at the Supreme People’s Court, Zhenghan Law Firm’s lawyers, with their profound insight into complex legal issues and exquisite litigation strategies, successfully met all of the opponent’s challenges:

Precisely Defining the Nature of Legal Norms

Zhenghan Law Firm’s lawyers argued that the State Administration of Foreign Exchange’s regulations on the registration of external guarantees are primarily aimed at external guarantees that require approval. Since the external guarantee in this case did not require prior approval, the legislative intent of the Foreign Exchange Bureau lay in administrative supervision and balance of payments statistics, rather than being an “effectiveness-oriented mandatory provision” that determines the validity of civil contracts; instead, it should be classified as a “management-oriented mandatory provision.” Therefore, the failure to register should not affect the validity of the guarantee contract itself. More importantly, the bank subsequently completed the supplementary registration procedures, rectifying the legal flaw, making it even less appropriate to use the failure to register as a reason for the invalidity of the external guarantee.

Navigating Complex Choice of Law

Zhenghan Law Firm’s lawyers clearly demonstrated the independence and legality of the principal and accessory contracts choosing their respective governing laws. They persuaded both courts to recognize the principle of party autonomy, clarified the respective scopes of legal application, and ensured the correct trial of substantive rights.

Skillful Application of Foreign Law: By submitting professional legal opinions issued by senior Hong Kong lawyers and combining them with thorough arguments during the court hearings, Zhenghan Law Firm’s lawyers assisted the court in accurately ascertaining Hong Kong law. This laid a solid foundation for the judgment to support all of the bank’s claims for principal, interest, and penalty interest.

IV. Key Points of the Judgment

Following the first instance trial by the Shanghai High People’s Court and the final instance by the Supreme People’s Court, both courts ruled in favor of the bank’s claims. In judgment (2010) Min Si Zhong Zi No. 12, the Supreme People’s Court clarified the following core adjudication rules:

Affirming that Principal and Accessory Contracts May Choose Different Governing Laws

The judgment clarified that the parties to a principal contract and an accessory contract may separately and independently agree on their respective governing laws, and both agreements are legal and valid.

Confirming the Validity of External Guarantee Contracts with Supplementary Registration

The Supreme People’s Court held that the provision of external guarantees by wholly foreign-owned enterprises does not require prior approval, and their external guarantee contracts do not take approval as a condition for taking effect. Although external guarantees should be registered, given that the guarantee in this case had undergone supplementary registration procedures, the mortgage guarantee contract in question was determined to be legal and valid.

Full Support for the Creditor’s Claims

The court ordered the borrower to repay all loan principal, interest, and penalty interest to the bank, and confirmed the bank’s priority compensation rights over the mortgaged property of the domestic hotel.

V. Case Insights

This case is a landmark case in the field of foreign-related financial guarantees tried by the Supreme People’s Court. Its judgment not only provides authoritative guidance on how to determine the validity of external guarantee contracts in judicial practice and clarifies the boundaries of the impact of approval and registration of external guarantees on contract validity under foreign exchange management regulations, but also reaffirms the importance of the principle of party autonomy in international commercial transactions. The case has a profound impact on promoting the stability of cross-border investment and financing transactions and ensuring the security of financial claims.

VI. Evaluation and Awards

The judgment of this case is a Gazette Case of the Supreme People’s Court and has been included in legal practice monographs such as “Guide to Difficult Issues and Winning Strategies in Guarantee Disputes.” This case is an important precedent in the field of foreign-related commercial trials, and its adjudication reasoning has a significant impact on subsequent cross-border financing guarantee businesses such as “domestic guarantees for foreign loans.”

 

*Special Note: This case occurred some time ago. Current regulations on external guarantees have been adjusted by the State Administration of Foreign Exchange. Practical operations should be based on the latest legal provisions and judicial practices.

Second-instance reversal: Zhenghan Law Firm, litigating away from home, recovers hundreds of millions in investments from a local government investment platform.

This case involves a complex real estate cooperative development dispute concerning a local government resettlement housing project, with the core controversy focusing on the calculation of losses after the contract was deemed invalid. The case was under the jurisdiction of the court located in the place where the local government is situated. Zhenghan Law Firm represented the project investor and the engineering construction and management agent, while the opposing party, the project owner, was a local government platform company. The first-instance court only upheld the party’s claim for the return of the investment principal and determined that the local government platform company had suffered losses amounting to over 100 million yuan. Through rigorous and meticulous courtroom argumentation and detailed post-trial communications with the judges, Zhenghan Law Firm successfully persuaded the second-instance court to re-determine the losses, not only revoking the unfavorable first-instance judgment but also helping the client fully withdraw from the project led by the local government platform, recovering hundreds of millions of yuan in investment principal, interest and damages, thus achieving a complete reversal.

I. Basic Facts of the Case

The Appellant (Original Plaintiff), Company A (the project’s construction and management agent), entered into a real estate cooperative development agreement with the Appellee (Original Defendant), Company B (a local government platform company and the project owner), stipulating that Company A would invest in and construct a local resettlement housing project. During the project’s construction, a dispute arose between the two parties, and the agreement in question was ultimately characterized by the court as a construction project contract and deemed invalid in a separate effective judgment due to the project’s violation of the mandatory provisions of the Tendering and Bidding Law.

As the project could not proceed further, Company A had already incurred substantial upfront costs and faced huge losses. Accordingly, Company A filed a lawsuit with the court, demanding that Company B return Company A’s investment funds and compensate for losses arising from the occupancy of funds, as well as reimburse Company A for upfront investment cost losses. Company B, through a counterclaim, asserted that it had also suffered losses and demanded that Company A bear liability.

The first-instance court upheld Company A’s claim for the return of the investment principal but completely dismissed Company A’s request for losses arising from the occupancy of funds. Meanwhile, it included all expenses incurred by Company B using the investment funds provided by Company A as part of Company B’s losses, resulting in a final determination of Company B’s losses of up to over 100 million yuan, even though Company B’s counterclaim only sought more than 20 million yuan. Since the court’s judgment allocated and offset the losses of Company A and Company B in proportion to their respective faults, Company A was required to make additional payments to Company B for losses beyond the investment funds, placing Company A in an extremely unfavorable position.

II. Key Points and Difficulties

1. The opposing party had a government background, making litigation away from home extremely challenging

The opposing party, Company B, was a platform company backed by the local government, and the project involved a major local livelihood project (resettlement housing construction). Litigation was conducted in the local court, and an unfavorable judgment had already been issued in the first instance. Overturning the original findings on appeal faced enormous pressure from the opposing party’s “home-court advantage.”

2. The complexity of proving losses

As the investor, Company A had invested a large amount of upfront costs in the project, whereas Company B, as the owner, had actually invested very little in the project. The first-instance court mechanically applied the law, excluding a significant portion of Company A’s actually incurred expenses on the grounds of insufficient relevance of evidence, and instead recognized expenses that Company B had not even raised in its counterclaim as losses. Another major difficulty was how to construct a complete chain of evidence and logic in the second instance to reduce the opposing party’s loss amount and increase our client’s loss amount.

3. The fault game after the contract was deemed invalid

It was an established fact that the contract in question was deemed invalid due to a violation of the Tendering and Bidding Law. The difficulty lay in how to argue that Company A, as the investor and construction/management agent, was less at fault than Company B, as the owner, thereby reducing the proportion of fault liability borne by Company A.

III. Highlights of Representation

1. Detailed communication and professional argumentation reshaped the judges’ inner conviction

Faced with the opposing party with a government background, the acting lawyers persuaded the judges through multiple rounds of professional, detailed and well-organized communications both in court and after the trial to recognize that the court should not adjudicate beyond the claims or recognize losses exceeding the amount claimed in Company B’s counterclaim.

2. Visual charts clearly presenting the specific composition of losses

The legal team produced detailed visual charts that corresponded the complex project costs with thousands of pages of evidence, clearly presenting the name, amount, payment date, etc., of each expense, and strongly proved that Company A’s expenditures were directly related to the project and should be recognized as losses.

3. Precisely identifying the liable subject and reducing the proportion of fault liability

The legal team conducted in-depth legal research on the issue of liability for invalidity of a contract due to failure to tender when required, and provided a legal research report for the judges’ reference. During the trial, through rigorous logical deduction, the team clarified to the judges that Company B, as the employer and the government-backed party, held an absolutely dominant position in the project, and its “failure to tender when required” was the fundamental cause of the contract’s invalidity; Company A, as the bidder, had no right to decide on the tendering and bidding procedures and should not bear primary liability.

4. Arguing vigorously and persuading the court to uphold claims for losses arising from fund occupancy

Regarding the fund occupancy fees dismissed in the first instance, the acting lawyers cited the latest judicial interpretations to argue that even if the contract was invalid, losses arising from fund occupancy should still be compensated. Ultimately, the second-instance court upheld the fund occupancy interest calculated based on the Loan Prime Rate (LPR).

IV. Key Adjudication Points

1. Fault determination for an invalid contract

In a case involving the invalidity of a real estate development contract subject to mandatory tendering, the employer (tenderer) is obligated to organize the tendering and bidding process. Its failure to tender in accordance with the law leading to the contract’s invalidity shall bear primary fault liability.

2. Scope of compensation for losses

Compensation for reliance interest losses shall cover the necessary expenses incurred by the parties in performing the contract, including upfront start-up fees, management fees and project investments, and shall not be limited to the actual project construction cost. Meanwhile, the court’s determination of losses shall not exceed the scope of the claims raised in the plaintiff’s complaint or the defendant’s counterclaim.

3. Nature of fund occupancy fees

After a contract is deemed invalid, the compensated losses shall include interest losses during the period of fund occupancy.

V. Case Implications

This case is a typical example of disputes arising from social capital’s participation in local government infrastructure projects. For investors, it is essential to attach great importance to the compliance of tendering and bidding procedures in the early stages of a project; otherwise, once the contract is deemed invalid due to procedural violations, they will face huge risks in claiming compensation. At the same time, the second-instance reversal in this case also demonstrates that through the precise analysis of legal issues by professional lawyers, even when facing a powerful local government platform company, one can still protect their legitimate rights and interests through judicial channels. This case provides important reference significance for the liability settlement after the invalidity of contracts in similar “government-enterprise cooperation” projects.