(RTTNews) - Tuesday, solar cell products maker China Sunergy Co., Ltd. (CSUN: News ) said that the Salten District Court in Norway had has granted a preliminary injunction prohibiting REC Wafer Norway AS from drawing on the US$50 million in bank guarantees before the legal situation is clarified.

The Nanjing, China-based company, while providing additional insights on the preliminary injunction granted on September 11, said one of the key reasons for this decision is that the original party to the contract, REC SITECH AS, no longer exists given its merger with REC ScanWafer AS, which later changed its name to REC Wafer Norway AS after the merger.

China Sunergy said it was never informed of this merger despite the contractual obligations of REC to do so prior to any such action. The company said the court refers in particular to the fact that it has been impossible for China Sunergy to extend the guarantees as the original party to the contract and supplier has merged with another company, namely REC Wafer.

The court has not found evidence that Nordea Bank has consented to the merger and thus has consented to the change to the parties on the rights side.

Despite the fact that REC SiTech AS never informed China Sunergy of its dissolution after the merger, even though the merger plans had come far by the time the contract was entered into, the inability of China Sunergy to extend the guarantees in the name of REC SiTech AS has been stated as a basis for REC Wafer's current claims.

Salten District Court has also noted that there must be a breach of contract on the part of China Sunergy in order for REC Wafer to be able to draw on the guarantees. There have been no wafer shipments from REC Wafer to China Sunergy, and the court has found that REC Wafer has not pleaded that any fundamental breach of the contract with China Sunergy exists. The court states that the conditions for drawing on the guarantee are therefore not present.
The preliminary injunction is in effect until October 15, 2009. The court has stated that China Sunergy and REC Wafer should clarify the legal issues that the merger has created by that time.

On September 11, in a press release, China Sunergy said that it initiated talks with REC in good faith in 2009, seeking a mutually agreeable solution to the challenging market situation and a strong and sustainable long-term partnership.

The company then said that it made notable concessions to REC, including new product mix and higher purchasing volume. While both parties were negotiating the remaining few key terms of an amendment to the contract, REC suddenly and unilaterally terminated the agreement, China Sunergy said.

To receive FREE breaking news email alerts for China Sunergy Co. Ltd. and others in your portfolio

 1   2   Next Page