In Depth: How One Acre in Shanghai Sparked a 20-Year Legal Battle

In 2003, Shenzhen entrepreneur Liu Jianshe faced financial challenges after acquiring rights to a prime plot of land in Shanghai's Lujiazhu financial district. Liu's vision was to develop an "international securities tower" on the 1.56-acre site. To fulfill the required payment, Liu's company, Shanghai Ruizheng Investment Co. Ltd., needed to pay 20% of the transfer fee by the end of 2003. However, new real estate lending rules made it difficult for Liu to access funds from Shenzhen for the Shanghai project, leading him to partner with local companies. Despite local company Shanghai Aoyi Enterprise Development Co. Ltd.'s investment, Liu still fell short of the needed amount. Consequently, he collaborated with Wang Shiming, a significant shareholder of developer Shanghai Longcang Real Estate Co. Ltd., who provided financial assistance, while Longcang agreed to lend money for preliminary expenses [para. 1][para. 2].

However, the partnership quickly turned contentious, leading to a 20-year legal battle involving lawsuits, criminal convictions, and appeals. The core issue remains unresolved over who rightly owns or owes for the Shanghai plot. Specifically, the project was delayed when Liu's side failed to secure a land-use certificate on time. A subsequent agreement gave Longcang a majority share in Ruizheng, but Liu, who was still entangled in various contractual obligations, had pledged significant shares to other entities, further complicating the legal dynamics [para. 4].

Longcang later filed a lawsuit against Ruizheng, claiming breach of contract for not timely acquiring the land certificate. The legal proceedings resulted in Ruizheng being unable to sell or transfer the property. More legal maneuvers ensued, including arbitration, in which the arbitrator decided Ruizheng must compensate Longcang, ultimately resulting in the transfer of the plot to Longcang. Construction commenced in 2007, and the building was eventually sold to Guohua Life Insurance Co. Ltd. for over 3.2 billion yuan, becoming the China Life Insurance Financial Building [para. 9][para. 10][para. 12].

Liu continued to fight through legal avenues, seeking to regain shares and filing lawsuits for land misappropriation. Despite Longcang's counterclaims and attempts to dispute Liu's shareholder status, a court ordered Longcang to pay compensation to Ruizheng, though Longcang's appeal failed [para. 15].

In attempts to avoid financial obligations from the shareholder lawsuit, Wang's legal team devised a strategy using a notarized debt agreement under China's Notarization Law to circumvent court processes. Documents were notarized in Beijing, where sympathetic notaries could be found, resulting in a manipulated legal scenario that offset Longcang's debt against previous judgments [para. 17][para. 19].

The legal saga spotlighted the roles of legal and financial professionals, who became subjects of criminal investigations. Liu accused Wang and associates of embezzlement, leading to scrutiny of the arbitration process and the eventual conviction of nine individuals, including Wang. However, appeals led to a retrial due to insufficient evidence [para. 24][para. 27].

The ongoing legal complexities emphasize the challenges in resolving ownership and financial disputes in China's real estate sector. A Shanghai High Court official noted the difficulty in distinguishing between civil and criminal actions, advocating for caution in using criminal interventions without clear ownership resolutions. Despite years of litigation, the ownership rights and financial responsibilities surrounding the Shanghai plot remain unclear, with further legal proceedings pending [para. 32][para. 34].