For Wal-Mart in China, trouble comes in bundles. Within a month's time, a Chongqing branch faced a pork scandal, and its CEO called it quits.
Now, the global retail giant is under fire again with reports that one of its outlets in Dalian, Liaoning Province, has refused to pay rent to the landlord for the past 10 years, ignoring rulings and rejecting mediation efforts by the local court.
In 1999, Dalian Wanguo Shopping Mall signed an agreement with Wal-Mart Dalian Branch to build a Sam's Club for the retailer giant. According to the contract, Wanguo would provide the land and money for the construction of the store, and make sure the blueprint, building materials and construction process all follow Wal-Mart's requirements. In turn, Wal-Mart would lease the retail space for 15 year at an annual rent of more than 10 million yuan (US$1,574,000).
However, Wal-Mart has not paid any rent since the store was handed over in 2002, said Zhou Yuling, head of Wanguo Shopping Mall.
During the next three years, Wal-Mart Dalian Branch applied twice to China International Economic and Trade Arbitration Commission (CIETAC) to dissolve the lease agreement, accusing Wanguo of construction delays, lack of necessary housing licenses and turning over unfinished buildings. After years of investigation and verification, CIETAC in 2003 and 2008 rejected Wal-Mart's two arbitration applications and urged the two parties to fulfill the contract.
Acting to enforce the CIETAC ruling and as a mediator, Dalian Intermediate People's Court has held a series of hearings and on-the-spot inspections since August over rental dispute. Still, Wal-Mart chose not to act and continued to default on rent, claiming that Wanguo had failed to complete the construction project.
However, court investigations found that construction was put on hold because Wal-Mart failed to install its refrigerating equipment and storage shelves in advance, which held up Wanguo from building walls at the intended positions. After taking over the building in 2002, Wal-Mart refused to let the landlord continue the work.
At the sixth hearing held on Sept. 15, the court advised Wanguo to pay to hire a third party to finish the project. However, Wal-Mart rejected the proposal and brought the case once more to a deadlock.
Meanwhile, a new Sam's Club is about to open in another district of Dalian, adding further complications to the resolution regarding the store in its 10th year of dispute.
Dalian Intermediate People's Court Judge Yu Zhou said Wal-Mart Dalian Branch had submitted written material declaring that it was going to open another store to replace the one at the location leased from Wanguo Shopping Mall. He added that the retail giant stressed there was no longer any point in fulfilling the contract with Wanguo.
According to China's Civil Procedure Law, Wal-Mart's refusal to perform the obligation secured by executed legal instruments could lead to a fine, detention and even criminal sanctions, Lin Chi, another judge with Dalian Intermediate People's Court, said.
Wal-Mart Dalian Branch has yet to comment publicly regarding the dispute.
The retail giant tops Fortune Global 500 list in 2011. Its Dalian Branch operates four stores with total sales of more than 900 million yuan and profits of 50 million yuan in 2009.
