Without consulting anyone at CUPL, the CESL tuition fees for 2008 to 2012 were unilaterally reallocated in August 2007, one year before CESL's establishment, and put into the budget of UHH as the project income of the latter, simply disregarding that CESL would be a faculty of CUPL within the sovereignty of P. R. China and not an overseas campus of UHH. The information had been concealed from CUPL and the other partners until December 2007 when the Grant Contract was simultaneously available to CUPL and the other partners after it had came into effect.
Regardless of whether the applicable law is German, EU, Chinese, or African, no contract can be used to impose obligations on the third party without the explicit agreement of the third party as it is a universally accepted principle that the binding force of any contract solely derives from a reciprocal agreement. Instead of apologizing for UHH’s wrongdoing, the representative of UHH repeatedly states that the binding force of Grant Contract between UHH and EU is extended to each of 16 CESL partners no matter it agrees or not.
In response to the representative of UHH, I brought four facts to his attention:
(1) On August 21, 2007, without delivering any documents concerning project application, the representative of UHH wrote to all partners requiring them to sign the "partner’s statement" before August 28, 2007.
(2) On September 3, 2007, the representative of UHH wrote to all partners drawing their attention that the "application form" was served without Annexes (the document which appropriates CESL's future income as a part of project income is named as Annex III of "application form" and then automatically re-named as Annex III of Grant Cotract after the approval of "application form ").
Prior to December 2007 when the paper version of the Grant Contract was concluded, with exception of UHH, no CESL partner was aware of the existence of Annex titled “Expected Sources of Funding".
The fact (1), (2) above irrefutably demonstrates that on one hand, UHH intentionally kept all annexes of the Application Form in secret to all partners until December 2007; on the other hand, UHH required every partner or "associate" to sign a uniform statement claiming that its representative had read the entire "application form" including all annexes before he or she signed it and sent it back to UHH before the deadline of August 28, 2007 when none of annexes had come into its existence.
(3) The contract between EU and UHH explicitly defines the latter as the sole beneficiary of EU Grant and explicitly rejects any third person including but not limited to UHH's partners to be the parties or third parties of Grant Contract. With respect to the implement of contract, the only one contact person is the representative of UHH.
Even if UHH is privileged to extend its contract with the EU to third persons, it can't be privileged to plant numerous hidden clauses in a contract of two hundred pages and reserve the power to pick up one or two paragraphs from it afterwards telling the partner, "Here, it is your obligation".
From the middle of 2010, the above statement has been continuously made to UHH, all partners, EU delegation and all Chinese organs involved without facing any substantial opposition as it is based on concreted legal and factual ground.
2. Legal Aspect of Tuition
In China, tuition fees paid by students to the university cannot be legally considered as a part of the university's income but the fees delivered to state treasury subject to "the separation of income and expenditure" until they have been integrated into the budgetary allocation from the Chinese government. The idea of integrating China's educational budget into an EU's project budget in terms of "development aid" is non-negotiable as it violates Chinese law and encroaches upon China's sovereignty.
3. Development Fund (DF)
Unlike UHH which has a strong incentive to keep its 7% commission as its net profits, in January 2011, CUPL announced the establishment of a Development Fund (DF) for CESL in the amount of 5,441,250 yuan which is equal to the amount of tuition fees paid by CESL students from 2008 to 2010 and is roughly equal to the commission fees UHH charged during the same period. The DF is established under Art. 29 of Implementation Measures of the Regulations on Chinese-Foreign Cooperation in Running Schools.
The representative of UHH misstated DF as a "reserve fund", circulated his misrepresentation to all partners and EU officers, and then falsely accused CUPL of keeping this money as its "profits". Although he apologized for this wrong doing later on, the negative consequence upon CUPL’s reputation can’t be easily removed by this apology. It's noteworthy that CUPL would in fact have numerous reasons to keep a reserve fund including: to cover the potential costs probably arising from its litigation against UHH; its liabilities to third parties under the circumstance that UHH breached its commitment to students and employees in China; and its obligation to finance an active law school after the end of the first phase of project. Nevertheless, CUPL still tried its utmost to compromise with UHH. On November 15, 2011, the following consensus was reached between the representative of UHH and myself (A copy of his handwritten statement is kept on file at CESL):
"All parties will have exhausted all funds including EU-Grant, income, donations, budgetary allocations from CUPL (currently including the amount of the development fund) with good faith for the best interest of CESL in accordance with action plan by the end of 2013. A surplus of funds shall be used to cover liabilities to third persons."
The representative of UHH promised to convince the president of UHH to sign this statement and I promised to do the same on my side. As with his other commitments, inactivity follows consensus.
4. UHH Not Satisfied
Since the beginning of January 2012 when the representative of UHH announced his non performance of Art. 7.2 of School Agreement by stopping quarterly transfers of the EU Grant to CESL, all of CESL's expenditures have been covered by CUPL, including, but not limited to, scholarships for international UHH MEIL students, salaries for two secretaries for the European co-dean, the cost of international travel for the Summer School in Europe, and books on European law. With the exception of costs for the flying faculty, UHH has externalized all costs of running the MEIL program to CUPL.
In its effort to cover up its misconduct five years agor, UHH escalated the budgetary fighting in 2012 in order to force CUPL to swallow a bitter pill by submitting itself to the binding force of Annex III and agreeing to use all CESL tuition to secure UHH from its liability to EU probably arising from its misrepresentation in Annex III. After this intention was frustrated by Chinese co-dean, the representative of UHH blocked the budget 2012 of CESL.
5. Enlightened by Kant's categorical imperative - "Act only according to that maxim whereby you can, at the same time, will that it should become a universal law" - I would like to ask the representative of UHH to reflect as to whether UHH would agree to count its own tuition as the income of CUPL by the application of Chinese Law and wish it to be a universal rule.
Fang Liufang (November 3, 2012)