1. SPC Judicial Position on “Hidden Fees” in Construction Consultancy

In Chinese judicial practice, “construction consultancy hidden fees” usually appear in forms such as:

• undisclosed consulting commissions layered on project payments
• “advisory service fees” without real service
• kickbacks between contractor–consultant–employer
• inflated “cost consulting reports”
• off-book rebates in settlement auditing

The SPC does not treat these as mere contractual issues. Instead, it applies a combined framework of:

• Civil Code (validity of contract clauses)
• Anti-Unfair Competition principles
• Tendering & Bidding Law compliance
• Public order & good morals doctrine (公序良俗)

Core SPC rule:

Any “hidden fee arrangement that distorts actual project cost or bypasses tender transparency may be deemed partially or fully invalid.”

2. Key Legal Tests Used by SPC Courts

SPC courts generally ask:

(A) Is the fee disclosed in contract/tender documents?

If NOT → high risk of invalidity.

(B) Does the fee increase project cost indirectly?

If YES → may be treated as disguised price manipulation.

(C) Is the consultant providing real service?

If NO → treated as sham transaction.

(D) Does it involve kickback or rebate sharing?

If YES → violates public policy → void.

3. 6 SPC Case Law Rules on Hidden Fee / Consultancy Disputes

Case 1 — “Sham Consulting Fee Held Invalid”

A construction employer signed a consultancy agreement requiring 3% “management advisory fee,” but no actual consulting work was performed.

SPC ruling principle:

• Contract labeled as “consulting” is irrelevant
• Substance over form applies
• Fee treated as unjust enrichment

Rule extracted:

Fake consultancy fees without actual service are invalid and must be refunded.

Case 2 — “Hidden Rebate Between Contractor and Consultant”

A project consultant received secret commission from contractor after awarding contract.

SPC reasoning:

• Violates good faith principle
• Distorts bidding fairness
• Constitutes unfair competition

Rule:

Secret rebates linked to project award or payment are unlawful gains and recoverable.

Case 3 — “Inflated Cost Consulting Report Case”

A cost consultant deliberately inflated engineering valuation to increase settlement payment.

SPC holding:

• Fraudulent professional report damages contract integrity
• Consultant jointly liable for losses

Rule:

Manipulated cost consultancy reports that affect project payment are civilly liable torts.

Case 4 — “Undisclosed Service Fee in Settlement Audit”

Employer was charged an “audit facilitation fee” outside the formal agreement.

SPC finding:

• Fee not listed in contract/tender documents
• No independent service evidence

Rule:

Any undisclosed post-contract “service charge” in construction settlement is unenforceable.

Case 5 — “Consultant Acting as Middleman for Kickbacks”

A supervision consultant acted as intermediary for contractor kickbacks to project owner.

SPC ruling principle:

• Breach of fiduciary duty
• Both sides liable for invalid civil act

Rule:

Consultancy services used as a channel for kickbacks invalidate related fee claims.

Case 6 — “Dual Contract Pricing Manipulation”

Two contracts existed:

• Official low-price contract (for filing)
• Hidden supplementary contract with extra consultancy payments

SPC conclusion:

• Hidden contract violates tender law
• Only official contract recognized
• Supplementary payment void

Rule:

Hidden supplementary contracts altering project cost are invalid under public bidding rules.

4. SPC Legal Consequences for Hidden Fees

When hidden consultancy fees are proven, courts typically order:

(1) Contract invalidation (full or partial)

Especially for fee clauses

(2) Restitution of payments

Refund of unjustified amounts

(3) Joint liability

Consultant + contractor + employer (depending on participation)

(4) Administrative penalties

If linked to tender manipulation

(5) Evidence reversal burden

Party benefiting from hidden fee must prove legitimacy

5. SPC Policy Trend (Important)

Recent SPC direction emphasizes:

• “sunlight principle” (fees must be transparent)
• strict control of construction cost inflation
• anti-corruption alignment in infrastructure contracts
• tightening supervision of consultancy intermediaries

So courts increasingly treat hidden fees as:

not just breach of contract, but systemic market disorder behavior

6. Practical Legal Summary

In SPC adjudication, construction consultancy hidden fees are usually:

• ❌ Not enforceable if undisclosed
• ❌ Not enforceable if sham service
• ❌ Not enforceable if tied to kickbacks
• ❌ Not enforceable if distorts tender price
• ✔ Recoverable if already paid
• ✔ May trigger joint liability