PRC court clarifies enforcement of Mainland award made by foreign institution

On 6 August 2020, Guangzhou Intermediate People’s Court made a civil ruling that an arbitral award made in Guangzhou by the ICC should be regarded as a Chinese arbitral award with a foreign element. It follows that the award should be enforced under Article 273 of the PRC Civil Procedure Law, rather than under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

(2015) Sui Zhong Min Chu Si Zi No. 62 or (2015)穗中法民四初字第62号

Background

This case concerned a supply contract between Brentwood Industries (US) as the seller, Guangzhou Faanlong Machinery Engineering Co Ltd (PRC) as the buyer, and Guangzhou Zhengqi Trading Co Ltd (PRC) as the agent of the buyer. Article 16 of the contract provided that “any dispute arising from or in connection with this contract shall be settled through friendly negotiation. If no settlement can be reached through negotiation, it shall be submitted to ICC for arbitration in the place where the project is located in accordance with international convention and practice” (emphasis added). Article 17 provided that “the applicable law of this contract is PRC law”. In this case, the project was located in Guangzhou, Mainland China.

On 16 December 2010, Brentwood brought a claim against Faanlong and others (Respondents) in the Court. The Court declined to hear the case, as there was an arbitration agreement between the parties. On 9 May 2011, Brentwood applied to the Court to invalidate the arbitration clause. Brentwood was not successful. Subsequent to the Court’s ruling confirming the validity of the arbitration clause, on 31 August 2012, Brentwood commenced ICC arbitration against the Respondents. The arbitration was administered by the ICC through its Secretariat Asia Office based in Hong Kong. On 17 March 2014, the sole arbitrator made a final award in favour of Brentwood. On 13 April 2015, Brentwood applied to the Court for recognition and enforcement of the award.

The Court’s ruling on enforcement

Brentwood argued that judicial practice in Mainland China is that the nationality of the arbitral award is determined by the place where the arbitration institution is located. Accordingly, as the award was made by the ICC, which is headquartered in Paris, it should be recognised and enforced in Mainland China in accordance with the New York Convention. Alternatively, if the Court considered that the award was made by the ICC Secretariat Asia Office based in Hong Kong, the award is a Hong Kong arbitral award and should be recognised and enforced in accordance with the Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region (Mainland and Hong Kong Mutual Arrangement).

The Respondents argued that (1) the award was not “made in the territory of a State other than the State where the recognition and enforcement of such awards are sought “ (Article 1 of the New York Convention), and thus should not be recognised and enforced under the New York Convention; (2) ICC was not an arbitration institution stipulated in the PRC Arbitration Law and it was not legal for it to administer arbitration in Mainland China; and (3) the validity of the arbitration clause and the enforceability of the arbitral award were two separate legal issues under different rules. The fact that the arbitration clause was held valid did not necessarily suggest that the award made pursuant to it was enforceable.

The Court ruled that the award, made in Guangzhou by the ICC, should be regarded as a foreign-related arbitral award made in Mainland China. Enforcement of the award should be brought under Article 273 of the PRC Civil Procedure Law. It rejected Brentwood’s arguments for recognition and enforcement under the New York Convention or the Mainland and Hong Kong Mutual Arrangement and directed Brentwood to re-apply for enforcement under the PRC Civil Procedure Law.

Comment

It is a long-standing question whether foreign arbitration institutions can administer arbitration seated in Mainland China under the current PRC Arbitration Law regime. The traditional view was no, because “arbitration commission” in the PRC Arbitration Law meant Chinese arbitration institutions only. However, with the increase in commercial dealings between Chinese and foreign parties, the strict interpretation of the law no longer sits well with the demands of commercial parties. China’s Supreme People’s Court has recently, in several cases and judicial interpretations, confirmed the validity of clauses providing for arbitrations administered by foreign institutions seated in Mainland China. This latest decision made by the Guangzhou Court took a further step,  supporting that the arbitral award made in arbitration seated in Mainland China and administered by a foreign arbitration institution can be enforced under PRC Civil Procedure Law. However, as Mainland China is not a case law jurisdiction, this latest decision by Guangzhou Court, even though it should have been vetted by the Supreme People’s Court via the internal reporting system, is not a binding authority in Mainland China.

Viewed in light of the fact that foreign arbitral institutions are now permitted to operate in Beijing and extended free trade zones in Shanghai (see here), we are hopeful that there will be a final clarification in the near future on the question of whether foreign arbitral institutions can administer arbitration seated in Mainland China. Legal practitioners in Mainland China have been calling for an amendment to the existing PRC Arbitration Law to address this issue. If that happens, it would be a significant step towards China further opening up its legal services market to foreign players. Having said that, before that final missing piece of the puzzle is complete, we would recommend that parties avoid agreeing to an arbitration clause that provides for arbitration seated in Mainland China to be administered by a foreign arbitral institution.

If you have questions or would like discuss any aspect of this post, please contact Helen Tang, Stella Hu or Briana Young of Herbert Smith Freehills, Weina Ye of Kewei Law Firm, or your usual Herbert Smith Freehills contact.

Helen Tang
Helen Tang
Partner, Shanghai
+86 21 2322 2160
Weina Ye
Weina Ye
International Partner, Kewei
+86 21 2322 2132
Stella Hu
Stella Hu
Of Counsel, Beijing
+86 10 65355017
Briana Young
Briana Young
Professional Support Consultant, Hong Kong
+852 2101 4214

 

 

Beijing to open to foreign arbitral institutions

On 7 September 2020, the State Council of China published a policy paper on opening up the services sector in Beijing (“Work Plan for Deepening Comprehensive Pilot and New Round of Opening-Up of Services Sectors in Beijing and Building Comprehensive Demonstrative Area of Opening-up of State Services Sectors” or《深化北京市新一轮服务业扩大开放综合试点建设国家服务业扩大开放综合示范区工作方案》). The paper announces  that foreign arbitral institutions will be allowed to set up “business organisations in designated area(s) in Beijing”, to “provide arbitration services in relation to civil and commercial disputes arising in the areas of international commerce and investments” and to “support and secure the application and enforcement of interim measures … before and during the arbitration proceedings, such as asset preservation, evidence preservation and action preservation” (emphasis added).

For these purposes, a “foreign arbitral institution” is one that is established outside Mainland China, including in Hong Kong, Macao or Taiwan.

The paper does not explain  the exact scope of activities that business organisations will be entitled to carry out in Beijing.  They might be permitted, for example, to organise arbitration hearings in venues in Beijing, or even to provide case administration services from Beijing.  This is one step further from an earlier policy under a 2017 State Council policy paper (“Reply of the State Council in relation to Deepening Reform and Further Opening-up of Services Sectors in Beijing as Comprehensive Pilot” or 《国务院关于深化改革推进北京市服务业扩大开放综合试点工作方案的批复》), which allowed foreign arbitral institutions to “establish representative offices in Beijing” (emphasis added). No foreign arbitral institution has set up offices in Beijing following the 2017 policy.

The State Council of China previously released similar policies in Shanghai’s free trade zone. In 2015, a State Council policy paper allowed foreign arbitral institutions to open representative offices in Shanghai’s free trade zone.  Subsequently, HKIAC, SIAC and ICC have opened representative offices in Shanghai. These offices, however, have been limited to liaison activities and have not been permitted to provide case administration services in Mainland China.

In August 2019, a further State Council policy paper stated that foreign arbitral institutions may be permitted to set up business organisations in Shanghai’s extended free trade zone to “conduct arbitration businesses in relation to civil and commercial disputes arising in the areas of international commerce, maritime affairs, investment, etc.” (emphasis added) (see here). It has been reported that several foreign arbitral institutions are in the process of setting up branches in the extended free trade zone under the August 2019 policy paper, although it remains to be seen which types of “arbitration businesses” those branches will be permitted to conduct.

It is worth noting that both the August 2019 Shanghai policy paper and the September 2020 Beijing policy paper mention that foreign arbitral institutions’ branches will be allowed “to support the application and enforcement of interim measures” in Mainland China. Under current Chinese law, parties to arbitration cases must apply to Chinese courts for interim measures; Mainland China-seated arbitral tribunals are not allowed to grant interim relief. However, Chinese courts generally do not accept interim relief applications from parties to arbitrations administered by foreign arbitral institutions (except for cases administered by designated Hong Kong arbitration institutions and seated in Hong Kong, see here), as there is currently no legal ground supporting this. The two policy papers appear to have allowed this possibility, but it remains unclear whether this is the correct interpretation and, if so, how it will be implemented in practice.

The latest Beijing policy paper, following the path of previous policy papers, signals further liberalisation and opening up of commercial arbitration practice in Mainland China. However, under the current Chinese Arbitration Law, foreign arbitral institutions are still not expressly permitted to administer arbitration cases seated in Mainland China.

For this reason, we continue to recommend against providing for arbitration of foreign-related disputes seated in Mainland China administered by an foreign arbitral institution (see here).

If you have questions or would like discuss any aspect of this post, please contact Helen Tang or Briana Young of Herbert Smith Freehills, Weina Ye of Kewei Law Firm, or your usual Herbert Smith Freehills contact.

Helen Tang
Helen Tang
Partner, Shanghai
+86 21 2322 2160
Weina Ye
Weina Ye
International Partner, Kewei
+86 21 2322 2132
Briana Young
Briana Young
Professional Support Consultant, Hong Kong
+852 2101 4214

HERBERT SMITH FREEHILLS UPDATES ESSENTIAL GUIDE TO DISPUTES CLAUSES IN CHINA CONTRACTS

Herbert Smith Freehills has launched the 8th edition of its guide, “Dispute resolution and governing law clauses for China-related commercial contracts‎”.

Better known as “The Dragon Book“, this practical guide explains how Mainland Chinese law affects parties’ choice of law and dispute resolution in China-related contracts.‎

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CIETAC tribunal applies UNIDROIT Principles where parties fail to present case under governing law

While commercial parties are generally free to select the law that governs their contracts, they must also ensure that they understand the law they selected, and can actually apply that law to the contract.  In a CIETAC arbitral award published by CIETAC in its publication “Selection of Arbitration Cases Involving the Belt and Road Countries”, a sole arbitrator came up with a creative solution in a situation where the parties failed to present their cases under the governing law of the contract.  The arbitrator applied the UNIDROIT Principles of International Commercial Contracts to determine the legal issues in dispute.  Despite this arbitrator’s willingness to “think outside of the box”, the case is a reminder that parties must consider the legal and practical implications of their contractual choices.

Background

On 24 September 2012, the Indonesian Respondent EPC contractor entered into an EPC Sub-Contract (Agreement) with the Mainland Chinese First Claimant and Indonesian Second Claimant to build a coal-fired power plant located in Indonesia.  The governing law of the Agreement was Singapore law and disputes were referred to arbitration at the China International Economic and Trade Arbitration Commission (CIETAC).

The Project was stayed at the preliminary design stage.  The Claimants contended that the Respondent had failed to provide permanent use of the road to access the Project’s site and failed to provide location details of the main entrance of the Project, which resulted in the Claimants’ delay in providing the preliminary design drawings to the Respondent.  The Respondent in return blamed the Claimants for their delay in submitting the preliminary design drawing within the time limits as provided under the Agreement; and called the advance payment bonds and performance bond just before the Claimants completed and submitted the preliminary design drawings.  After calling the bonds, the Respondent refused to pass the preliminary design drawing to the Employer for review and approval.  As a result, performance under the Agreement was suspended.

The Claimants commenced arbitration and sought a declaration that the Agreement was terminated due to the Respondent’s breach.  The Claimants also sought an order for the Respondent to return the called amounts of the performance bond; to return the difference between the amount of the advance payment bonds and advance payment to the Claimants; damages, and interest.

The governing law issue

The parties had expressly selected Singaporean law to govern the Agreement.   However, neither party engaged Singaporean counsel or legal experts when arguing their cases in the arbitration. The Claimants submitted their pleadings based on Chinese law.  Whilst the Respondent objected to the application of Chinese law, it merely submitted a Singaporean legal expert report with a few Singapore court cases in support, which was very limited in substance and did not touch upon the major issues in dispute.

Despite the sole arbitrator’s instructions, the parties failed to provide sufficient Singaporean legal authorities.  The sole arbitrator referred to Article 49 of the CIETAC Arbitration Rules, which provides: “[t]he arbitral tribunal shall independently and impartially render a fair and reasonable arbitral award based on the facts of the case and the terms of the contract, in accordance with the law, and with reference to international practices”, and proposed that the parties submit their cases under the UNIDROIT Principles.  If any party considered there was a conflict between Singaporean law and the UNIDROIT Principles, it could make submissions accordingly.   The parties accepted this solution and submitted pleadings based on the UNIDROIT Principles.

The sole arbitrator found that the Claimants had breached the Agreement by delaying the initial design drawings.  However, the sole arbitrator held that the Respondent’s response to the Claimants’ breach, by calling the bonds in full and refusing to submit the initial drawing to the Employer, had been disproportionate to the breach.  In the arbitrator’s view, the Respondent’s call on the bonds made it impossible for the Claimants to continue performing the Agreement.

In the arbitrator’s view, the Respondent’s call on the bonds therefore constituted a fundamental breach of the Agreement.  The arbitrator relied on the UNIDROIT Principles to uphold the Claimants’ claim that they were entitled to terminate the Agreement, and to determine the consequences of that termination.  The arbitrator reasoned that the UNIDROIT Principles reflect good practice and general principles in international commercial contracts.  Unless either party could demonstrate otherwise, the sole arbitrator held that he had no reason to believe there was any inconsistency between Singapore law and the UNIDROIT Principles.

Comment

In practice, many arbitrators would not proactively apply a non-binding codification of transnational legal principles to resolve a dispute where parties have explicitly chosen the governing law of the contract.  The published award does not elaborate on why the tribunal proposed applying the UNIDROIT Principles.  However, it does indicate that Chinese arbitrators may be increasingly open to applying international legal principles when dealing with foreign-related commercial disputes.

Nevertheless, this case appears to be a one-off, and it would be unwise for parties to rely on an arbitrator’s willingness to adopt creative solutions of this kind.  Parties who take advantage of the contractual freedom to select a neutral governing law must be prepared to argue their cases under that law, i.e. to instruct counsel or experts who are qualified to practice that law.  If parties do not apply the selected governing law in the arbitration, they must be prepared for the additional time and expense involved in determining which laws apply before the substantive claims can be heard, not to mention the risk of an unexpected outcome if the law applied produces an unfavourable decision.

[1] This award was published by CIETAC in the Selection of Arbitration Cases Involving the Belt and Road Countries, at pages 58 to 105.

Helen Tang
Helen Tang
Partner
+86 21 2322 2160
Jean Zhu
Jean Zhu
Counsel, Kewei
+86 10 6535 5041
Yingtong Chen
Yingtong Chen
Legal Assistant, Kewei
+86 10 6535 5133

Chinese Supreme People’s Court releases revised rules of evidence in civil proceedings and further policy paper on Shanghai’s Lin-gang Free Trade Zone

The Chinese Supreme People’s Court (SPC) issued a series of judicial interpretations and opinions in December 2019 in relation to the rules of evidence in civil proceedings and further liberalisation of litigation and arbitration practice concerning the Ling-gang Special Area of the Shanghai Pilot Free Trade Zone. In this post, we will share our thoughts on the key highlights of those judicial interpretations and opinions.

Revised rules of evidence in civil proceedings

The SPC released the revised Provisions on Evidence in Civil Proceedings (Fa Shi [2019] No.19) (New Rules) on 25 December 2019. The New Rules will come into force on 1 May 2020, replacing the old rules which have been in effect since 2002. Significant changes in the New Rules include among others the following:

Electronic data evidence

The Chinese Civil Procedure Law has recognised electronic data as a type of evidence in civil proceedings since 2012. Electronic information such as WeChat messages and online transaction records have been widely accepted by PRC courts as evidence in judicial practice.

The New Rules now formally define the scope of electronic data evidence. According to the New Rules, electronic data evidence includes a wide range of electronic information, including webpages, blogs, microblogs, text messages, instant messages, emails, user registration and authentication information, electronic transaction records, and any other types of documents and information stored, processed or transmitted in digital forms.

The courts may take into account a range of factors in determining the veracity of electronic data, including the hardware and software environment of the relevant computer system, its operating condition, and the methods that the data was stored, transmitted and extracted. There are certain situations where the courts will assume the veracity of electronic data information unless there is evidence to the contrary, including (i) where the data information was kept or submitted by a party to whom the contents of the information were unfavourable; (ii) where the data was provided or verified by an independent third party platform which stores such data; (iii) where the data was stored by way of official archive; (iv) where the data was generated during normal business operations; (v) where the data was stored, transmitted or extracted by methods agreed by the parties; and (vi) where the content of the data has been notarised by a notary public.

Disclosure of documents

Document disclosure requests traditionally were not allowed in civil proceedings in mainland China. In 2015, the SPC published the Interpretation on the Implementation of the Civil Procedure Law (2015 Interpretation) which, in Article 112, for the first time allowed parties to apply for disclosure of documents in civil proceedings as a matter of principle. However, the 2015 Interpretation does not provide detailed guidance for the parties and the courts to follow; therefore, in judicial practice, parties seldom rely on Article 112 of 2015 Interpretation to request evidence from counterparty.

The New Rules now set out detailed rules for parties and courts to follow in practice. Pursuant to the New Rules, where a party in possession of a document relied on that document in the proceedings, or created that document in favour of the other party, that document should be disclosed. Any documents that the other party is legally entitled to review or obtain, as well as any accounting books and vouchers, should also be disclosed. Where a request is not specific or is irrelevant or immaterial to the outcome of the case, or where the document requested is not within control of the other party, the court should not allow the request. The court should hear both parties’ opinions in deciding whether to grant a document request. Where a party refuses to disclose a document without justifiable reasons in breach of a court order, the court is entitled to draw adverse inferences against that party. Finally, under the New Rules, parties are entitled to request disclosure of electronic data evidence, and the rules applicable to disclosure of documentary evidence apply equally to electronic data evidence.

Factual and expert witnesses

The New Rules also made certain changes to the rules on the presentation of factual witness evidence and expert witness evidence in civil proceedings. For example, under the New Rules factual witnesses are now generally required to provide a statement of truth, both orally and in writing, to the courts. Expert witnesses (who are mostly appointed by the courts in Chinese civil proceedings) are also required to provide an undertaking to the courts that they will act objectively and impartially when accepting the appointment.

Further internationalisation of Chinese litigation and arbitration practice

In December 2019, the SPC and the Shanghai High People’s Court issued two policy papers on the Ling-gang Special Area of the Shanghai Pilot Free Trade Zone (Lin-gang FTZ) – the “Opinion on People’s Courts’ Provision of Judicial Services and Safeguard to the Development of China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area” published by the SPC on 13 December 2019 (SPC Opinion) and the “Implementing Opinion on Shanghai Courts’ Judicial Services to Safeguard the Development of China (Shanghai) Pilot Free Trade Zone Lin-gang Special Area” published by the Shanghai High People’s Court on 30 December 2019 (Shanghai Courts Opinion).

We reported in August 2019 and November 2019 on the Chinese government’s plan on the Ling-gang FTZ and the impact on the arbitration practice. The SPC Opinion and the Shanghai Courts Opinion set out the actions to be taken by the courts to implement the plan. Although the provisions contained therein are still expressed in general terms, a number of the provisions signal further policy liberalisation or internationalisation of the litigation and arbitration practice in China. In particular, the SPC Opinion and the Shanghai Courts Opinion confirm that:

  • Registered foreign arbitration institutions will be allowed to set up businesses in Lin-gang FTZ and to “conduct arbitration businesses in relation to civil and commercial disputes arising in the areas of international commerce, maritime affairs, investment, etc.“. This has been understood to be a green light for foreign arbitration institutions to administer arbitration cases seated in mainland China. (Article 6 of the SPC Opinion and Article 9 of the Shanghai Courts Opinion)
  • Enterprises registered in Lin-gang FTZ are encouraged to submit their disputes to arbitration “in a specified location, pursuant to specified arbitration rules and by specified arbitrators“. Such wording has been understood to be an endorsement for ad hoc arbitration seated in mainland China under certain circumstances, as we reported previously. As encouraging as it might seem, the provision is still very vague and how it will apply in practice still remains to be seen. (Article 6 of the SPC Opinion)
  • Chinese courts may, upon the relevant parties’ consent, allow foreign parties to use English when participating in court proceedings concerning international commercial disputes in relation to the Lin-gang FTZ. (Article 17 of the Shanghai Courts Opinion)
  • Chinese courts will explore the possibility of hearing cases which do not have any “nexus” to mainland China and which were submitted to the Chinese courts’ jurisdiction solely based on parties’ agreement. (Article 12 of the Shanghai Courts Opinion)

 

If you have any questions or would like to discuss any aspect of this post, please contact Cathy Liu, Helen Tang, Weina Ye or your usual Herbert Smith Freehills contacts.

Cathy Liu
Cathy Liu
Partner, Kewei, Mainland China
+86 21 2322 2158
Helen Tang
Helen Tang
Partner, Mainland China
+86 21 2322 2160
Weina Ye
Weina Ye
Senior Associate, Mainland China
+86 21 2322 2132

 

 

New BAC Rules to enter into force on 1 September 2019

The Beijing Arbitration Commission (BAC) has updated its arbitration rules and fee schedule. The new versions will replace the current (2015) version, with effect from 1 September 2019.

Among a number of notable amendments, BAC’s revised fee structure marks a significant step towards aligning Chinese arbitral practice with international standards. The new fee schedule:

  • distinguishes between the institution’s administrative charges and the arbitrator’s fees, with a clear imposition of higher charges for the latter. Under the current fee schedule, arbitration fees are payable entirely to the institution, without transparency as to the proportion that is paid to the arbitrators;
  • applies equally to both domestic and international arbitrations, removing any differentiation between the fees applicable. In addition, parties to domestic arbitrations can now agree to have the arbitrator’s fees charged on an hourly basis whereas under the current rules, this option is only available for international arbitrations;
  • increases the minimum administrative charges as well as arbitrator’s fees. For arbitrations involving amounts in dispute below RMB 250,000, the administrative charges and arbitrator’s fees shall be RMB 5,000 and RMB 12,000 respectively, totalling RMB 17,000. Under the current rules, the minimum arbitration fees payable for a dispute up to and including RMB 1,000 is only RMB 5,100, a sum that barely covers one hour of a sole arbitrator’s hourly rate;
  • imposes a maximum on the administrative charges and arbitrator’s fees, thereby preventing disproportionately high costs for high-value cases. For arbitrations involving amounts in dispute of RMB 5 billion and above, the administration fees will be capped at RMB 8.761 million. If the disputed amount is RMB 8.682 billion and above, the arbitrators’ fees will further be capped at RMB 18 million. Where hourly rates apply, an arbitrator’s hourly fee shall be capped at a maximum of RMB 5,000.

Other highlights of the new BAC Rules include:

  • the threshold for ordinary procedures before a full panel of three arbitrators has been increased from RMB 1 million to RMB 5 million. Where the amount in dispute falls below RMB 5 million, summary procedures handled by a sole arbitrator shall apply (Article 54);
  • a claimant may file a single notice of arbitration where a dispute arises out of multiple contracts provided that (i) the contracts contain identical or compatible arbitration clauses and (ii) the contracts are collateral or the contracting parties are identical and the subject matter of the arbitration is of a similar or related nature (Article 8);
  • amendments to the emergency arbitration procedure. Drawing on its experience of administering the first emergency arbitration in China in 2017, which resulted in an award that was successfully enforced in Hong Kong, BAC has clarified the emergency arbitration regime in its new rules. This includes clearer stipulations of the procedures and fees involved in the appointment of emergency arbitrators (Article 63);
  • the period for BAC to accept a case after a claimant’s payment of the requisite fees is extended from five to 10 days (Article 9);
  • an option for certain administrative deadlines to be extended by approval of the Secretary-General of the BAC, depending on the circumstances of each case, is now expressly codified (Article 70).

The new BAC Rules and fee schedule will no doubt be warmly welcomed by users and practitioners, enhancing BAC’s reputation as one of China’s most progressive arbitral institutions.

 

Helen Tang
Helen Tang
Partner, Mainland China
+86 21 2322 2160
Michelle Li
Michelle Li
Partner, Mainland China
+86 21 2322 2162
Hew Kian Heong
Hew Kian Heong
Partner, Mainland China
+86 21 2322 2150
Stella Hu
Stella Hu
Senior Consultant, Hong Kong
+852 2101 4248

SPC ISSUES PROVISIONS ON ACTION PRESERVATION IN IP RIGHTS DISPUTES

The Supreme People’s Court of China (SPC) has released a new set of judicial interpretations concerning interim injunction applications for intellectual property rights (IP Rights)-related disputes. The Provisions on Application of Laws in Adjudication of Action Preservation Cases Involving Intellectual Property Disputes (Fa Shi [2018] No. 21) (Provisions) were published on 12 December 2018 and take effect on 1 January 2019. Prior to that, a consultation draft of the Provisions was released for public consultation on 26 February 2015.

The Provisions provide further guidance on interim injunctive relief (i.e. action preservation) applications made under Articles 100 and 101 of the Civil Procedure Law 2017 (2017 CPL) in cases concerning IP Rights and unfair competition, and clarify certain key concepts therein. (For more information on interim relief in the PRC, contact briana.young@hsf.com to request a copy of our guide “Interim Relief in Mainland China”.)

Some important articles in the Provisions, which are covered in this post, are:

  • Article 6, which provides for circumstances classified as “urgent circumstances” under Articles 100 and 101 of the 2017 CPL;
  • Article 7, which lists the factors that the courts shall take into consideration in determining whether an action preservation order should be granted;
  • Article 10, which elaborates on the concept of “irreparable harm” under Article 101 of the 2017 CPL in cases related to IP Rights or unfair competition. Risk of “irreparable harm” is an element that needs to be proved in any application for pre-litigation or pre-arbitration action preservation orders; and
  • Article 16, which specifies circumstances under which applications for action preservation will be considered “wrongful”.

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Inside Arbitration: Issue #6 of the publication from Herbert Smith Freehills’ Global Arbitration Practice

We are delighted to share with you the latest issue of the publication from the Herbert Smith Freehills Global Arbitration Practice, Inside Arbitration.

In addition to sharing knowledge and insight about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

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