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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Commercial Arbitration in Australia: Restraining Arbitration to Protect the Integrity of the Court Process

In the recent decision of Caratti v Caratti [No 2],1 Justice Allanson of the Supreme Court of Western Australia granted an interlocutory injunction restraining a party to the proceedings from commencing arbitration. In so doing, His Honour clarified the operation of section 8(2) of the Commercial Arbitration Act 2012 (WA) (CAA), a provision that is based on the text of Article 8(2) of the UNCITRAL Model Law2 and is replicated in the domestic commercial arbitration legislation of all Australian states and territories (save for the ACT).

The decision clarifies that the ability under section 8(2) CAA to commence arbitration in parallel to court proceedings is subject to the court’s power to protect the integrity of its own processes.

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Injunctions to Preserve Assets or Evidence under Section 44(3) of the English Arbitration Act 1996: High Court Considers Scope

In Zim Integrated Shipping Services Limited v European Container KS and European Container KS 11 [2013] EWHC 3581 (Comm), the High Court considered whether to exercise its discretion to grant interim relief under s44(3) of the Arbitration Act 1996 (the Act). Section 44(3) empowers the Court in cases of urgency to make an order for interim relief for the purpose of preserving evidence or assets.

Zim Integrated Shipping Services Limited (Zim), the claimants in an arbitration, had made a without notice application to the Court for an order under s44(3) of the Act and/or s37 of the Senior Courts Act 1981 to preserve the contractual right to the repayment of loans by the Respondents; and the contractual right to deduct from charter hire payable to the Respondents by Zim under certain charterparties. The existence of these rights was the subject of the arbitral proceedings between the parties. The effect of the order sought by Zim would have been to secure the outstanding loan amounts.

Zim’s application was unsuccessful. The Court’s decision focused on s44(3) of the Act, as it was clear that s37 of the Senior Courts Act could not be used to circumvent the limitations contained in s44(3). In declining to make an order, the Court noted that s44(3) was a limiting provision which could only be used for the purposes of preserving assets or evidence, and could not be used to make any kind of interim injunction. The Court questioned whether the rights Zim sought to preserve were within the scope of s44(3), although was prepared to assume, with some hesitation, that this was a case that fell within s44(3). However, in the exercise of its discretion, the Court refused to grant the injunction.

The Court highlighted that, the closer any injunction came to determining a matter which parties have agreed should be decided by an arbitral tribunal, the more wary it should be as a matter of discretion. In this case, the question of whether the claimants did have the contractual rights which they sought to preserve was the question which the tribunal had to decide.

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Court grants interim injunction under the English Arbitration Act 1996 to preserve the value of contractual rights

In Doosan Babcock Ltd v Commercializidora de Equipos y Materiales Mabe [2013] EWHC 3010 (TCC), the High Court considered the scope of section 44(3) of the Arbitration Act 1996 (the Act). Section 44(3) empowers the courts in cases of urgency to make an order for interim relief for the purpose of preserving evidence or assets.

The Claimant had made an application for an interim injunction restraining the Respondent (known as MABE) from making demands for payment under two “on demand” performance guarantees, on the ground that MABE had failed to issue Taking-Over Certificates (the Certificates) as required by a contract between the parties. The guarantees were stated to expire upon the issuance of the Certificates.

The Claimant was successful in its application for injunctive relief. The Court held that it could make an order for the purpose of the preservation of a contractual right if the effect of the order was to preserve the value of the right and the case was one of urgency. The case also suggests that the usual threshold test for obtaining interim relief of demonstrating “a serious question to be tried” is a more difficult one to overcome in practice where the relief pertains to “on demand” bonds or guarantees, as the applicant must establish that it has a “strong case”.

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UK Supreme Court confirms power to issue an anti-suit injunction even when no arbitration is underway or proposed

The Supreme Court has confirmed that the English court has jurisdiction to injunct the continuation or commencement of foreign proceedings brought in breach of an arbitration agreement, even in the absence of an actual, proposed or intended arbitration (Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent) [2013] UKSC 35). Following the now famous West Tankers¹ decision, it should be noted that this power only applies against jurisdictions which fall outside the Brussels Regulation and Lugano Convention (ostensibly, non-EU countries). Continue reading

Recent Developments in India-related international arbitration

Herbert Smith Freehills has issued its latest Indian International Arbitration e-bulletin. The e-bulletin considers two pro-arbitration decisions from the Indian courts as well recent decisions rendered by the English High Court and the Singapore Court of Appeal. The e-bulletin also comments on the India-Pakistan Indus river arbitration and Singapore International Arbitration Centre’s 2012 Annual Report.

Please click here for a copy of our latest Guide to Dispute Resolution and Governing Law clauses in India-related Commercial Contracts.