Arbitration clauses are now commonplace in IP and other licences between western and Asian parties. But the question often remains – where should we arbitrate and which authority should we designate? It is tempting to designate a local authority in the US or Europe, but in many cases that will not be the best option. Especially if one party is in mainland China, or you foresee having to enforce a judgment there, then I highly recommend designating an arbitration authority in China.
Many western companies are justifiably reluctant to do so, but given the alternatives and how far arbitration in China has come, we have reached the tipping point where arbitrating in China is the best option. The reason is that even though China has signed a treaty making foreign arbitration decisions enforceable in China, the reality is different. In contrast, Chinese courts will likely enforce an arbitration judgment by a Chinese arbitration authority, especially the China International Economic and Trade Arbitration Commission (CIETAC), as it is an official, government-recognised organisation with multiple branches across China.
Agreements with foreign entities have traditionally designated the Shanghai and Beijing branches with about equal frequency. These arbitrations may be conducted in either Mandarin or English, and once I heard of an arbitration being conducted in Beijing in French. Over the past 10 years these branches have received increasing experience dealing with international disputes, including those related to IP/tech transfer, IP licences and royalty payments. With this experience, overall the results have become more reasoned, predictable and acceptable according to international norms.
That being said, recently an internal power struggle between the Beijing and Shanghai/Shenzhen branches casts uncertainty for the future of CIETAC. While it is a virtual certainty that the Beijing office will continue to be in charge, it is unknown whether the Shanghai or Shenzhen branches will continue in their current, or a modified, form. The situation is quite fluid with new public announcements and counter-announcements being issued weekly. Thus, I suggest at this point that foreign companies seeking to designate CIETAC should go with the Beijing office until the status of the Shanghai and Shenzhen offices are clarified.
For those deals in which a Chinese entity is a party but designating CIETAC is not a viable option, then another option would be the Hong Kong International Arbitration Centre (HKIAC). Successful enforcement is not guaranteed, but at least your chances are better than other jurisdictions. The reasoning for this is that since Hong Kong is officially part of China, your chances of enforcing a HK arbitration judgment in a Chinese court are higher than for example, a US or Singaporean judgment. Furthermore, since Hong Kong has been a favoured arbitration locale for many decades, HKIAC is quite experienced in handling very complex, international IP and transactional disputes. Thus, some parties may feel more comfortable designating HKIAC for potentially complex, difficult arbitrations. The HKIAC also benefits from having a database of experienced arbitrators readily available, and arbitrations may be conducted in English, Cantonese or Mandarin.
|Michael Lin |
Marks & Clerk
From my experience, Hong Kong, Malaysia and Singapore are the three most arbitration-friendly jurisdictions in Asia. And perhaps I'm biased, being from Hong Kong, but I believe it has a slight advantage.
Strong arbitration regimes tend to have some specific qualities. First, the legal system has to be well established, one that is easy to use and follows international norms. For the parties involved, consistency and predictability is very important.
Similarly, the court system has to be supportive of arbitration. For example, a rights holder in an IP case may need a preservation order to prevent continual infringement by the other party. It is important that the system to get such an order is fast, easy to use, and works well given the issues at stake.
Finally, an arbitration-friendly jurisdiction needs to have the required expertise. This is especially important in IP matters, where you need not only arbitrators and lawyers with legal experience, but also the scientific knowledge to understand complex technical issues in a patent dispute.
In Asia, Hong Kong, Malaysia and Singapore are the jurisdictions that are best suited for arbitration, though Hong Kong's expertise might run a bit deeper. There are more international law firms in Hong Kong than in Malaysia and Singapore. There are also many arbitrators with both legal and scientific qualifications, and according to one survey, more than anywhere else in the region. This advantage is supported by a commitment to developing arbitration expertise; among the eight universities in Hong Kong, four of them have masters programmes in dispute resolution producing about 300 practitioners a year.
Finally, Hong Kong simply has more experience in arbitration of all types, including IP. It has been conducting arbitration much longer than Malaysia and Singapore, and combined with the higher volume of trade and business in Hong Kong, simply deals with more IP arbitration cases than the other two jurisdictions.
So while all three legal systems are generally equal in quality, I think that Hong Kong has a slight advantage in terms of expertise.
Other jurisdictions in Asia are good for arbitration as well, though they often lack some of the big three's advantages. In Japan, for example, while the legal system is very good, the legal culture tends to focus on reconciliation and compromise. Compromise is a good thing, but it may make it more difficult to get the finality parties may be seeking in arbitration.
Mainland China is also a good place for arbitration. In Beijing and Shanghai, you can get high-quality arbitration services similar to the level in Hong Kong, Malaysia and Singapore, though it may be difficult to find an arbitrator with the right background who speaks English. However, in some of the other provinces, the legal system may not be as supportive. A judge there may not be as quick to enjoin an infringer or seize assets, and may even see the arbitrator as attempting to usurp the judge's rightful authority.
|Christopher To |
Hong Kong International Arbitration Centre
All too often the arbitration clause in a commercial agreement is drafted with little or no thought as to the likely nature of any dispute. When the subject matter of the agreement is intellectual property (as with a patent licence), or intellectual property can be expected to result from relationship governed by the agreement (as with an R&D agreement), a compelling case can be made for considering an arbitration clause that designates the WIPO Arbitration and Mediation Center.
Although the Center is based, as with WIPO of which it forms part, in Geneva, Switzerland, it has since 2010 also had an office in Singapore, in recognition of the fast growing need for and interest in such services from companies based in Asia.
Although its caseload also includes disputes, notably in the ICT sector, which are not necessarily IP-related, the Center is the only international arbitration centre to concentrate on IP disputes. Although perhaps best known for the administration of domain name disputes it also administers a wide range of other IP arbitrations, including multijurisdictional ones under submission agreements reached after parties have abandoned attempts to resolve disputes through the traditional means of litigation in the courts of multiple jurisdictions – an especial problem with intellectual property, given its national nature.
The IP focus of the Center is reflected in its rules, which were developed by leading experts in cross-border dispute settlement and are widely recognised as particularly appropriate for technology, entertainment and other disputes involving intellectual property. Thus these make for example provision not seen in other sets of rules for complex confidentiality regimes (indeed until recently its rules were one of the few sets of rules to mandate confidentiality of the arbitration process as the default), and, of relevance to patent disputes, the conduct of experiments and the inspection of allegedly infringing processes. This focus is also reflected in the Center's choice of neutrals, as to which it assists parties in the selection of mediators, arbitrators and experts from its database of over 1,500 neutrals with experience in dispute resolution and specialised knowledge in IP disputes.
Having myself sat as a WIPO arbitrator I can personally vouch for the support that the Center provides to all involved in terms of monitoring the progress of the cases that it administers in terms of timescales and cost effectiveness. Should the parties wish to use it the Center offers the WIPO Electronic Case Facility (WIPO ECAF), which allows for secure filing, storing and retrieval of case-related submissions in a web-based electronic docket, by parties, neutrals and the Center from anywhere in the world, and which also facilitates case management by providing, in addition to the online docket, a case overview, time tracking and financial information. Given the volume of documentation found in many IP disputes, this facility can prove extremely useful.
|Trevor Cook |
Bird & Bird
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