HK Court Grants Anti-Suit Injunction in Armani Case

In Giorgio Armani SPA & Ors v Elan Clothes Co Ltd [2019] HKCFI 2983, the parties entered into a Master Agreement under which Elan was appointed as an authorized retailer with the right to open and operate single brand stores on the Mainland.

The Master Agreement was expressed to be made “by and between” SPA “together with its branch offices and Affiliates”, and Elan.

Disputes arose as a result of a rebranding exercise by SPA whereby products sold under some Armani marks were rebranded and sold under another Armani mark.  Elan claimed that such rebranding caused it to sustain significant losses and as a result, it stopped paying royalties and advertising contributions under the Master Agreement, leading to SPA serving a notice of termination of the Master Agreement and the commencement of arbitration in Hong Kong seeking a declaration that it had validly terminated the MA, and orders for damages and injunctive relief.  Elan then commenced legal proceedings against SPA and other affiliated companies on the Mainland, and SPA commenced proceedings in Hong Kong for an anti-suit injunction against Elan.

The Court noted the importance of commercial considerations when interpreting arbitration clauses, stating [§18]:

“Of particular importance in the construction of contracts including arbitration clauses, are the commercial considerations highlighted by Lord Hoffman in Fiona Trust & Holding Corp v Privalov [2007] 4 All ER 951.  The assumption is that as rational businessmen, parties are likely to have intended any dispute arising out of the relationship in which they had entered or purported to enter to be decided by the same tribunal.  An arbitration clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.  The courts have emphasized that if any businessman did want to exclude disputes about the validity of the contract, or disputes of a particular type, it would be comparatively easy for them to say so expressly.  Otherwise, having gone to the trouble of agreeing that their disputes would be heard in the courts of a particular country or by a tribunal of their choice, they could not rationally have expected that time and expense would be taken in lengthy argument about the nature of particular causes of action, and whether any particular cause of action comes within the meaning of a particular phrase they have chosen in their arbitration clause.”

Regarding the Court’s power to grant anti-suit relief under s.21L of the HCO and s.45 of the Arbitration Ordinance, the Court noted [§23-25]:

“It is clear that the Court has jurisdiction to do this, under section 21L of the High Court Ordinance and/or its inherent jurisdiction, in accordance with the principles clearly set out in The Angelic Grace [1995] 1 Lloyd’s Rep 87, and Donahue v Armco [2002] 1 Lloyd’s Rep 425.  The justification for such an injunction is that it should be granted to restrain foreign proceedings in breach of an agreement “on the simple and clear ground that the defendant has promised not to bring them”.  In AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] 1 WLR 1889, the English Court was dealing with its general jurisdiction to grant injunctions and relief under the Senior Courts Act 1981, and Lord Mance observed that orders restraining the actual or threatened breach of the negative aspect of an arbitration agreement (not to bring proceedings other than by way of arbitration) enforce the negative right not to be vexed by foreign proceedings.”

“An injunction to restrain foreign proceedings brought in breach of an arbitration agreement, in the interim of an award by the arbitral tribunal in an arbitration, may also be a type of interim measure which the Court may grant under section 45 of the Ordinance (GM1 & GM2 v KC [2019] HKCFI 2793, 14 November 2019).  However, in this case, I do not agree that the Court is not able or should hesitate to grant the Injunction as “final” relief at trial.”

“Section 45 (4), when it applies, does not prohibit the Court from granting relief falling within the scope of “interim measures”.  The section only states that the Court “may” decline to grant such interim measure, if it considers it more appropriate for the interim measure to be dealt with by the tribunal.  Section 45 (3) of the Ordinance expressly states that the powers conferred by the section may be exercised by the Court irrespective of whether or not similar powers may be exercised by an arbitral tribunal under section 35 in relation to the same dispute.”

The Court was prepared to grant a permanent injunction in respect of the Mainland proceedings on the basis that they were oppressive, vexatious, brought for the purpose of frustrating and obstructing the Arbitration and to exert pressure on the Plaintiffs.  The Court stated [§33]:

“In my view, the steps taken by Elan on the Mainland by instituting the Shangdong Proceedings against SPA and extending the claims to Shanghai, HK and GA all of which are closely associated, are vexatious attempts to bypass the arbitration agreement, and to subject the Plaintiffs to duplicative costs and inconvenience in parallel proceedings on the same issues.  It would be unconscionable for this Court to allow Elan to pursue its claims against SPA and its associates on the Mainland, when such claims fall within the scope of the arbitration clause in the MA (BNP Paribas SA v Open Joint Stock Company Russian Machines & Anor [2011] EWHC 308 (Comm)).  It is no less unconscionable of Elan to make a claim against Shanghai, HK and GA otherwise than through arbitration, than it would be for Elan to make a claim against SPA, when the true substance of its claim arises under and derived from the supply and sale of the Products bearing the Armani Marks under the MA, and the relationship created under the MA.”

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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