GIORGIO ARMANI SPA AND OTHERS v. ELAN CLOTHES CO LTD f/k/a DALIAN LES COPIOUS CLOTHES CO LTD

HCCT 71/2018

[2019] HKCFI 2983

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 71 OF 2018

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J U D G M E N T

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Background

1.  These proceedings were commenced by the 1^st Plaintiff, Giorgio Armani SPA (“SPA”), in October 2018 against the Defendant (“Elan”). By order made on 27 February 2019, leave was granted to add as 2^nd to 4^th Plaintiffs Giorgio Armani (Shanghai) Trading Co Ltd (“Shanghai”), Giorgio Armani Hong Kong Ltd (“HK”) and Mr Giorgio Armani himself (“GA”) as parties.

2.  The facts of the underlying dispute between the parties have been set out in detail in the Judgment of Deputy High Court Judge Field dated 27 February 2019, and will not be repeated here.  Suffices it to say that a Master Agreement (“MA”) was entered into between SPA and Elan in December 2014, under which Elan was appointed as an authorized retailer with the right to open and operate single brand stores on the Mainland, to sell products under the label of at least one of the Armani Marks which were defined in the MA (“Products”). Elan purchased the Armani Products from HK and Shanghai, which are authorized distributors under the MA.

3.  The MA provides for the laws of Hong Kong to be the governing law, and clause 13 of the MA provides as follows:

“13.1 Any dispute, controversy or claim deriving from, arising out and/or regarding this Agreement, including any dispute regarding the validity, interpretation, construction, performance, breach and termination thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force and as may be amended by the rest of this clause. The appointing authority shall be Hong Kong International Arbitration Centre (HKIAC). The place of arbitration shall be in Hong Kong at Hong Kong International Arbitration Centre. The number of arbitrators shall be three. The arbitrator’s [sic] decision shall be final and binding and may be enforced by any court of competent jurisdiction.

13.2  Nothing in this article 13 shall be construed as preventing any Party from seeking conservator or other interim relief and remedies, in relation to which the arbitration committee is not competent pursuant to mandatory provisions of law, in any court of competent jurisdiction.”

4.  Disputes arose as a result of a rebranding exercise announced by SPA in February 2017 (“Rebranding”), whereby products sold under some Armani Marks were rebranded and sold under another Armani Mark.  SPA relies on the fact that it has complete control over its Armani Marks and their rebranding under the MA.  On its part, Elan claims that such Rebranding of the Products sold under the Armani Marks caused it to sustain significant losses, and as a result, it stopped paying royalties and advertising contributions under the MA.  This led to SPA serving notice of termination of the MA and, pursuant to clause 13 of the MA, SPA commenced arbitration in Hong Kong against Elan on 5 June 2018 (“Arbitration”), seeking a declaration that it had validly terminated the MA, and orders for damages and injunctive relief.  In its Response to the Notice of Arbitration, Elan denied the valid termination of the MA and reserved the right to counterclaim for breach and repudiation.  The arbitral tribunal (“Tribunal”) has been constituted, as confirmed by the letter dated 31 July 2018 from the HKIAC.

5.  On 2 August 2018, Elan commenced legal proceedings against SPA, Shanghai, HK and GA in Shandong (“Shandong Proceedings”).  In its Statement of Claim which was served on Shanghai on 22 October 2018, Elan claims that SPA’s and GA’s discontinuance or cancellation of products under two of its brands infringed Elan’s interests, and that Shanghai and HK are jointly liable. Shortly after the commencement of the Shandong Proceedings, on 18 September 2018, Elan applied to the Shandong Court for preservation of Shanghai’s assets up to a limit of RMB 600 million.  Assets of Shanghai were frozen by the Shandong Court, subsequently released only upon Shanghai’s provision of a bank guarantee to cover the preserved assets (“Guarantee”).

6.  On 25 October 2018, SPA commenced these proceedings in Hong Kong for an anti-suit injunction against Elan.  By its Originating Summons (“OS”), SPA sought a declaration that Elan’s conduct of commencing the Shandong Proceedings was a breach of the MA and the arbitration clause; permanent injunctions against Elan to require it to discontinue the Shandong Proceedings, and to restrain Elan from commencing or pursuing any proceedings other than in accordance with the arbitration clause in the MA; and interim injunctions and interim measures pending the final determination of the Arbitration. 

7.  On the same day, SPA obtained an interim injunction from the Court (“Injunction”), which restrained Elan from taking any further step in the Shandong Proceedings. The Injunction was continued on 2 November 2018.

8.  On 27 February 2019, after hearing substantive arguments, DHCJ Field continued the Injunction until final determination of these proceedings, ordering Elan to procure the release of the Guarantee, and allowing the joinder of Shanghai, HK and GA as plaintiffs (“Field Judgment”). 

9.  SPA, Shanghai, HK and GA all submitted jurisdictional challenges to the Shandong Court.  On 10 July 2019, the Shandong Court handed down its judgment (“Shandong Judgment”), which allowed the Plaintiffs’ jurisdictional challenge and dismissed Elan’s claims against SPA, Shanghai, HK and GA.  Elan has appealed against the Shandong Judgment.

10.  The claims made by the Re-amended OS issued in these proceedings were heard on 21 November 2019.  This hearing took place before the hearing scheduled for the Tribunal to hear the application by SPA for the joinder of Shanghai, HK and GA as parties to the Arbitration.

11.  Elan’s defence to the claims made in these proceedings are that HK, Shanghai and GA are not parties to the MA.  They are therefore not bound by the arbitration agreement contained in clause 13 of the MA, and there is no basis for the Plaintiffs to restrain Elan from pursuing the Shandong Proceedings against HK, Shanghai and GA.  Elan claims that it is not precluded from raising this defence by the Field Judgment which was interlocutory in nature, and was not a final determination of the rights of the parties to the MA.

12.  Elan further claims that this Court should not determine the claims made by the Plaintiffs in the OS, as this would preclude and preempt the Tribunal’s decision on the issue of the joinder of HK, Shanghai and GA to the Arbitration, and may lead to a risk of inconsistent decisions.

13.  There is no dispute, that HK is wholly owned by SPA, that Shanghai is wholly owned by HK, and that GA controls and is the Chairman of the board of SPA.

14.  According to Elan, its claims in the Shandong Proceedings are tortious in nature under PRC law, and are not contractual.  Its cause of action is that the Plaintiffs had jointly committed a tort in violation of the PRC Tort Liability Law, whereby Elan’s property rights, commercial reputation and anticipated operation benefits had been infringed.  Elan claims that the only signatories to the MA were SPA and Elan, and that Shanghai, HK and GA were not parties to any arbitration agreement.  The Arbitration was concerned only with a dispute over royalties claimed to be due under the MA, and did not cover the cancellation of the relevant Armani Marks of which Elan complains.  Accordingly, Elan denies that it had acted in breach of the arbitration clause, at least with respect to Shanghai, HK and GA.

Parties to the MA and the scope of the arbitration agreement

15.  The MA is expressed to the made “by and between” SPA “together with its branch offices and Affiliates”, and Elan.  Each of SPA and Elan is referred to in the MA as a “Party”, and together as the “Parties”.  “Affiliate” is defined in clause 1.6 of the MA as a person “directly or indirectly through one or more intermediaries, Controls, is Controlled by, or under common Control with, the specified person”.  “Control” is defined to mean having the power to direct the affairs of a person, by reason of the appointment of a majority of the governing body of such person, owning or controlling the right to vote a majority of the voting shares of such person, ownership of 50% or more of the equity capital, or the right to direct the general management of the affairs of such person. 

16.  The description of the parties to the MA, and of SPA as a Party “together with its Affiliates”, is clear indication that SPA, Shanghai, HK and GA are all included as parties to the agreement.  The wide definition of “Affiliates” in the MA includes HK which is wholly owned by SPA, Shanghai which is wholly owned by HK, and GA who controls the board and management of SPA.

17.  The body of the MA includes references to Affiliates, when obligations imposed and rights conferred on the Parties are set out in the provisions of the MA.  I have carefully reviewed the Field Judgment, and in particular paragraphs 49 to 52 thereof, and respectfully agree with the analysis made by DHCJ Field of the provisions and effect of the MA.  It is clear from the overall review and construction of the MA that the parties to the MA include not only SPA, but Shanghai, HK and GA as Affiliates, and that the MA was intended to benefit the Affiliates as well.

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.

19.  Clearly, the relationship created under the MA is for Elan to be supplied with Products bearing the Armani Marks for sale by Elan on the Mainland, on the terms set out in the MA.  The Products were contemplated to be supplied by SPA and its Affiliates which were the authorized distributors.  Shanghai and HK are such authorized distributors.  Disputes as to Elan’s right to be supplied with and to sell and distribute the Products bearing the Armani Marks on the Mainland, and its obligations to make payments thereunder, all arise out of, derived from and relate to the MA, and the relationship created thereunder between the parties.  As rational commercial businessmen, it must have been contemplated and intended by them that all such disputes relating to the supply, sale and distribution of the Products bearing the Armani Marks on the Mainland should be decided by one tribunal, in the manner chosen and expressly provided for in clause 13.1 of the MA, namely by arbitration in Hong Kong.

20.  Even if Shanghai, HK and GA are not parties to the MA, it is clear in my judgment that from the language of clause 13.1, used in the commercial sense, and construed in the modern trend of presumption in favour of one-stop arbitration, clause 13.1 must extend to claims against and disputes with Shanghai, HK, GA and other entities within the wide definition of “Affiliates”, such as those which were made by Elan in the Shandong Proceedings. These claims relate to Elan’s damage allegedly sustained as a result of the Rebranding, and the termination of supply of Products bearing the AJ and AC Armani Marks, which clearly fall within the wide scope of clause 13.1 of the MA.  Whether the claims are contractual made under the MA, or are tortious in nature as Elan claims, make no difference: when they derived from, arise out of and/or are regarding the MA, and constitute a dispute regarding the performance, breach and termination of the MA - within the scope of clause 13.1.  The claims certainly cannot be said to be “entirely unrelated to” the MA and the relationship created between the parties thereunder (Getwick Engineers Ltd v Pilecon Engineering Ltd HCA 558/2002).

21.  In my view, by instituting the Shandong Proceedings against SPA, Shanghai, HK and GA, there is breach by Elan of the arbitration agreement contained in the MA.

Relevance of section 45 (4) of Arbitration Ordinance

22.  On behalf of the Defendant, it was argued that the Court should not be considering the relief sought by the OS, since the Arbitration is in place and the Tribunal will, on 8 January 2020, determine SPA’s application to join Shanghai, HK and GA in the Arbitration.  The Court should not pre-empt the decision of the Tribunal on substantially the same issue of parties to the MA and the Arbitration, as it is more appropriate, in accordance with section 45 (4) of the Arbitration Ordinance (“Ordinance”), for the Plaintiffs’ claims for the declaration and injunctions to be dealt with by the Tribunal.

23.  The substance of the claims made in these proceedings is for an anti-suit injunction against Elan, to restrain it from commencing and pursuing the Shandong Proceedings, the appeal against the Shandong Judgment, and any other proceedings, otherwise than by the Arbitration and in accordance with clause 13 of the MA.  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.

24.  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.

25.  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.

26.  At the foremost, the Injunction sought in these proceedings is not currently “an interim measure which is the subject of the Arbitration”.  SPA did not seek the Injunction from the Tribunal.  It only seeks to include Shanghai, HK and GA as parties to the Arbitration, for the Tribunal to deal with the claims made by SPA and its Affiliates, and the defence and claims which may be made by Elan by way of counterclaim in the Arbitration, in relation to their mutual dealings which arise out of the MA.  It is open to the Tribunal to decide whether Shanghai, HK and GA can, and should, be added, which will of course involve the question of whether the Tribunal has jurisdiction to do so under the arbitration clause. 

27.  As explained in the preceding paragraphs, SPA and Shanghai, HK and GA if they are parties to the MA are entitled to be protected by an anti-suit injunction, and the OS is for the purpose of seeking the Court’s determination of whether there is an arbitration agreement, and breach or threatened breach thereof, to justify the grant of the injunction in the exercise of its discretion.  The questions to be finally resolved by the Court at the substantive hearing of the OS are the existence or otherwise of a valid agreement to arbitrate, whether there is breach thereof, and the enforcement of the rights of the parties to such agreement, not to be vexed by proceedings instituted and pursued in breach of the promise to arbitrate.  It is the determination of a contractual claim and its enforcement. 

28.  The relief sought in these proceedings commenced by the OS is not confined to relief pending the determination of the Arbitration, as it includes a claim for a permanent injunction to restrain Elan from commencing or pursuing on the Mainland or anywhere in the world any court or other proceedings relating to disputes, controversies or claims deriving from or arising out of or regarding the MA, otherwise than in accordance with the arbitration clause in the MA, as well as a declaration that Elan was in breach of the contract to arbitrate.  The subject matter and relief sought in the Arbitration may overlap with the subject matter and relief sought in the OS, but appropriate relief such as a declaration of breach and a permanent injunction to enforce and protect the rights of the parties to an agreement may and should be granted by the Court, if it is just and convenient to do so.  Repeating the rationale adopted by the Court in The Angelic Grace, unless good reason can be shown why the Court should not exercise its discretion, the injunction should be granted on the simple and clear ground that the defendant had promised not to bring proceedings otherwise than by way of arbitration in Hong Kong.

29.  In this case, the Defendant does not dispute the existence and validity of the MA, which this Court finds extends to Shanghai, HK and GA as parties. I cannot see why it would be more appropriate for the Tribunal to deal with the relief sought by the Plaintiffs, and no other good reason has been advanced by the Defendant as to why the declaration and injunction should not be granted by the Court.  If the Tribunal agrees that Shanghai, HK and GA are parties to MA, there is no inconsistency between its finding and the finding made by this Court. If the Tribunal should take the view that there was no arbitration agreement between Elan, Shanghai, HK and GA, I would make it clear that I am prepared to grant the permanent injunction and declaration sought by the Plaintiffs on the basis that it would be unconscionable to allow Elan to pursue the Shandong Proceedings on the Mainland, for the reasons set out below.

Vexatious and oppressive proceedings

30.  I accept the submissions made by Leading Counsel on behalf of the Plaintiffs, that in any event, the Shandong Proceedings are oppressive, vexatious, brought for the purpose of frustrating and obstructing the Arbitration and to exert pressure on the Plaintiffs.  Elan does not dispute that it is a party to the MA with SPA, and that it is bound thereby.  On the facts, the claims made by Elan against the Plaintiffs in the Shandong Proceedings clearly relate to and arise out of its commercial relationship and dealings with SPA under the MA, and the parties’ dispute thereunder in relation to Elan’s sale of the Products bearing the relevant Armani Marks.  There is no good explanation to justify the need to commence and pursue the Shandong Proceedings, after the Arbitration was commenced, and after Elan had participated in the Arbitration.  The claims made by Elan, even if tortious in nature, clearly fall within the ambit of clause 13 of the MA, and the damages alleged to have been suffered by Elan as a result of the Rebranding can be made and pursued in the Arbitration, on the basis of the alleged breach of the MA. 

31.  Whether the Shandong Court has jurisdiction under PRC law to determine the tortious claims made by Elan is not relevant, when the essential question is that since Elan had agreed to the arbitration clause, it should not be allowed to invoke any other jurisdiction (Tamil Nadu Electricity Board v ST-CMS Electric Company Private Ltd [2007] EWHC 1713 (Comm), OT Africa Line Ltd v Magic Sportswear Corporation & Ors [2005] EWCA Civ 710). 

32.  In any event, it is clear from the Shandong Judgment that the Shandong Court regarded the dispute between Elan and the Plaintiffs to be contractual in nature, and that the parties’ liabilities should be governed by contract law and not the law on tortious liability.  The Shandong Court also considered the facts alleged by Elan in the Shandong Proceedings to be related to the performance of the MA, resulting in the Shandong Court’s allowance of the jurisdictional challenge made by the Plaintiffs and the dismissal of Elan’s claims against the Plaintiffs.

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.

Disposition

34.  For all the above reasons, I am prepared to grant the declaration and the permanent injunction sought by the Plaintiffs, in terms of paragraphs 1 and 2 of the Re-amended OS.  I also grant the interim measures in terms of paragraph 3 of the Re-amended OS, pending the final determination of the Arbitration and further orders of the Tribunal.

35.  The costs of the action are to be paid by Elan to the Plaintiffs on indemnity basis (including all costs reserved), with certificate for 2 counsel.

Mr Barrie Barlow SC and Ms Eva Leung, instructed by de Bedin & Lee LLP, for the plaintiffs

Mr Jin Pao SC and Mr Victor Lui, instructed by Reed Smith Richards Butler, for the defendant

HCCT 71/2018

[2019] HKCFI 791

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO 71 OF 2018

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RULING ON WORDING OF THE ORDERS
TO BE MADE FOLLOWING THE JUDGMENT
HANDED DOWN ON 27 FEBRUARY 2019

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1.  I have considered: (i) the draft orders marked A, B and C which are the orders proposed by the plaintiff following the handing down of the judgment on 27 February 2019 but with amendments sought by the defendant; (ii) the letter from Reed Smith Richards Butler (“RSRB”) dated 14 March 2019; (ii) the letters from de Bedin & Lee (“DBL”) dated 1 March 2019 and 14 March 2019.

2.  The principal issue between the parties is which of the proposedorders properly reflect the findings made in the aforesaid judgment.  I have also taken into account the need for clarity.

Annex A order

3.  I approve the amendments to the Recitals proposed by RSRB.

4.  It is agreed that paragraphs 1 and 2 of the original order shouldnot be included.  The first paragraph of the substantive order will therefore be the original para 3, renumbered 1 by DBL

5.  I approve RSRB’s proposed amendments to renumbered paras1, 2, 3, 4, 5, 6, save that the words “the Plaintiff’s Affiliates” in lines 2 and 3of renumbered para3 should not be excised but should be included in para 3.

6.  It is with reluctance that I agree that this order should not include the proposed case management directions set out in renumbered para 4.  I am constrained to take this view because I have heard no representations from the defendant on what DBL propose save that it is to be inferred that RSRB object to the directions.  If RSRB are simply taking the narrow point that directions were not canvassed at the hearing of the summons but otherwise have no substantive objection to what DBL propose, I urge the defendant to agree DBL’s proposed directions which appear to me to be eminently reasonable.  If the plaintiff is forced to issue another summons for directions and the court makes an order in similar terms to those presently proposed, I would expect the defendant to be on the end of costs order designed to mark the Court’s displeasure at the defendant’s unreasonable conduct.

Annex B order

7.  I approve RSRB’s proposed amendment to the recitals.  Save as aforesaid, this order is agreed and I approve it as amended by RSRB.

Annex C order

8.  In dealing with the application for joinder the Court consideredMs Ferrari’s 3^rd affirmation that was adverted to in the defendant’s objections to joinder.  In the opinion of the Court, this required consideration of Ms Ferrari’s 1^staffirmation to put her 3^rdaffirmation in context.  It follows in my judgment that the 1^staffirmation legitimately featured in the hearing of the summons and that paragraph 1 of this order is justified but with the excision of the words beginning “pursuant to the Plaintiff’s obligations” down to “25^thOctober 2018”.

9.  I can see no basis for paragraph 2 of this proposed order.  There should also be no order as to costs.

Costs

10.  I direct that there be no order as to costs in respect of this ruling.

HCCT 71/2018

[2019] HKCFI 530

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 71 OF 2018

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____________

_______________

J U D G M E N T

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Introduction

1.  This is the hearing of a summons issued by the plaintiff (“Armani SpA”) on 26 October 2018 seeking, inter alia, the continuation of an anti-suit injunction made against the defendant (“Elan”) by Deputy Judge Ng on 25 October 2018 restraining Elan from taking any further step in the proceedings (“the Shandong Proceedings”) brought within the Higher People’s Court of Shandong and given the case number: (2018) Lu Min Chu.

2.  Armani SpA is head of the Armani Group of Companies whichmanufactures and supplies luxury fashion products including, in particular,clothing, which bear trademarks belonging to Armani SPA.

3.  Armani SpA and the Armani Group is controlled by Mr Giorgio Armani (“GA”), a well-known figure in the world of fashion.

4.  Elan is a wholly owned subsidiary of Dashang Company Limited (“Dashang”), a PRC company listed on the Shanghai Stock Exchange.

5.  On or about 18 December 2014, Armani SpA and Elan entered into a Master Agreement (“the MA”) under which Elan was appointed as “an Authorised Retailer with a right to open and operate single brand storesdistinguished by a sign bearing one of the Armani Marks in order to sell atretail level the Products [defined as any clothing, Accessories or other goods under the label of at least one of the Armani Marks] in specified Points of Sale located in the Territory [the PRC]”.

6.  “Armani Marks” are defined as “the Armani Jeans Marks, the Armani Junior Marks, the Giorgio Armani Marks, the Emporio Armani Marks, the ‘EA7’ Marks and the Armani Collezioni Marks”, each of which Marks are separately defined by reference to copies thereof reproduced in Schedule 1.

7.  The Armani Jeans Marks and the Armani Collezioni Marks are referred to hereafter as the “AJ brand” and the “AC brand” respectively.  

8.  Under the MA, the single brand points of sale from which Elan is authorised to sell the specified Armani branded products have to be approved by Armani SpA.  The distribution and sale of Armani branded products through single-branded stores was the only business of Elan.  It purchased the Armani products from the Swiss branch of Armani SpA, Giorgio Armani Hong Kong Limited (“Armani HK”) and Giorgio Armani (Shanghai) Trading Co Ltd (“Armani PRC”).  Armani HK and Armani PRC are authorised distributors under the MA.

9.  Clause 13.3 of the MA provides that the formation, validity, interpretation, and implementation of the Master Agreement are to be governed by the laws, administrative regulations and other rules of the Special Administrative Region of Hong Kong.

10.  In relevant part, Clauses 13.1 and 13.2 of the MA provide:

“ 13.1 Any dispute, controversy or claim deriving from, arising out and/or regarding this Agreement, including any dispute regarding the validity, interpretation, construction, performance,breach and termination thereof, shall be settled by arbitration inaccordance with the UNCITRAL Arbitration Rules as at present in force and as may be amended by the rest of this clause. The appointing authority shall be Hong Kong International Arbitration Centre (HKIAC). The place of arbitration shall be in Hong Kong at Hong Kong International Arbitration Centre. The number of arbitrators shall be three. The arbitrator’s [sic] decision shall be final and binding and may be enforced by any court of competent jurisdiction.

13.2  Nothing in this article 13 shall be construed as preventingany Party from seeking conservatory or other interim relief and remedies, in relation to which the arbitration committee is not competent pursuant to mandatory provisions of law, in any court of competent jurisdiction.”

11.  On 24 February 2017, GA announced without warning to the media in Italy that the AJ and AC brands were to be changed in a re-branding exercise.  On the same day, Armani SpA announced a reorganization of its brands to become effective for its Spring/Summer season pursuant to which the products sold under the AC brand and the AJ brand would be rebranded under the “Emporio Armani” brand.  This news was not well received by Elan.  It alleges that this abrupt change has caused it significant losses including: (a) the loss of sales of Armani products, particularly AC brand and AJ brand products, purchased before the re-branding announcement, in part pursuant to a minimum purchase obligation under the MA; (b) the loss of the profit it would have expected to make on AC brand and AJ brand products; and (c) the loss arising from the closure or compulsory refurbishment of the stores that had been selling AJ brand and AC brand products.

12.  Armani SpA contends that under the MA it was recognised as having complete control over the Armani brands and was entitled to carry out the re-branding exercise.

13.  Elan stopped paying royalties and advertising contributions that Armani SpA contended were due under the MA, but which Elan claimed were not due.  On 4 June 2018, the parties having failed to settle their differences, Armani SPA served a notice of termination of the MA.  The following day, 5 June 2018, Armani SPA commenced arbitration proceedings in Hong Kong pursuant to Clause 13.1 of the MA seeking a declaration that it had validly terminated the MA, damages and injunctive relief.  On 5 July 2018, Elan served their Response to Notice of Arbitration in which it denied that Armani SpA had validly terminated the MA and reserved any right to raise counterclaim(s) against Armani SpA for breach and/or repudiation of the MA.  By letter dated 31 July 2018 to the parties, the HKIAC confirmed the appointment of the presiding arbitrator and the convening of the tribunal.  On 2 October 2018, the tribunal emailed to the parties a finalized Provisional Timetable for the steps to be taken leading up to hearing of the reference.

14.  Notwithstanding Clause 13.1 of the MA, on 2 August 2018 Elan commenced the Shandong Proceedings against Armani SpA, GA, Armani PRC and Armani HK (“the Shandong Defendants”).  Elan’s Statement of Claim in these proceedings invokes Articles 6, 8, 11, and 15 of the Law on Tort Liability of the PRC and pleads: (a) Elan has been the “legal” retailer of six Armani brands in Shandong six 2008; (b) the sudden announcement by GA who controls the defendants that the AC brand and the AJ brand were to be discontinued without any prior notification to consumers in accordance with Chinese consumer protectionslaws; (c) there were resulting complaints and claims by consumers againstElan; (d) Elan suffered resulting losses; and (d) whilst GA and Armani SpAcancelled the Armani brand products, Armani PRC and Armani HK, whichare subsidiaries controlled by GA and Armani SPA, also jointly committed acts infringing Elan’s interests.

15.  On about 27 September 2018, Elan obtained an order from theShandong People’s High Court (“the Shandong Court”) for the preservationof the assets of the Shandong Defendants up to a limit of RMB 600 million.  On the same day and/or the day following (28 September 2018), the asset preservation order was executed against Armani PRC’s bank account in thePRC and the stock and inventory in Armani PRC’s warehouse ordering that a specific volume of inventory within the warehouse be maintained.

16.  On 25 October 2018, Armani SpA applied ex parte for and was granted by Deputy High Court Judge Marlene Ng (as she then was) (“Deputy Judge Ng”) an interim injunction over to 2 November 2018 pursuant to section 45(2) of the Arbitration Ordinance (“the AO”) restraining Elan from taking any further step in the Shandong proceedings.

17.  Also on 25 October 2018, Armani SpA issued an Originating Summons seeking:

(a)  a declaration that by commencing the Shandong Proceedings Elan had breached Clause 13 of the MA;

(b)  permanent injunctions requiring Elan to discontinue or otherwise formally abandon the Shandong Proceedings and restraining Elan from commencing or pursuing either within the PRC or elsewhere any court or other proceedings relating to disputes, controversies or claims deriving from or arising out of or regarding the MA otherwise than by HKIAC arbitration in accordance with Clause 13.1 of the MA;

(c)  pending final determination of the current HKIAC arbitrationinterim injunction orders under section 45(2) of the Arbitration Ordinance: (i) to restrain Elan from continuing to pursue or take any further step in the Shandong Proceedings, save for complying with the order in (ii) below; (ii) ordering Elan forthwith to take all necessary steps to set aside the order made in the Shandong Proceedings freezing Armani PRC’s assets (“the Shandong asset preservation order”).

This summons is yet to be heard.

18.  On 26 October 2018, the summons now before the Court was issued by Armani SpA.  As already recorded, by this summons Armani SpA seeks an order that the anti-suit injunction made by Deputy Judge Ng be continued pending final determination of the Originating Summons issued on 25 October 2018.  Armani SpA also seeks an interim order under section 45(2) of the AO requiring Elan to take all necessary steps to set aside the Shandong asset preservation order.

19.  On 2 November 2018, Madam Justice Mimmie Chan ordered: (a) that the injunction granted by Deputy Judge Ng be continued pending the determination of the summons issued on 26 October 2018 or further direction of the Court; (b) that the hearing of the summons issued on 26 October 2018 be adjourned to a date to be fixed.

20.  On 6 November 2018, Armani PRC submitted a jurisdictional challenge to the Shandong Court.

21.  On or about 28 November 2018, two further bank accounts of Armani PRC were made the subject of the preservation order granted by the Shandong Court.

22.  On 26 December 2018, an acceptable guarantee having been provided by Armani PRC to the Shandong Court, the earlier preservation orders against the bank accounts and warehouse of Armani PRC were discharged.

The applicable law

23.  This Court has power under both section 45 of the AO and section 21L of the High Court Ordinance (“the HCO”) to grant the anti-suit injunction sought by Armani SpA.

24.  Section 45 of the AO confers on the Court the power to grant in relation to any arbitral proceedings the same interim measures as are referred to in Article 17(2) of the UNCITRAL Model Law which includeorders to maintain or restore the status quo or to prevent harm or prejudice to the arbitral process itself.

25.  Section 21L of the HCO empowers the Court of First Instanceto grant an injunction in all cases in which it appears to be just or convenient to do so.

26.  The legal principles applied by the courts of Hong Kong whendeciding whether or not to grant an anti-suit injunction under these provisionsare founded on the principles developed by the courts of England and Wales. Pursuant to these principles, an anti-suit injunction “is directed only to the defendant and is in respect of the conduct of the defendant, and does not call into question the jurisdiction of the foreign court.”[1]

27.  Foreign proceedings in breach of an arbitration agreement or exclusive jurisdiction clause (“EJC”) are a breach of contract which ordinarily will be restrained by the grant of an injunction restraining the party in breach from conducting such proceedings unless there are strong reasons to the contrary shown; see Donohue v Armco [2002] 1 Lloyd’s Rep 425 at [24].

28.  In The Angelic Grace [1995] 1 Lloyd’s Rep 87, the Court of Appeal of England and Wales upheld the injunction granted by Rix J restraining the charterers of a vessel from bringing proceedings in Venice in breach of an amended Centrocon arbitration clause.  In the course of his oft-cited and celebrated judgment Millett LJ said (at p 96):

“ In my judgment the time has come to lay aside the ritual incantation that this is a jurisdiction that should only be exercised sparingly and with great caution. There have been many statements of great authority warning of the danger of giving an appearance of undue interference with the proceedingsof a foreign Court. Such sensitivity to the feelings of a foreignCourt has much to commend it where the injunction is sought onthe ground of forum non conveniens or on the general ground that the foreign proceedings are vexatious or oppressive but where no breach of contract is involved. In the former case great care may be needed to avoid casting doubt on the fairness or adequacy of the procedures of the foreign Court. In the latter case, the question whether the proceedings are vexatious or oppressive is primarily a matter for the Court before which they are pending. But in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them …

In my judgment, where an injunction is sought to restrain a party from proceeding in a foreign Court in breach of an arbitration agreement governed by English law, the English Court need feelno diffidence in granting the injunction, provided that it is soughtpromptly and before the foreign proceedings are too far advanced. ‌… The jurisdiction is, of course, discretionary and is not exercised as a matter of course, but good reason needs to be shown why it should not be exercised in any given case.”

29.  The Angelic Grace has been applied in Hong Kong in Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi [2015] 2 HKLRD 866; Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2016] 1 HKLRD 1032; [2016] 3 HKLRD 352 (CA); and Compania Sud Americana de Vapores SA v Hin-Po International Logistics Ltd (2016) 19 HKCFAR 586 at para 57.

30.  If the arbitration clause or EJC is valid and applicable under the proper law, the fact that the foreign tribunal will not recognize the clause as valid or give effect to it will not normally prevent an English court (nor,in my view, a Hong Kong court) enforcing it through an anti-suit injunction;see Youell v Kara Mara Shipping [2000] 2 Lloyd’s Rep 102 at [60]; Akai Pty Ltd v People’s Insurance Co [1998] 1 Lloyd’s Rep 90 at 99 – 100.

31.  There is authority to the effect that where, as here, an interim anti-suit injunction is being sought on the basis of a contractual promise notto sue in a foreign jurisdiction, the applicant must show to a high probability that its case is right given the impact of the injunction if granted on the proceedings before the foreign court; see Gee, Commercial Injunctionsop cit para 14-027.

32.  Where there is a risk of parallel proceedings and inconsistent decisions because the interests of parties in the foreign proceedings not bound by the arbitration clause or EJC are involved, or grounds of claim notthe subject of the clause are part of the relevant dispute, the Court may well decline to grant an anti-suit injunction, see Donohue v Armco Inc & ors [2002] 1 Lloyd’s Rep 425 at [27].

33.  The modern approach to the construction of arbitration clausesinvolves a departure from the former tendency of the English courts to drawfine distinctions between those issues that were within an arbitration clause and those that were not.  Instead the approach now is to give effect, so far as the language used by the parties will permit, to the commercial purposeof the arbitration clause, namely, to have disputes that may arise out of theagreement containing the arbitration clause to be decided by a chosen tribunal. Construction of the clause must therefore be influenced by whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by national courts.  If, as appearsto be generally accepted, there is no rational basis upon which businessmen would be likely to wish to have only some issues arising out of, or in connection with, the agreement containing the arbitration clause determined by arbitration, one needs to find very clear language before deciding that they must have had such an intention.  The construction of an arbitration clause should therefore start with the presumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered to be decided by the same tribunalunless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction. (See Lord Hoffmann’s seminal speech in Fiona Trust & Holding Corporation and others v Privalov and others [2007] 4 All ER 951; [2007] UKHL 40 [2]).

34.  Lord Hoffmann’s judgment has been followed in Hong Kong;see eg The Incorporated Owners of Hamden Court v Mega Miles Construction Co Ltd (HCCT 32/2014, 2 June 2015 (Mimmie Chan J).

The parties’ respective cases

35.  Armani SpA submits that the Shandong Proceedings against allof the Shandong Defendants, not just Armani SpA, fall within Clause 13.1 construed in accordance with the approach enunciated in Fiona Trust.

36.  In support of this submission reliance is placed on the opening words of the MA:

“ This agreement (the ‘Master Agreement’) is dated December 18^th, 2014 and is by and between:

Giorgio Armani S.p.A., … (hereinafter referred to as ‘Armani’ together with its branch offices and Affiliates);

Dalian Les Copious Clothes Co., Ltd. … (hereinafter referred to as ‘Company’ together with its branch offices and Affiliates);

Each of Armani and Company is referred to as a ‘Party’ and together the ‘Parties’.”

37.  “Affiliate” is defined in the MA as meaning “in respect of a person, or any other person, who (at the time when the determination is made), directly or indirectly or indirectly through one or more intermediaries, (a) Controls, is Controlled by, or under common Control with, the specified person; or (b) in case of a person who is a natural person, any relative of the specified person”.

38.  It is common ground that GA, Armani PRC and Armani HK are “Affiliates” within this definition.

39.  Armani SpA also draws attention to the numerous occasions when “Affiliates” are referred to in the operative clauses of the MA.  Examples are:

Clause 2.2:

“ Company acknowledges and agrees that it will hold Armani and/or any of its Affiliates harmless …”

Clause 3.3:

“ Company hereby acknowledges and agrees that Armani and its Affiliates have granted to certain third parties licences to manufacture …”

Clause 9.8:

“ In addition to the above, Company hereby undertakes to pay tothe Authorized Distributor (i.e. Giorgio Armani Hong Kong Ltd.or [Armani PRC] on each Sales Season an amount equal to 2% ‌… of its Net Purchases …”

Clause 10.14:

“ Following termination of this Master Agreement by Armani for any reason whatsoever no compensation of any sort … shall be payable by Armani (or any of its Affiliates or Authorized Distributors) to Company, nor shall Armani (or any of its Affiliates or Authorized Distributors) be liable for any penalty, reimbursement or other payment to Company …”

40.  Mr Barlow SC for Armani SpA submitted that GA, Armani PRC and Armani HK were contracting parties to the MA through the agency of Armani SpA and Armani SpA was granted leave to apply to have these parties joined into the proceedings (HCCT 71/2018). In support of the joinder application, Armani SpA contended that it had authority, expressedor implied to enter into the MA on behalf of the Affiliates, whose rights and obligations are set out therein.

41.  Elan opposed Armani SpA’s application to have GA, Armani PRC and Armani HK joined in as parties to the proceedings on the following grounds:

“ [A] (i) the application is inconsistent with (a) the 1^st affirmation of Wong Li Ying, a witness on behalf of Armani SpA, in which it is stated that the Plaintiff and the Defendant entered into the MA on or about 8 December 2014 and it is not suggested that the Plaintiff signed the MA on behalf of Affiliates; (b) Armani SpA’s skeleton arguments for the hearing of the summons before the Court; (c) the evidence before the Court generally and that contained in the 3^rd affirmation of Nicola Ferrari, Armani HK’s Operations Director, where Ms Ferrari states that she has read the affirmations filed by Armani SpA and confirms that Armani PRC, Armani HK and GA agree and adopt the said evidence.

[B] In any event, Ms Ferrari’s 3^rd Affirmation does not lay a sufficient evidential foundation for a finding that Armani SpA signed the MA on behalf of the Affiliates.

[C] The joinder application should be adjourned to be dealt with on the hearing of the Originating Summons.

[D] If joinder is permitted notwithstanding the objections set out in [A] [B] and [C], the Court should make it clear that the decision to order the joinder of Armani PRC, Armani HK and GA is not (and is not intended to be) a final determination of the issue whether Armani PRC, Armani HK and GA are parties to the MA.”

42.  Armani SpA’s argument that the Shandong Proceedings brought by Elan against GA, Armani PRC and Armani HK were governed by Clause 13.1 was not wholly dependent on the submission that GA, Armani PRC and Armani HK were contracting parties to the MA.  Armani SpA also contended that it was to be presumed that Armani SpA and Elan, controlled as they are by rational commercial businessmen, intended that claims against Affiliates (a fortiori claims against Affiliates jointly with Armani SpA) deriving from, arising out and/or regarding the MA brought by Elan, were to be decided by arbitration, even if the Affiliates in question were not contracting parties to the MA, and there was nothing in the language of Clause 13.1 that rebutted this presumption.  If, as Armani SpA contended, GA, Armani PRC and Armani HK were contracting parties to the MA, the argument as to the presumed intention of Armani SpA and Elan was all the stronger.

43.  It was contended by Elan that Armani SpA had been guilty ofmaterial non-disclosure when obtaining the ex parte order of Deputy Judge Ng by not drawing to the judge’s attention Elan’s potential defence that GA, Armani PRC and Armani HK were not parties to the MA.

44.  Elan next submitted that the only contracting parties to the MAare the parties who signed the agreement and who are referred to in the MA as the “Parties”, namely “Armani” (Armani SpA) and “Company”(Elan).  In support of this submission, Mr Rimsky Yuen SC made reference to various clauses in the MA[3], including the clauses referred to in paragraph 39above (Clauses 2.2, 3.3, 9.8 and 10.14), where a distinction is made between “Armani” on the one hand and “Affiliate(s)” and “Authorized Distributor” on the other.

45.  It was further contended by Mr Yuen in his written submissions that the claim in tort brought by Elan against all the defendants in the Shandong Proceedings was not covered by Clause 13.1 because: (i) the tort claim has no connection with and is not based on any breach of the MA; and/or (ii) the arbitral tribunal will be entitled to apply the Hong Kong conflicts of laws rules in deciding what is the law applicable to the tort and, under those conflicts rules, the double actionability rule would apply, with the consequence that the tort claim would not be actionable in the HKIAC arbitration; (iii) Clause 13.1 is neither apt nor intended to cover claims thata Hong Kong court would not have jurisdiction to entertain, see Lord Scott in Donohue v Armco at [68]. 

46.  Finally, it was argued by Mr Yuen that even if the claim in tort against Armani SpA in the Shandong Proceedings was covered by Clause 13.1, there were good reasons why that clause should not be enforced in respect of that claim since the Shandong Proceedings would continue against Armani PRC, Armani HK and GA, giving rise to the real possibility of inconsistent verdicts being reached in the HKIAC arbitration and the Shandong Proceedings.

47.  Each side served expert evidence provided by distinguished and highly qualified experts on several of the legal aspects of the Shandong Proceedings and PRC law generally.  Elan’s expert was Dr Liu Shoujie, a retired presiding judge of the No 4 Tribunal of the Supreme People’s Court of China who had about 27 years’ experience of trying commercial and maritime disputes.  Armani SpA’s expert was Professor Dr Shen Wei, KoGuan Distinguished Professor of Law at Shanghai Jiao Tong University Law School and Emeritus Dean of Shandong University Law School.  I found the reports of both experts very helpful in understanding, inter alia, the Shandong Proceedings and the approach of the PRC courts to foreign anti-suit injunctions directed at proceedings in the PRC.

Discussion and decision

48.  I reject Elan’s submission that Armani SpA was guilty of material non-disclosure when obtaining the ex parte injunction ordered by Deputy Judge Ng.  I have carefully read the transcript of the hearing and it is clear to me that both the judge and counsel proceeded on the basis that the parties to the MA were Armani SpA and Elan and that the significance of the reference to “Affiliates” was as to the reach of the arbitration clause. That is why the judge asked how Armani PRC, Armani HK and GA “inter play in the dispute in relation to the Master Agreement.”  She was then given an explanation in the course of which Mr Barlow explained that it was Armani SpA “with whom the Master Agreement was signed”.  Given the way the case was being put to her, there was no requirement for the judge to be told that Elan had a potential defence to the contention that Armani PRC, Armani HK and GA were parties to the MA.

49.  In my judgment there is a strongly arguable case that Armani PRC, Armani HK and GA are parties to the MA.  I say this for the following reasons:

(1)  The words in the opening sentence of the MA:

“ This agreement … is by and between:

Giorgio Armani S.p.A., … (hereinafter referred to as ‘Armani’ together with its branch offices and Affiliates);

Dalian Les Copious Clothes Co., Ltd. … (hereinafter referred to as ‘Company’ together with its branch offices and Affiliates);” [Emphasis supplied]

are a strong pointer that “Armani” and (“together with”) its Affiliates and “Company” and its Affiliates (“together with”) are each separate parties to the MA, “Armani” and “Company” respectively signifying Armani SpA and Elan and “Affiliates”separately signifying persons and entities that satisfy the definition of Affiliates in the MA.

(2)  This pointer is not diminished by the words “Each of Armani and Company is referred to as a ‘Party’ and together the ‘Parties’.” because these words are not premised on “Armani”and “Company” being the sole parties to the agreement.  Instead, these words, particularly “the ‘Parties’”, are intended to provide a convenient short hand to be used when it is Armani and/or Company, as distinct from the other parties (viz Affiliates and branch offices) which are to be the subject or the beneficiary of a particular obligation contained in the MA. Examples of such usage are:

Clause 2.1:

“ The Parties acknowledge and agree that the Existing Stores … will be listed and managed by Company …”

Clause 3.5:

“ The Parties agree that they will exchange information with each other …”

Clause 7.4:

“ Withholding taxes will be regulated as follows between the Parties ‌…”

Clause 9.4:

“ Upon request of Armani and on terms agreed upon by the Parties,Company shall carry out any advertising or promotional activity that Armani may require from time to time.”

Clause 10.1:

“ This Master Agreement will enter into force upon the formal execution by the legal representatives of the Parties on the Commencement Date …”

Clause 10.2:

“ This Master Agreement may be terminated by either Party by written notice given to the other Party …”

(3)  The pointer is reinforced by the clauses that provide that “Affiliates” as distinct from “Armani” are the beneficiaries of particular obligations provided for in the MA, examples of which are given in paragraph 39 above.

(4)  The pointer is also not diminished by the fact that the entitlements of “Armani” and “Company” under the MA are not co-terminate with the entitlements of the Affiliates. Thus, it is entirely rational and in accordance with the scheme of the MA that only “Armani” and “Company” are entitled to terminate the MA under clause 10.2, whilst Armani HK and Armani PRC are alone entitled to be paid the sums specified in Clause 9.8 as contributions towards trade marketing expenses.

(5)  Given: (i) the above referred-to contractual intention derived from the language of the MA that Affiliates are to be parties to the MA in their own separate right; (ii) the obvious commercial interest that each of Armani SpA and Elan had in Affiliates being entitled both to enforce the entitlements conferred on them by the MA and to defend claims against them in the arbitral proceedings contemplated by Clause 13.1; and (iii) Armani SpA and Elan control their respective Affiliates” -- it is strongly arguable that Armani SpA and Elan executed the MA on behalf of their Affiliates with authority, express or implied, to do so. Further and in the alternative, by consenting to Armani SpA’s application that they be joined into these proceedings as parties to the MA, Armani HK, Armani PRC and GA have ratified Armani SpA’s execution of the MA on their behalf, a result that Elan is constrained to accept given that the wording of the MA proceeds on the basis that these Affiliates are parties to the agreement.

50.  Applying the Fiona Trust approach to the construction of Clause 13.1, it follows that there is a very good argument that any dispute, controversy or claim deriving from, arising out and/or regarding the MA iscovered by the clause where one of the parties is an Affiliate of Armani SpA.  

51.  I am also of the view that there is a strong argument that the tort claim in the Shandong Proceedings falls within Clause 13.1.  I am of this view given: (i) the breadth of the wording of Clause 13.1; (ii) the implicit contention that the acts complained of in the Shandong Proceedings are wrongful, at least in part, because the re-branding was not permitted under the arrangements (the MA) that constituted Elan the “legal” retailer of six Armani brands; and (iii) the fact that the pleaded damage complained of in the Shandong Proceedings results in part from Elan’s purchase of products and establishment of outlets as required by the MA.

52.  Even if Affiliates are not parties to the MA, I think there is a good argument that, construed according to Fiona Trust principles and bearing in mind the frequent reference to Affiliates in the MA, Clause 13.1 covers Elan’s claims in the Shandong Proceedings not only against Armani SpA, but also GA, Armani PRC and Armani HK.  After all, if those managing Armani SpA and Elan wanted “disputes, claims or controversies deriving from, arising out and/or regarding the MA” to be decided by arbitration where Armani SpA and Elan were parties to the dispute or claim, surely, as rational businessmen, they would have wanted such “disputes, claims or controversies” where the claimant or disputant was an Affiliate also to be decided by arbitration?

53.  I confess I found Mr Yuen’s submission founded on the double actionability rule in Hong Kong’s conflict rules difficult to follow because he did not argue out his bare assertion that the tort sued for in the Shandong Proceedings was not actionable in Hong Kong. In my view, contrary to Mr Yuen’s assertion to the contrary, the acts in the PRC alleged to be tortious in the Shandong Proceedings are arguably actionable in Hong Kong as the torts of inducing a breach of contract and/or conspiracy by unlawful means (see JSC BTA Bank v Khrapunov [2018] UKSC 19).

54.  Even if the acts complained of in the Shandong Proceedings would not give rise to a liability in tort under Hong Kong law, I regard it as distinctly arguable that the exception to the double actionability rule identified by Lord Wilberforce in Boys v Chaplin [1971] AC 356 may apply. I say this having particularly in mind Lord Slynn’s speech in the Privy Council in the Hong Kong appeal in Red Sea Insurance Co Ltd v BouyguesSA [1995] 1 AC 190 where he said[4] that the exception could be invoked where the lex loci delicti was more significantly related to the case as a whole (as here) than was the lex fori.

55.  I also think that Mr Yuen’s reliance on paragraph 68 of Lord Scott’s speech in Donohue v Armco is not soundly based.  Lord Scott was alone in concluding that the EJC in that case did not cover the RICO Act claims against Mr Donohue because the courts of England and Wales had no jurisdiction to try such claims.  Lord Bingham was clearly of the view that the RICO Act claims were covered by the EJC[5] and Lords Nicholls, Mackay and Hobhouse expressly agreed with Lord Bingham.

56.  In the light of my conclusion that there is a strong argument thatClause 13.1 covers the claim in tort brought against all the defendants in theShandong Proceedings, it is unnecessary to deal with Mr Yuen’s submission that there are good grounds for not enforcing Clause 13.1 based on the possibility of inconsistent decisions being reached by the Shandong Court and the arbitral tribunal.  As Mr Yuen accepted, this Court is entitled to assume that, if it orders Elan not to continue the Shandong Proceedings, itsorder will be obeyed, in which case there will be only one set of proceedings and those will be by arbitration. 

57.  Mr Yuen also pointed out that under Article 17.5 of the UNCITRAL Arbitration Rules which govern the arbitration proceedings begun by Armani SpA, the arbitral tribunal’s power to join third persons in the arbitration is dependent on the third person being a party in the arbitration agreement.  As to this, I have held that there is a strong argument that Armani PRC, Armani HK and GA are indeed parties to the arbitration agreement.  It will of course be up to the tribunal to decide whether Armani PRC, Armani HK and GA can be joined in the current arbitration as parties to the MA if the anti-suit injunction granted by Deputy Judge Ng is continued.  There will be no res judicata preventing Elan from seeking to persuade the tribunal to take a different view from my own.  If the tribunal decide that the Shandong proceedings are not covered by Clause 13.1 that will be an end of the matter.  If they decide that those proceedings are covered by Clause 13.1 and that Armani PRC, Armani HK and GA are parties to the agreement, they are very likely to agree to joinder.  If they decide that the Shandong proceedings are coveredby Clause 13.1 but Armani PRC, Armani HK and GA are not parties to theMA, it is still likely that the tribunal would grant an application for joindersince Armani SpA has declared that it would consent to Elan being allowed to bring counterclaims in the arbitration against all the defendants in the Shandong Proceedings.  It follows, in my judgment, that Article 17.5 affords no ground for declining to enforce Regulation 13.1 by the injunction sought to be continued.

Conclusions

58.  In light of my findings that: (i) Armani SpA has a strong argument that Clause 13.1 covers the claims against all the defendants in theShandong Proceedings on the basis that Armani PRC, Armani HK and GA are parties to the MA; and (ii) in the alternative, even if those Shandong defendants are not parties to the MA, Armani SpA has a good argument that the Shandong claims are subject to Clause 13.1, I conclude that it is just and convenient to order the continuation of the anti-suit injunction granted by Deputy Judge Ng on 25 October 2018. Whichever of the two bases might be upheld for concluding that the Shandong Proceedings are brought in breach of Clause 13.1, there are no good reasons for not enforcing that clause.

59.  I also propose to issue a mandatory interim injunction albeit one in different terms from that sought in the 26 October 2018 summons.  The amendment is necessary in light of the discharge of the asset preservation orders made by the Shandong Court against Armani PRC upon the court’s acceptance of a guarantee that is to stand in the place of those orders.  The order I make is that the defendant (Elan) must forthwith applyto the Shandong Court for the release of the guarantee provided by Armani PRC that has been accepted in place of the prior asset preservation orders.

60.  The aforesaid injunctions will take effect on the handing down of this judgment.  This means that the permission granted by the Court to Elan on 22 February 2019 to participate in the Jurisdiction Challenges brought by Armani PRC, Armani HK and GA in the Shandong Proceedings will terminate on the handing down of this judgment on condition that Armani PRC, Armani HK and GA suspend the said Jurisdiction Challenges.

61.  On the basis of my finding that Armani SpA has a strong argument that Armani PRC, Armani HK and GA are parties to the MA, I grant Armani SpA’s application for the joinder of those parties into these proceedings as joint plaintiffs.  Armani SpA must, however, pay the costs of and consequential on that application.

62.  The defendant Elan must pay the costs of the hearing of the 26 October 2018 summons, to be taxed if not agreed.

63.  Finally, I wish to assure the Shandong Court that I intend it no disrespect in making the orders identified in paragraphs 58 and 59 above. As I have been at pains to point out, these orders are directed against the defendant (Elan) and not the Shandong Court.  They are being made because the Court has found that it is strongly arguable that by bringing theShandong Proceedings the defendant (Elan) has acted in breach of the MA, that being a contract which by Clause 13.3 thereof is governed by the laws of Hong Kong.