“In practical practice, arbitration agreements should be given more attention by the transacting parties.”
It is very common in commercial contracts, especially with foreign entities, to agree to arbitration as a method of dispute resolution. Specify. When drafting an arbitration agreement, especially if the arbitration clause is incorporated into the body of the contract, the contracting parties typically write into the contract the applicable law and dispute resolution body of the main contract, but do the same in addition to the arbitration agreement itself. Rarely done. Main contract.
In general, when a dispute concerns issues surrounding the validity (or arbitrability) of an arbitration clause, arbitration agreements offer nothing about arbitrability, but in practice two questions can arise. There is a nature. A question of arbitrariness? (2) Do courts or arbitral institutions have jurisdiction over arbitrability issues?
Case Study 1: Hong Kong Law
Recently, I was dealing with a technology transaction and encountered an issue with the applicable law. The transaction includes the termination of a patent license agreement in connection with the acquisition of the company.
The License Agreement contained an arbitration clause providing that the arbitration institution was HKIAC, the seat of arbitration in Hong Kong, and that HKIAC’s arbitration rules would apply. The license agreement also stipulated Chinese law as the governing law of the agreement. However, the agreement did not say anything about the governing law of the arbitration clause.
The concern was whether the arbitration clause would be valid so that an arbitration award under the arbitration clause could be enforced in mainland China.
According to Article 7 ofAgreement on Mutual Enforcement of Arbitral Awards between the Mainland and Hong Kong;If the arbitration clause is invalid under the law of the place of arbitration, in this case Hong Kong law, issued by the Supreme People’s Court, which does not determine the governing law of the arbitration clause, an arbitration award made on the grounds of this arbitration. Terms may not be enforced by the courts of Mainland China.
The question therefore boils down to whether the arbitration clause is valid under Hong Kong law. To resolve this issue, I needed to obtain a legal opinion from a Hong Kong lawyer. Given the time constraints involved, the legal opinion obtained from the Chinese lawyer indicated that the validity of the document should be reviewed by the Hong Kong lawyer.
Regarding jurisdictional issues, both courts and arbitral tribunals may have jurisdiction over issues of validity of arbitration clauses in accordance with China’s arbitration law, but in the event of a conflict of jurisdiction, courts may have limited jurisdiction. has priority.
To clarify how the same issue is treated under U.S. law, here is a U.S. case dealing with whether a patent non-infringement determination is arbitrable.
Case Study 2: United States – California Law
In 2007, ROHM Japan and MaxPower signed a Technology License Agreement (TLA). This permits ROHM Japan and its subsidiaries (collectively referred to as “ROHM”) to use MaxPower’s MOSFET-related technology by paying royalties to MaxPower. Rohm Semiconductor USA, LLC v. Maxpower Semiconductor, Inc. 2021-1709, Court of Appeals for the Federal Circuit.
The TLA contains a contract to arbitrate “any dispute, controversy or claim arising out of or relating to this Agreement or the law, or the breach, termination or validity thereof.” It stipulates that it shall be carried out in accordance with the Code of Litigation (CCCP).
In 2019, a dispute arose between ROHM Japan and MaxPower over whether the TLA would cover ROHM’s silicon carbide MOSFET products. In September 2020, MaxPower notified ROHM Japan of its intention to initiate arbitration.Shortly thereafter, ROHM USA, a subsidiary of ROHM Japan, sued for non-infringement of his four patents owned by MaxPower in a federal district court and his four patents. between the parties Consider a petition for the same patent. MaxPower then filed a motion to compel arbitration in the district court.
The focus of the dispute is that where an arbitration agreement refers solely to the CCCP as governing law and does not specify who has jurisdiction to apply, the question of arbitrability of a patent non-infringement determination may be challenged by a court or arbitral tribunal. It was whether or not it should be decided. law.
According to the law of the state in which the arbitration agreement was signed, unless there is a clear and unmistakable agreement to arbitrate arbitrability, the question of arbitrability should be decided by a court.
The court will first determine that the dispute under arbitration is of an international commercial nature pursuant to CCCP §1297.13, and then determine that the arbitral tribunal has jurisdiction over the arbitrability issue of international commercial arbitration pursuant to CCCP §1297.161. decided to have.
The court further held that there is a clear and distinct delegation of authority to arbitrators to determine arbitrability issues consistent with the Ninth Circuit Court of Appeals’ decision. Oracle vs Myriad.
The Ninth Circuit, in line with other circuit court cases, held that the incorporation of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules would require that the parties agree to an arbitrator to determine arbitrability. I concluded that it was clear and indisputable evidence. Accordingly, the district court decided on the following grounds. Oracle Incorporation of the CCCP in the TLA is clear evidence for establishing the jurisdiction of the arbitrator when determining arbitrability issues.
The court further distinguished this case from the following cases: Chesapeake Appalachia v. Scout PetroleumThe Third Circuit made an exception to the class arbitration rule given that the dispute in this case is between two parties.
The point is that the arbitration agreement deserves more attention from the trading parties in actual practice. An unwritten clause may not invalidate an arbitration agreement, but a fully-fledged clause can certainly help clients further their trading goals and reduce litigation risk.
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Author: Airdan
