Fang Zhao, Jing Liu and Xueyu Yang of Hui Zhong Law Firm discuss the status of interim injunctions under PRC law
Court injunctions originated as a common law concept, which takes its name from the Latin word to enjoin or to impose. The glossary of the UK White Book defines it as: ‘A court order prohibiting a person from doing or requiring a person to do something.’ In its interim form, an injunction constitutes one of a number of remedies available to a litigant in the course of litigation, a procedure which enables a party to apply to the court for temporary measures against the other party in advance of a final judgment. If and when granted, an interim injunction will have a mandatory effect, requiring the respondent to take or refrain from taking such actions as are stipulated in the court order. An interim injunction is generally regarded as a powerful tool in civil litigation proceedings since it substantially impacts on the rights and obligations of the parties prior to substantive resolution of the dispute. As such, it acts as a strong incentive for early settlement.
Due to its rapid economic development, China is an increasingly important participant in international business transactions. Unavoidably, disputes involving Chinese elements and law are on the rise. It follows that the availability of a remedy equivalent to an interim injunction under PRC law is of relevance to foreign businesses and practitioners alike. Further, in so far as such a remedy is available in principle, the next question that arises is in what circumstances it is likely to be granted and enforced.
This article is intended to be a concise introduction to the regime of interim injunctions and their enforcement under Chinese law. It examines this regime from four perspectives:
(1) PRC-relevant legislation;
(2) The power of an arbitral tribunal to grant an interim injunction;
(3) Courts’ enforcement of domestic interim injunctions; and
(4) The enforceability within the territory of the PRC of foreign interim injunctions.
I. Interim injunctions under PRC law
As a broad statement of principle, PRC law does indeed provide for a concept similar to an interim injunction under English law. It is similar but not altogether the same since it has its own peculiarities as follows:
(1) In and of itself, the term ‘interim injunction’ does not appear in Chinese legislation;
(2) Nor does the legislation contain a clear and unified definition of interim injunctions; and
(3) Chinese courts have at their disposal recourse to a variety of court orders with similar effects.
‘China is increasingly important in international business. Disputes involving Chinese law are on the rise.’
Chinese courts’ power to grant the orders referred to in I(3) above is found in numerous statutes. The list below is non-exhaustive:
(1) The PRC Civil Procedure Law 2017 empowers PRC courts to order the following:
(a) Preservation of evidence – under Article 81 a court may entertain an application for the preservation of evidence. If granted, the order will specify the terms applied for and accepted by the court, and will compel the respondent to take or refrain from taking actions pertaining to the evidence on such terms.
(b) Preservation of property – pursuant to Article 100, the same applies to an application and an order for property preservation.
(2) Intellectual property laws provide for more specific interim measures, which can be seen as sub-categories of the more general provisions in the Civil Procedure Law:
(a) Article 50 of the Copyright Law 2001 provides that the court may order the respondent to refrain from infringing a copyright where failure to promptly stop the infringement will cause irreparable damage to the right owner.
(b) Article 61 of the Patent Law 2008 and Article 65 of the Trademark Law 2013 provide for similar measures in the context of trade mark rights.
(c) The Copyright Law, Trademark Law and Patent Law also provide for measures for the preservation of evidence similar to those contained in the Civil Procedure Law.
(3) In addition, the Supreme People’s Court has released judicial interpretations that further specify the conditions, scope and effect of the foregoing interim injunctions in the context of trade mark and patent litigation.
It can be concluded from the above that PRC law provides for the wide-ranging application of the concept of an interim injunction in both litigation and arbitration.
As shall be seen below, in the context of arbitration proceedings, though under PRC laws, the power to order an enforceable interim injunction is exclusive to the courts. More specifically, though arbitral tribunals may order an interim injunction in theory, the enforcement of such an order is not mandatory.
II. Legal basis for arbitral tribunals’ interim injunctions in the PRC
In general, PRC laws are silent on the power of arbitral tribunals to order interim injunctions. None of the orders mentioned above are expressly made available to arbitral tribunals where the seat of the arbitration is the PRC.
The Civil Procedure Law and Arbitration Law 1995 provide that, where a party has filed an application for property or evidence preservation in connection with an arbitration, the arbitration institution must transfer the application and supporting documents to the relevant court. Whether or not the application will be granted is a matter for that court only. Therefore, where the lex arbitri is PRC law, strictly speaking, the tribunal has no power to grant an interim injunction that is not supported by the court in accordance with the Civil Procedure Law and Arbitration Law.
On the other hand, where the arbitration takes place in China but China is not its seat – that is to say, the proceedings are governed by a foreign law – it is open to the tribunal to render an interim injunction in accordance with that foreign law. This is reflected in the arbitration rules of some PRC arbitration institutions. For instance:
‘To date, no provision of international law or a treaty entered into by the PRC requires the PRC court to enforce foreign interim measures.’
(1) Article 18 of the Arbitration Rules of China International Economic and Trade Arbitration Commission allows the arbitral tribunal to award interim measures in accordance with the lex arbitri or by agreement of the parties.
(2) Article 18 of the Arbitration Rules of Beijing Arbitration Commission and Articles 18 to 20 of the China (Shanghai) Pilot Free Trade Zone Arbitration Rules, published by the Shanghai International Arbitration Center contain similar provisions.
In short, these PRC institutional rules allow arbitral tribunals to award interim injunctions where the arbitration proceedings are governed by a foreign law that allows for such power. The presumption is that the parties would seek enforcement of the interim injunctions in jurisdictions other than the PRC. This is particularly true where the parties have agreed that the Chinese arbitral tribunals conduct arbitration proceedings seated at foreign jurisdictions.
III. Enforcement of domestic interim injunctions in the PRC
As mentioned above, under PRC laws, since the power to grant interim measures rests exclusively with the court, the arbitration institution’s role is essentially that of a messenger rather than a decision maker.
Yet, PRC courts have widely applied interim injunctions in domestic litigation. The leading case of Eli Lilly and Company and Lilly (China) Research and Development Company Ltd v Huang Mengwei [2013]1, illustrates the factors a court will usually weigh when deciding on an application. Eli Lilly v Huang concerned Huang Mengwei’s alleged infringement of trade secrets owned by Eli Lilly. In granting Eli Lilly’s application for an injunction, the court was guided by the following five factors:
(1) The merits of the applicant’s case;
(2) Whether the applicant would suffer irreparable harm if the court fails to grant an interim injunction;
(3) The balance between the potential damage to the applicant if their application is not granted and the potential damage to the respondent if an interim injunction is ordered;
(4) The application should be sufficiently specific to be enforceable; and
(5) The interim injunction sought is not offensive to public interest.
These guidelines essentially reflect the spirit of the common law as found in the leading case of American Cyanamid2.
IV. Enforcement of foreign interim injunctions in the PRC
Notwithstanding that the concept of an injunction exists in Chinese legislation and that applications for an interim injunction have in practice been granted in a variety of industries, it is not altogether common practice for the Chinese court to enforce foreign interim injunctions. The court’s position does not change regardless of whether the injunction was rendered by a foreign court or by a foreign arbitral tribunal. Two main concerns stand in the way of such enforcement:
Procedural obstacles
The enforcement of any interim injunction ordered by a foreign court is governed by Article 282 of the Civil Procedure Law. Under this article, a judgment or order of a foreign court can only be enforced pursuant to a relevant provision of international law or a treaty. In the absence of either, the parties would have to rely on the principle of reciprocity. To date, no provision of international law or a treaty entered into by the PRC requires the PRC court to enforce foreign interim measures.
With regards to the enforcement of interim measures ordered by a foreign arbitral tribunal, the New York Convention on the Recognition and Enforcement of Foreign Arbitration Awards 1958 (NYC) presents a similar problem. Chinese courts’ prevailing understanding of the NYC is that its recognition and enforcement requirements are limited to final awards. Given the temporary effect and duration of interim measures, it follows that they fall outside of the outer limit of the NYC.
Substantive problems
In addition to the above, PRC courts are also reluctant to enforce foreign interim measures because of the difficult jurisdictional issues such enforcement gives rise to.
Article 533 of the Supreme People’s Court’s Interpretation of the Civil Procedure Law 2016 takes a rather conservative stance in terms of parallel lawsuits. It allows the PRC courts to exercise jurisdiction over a case regardless of whether or not a foreign court has seized jurisdiction over the same case.
‘PRC courts are generally averse to the enforcement of a foreign anti-suit injunction which, de facto, would prevent them from exercising jurisdiction over the case.’
In reliance on Article 533, PRC courts are generally averse to the enforcement of a foreign anti-suit injunction which, de facto, would prevent them from exercising jurisdiction over the case. This position is integral to Chinese jurisprudence and is explicit in the recent leading case of Huatai Insurance Co Ltd v Clipper Chartering SA [2017].
Huatai v Clipper concerned a bill of lading dispute, in which Clipper obtained an anti-suit injunction from the Hong Kong High Court. Upon Huatai’s application, on 21 July 2017, the Wuhan Maritime Court issued an ‘anti-anti-suit injunction’ ordering Clipper to withdraw the anti-suit injunction from the Hong Kong High Court on the basis that the maritime court had full jurisdiction over the case.
Doctrine of forum non conveniens
The position as set out above does not, however, foreclose other avenues. In the face of judicial reluctance to enforce a foreign anti-suit injunction, parties seeking to prevent parallel proceedings may elect to follow an alternative route, that of raising a jurisdictional challenge based on other grounds but with similar effects.
PRC courts have historically applied the forum non conveniens (FNC) doctrine as grounds on which to decline the exercise of their own jurisdiction over foreign-related cases. As early as 2005, the Supreme People’s Court published Meeting Minutes on the Second National Conference on Adjudication of Foreign-related Commercial and Maritime Cases, of which Article 11 provides that courts may refuse to hear a plaintiff’s claim based on the doctrine of FNC. The meeting minutes set out the factors to be considered by the court when deciding whether to do so. These include whether the major facts of the case took place on PRC territory and whether it is more appropriate for a foreign court to hear the case. The FNC argument has been successful in quite a few cases.
Essentially, if a defendant’s jurisdictional challenge based on FNC succeeds, the effect will be the same as that of an anti-suit injunction. The doctrine of FNC and anti-suit injunctions, though different, in this context operate like two sides of the same coin.
As to the enforcement of a foreign evidence-preservation injunction, no obstacles should be encountered since this remedy exists in any event as a matter of PRC law.
V. Summary
In conclusion, PRC law does provide for measures equivalent to common law interim injunctions. However, only domestic interim injunctions are directly enforceable by PRC courts. Despite this, the parties may be able to achieve the same result by means of another route. Commercial entities facing a potential dispute that involves Chinese elements may want to design the specific strategies and routes from the very beginning to avoid any unexpected and avoidable pitfalls.
Fang Zhao, partner, Jing Liu, senior counsel, and Xueyu Yang, partner (pictured left to right)
1. In China, we do not use case citations like those of UK cases. Most of the judgments rendered by the court will be made publicly available shortly after they are made. The general public can search for a judgment by using the parties’ names or any relevant information on the database of the Chinese court.
2. American Cyanamid v Ethicon [1975] AC 396