Issue #55: A $835M Tempest in a Teapot?
Welcome to the 55th edition of OIA!
Here are the latest 🌶 headlines in APAC:
Ling Yah
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Hong Kong Court Muzzles Russian Bank
A German bank clinched victory against a sanctioned Russian bank in the Hong Kong Court of First Instance, securing anti-suit injunctions over a €113 million settlement dispute.
🍿 What Happened?
The saga began with a 2003 ISDA Master Agreement (“Agreement“) for forex and derivatives transactions between the German bank and the Russian bank.
Post-Russian invasion of Ukraine in 2022, the EU sanctioned the Russian bank on the same day that both banks concluded a settlement agreement covering the termination of their rights and obligations under all the outstanding transactions covered by the Agreement (and also included HKIAC arbitration clause).
When the Russian bank demanded payment, the German bank cited EU sanctions as a roadblock.
In response, the Russian bank commenced legal proceedings in Moscow, securing judgment for the full amount and attempting to freeze the German bank's assets. Meanwhile, the German financial regulator neutered the Russian bank's control over its German subsidiary, appointing a trustee who initiated voluntary liquidation.
👀 TL;DR
The Hong Kong courts are very willing to enforce arbitration agreements, and “acts of state” defence is not always an acceptable defence!
A Tempest in a Teapot?
In a plot twist worthy of a maritime thriller, Yangzijiang Shipbuilding finds itself navigating choppy legal waters.
🍿 What Happened?
The China-based shipbuilder revealed that certain unnamed customers have launched a USD 835 million arbitration broadside in London against three of its subsidiaries. The dispute centers on 10 vessel contracts worth a whopping $900 million, signed in late 2021 but swiftly scuttled by the customers in 2022.
The mysterious claimants allege breach of contract and are demanding compensation for lost profits. Interestingly, they've only paid a mere USD 3.3 million of the total contract value. Yangzijiang, however, isn't taking this lying down, asserting that the claims have "no merits" and are "highly improbable to succeed."
👀 Now
As the first salvos of this legal battle are set to be fired in November 2024, Yangzijiang remains buoyant. CEO Ren Letian reassures shareholders that this storm is unlikely to capsize their financial position for FY2024. With a record-breaking order book of USD 20.2 billion for 224 vessels, Yangzijiang seems well-equipped to weather this squall.
But as any seasoned mariner knows, in the unpredictable seas of international arbitration, it's best to keep a weather eye on the horizon.
UK Court Throws Spanner in the Works
The UK Court of Appeal has overturned a previous High Court ruling, declaring that Xiaomi is entitled to an interim license for Panasonic's standard-essential patents (SEPs) pending a final FRAND determination.
🍿 What Happened?
In July 2023, Panasonic filed a flurry of lawsuits against Xiaomi and OPPO across multiple jurisdictions, including the UK, Germany, and the Unified Patent Court (UPC). The dispute centered on 3G and 4G patents, with the crux being the determination of a fair, reasonable, and non-discriminatory (FRAND) royalty rate.
Lord Justice Richard Arnold, in a scathing judgment, described Panasonic's conduct as "indefensible" and a breach of its ETSI obligations to negotiate a licence with Xiaomi “in good faith”.
The court concluded that Panasonic was using the threat of injunctions in foreign courts to strong-arm Xiaomi into accepting supra-FRAND terms.
As the dust settles, all eyes turn to the upcoming FRAND trial set for October 31 before Lord Justice Meade.
👀 Hmm
This landmark decision not only reshapes the Panasonic-Xiaomi dispute but also sets a precedent for future global SEP litigation strategies. SEP holders and implementers alike will be watching closely as this legal soap opera unfolds.
Spotlight: Nimisha Jaya Gobi
Nimisha is a partner who leads the Employment and Industrial Relations Practice at LAW Partnership in Malaysia.
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