Exploring the latest developments of the Chinese court's anti-suit / anti-enforcement injunction

Anti-suit injunction is an important tool in cross-border commercial disputes. It is an “in personam” court order, which restrains a person from commencing / continuing foreign legal proceedings. The utilisation of anti-suit injunction has a long-established history in common law jurisdictions, such as the US and UK where the courts stand willing to grant anti-suit injunctions to restrain parallel foreign legal proceedings.

Under Chinese law, there is no express provision or established principle regarding anti-suit injunction. However, since 2017, the Chinese courts have begun to issue anti-suit / anti-enforcement injunctions against other litigants in other courts that had filed lawsuits or obtained an anti-suit injunction. This article provides a brief overview of the latest developments of the Chinese courts’ attitude towards anti-suit / anti-enforcement injunctions.

Anti-suit injunctions in the maritime context

In July 2017, the Wuhan Maritime Court issued a maritime injunction ordering a foreign ship owner to apply to withdraw an anti-suit injunction made by the Hong Kong High Court against a Chinese insurer. This case is known to be the first published case where the Chinese court issued an anti-anti-suit injunction.

Recently, in another case brought by a Chinese insurer against foreign ship owners for cargo damages, the Guangzhou Maritime Court issued a maritime injunction ordering the foreign ship owners to apply to withdraw the anti-suit injunction made by the English court. This case has been selected as one of the 2022 Top 10 Maritime cases.

Both of these cases concern cargo claims arising out of bill of lading which incorporated a London or Hong Kong arbitration clause contained in a charterparty. Unlike common law courts, Chinese courts take a different view that the bill of lading holder or the subrogated cargo insurer cannot be bound by a charterparty arbitration clause through the words of incorporation in the bill of lading.

The fact that the anti-suit injunction issued by foreign courts in support of arbitration is not directly targeted at Chinese courts, does not prevent Chinese judges from believing that it is inappropriate for foreign courts to issue an anti-suit injunction restraining Chinese proceedings.

Anti-suit injunctions concerning SEP Disputes and FRAND Principle

Apart from cargo claims under bill of lading in the maritime context, in the recent five reported cases concerning IP rights (two of which have been selected as the 2020 China Top 10 IP cases), Chinese courts have also adopted a relatively innovative / broad interpretation by extending conduct preservation under Article 100 of PRC Civil Procedure Law to anti-suit or anti-enforcement injunctions and ordered the Respondents not to proceed with the foreign court proceeding or enforce the foreign court judgment. This new legal tactic has caused concern to foreign companies as to how China will protect the patent and copyright.

All five reported cases concern disputes over standard essential patents (SEPs) in the high-tech telecommunications industry. What lies at the core of SEPs disputes is the so-called FRAND principle, that is, whether the licensing terms can be viewed as fair, reasonable and non-discriminatory.

As patents have territorial effects and most technology contributors hold the patent right in several jurisdictions, it is not uncommon for FRAND disputes to be brought in several jurisdictions, which leads to parallel proceedings in different jurisdictions. Parties are often enjoined from initiating or continuing parallel legal proceedings in another jurisdiction, including a declaration on FRAND rates, injunctions, or complaints of anti-trust. By all means, the anti-suit injunction has been recognised as an influential tool in the sphere of IP law for the protection of FRAND rights.

The downside of using such an anti-suit injunction is that it may infringe upon the judicial sovereignty of another state, thus undermining international comity. Moreover, such exercise of judicial power might infringe the opposing party’s right to intellectual property and its entitlement to judicial protection. The restriction of patent owners' ability to enforce their patent right through legal proceedings would inevitably diminish their sense of security, ultimately lessening their incentive to commercialise and develop their patents. It is noteworthy that the European Union (EU) has filed a dispute settlement case against China for using anti-suit injunctions to restrict EU companies from enforcing their SEPs in foreign courts. On 8 June 2023, the EU filed its first Written Submission to the World Trade Organisation.¹

China: A step forward as another jurisdiction in which anti-suit injunctions are available

In four of the five reported cases, the Chinese courts ruled in favour of Chinese telecom companies - Huawei Technologies Co., Xiaomi Inc., ZTE Corporation and OPPO Telecommunication Co. The court in the fifth case supported South Korea’s Samsung Electronics Corp. in a dispute with Swedish telecom giant Ericsson AB.

Huawei v Conversant

On 28 August 2020, China’s very first anti-enforcement injunction was granted by the Chinese Supreme People’s Court, in a dispute concerning SEP royalty. The case was initially brought by Huawei before the Nanjing Intermediate People’s Court in Jiangsu Province in January 2018 where Huawei sought a determination of FRAND royalty rate for Conversant’s SEP in China. As the owner of the SEPs, Conversant filed a case in April 2018 before the Dusseldorf District Court in Germany, alleging Huawei’s infringement of several European patents. Conversant subsequently obtained an injunction from the German court against Huawei’s sale, use or importation in Germany of devices infringing patents.² Huawei then applied to the Supreme People’s Court of China seeking a “conduct preservation” ruling (the equivalent of an anti-suit injunction in China) pursuant to Article 100 of the PRC Civil Procedure Law to prohibit Conversant from enforcing the Düsseldorf injunction until the conclusion of the Chinese proceedings.

Ultimately, the Supreme People’s Court ruled in favour of Huawei. Apart from enjoining Conversant from seeking enforcement of the Dusseldorf Regional Court’s injunctive ruling against Huawei, the Supreme People’s Court also imposed a penalty of CNY1 million per day, in case Conversant violated the court order.

In deciding whether the anti-suit / anti-enforcement injunction should be granted, the Supreme People’s Court based the decision on a five-factor test, which shed light on how Chinese courts decide anti-suit or anti-enforcement injunction cases:

1. The impact of the foreign court proceeding/enforcement of foreign court judgment on the parallel Chinese court proceedings;
2. The necessity of the anti-suit / anti-enforcement injunction;
3. A reasonable balance between the parties’ interests;
4. The impact of the anti-suit / anti-enforcement injunction on public interest;
5. International comity (in particular the dates of case registration, the jurisdiction of the courts, and/or the impact of the anti-suit / anti-enforcement injunction on foreign court proceedings/enforcement of foreign court judgment).³

Notably, by adding the 5th factor, it is clear that the Supreme People’s Court has given due consideration to the use of anti-suit injunction, which may potentially infringe upon the judicial sovereignty of other jurisdictions and international comity. Having concluded that the cases lodged with the Nanjing court were earlier than that of the Dusseldorf court and the injunction would only have an interim effect on the international comity, ultimately, the Supreme People’s Court concluded that the anti-enforcement injunction sought by Huawei will not violate the international comity.

Xiaomi v InterDigital

Following the issuance of an anti-suit injunction by the Supreme People’s Court, the Wuhan Intermediate People’s Court issued a “global anti-suit injunction” in September 2020 against InterDigital prohibiting it from (i) pursuing any action for injunctive relief in any other jurisdiction for patents under review in the Chinese proceedings, and (ii) requesting a court in any other jurisdiction to set a FRAND rate for the patent in question.⁴ In this unconventional case, Xiaomi filed a claim requesting the court to determine a FRAND rate for InterDigital’s global SEP portfolio. In response, InterDigital filed a patent infringement claim against Xiaomi at the High Court of New Delhi in India.

The anti-suit injunction in Xiaomi v InterDigital is much broader than that in the case of Huawei v Conversant. The Wuhan Court not only prohibited InterDigital from seeking injunctive relief from courts in all other jurisdictions, but also prohibited it from seeking a determination of FRAND rate for its patent from courts in other jurisdictions.

OPPO v Sharp

In the SEPs dispute between OPPO and Sharp, the Shenzhen Intermediate People’s Court granted a global anti-suit injunction preventing Sharp from initiating any new legal proceedings or injunction application until the PRC court has made a final ruling on the FRAND rates between OPPO and Sharp. Seven hours after the issuance of the Shenzhen anti-anti-suit-injunction, Munich First District Court in Germany issued an anti-anti-injunction ordering OPPO to withdraw the Shenzhen anti-suit injunction.

While Sharp appealed the Shenzhen anti-suit injunction in the first place, Sharp ultimately withdrew the appeal as well as the Munich anti-anti-suit injunction.

Conclusion

In both theory and practice, Chinese courts could and did issue the so-called “global” anti-suit or anti-enforcement injunction concerning maritime disputes or IP related disputes. These cases clearly demonstrate China’s intention to transform itself into a jurisdiction of choice for determining cargo claims in the maritime context or FRAND royalty rates in global SEPs disputes.

However, it is noteworthy that China is not a jurisdiction that applies the doctrines of precedent or stare decisis, and Chinese courts are not empowered to create laws. Therefore, strictly speaking, the five reported cases (including the decision rendered by the Chinese Supreme People’s Court in Huawei v. Conversant) do not have any binding effect on future cases in general. Unless new laws are enacted or new judicial interpretations are issued by the Chinese Supreme People’s Court providing clear guidance on global anti-suit or anti-enforcement injunctions, it still remains to be seen if such global injunctions will be granted by Chinese courts randomly or more widely in future disputes.

If you would like to discuss how the Chinese Court’s anti-suit / anti-enforcement injunction may affect your business, please feel free to contact the authors.

 

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¹ See page here.
² Conversant Wireless Licensing SARL v Huawei Technologies Co, Ltd, Dusseldorf District Court (Landgericht Du ̈sseldorf) Case No 4b O 30/18 (27 August 2020).
³ Huawei Technologies Co, Ltd v Conversant Wireless Licensing SARL, PRC Supreme People’s Court, Case No 732, 733, 734 Part 1/2019 (28 August 2020).
⁴ Xiaomi v InterDigital Inc, Wuhan Intermediate People’s Court, Case No. 01 169 (23 September 2019).