Giorgio Armani S.P.A. v. Elan Clothes Co. Ltd. (Formerly Known As Dalian Les Copious Clothes Co. Ltd.

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 Injunctions op 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 Bouygues SA [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.

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

Mr Rimsky Yuen SC and Mr James Man, instructed by Reed Smith Richards Butler, for the defendant