In Rare Ruling, Chinese Court Upholds U.S. Arbitration Award

Companies seeking to protect copyrights and trademarks have long struggled with China. The United States has frequently bemoaned problems with piracy and counterfeiting in China in annual trade reports, as it did earlier this month.

So lawyers at Kilpatrick Townsend & Stockton had reason to celebrate when word came Monday that a Chinese court had confirmed a $1.7 million arbitration award for menswear fashion designer and client Joseph Abboud over the breach of a licensing agreement by China-based Judger Group Co., Ltd. According to Kilpatrick Townsend, the decision is believed to be one of the few rulings, if not the only one, where a Chinese court confirms a U.S. arbitration award.

According to Kilpatrick’s Marc Lieberstein and Georges Nahitchevansky, the license agreement between Abboud and Judger stipulated arbitration in the United States. After a three-arbitrator panel in July found Judger liable to Abboud, a second panel in October awarded damages.

The trick at that point became enforcing the award. Judger had no offices in the United States, so they asked a Chinese court to confirm the award. Lieberstein flew to China in January, and was allowed to argue the case before the Shanghai Intermediate Court No.1 (with Chinese co-counsel at his side). “It was very unusual,” Lieberstein said. “My China counsel advised me it was almost unheard of for a judge to let a U.S. lawyer speak.”

Judger Group contended that its Shanghai branch had been terminated, making enforcement impossible. In addition, it argued that, because the license agreement did not name an arbitration agency, the arbitration agreement was invalid. The court disagreed. Referring to the U.S. Federal Arbitration Act and the New York Convention, the Chinese judge held that an effective arbitration agreement existed.

The next step for the Kilpatrick lawyers and their client will be collecting on the award, which the lawyers admit will be difficult. It’s a lot of international fighting for just $1.7 million, they acknowledge. Nahitchevansky said that most clients drop their claims when faced with the prospect of going to China to enforce their rights. “They’re very hesitant to go into another country, because they’re dealing with rules they’re not familiar with,” he said. But in this case, said Lieberstein: “The client really felt that it needed to take a stand.”