For more than two hundred years the Courts of England and Wales have been hearing international commercial disputes. Historically this was due to the United Kingdom being a nation with considerable international trade, and more recently because English law has often been chosen as the law to govern international commercial contracts.
Attractiveness of English Courts for deciding International disputes
The reasons for choosing the English Courts for settling international commercial disputes include the independence of the Judiciary, particularly that it was free from influence by the national Government (and in fact is prepared to decide against them, as the UK Supreme Court did recently during the Brexit Constitutional crisis) and that as a result there is no home advantage if one of the parties in the dispute is UK based.
Another reason is the abundance of highly qualified lawyers in London who regularly act in international cases and from whom the English Judges are selected. The English Court system has also developed not only subject matter focused courts (such as the Patents Court and the Intellectual Property Enterprise Court) but the High Court’s Chancery Division is specialised in dealing with international commercial disputes.
For some Claimants it also helps that the English legal system is based on the common law and so its principles and procedures are very similar to those of other countries which have common law based legal systems including the US, India, Australia, Singapore, Malaysia, South Africa, and Hong Kong.
International Intellectual Property disputes
In the English High Court intellectual property disputes are heard in the Chancery Division. This has developed procedures to assist in deciding international disputes and to tailor the expense of the proceedings to suit the size of claim.
The English legal system has developed jurisdictional rules which enable it to take jurisdiction over disputes where neither of the parties are based in the UK as long as certain other criteria apply and the Courts have shown a willingness to decide cases between foreign parties.
More importantly from an IP perspective, the English Courts are prepared to hear claims based on foreign intellectual property rights. One example is the decision of the UK Supreme Court in 2011 in a dispute over ownership of copyright in the design of the Stormtrooper helmets used in the film Star Wars. In that case the Supreme Court decided that so long as the English Court had in personam jurisdiction over the defendant then the English Court had jurisdiction to decide whether there had been infringement of United States copyright. Another example in the field of patent law is the decision in Actavis (see below) where the English Court accepted jurisdiction over a claim for declarations of non-infringement in relation to foreign patents.
The procedures for deciding issues of foreign law in the English Court have developed over many years and involve experts in the relevant foreign law providing evidence to the Court as to the foreign law allowing the Court to then apply that law to the facts of the case.
Their commercial focus of the English Courts is another benefit in commencing proceedings in respect of IP cases. The English system provides different courts and procedures to ensure that the legal costs of intellectual property cases are proportional to the size or value of the claim. These include the Intellectual Property Enterprise Court which is designed for claims valued at less than £500,000 and has a limited trial length with little or no documentary disclosure or cross-examination. In addition, the High Court procedure which is intended for larger claims has a two-tier system including the shorter trial scheme with a limited trial length for medium sized claims and a full High Court action for larger value cases with longer trials, wider documentary disclosure and cross-examination.
As part of the focus on achieving a commercial result for the parties, the costs regime in the English Court system follows the rule that in general the loser pays the costs of the successful party, which encourages parties with weaker cases to settle rather than pursue the case to trial and pay a potentially significant cost award. The rules also allow for the parties to communicate on a without prejudice basis to discuss settlement without those communications being disclosed to the court and potentially undermining a parties’ legal arguments.
Intellectual Property Claims with significant international elements heard by the English Courts
Merck KGaA v Merck Sharp & Dohme Corp. & Othrs
This case involved a dispute between the Claimant, Merck KGaA, Darmstadt, Germany and Merck Sharp & Dohme Corp, a group based in the US (together with several of its subsidiaries). The claim was for trade mark infringement and breach of a 1970 global co-existence agreement relating to the right to use “Merck”.
Proceedings were issued in the English Courts and no objection was made by the defendants to the English Court having jurisdiction to decide the case.
The global co-existence agreement was silent on which law governed the contract. On a preliminary issue, applying the English common law authorities to the agreement (because it dated from before the Rome Conventions) the Court held that the proper law of the contract was German law, as opposed to the law of the State of New Jersey which had been argued by the Defendants. This was the system of law with which the transaction had its closest and most real connection.
Both sides then submitted expert evidence as to German contract law and the English Court applied this to the facts in the case, interpreting the contract and finding that it had been breached by the Defendants under German law. This decision was upheld on Appeal.
Celgard LLC v Shenzen Senior
In Celgard neither party was domiciled in the UK. Celgard LLC was incorporated in Delaware, United States and sought an interim injunction in the English Courts against a Chinese company, Shenzen Senior, to prevent them marketing or selling battery components in the UK which Celgard claimed had been manufactured in China using its confidential information. There was also ongoing litigation between the parties in the US and in China in relation to the acts of acquisition and use of the confidential information.
The English Court had to decide whether it was forum conveniens to hear the claim or whether another jurisdiction was more appropriate. This involved deciding whether the English Court was clearly and distinctly the most appropriate forum to hear the case by assessing the factors connecting the case to it and other jurisdictions.
Although the obtaining of the confidential information had occurred in the US and the use of it (i.e. the manufacture of the batteries) had occurred in China, the Court decided that the English Court was the most appropriate jurisdiction to hear the claim. In doing so it heard expert evidence as to Chinese law to assess whether the Chinese Courts could grant the relief sought.
The English Court went on to grant an interim injunction against Shenzen preventing the importation of the battery components in the UK pending a full Trial.
Actavis v Eli Lilly and Company
The Actavis parent company was domiciled in Iceland and Eli Lilly in the State of Indiana in the United States.
A claim was brought before the English Courts seeking declarations of non-infringement against both the UK and foreign designations of a European Patent. It was accepted that declarations of non-infringement of a patent were treated as torts. Consequently, so long as the court had jurisdiction over the Defendant and validity was not in issue, a declaration of non-infringement in relation to a foreign patent was an issue that was justiciable by the English Court.
In establishing jurisdiction, as well as establishing that the proceedings were properly served, the English Court had to assess whether the English Court was forum conveniens. The Court was persuaded that it was advantageous for the five claims to be determined by the English court because:
- the case could be run using one set of lawyers and one set of factual witnesses;
- the case could be determined by reference to only one law (should Eli Lilly chose not to raise any issue of foreign law); and
- even if different laws were to be applied, it would mean one court at first instance and one court on appeal would determine all five claims which would eliminate the prospect of inconsistent decisions.
Consequently, the English Court was able to hear the claims for declaration of non-infringement in relation to the UK, French, German, Italian and Spanish designations of the European patent
Enforcement of English Judgments Post-Brexit
Following the end of the Brexit transitional period, the UK is no longer a party to the Brussels Regulation on Jurisdiction and Enforcement. In addition, the EU Commission has objected to the UK’s accession to the Lugano Convention.
There has been some suggestion that this will make it difficult or impossible to enforce English Court IP Judgments against Defendants who are based outside the UK.
However in practice very little has changed. The position remains the same as it was pre-Brexit for Defendants based in jurisdictions outside the EU, such as the US.
As regards Defendants based in the EU the practical effect of Brexit on the enforcement of English Court IP Judgments is likely to be limited because in an IP infringement or contract case it is rarely necessary to seek to enforce the English Court’s Judgment in other jurisdictions. The reasons for this include:
a. If the action is brought in the UK it is likely that at least some of the infringing activities are occurring in the UK. The primary relief for IP infringement is injunctive – the English Court has wide powers to stop breaches of injunction within the UK whether by the Defendant or on their behalf;
b. Substantial companies are unlikely to want to breach an English Court Order (even in respect of non-injunctive monetary relief) given the sanctions that could be imposed on their activities in the UK or on members of their management visiting the UK; and
c. If the claim relates to a contract which has an exclusive jurisdiction clause designating the courts England and Wales, EU Courts are required to enforce any Judgment of the English Court under the The Hague Convention on Choice of Court Agreements.
The procedures and experience of the English Courts in deciding international disputes make it an attractive forum for international IP claims in appropriate cases. It will be interesting to see whether the willingness of the English Courts to take jurisdiction over IP claims with significant international elements continues or even increases after Brexit.