Kaspersky Lab UK Ltd (“Kaspersky”) v Hemisphere Technologies Pty Ltd (“Hemisphere”) [2016] NSWSC 1476, heard on 14 October 2016, demonstrates the need for commercial parties to properly draft dispute resolution clauses and consider the kind of disputes that may arise at the time an agreement is drafted. Choosing to refer some kinds of dispute to court and other kinds to arbitration can complicate the entire dispute resolution procedure (including applications for interim relief) and undermine the smooth process of both court and arbitral proceedings.

In the case, Kaspersky purported to terminate a distribution agreement with Hemsiphere for alleged non-payment of royalties under the agreement. Hemisphere disputed the validity of the termination. The arbitration clause in the distribution agreement referred disputes, except for royalty claims, to arbitration in Stockholm. This carve out meant the arbitration process could only commence once a court had determined Kaspersky’s entitlement to royalties, the non-payment of which entitled Kaspersky to terminate the distribution agreement.

Kaspersky had brought a claim in the Supreme Court of New South Wales (“the Court”) for payment of the royalties. Injunctions to preserve the status quo had been granted by the Court for 30 days to allow Hemisphere to bring its claim disputing Kaspersky’s termination in arbitration. Hemisphere had made an application to an Emergency Arbitrator for similar interim relief, but it was refused. Hemisphere then sought to extend the Court’s injunction to allow for Hemisphere to put a ‘reasoned request’ to the Emergency Arbitrator for the decision to be amended or revoked under Article 9(2) of the Stockholm Rules.

The Court reaffirmed that “[Australian] commercial courts respect commercial parties’ decision to proceed to arbitration of their dispute.” However it noted that, “[e]very application must be considered on its own facts and merits.”

The Court decided to grant a short extension of the injunction to allow the ‘reasoned request’ procedure to take place. Nevertheless, the Court usefully observed that “in the circumstances of the parties choosing to commence the proceedings here, fighting them to the point, and then commencing the arbitration proceedings, they should reflect on what they really can achieve by this bifurcated process.”

The complications faced by Kaspersky and Hemisphere can be avoided by a well-drafted dispute resolution clause.