ICC Rules: 1988

Claimant: Distributor (Hong Kong)

Defendant: Manufacturer (France)

The dispute relates to an agreement (the 'Distributorship Agreement') providing for exclusive distribution of Defendant's products by Claimant in Hong Kong. A number of points of contention arose between the parties concerning payments claimed by one and contested by the other, products alleged to be defective, the level of promotion and the clarity of marketing information. The parties negotiated a settlement to their differences, but disagreements arose over its implementation, causing Defendant to terminate the Distributorship Agreement. Claimant considered such termination as unfair and made a settlement proposal in an attempt to maintain their relations. This was rejected by Defendant, which entered into a new exclusive distribution agreement with another distributor, advising customers in Hong Kong thereof. Claimant responded by insisting that it was still the exclusive distributor of Defendant's products in Hong Kong, which Defendant in turn denied. Claimant filed a Request for Arbitration alleging wrongful termination and claiming damages for this, as well as with respect to breach of exclusivity and unfair competition, failure to pay various sums, and for products returned by customers after the termination of the Distributorship Agreement. Defendant argued that the Arbitral Tribunal lacked jurisdiction, rejected the claims made by Claimant and entered counterclaims, alleging unfair competition resulting from Claimant's insistence that it was still Defendant's exclusive distributor after termination of the Distributorship Agreement, failure to respect quotas and purchase plans, trademark infringement, breach of exclusivity, and outstanding invoices. It also sought from the Arbitral Tribunal an injunction to prevent Claimant from continuing to sell Defendant's products, with a fine for each product distributed in violation of the injunction.

With regard to the injunction sought by Defendant:

'Defendant expresses concern that Claimant may still be selling Defendant's products in breach of Article 10.F. of the Distributorship Agreement and requests that this Tribunal issue an injunction ordering Claimant to stop selling Defendant's products. Defendant further requests that this Tribunal find that Claimant be subject to a fine of FF 1,000 for each product sold in violation of that injunction.

The Tribunal must first address the question as to whether it has the power to do so. The granting, in a final arbitral award, of an injunction coupled with a fine for non-compliance, although not specifically foreseen in the ICC Rules, is in no way inconsistent with them. In particular, Article 11 grants to the Tribunal, when the ICC Rules are silent and in the absence of an agreement of the parties, the power to determine the procedural rules governing the arbitration. For example, it is accepted that Article 11 gives arbitral tribunals the power to grant interim or conservatory measures, unless a mandatory provision of the relevant national procedural law or an express stipulation of the parties requires otherwise. (Schwartz, The Practices and Experience of the ICC Court, ICC Publication no. 519 Conservatory and Provisional Measures in International Arbitration, ICC Publishing S.A. 1993, pp. 57-58). There is no reason to treat the procedural device of an injunction coupled with a fine differently.

In this Arbitration, there is no agreement of the parties which would forbid the granting by this Tribunal of an injunction coupled with a fine. Rather, Defendant's counterclaim for an injunction coupled with a fine is clearly set forth in Paragraph B.7.1 of the Terms of Reference.

Thus the Tribunal finds that it has the power, under the ICC Rules, to grant an injunction coupled with a fine, unless a mandatory provision of French procedural law, the procedural law of the place of this Arbitration, requires otherwise. In that regard, French courts and French legal authors have found that arbitrators have the power to grant an injunction coupled with a fine (mesure d'injonction assortie d'une astreinte). (Cass. Civ., 25 juillet 1882, DP, 1883, p. 243; Rennes, 26 septembre 1984, Rev. Arb. 1986, pp. 441 et seq., note Ancel; Boisséson, Le Droit Français de l'Arbitrage Interne et International, Editions GLN-Joly 1990, pp. 259 et seq.; Jarrosson, Réflexions sur l'Imperium, Etudes Offertes à Pierre Bellet, Litec 1991, pp. 273-274). Of course, any such injunction coupled with a fine may not be enforced by the arbitral tribunal but must be enforced, as appropriate, by the national court before which enforcement is sought. (Boisséson, op. cit. p. 261).

In sum, this Tribunal finds that under the ICC Rules, and given the absence of (i) an agreement of the parties to the contrary and (ii) a mandatory provision of French procedural law requiring otherwise, it has the power to grant an injunction coupled with a fine in this Arbitration.

The Tribunal now turns to the merits of Defendant's request. In that regard, the Tribunal has found that pursuant to Article 10.F. of the Distributorship Agreement Claimant has no present right to sell Defendant's products. Indeed Claimant agreed in Article 10.F. of the Distributorship Agreement that it would cease to sell Defendant's products upon the termination of that agreement. However, the Tribunal also finds that the damages awarded to Defendant for Claimant's breach of Article 10.F. fully compensate Defendant for the damages caused by that breach up to the date of receipt by Claimant of this Award.

In consequence, this Tribunal enjoins Claimant from any further selling of Defendant's products as from its receipt of this Award and finds that Defendant shall be entitled to the amount of FF 500 for each Defendant product sold by Claimant after Claimant's receipt of this Award. It is up to the Defendant to pursue this finding, if applicable, before local courts of enforcement.'