Post on 14-May-2018
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THE 11TH LAWASIA INTERNATIONAL MOOT COMPETITION
KUALA LUMPUR REGIONAL CENTRE FOR ARBITRATION
2016
BETWEEN
CHELSEA TEA COMPANY
(CLAIMANT)
AND
ALMOND TEA COMPANY
(RESPONDENT)
MEMORIAL FOR THE RESPONDENT
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TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................................. 4
STATEMENT OF JURISDICTION ................................................................................... 10
QUESTIONS PRESENTED ................................................................................................ 11
STATEMENT OF FACTS ................................................................................................... 12
SUMMARY OF PLEADINGS ............................................................................................. 15
PLEADINGS .......................................................................................................................... 18
I. THE APPLICABLE PROCEDURAL LAW TO THE ARBITRATION IS SRI
LANKAN LAW .......................................................................................................... 18
A. Sri Lanka is the seat of the present arbitration .................................................. 18
B. The procedural laws of Sri Lanka apply to the present dispute ......................... 19
II. THE LAW GOVERNING THE SUBSTANTIVE ISSUES IN THIS DISPUTE IS
MALAYSIAN LAW .................................................................................................. 20
A. The Tribunal must directly apply the substantive law it deems appropriate ...... 20
(1) Article 35(1) of the KLRCA i-Arbitration Rules applies to the dispute ..........20
(2) The Tribunal should apply the closest connection test ................................... 22
B. Malaysian law is the most appropriate law to govern the contractual issues ....23
III. THE DOUBLE-ACTIONABILITY RULE APPLIES TO THE CLAIMS IN
TORT .......................................................................................................................... 23
IV. ATC IS NOT LIABLE FOR A BREACH OF CLAUSE 4.2 BY DISTRIBUTING
SAILOR’S CEYLON ................................................................................................ 24
A. Clause 4.2 is unenforceable under the Malaysian Contracts Act ....................... 25
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B. Clause 4.2 is also unenforceable under the common law test of reasonableness
................................................................................................................................ 28
C. In any event, ATC is not in breach of Clause 4.2 ................................................ 30
(1) Clause 4.2 prohibits the use of mark that is similar to the point of possible
confusion with CTC’s trademarks...................................................................31
(2) ATC did not use a possibly confusing mark ....................................................33
V. ATC IS NOT LIABLE UNDER THE LAW OF GEOGRAPHICAL
INDICATIONS FOR USING THE BRAND NAME “SAILOR’S CEYLON” ... 35
A. The claim for infringement of a geographical indication is a non-arbitrable
issue ....................................................................................................................... 36
B. In any event, ATC’s use of the word “Ceylon” is not misleading ....................... 38
VI. ATC HAS NOT BREACHED CLAUSE 9.3.7 AS IT DID NOT USE A MARK
LIKELY TO CAUSE CONFUSION WITH THE TRADEMARKS OF CTC .... 40
VII. ATC IS NOT LIABLE FOR THE TORT OF PASSING OFF ............................. 42
A. The elements of the tort are not made out in either Malaysia or Sri Lanka ......... 42
(1) ATC has not misrepresented its products as being connected to CTC...............43
(2) CTC has not suffered damage to its goodwill due to ATC’s actions .................44
B. The extended tort of passing off is not actionable ................................................. 45
PRAYER FOR RELIEF ....................................................................................................... 47
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TABLE OF AUTHORITIES
STATUTES
Arbitration Act (No 11 of 1995) (Sri Lanka) ............................................................... 19, 21, 36
Contracts Act 1950 (Revised 1974) (Malaysia) ........................................................... 25, 27, 28
Geographical Indications Act 2000 (Act 602 of 2000) (Malaysia) ................................... 35, 38
Intellectual Property Act 2003 (No 36 of 2003) (Sri Lanka) ................................................... 37
Partnership Act 1961 (No 135 of 1961) (Malaysia) ................................................................ 27
Trade Marks Act 1976 (No 175 of 1976) (Malaysia) .............................................................. 40
ARBITRAL RULES
Kuala Lumpur Regional Centre for Arbitration i-Arbitration Rules ..................... 18, 20, 21, 22
UNCITRAL Arbitration Rules ................................................................................................ 20
CASES
Amoco Australia d v Rocco Bros Motor Engineering Co d [1975] 1 AC 561 ......................... 29
Beckett Investment Management Group v Hall [2007] EWCA Civ 613 ................................. 30
Berjaya Times Square Sdn Bhd (dahulunya dikenali sebagai Berjaya Ditan Sdn Bhd) v M-
Concept Sdn Bhd [2010] 1 CLJ 269 ..................................................................................... 31
Boys v Chaplin [1971] AC 356 ................................................................................................ 24
BRG Brilliant Rubber Goods v BHPC Marketing [2015] 1 LNS 423 ......................... 31, 33, 34
BRG Brilliant Rubber Goods v Leong Choon Loy [2016] 1 CLJ 1001 ................................... 34
Bridge v Deacons [1984] AC 705 ............................................................................................ 29
British Legion v British Legion Club (Street) [1931] 63 RPC 555 .......................................... 43
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Bulmer (HP) Ltd v Bolinger SA [1978] RPC 79 ...................................................................... 44
Chan Kwon Fong v Chan Wah [1977] 1 LNS 12 .................................................................... 24
Chocosuisse Union v Maestro Swiss Chocolate [2010] 3 MLJ 676 ................ 35, 38, 39, 40, 45
Chocosuisse Union v Maestro Swiss Chocolate [2013] 6 CLJ 53 ........................................... 39
Compagnie Tunisienne de Navigation SA v Compagnie d'Armement Maritime SA [1971] 1
AC 572 ................................................................................................................................. 19
Consitex SA v TCL Marketing [2008] 1 LNS 91 ..................................................................... 41
Erven Warnik BV v J Townend & Sons (Hull) Ltd [1979] AC 731 ......................................... 44
Esso Petroleum Co v Harper’s Garage (Stourport) [1968] AC 269 ....................................... 28
Fitch v Dewes [1921] 2 AC 158 .............................................................................................. 29
Forschner Group Inc v Arrow Trading Co Inc 30 F 3d 348 at 355 (2nd Cir, 1994) ............... 38
Glendhow Autoparts v Delaney [1965] 1 WLR 1366 .............................................................. 29
Harrods Application [1935] 52 RPC 65 .................................................................................. 34
Hebtulabhoy and Co Ltd v Stassen Exports Ltd SC Appeal No 20/89 .................................... 45
Herbert Morris Limited v Saxelby [1916] 1 AC 688 ............................................................... 28
Intel Corp v Intelcard Systems [2004] 1 MLJ 595 ............................................................. 43, 45
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98
.............................................................................................................................................. 31
Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank Bhd [2007] 2 CLJ 127 ............................. 31
Malaysian International Trading Corp (Japan) Sdn Bhd v Bentini SPA & others [2014] 11
MLJ 255 ............................................................................................................................... 27
Maestro Swiss Chocolate v Chocosuisse Union [2016] 3 CLJ 345 ......................................... 39
MBF Capital Bhd v Tommy Thomas [1997] 3 MLJ 395 ......................................................... 27
MBF Holdings Bhd and Anor v Dato' Loy Teik Ngan & Anor [2015] 1 AMCR 21 ............... 31
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McCurry Restaurant (KL) v McDonalds Corporation [2009] 3 MLJ 774 .............................. 43
MI & M Corporation v A Mohamed Ibrahim [1964] MLJ 392 ......................................... 31, 41
Millennium Medicare Services v Nagadevan Mahalingam [2016] 2 CLJ 36 ........ 25, 26, 27, 28
Monument Mining Limited v Emas Kehidupan Sdn Bhd [2016] 1 LNS 111 ........................... 31
Nokia Corporation v Truong [2005] 66 IPR 511 .................................................................... 33
Novelty Pte Ltd v Amanresorts Ltd [2009] 3 SLR(R) 216 ....................................................... 44
Pelita Samudra Pertama (M) v Venkatasamy a/l Sumathiri [2012] 6 MLJ 114 ..................... 43
Petrofina (Great Britain) Limited v Martin [1966] 1 All ER 126 ........................................... 25
Phillips v Eyre (1870) LR 6 QB 1 ........................................................................................... 24
Polo/Lauren Co LP v United States Polo Association [2002] 1 SLR(R) 129 ......................... 34
Polygram Records Sdn Bhd v The Search [1994] 3 MLJ 127 ........................................... 25, 26
PT Garuda Indonesia v Birgen Air [2002] 1 SLR(R) 401 ....................................................... 18
Randenigala Distilleries Lanka v Distilleries Company of Sri Lanka SC (CHC) Appeal No
38/2010 ................................................................................................................................. 42
Reckitt & Coleman Products Ltd v Borden Inc [1990] 1 All ER 873 ...................................... 42
Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 ................................................... 24
S W Strange v Mann [1965] 1 WLR 629 ................................................................................. 29
Sabel v Puma [1998] RPC 199 ................................................................................................ 31
Stenhouse Australia Ltd v Phillips [1974] AC 391 .................................................................. 29
Symbion Pharmacy Services v Idameneo [2011] FCA 389 ............................................... 31, 32
T Lucas & Co v Mitchell [1974] Ch 129 .................................................................................. 29
Thorsten Nordenfelt v Maxim Nordenfelt Gun and Ammunition Company [1894] 1 AC 535
.................................................................................................................................................. 28
Vision Cast Sdn Bhd v Dynacast (Melaka) Sdn Bhd [2014] 8 CLJ 884 ............................ 26, 28
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Worldwide Rota Dies v Ronald Ong Cheow Joon [2008] 8 MLJ 297 ..................................... 28
Wrigglesworth v Wilson Anthony [1964] MLJ 269 ................................................................. 26
Yong Sze Fun v Syarikat Zamani Hj Tamin [2006] 5 MLJ 262 ......................................... 42, 44
ARBITRAL AWARDS
ICC Case No. 4604, X YBCA 973 (1985) 975 ........................................................................ 36
ICC Case No. 5505, Preliminary Award, 1987, XIII YBCA 110 (1988) 110 ......................... 19
ICC Case No. 6162 (Consultant v Egyptian Local Authority) XVII YBCA 153 (1992) ........ 36
TREATISES
Christopher Wadlow, The Law of Passing-Off: Unfair Competition by Misrepresentation
(Sweet & Maxwell, 2011) .................................................................................................... 44
Dicey, Morris and Collins on the Conflict of Laws (Lawrence Collins gen ed) (Sweet and
Maxwell, 2012, 15th Ed) ...................................................................................................... 18
Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 2011, 14th Ed) ...................... 29
Gary Born, International Arbitration: Law and Practice (Kluwer Law International, 2012)
.................................................................................................................................................. 21
Gary Born, International Commercial Arbitration (Kluwer Law International, 2009) .... 22, 36
Julian Lew, Loukas Mistelis, et al, Comparative International Commercial Arbitration
(Kluwer Law International, 2003) ........................................................................................ 36
Kerly’s Law of Trade Marks and Trade Names (Sweet & Maxwell, 2011, 15th Ed) ............. 31
Nigel Blackaby et al, Redfern and Hunter on International Arbitration (Oxford/New York:
Oxford University Press, 2009, 5th Ed) ....................................................... 18, 19, 22, 36, 37
Norchaya Talib, Law of Torts in Malaysia (Sweet & Maxwell Asia, 2003, 2nd Ed) .............. 45
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Rolf Shutze, Institutional Arbitration: An Article-by-Article Commentary (Verlag CH Beck,
2013) ..................................................................................................................................... 22
Ruth Sullivan, Driedger on the Construction of Statutes (Butterworths, 1994, 3rd Ed) ......... 35
Simon Greenberg, Christopher Kee, Romesh Weeramantry, International Commercial
Arbitration: An Asia-Pacific Perspective (Cambridge University Press, 2011) .................. 24
Susanna Leong, Intellectual Property Law of Singapore (Academy Publishing, 2013) ......... 35
Visu Sinnadurai, Law of Contract (LexisNexis, 2011, 4th Ed) ............................................... 28
ARTICLES
Carolina Saf, “A Study of the Interplay between the Conventions Governing International
Contracts of Sale” (Queen Mary and Westfield College, 1999) .......................................... 22
Claude Reymond, “Where is an Arbitral Award Made?” (1992) 106 LQR 1 ......................... 19
Doug Jones, “Choosing the Law or Rules of Law to Govern the Substantive Rights of the
Parties” (2014) 26 SAcLJ 911 .................................................................................. 20, 21, 22
Larry Sait Muling, “Geographical Indications – What is New in the Asia-Pacific Region?
Malaysia Perspective”, March 2013 (WIPO/GEO/BKK/13/INF/4) .................................... 36
Lisa P Lukose, “Rationale and Prospects of the Protection of Geographical Indications: An
Inquiry” (2007) 12 Journal of Intellectual Property Rights 212 .......................................... 37
Sanath Wijesinghe, “The Protection on Geographical Indications in Developing Countries:
The Case of Ceylon Tea” (2015) 1 Multidisciplinary Law Journal 6 .................................. 37
Suman Naresh, “Passing off, Goodwill and False Advertising: New Wine in Old Bottles”
[1986] 45 CLJ 97 .................................................................................................................. 45
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REFERENCE MATERIALS
Justice Saleem Marsoof, “Arbitration Procedure, Law and Facilities in Sri Lanka”,
Arbitration in Commonwealth Countries – An Anthology ................................................... 21
Oxford English Dictionary (Oxford University Press, 2016) .................................................. 32
Sri Lanka Tea Board Website .................................................................................................. 39
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STATEMENT OF JURISDICTION
The parties, the Chelsea Tea Company (“CTC”) and the Almond Tea Company (“ATC”), have
agreed to submit the present dispute to arbitration in accordance with the Kuala Lumpur
Regional Centre for Arbitration i-Arbitration Rules (“KLRCA i-Arbitration Rules”).
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QUESTIONS PRESENTED
1. Whether the procedural law applicable to the dispute is Sri Lankan law;
2. Whether the substantive law applicable to the dispute is Malaysian law;
3. Whether ATC is liable under Clause 4.2 of the Agreement between the parties:
a. whether Clause 4.2 is enforceable; and
b. whether the distribution of SAILOR’S CEYLON is in breach of Clause 4.2 of the
Agreement.
4. Whether ATC is in breach of Clause 9.3.7 of the Agreement by its use of the ATC’s Mark;
5. Whether ATC’s use of the word “CEYLON” in respect of its tea products infringes a
geographical indication:
a. whether the present claim is arbitrable; and
b. whether ATC’s use of the word “CEYLON” is misleading as to the geographical
origins of its tea products.
6. Whether ATC’s use of the ATC’s Mark amounts to the tort of passing off.
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STATEMENT OF FACTS
1. The Claimant, Chelsea Tea Company (“CTC”), is a company incorporated in Sri Lanka that
manufactures “Ceylon tea” under the brand name CTC CEYLON. CTC CEYLON is affixed
with the Lion Logo, a trademark used by approved traders of the Sri Lankan Tea Board (“the
SLTB”). The Lion Logo is registered under the SLTB in Malaysia. Marvan Ranatunga
(“Ranatunga”) is the Chairman of the Board of Directors for CTC.
2. The Respondent, Almond Tea Company (“ATC”), is a company incorporated in Singapore
which manufactures and distributes tea in Singapore and Malaysia. ATC is helmed by its
Managing Director Philip Chan (“Chan”), a former ship captain who decided to venture into
the tea industry. Over the years, Chan has acquired considerable market expertise within the
Malaysian tea industry.
3. In 2008, Ranatunga went to great lengths to convince Chan to accept their offer for ATC to
be CTC’s exclusive distributor in Malaysia. Chan was not keen to accept this offer, as CTC
wanted ATC to disrupt the normal operations of its business and cease sales of all other tea
products except CTC CEYLON in Malaysia. Chan therefore rejected Ranatunga’s proposal.
4. However, following a fungal disease that devastated ATC’s tea plantations, Ranatunga took
the opportunity to convince Chan to accept his proposal. On 20 October 2008, ATC and
CTC (collectively, “the Parties”) entered into a Distribution Agreement (“the Agreement”).
Under the Agreement, CTC was to supply CTC CEYLON exclusively to ATC, who would
distribute it within the Malaysian territory for five years.
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5. Throughout the duration of the Agreement, ATC met and exceeded the targets set by CTC
for the sales of CTC CEYLON. When the Agreement expired on 20 October 2013, it was
not renewed. CTC had by then set up its own headquarters in Kuala Lumpur, Malaysia, to
promote and distribute CTC CEYLON in the region. This was a move consistent with Mr
Ranatunga’s vision of CTC’s global dominance. Meanwhile, for 12 months after the expiry
of the Agreement, ATC could not become concerned or interested “in the manufacture or
distribution in the Territory of any goods that compete with the Products, affixed with
(CTC’s) Trade Marks or any other arguably similar mark”, pursuant to Clause 4.2 of the
Agreement.
6. In 2012, ATC began distributing its own brand of tea, SAILOR’S CEYLON, which is grown
and manufactured in China. SAILOR’S CEYLON is affixed with the ATC’s Mark, which
displays an illustration of a maned lion and bears the number “1972”. The number “1972”
was Chan’s service number when he was serving as a ship’s captain. CTC came to know of
SAILOR’S CEYLON only in 2015, and subsequently ordered an investigation into the
matter.
7. CTC alleged a breach of the Agreement, immediately asking ATC to pay damages. CTC
also demanded ATC to stop using the ATC’s Mark, and to not use the word “Ceylon” to
describe their tea. This is notwithstanding the fact that CTC is not the registered proprietor
of the Lion Logo in Malaysia, and neither CTC nor the SLTB have exclusive rights over the
words “CEYLON TEA” and “SYMBOL OF QUALITY” contained in the Lion Logo. ATC
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did not accede to CTC’s request as there was, in their view, no violation of the terms of the
Agreement.
8. Unable to resolve the matter, the Parties submitted the dispute to binding arbitration. The
place of arbitration is Sri Lanka, and the arbitration is to be conducted in accordance with
the Kuala Lumpur Regional Centre for Arbitration i-Arbitration Rules.
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SUMMARY OF PLEADINGS
A. The applicable procedural law to the arbitration is Sri Lankan law
The Parties have designated the place of arbitration to be Sri Lanka. This is tantamount to
designating Sri Lanka as the seat of the arbitration. The procedural laws of the seat apply to the
dispute where there is no evidence to the contrary. Accordingly, the procedural law governing
the arbitration is Sri Lankan law.
B. The law governing the substantive issues in this dispute is Malaysian law
The Tribunal must select the law it deems most appropriate to govern the substantive issues
arising from the dispute, as set out under Article 35(1) of the KLRCA i-Arbitration Rules. This
is best achieved with the internationally recognised closest connection test. Malaysian law is
the law of closest connection to the Agreement, and thus governs the contractual issues in the
dispute. Accordingly, the Malaysian approach of double-actionability for tort applies.
C. Clause 4.2 of the Distribution Agreement is not enforceable
Clause 4.2 is unenforceable under Section 28 of the Malaysian Contracts Act for being in
restraint of trade. Clause 4.2 also does not fall within any of the exhaustive statutory exceptions.
Even if the common law test of reasonableness applies, Clause 4.2 is an unreasonable restraint
in light of its indiscriminate geographical scope and excessive duration. Hence, Clause 4.2 is
void and unenforceable.
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D. ATC has not breached the Agreement by contravening Clause 4.2
Clause 4.2 prohibits ATC from becoming interested in competing goods only if these bear
marks that may possibly confuse customers into thinking such goods are CTC’s. ATC’s Mark
contains entirely distinctive features from the Lion Logo, and could not possibly confuse. Thus,
ATC has not contravened Clause 4.2.
E. ATC’s use of ATC’s Mark is not a breach of Clause 9.3.7
Clause 9.3.7 only prohibits use of a mark that is likely to cause confusion to the public,
analogous to the standard of statutory trademark infringement. As ATC’s Mark has not
infringed the Lion Logo, ATC has not breached this clause.
F. ATC’s use of the word “Ceylon” in respect of its tea products is not misleading
A claim by CTC for the misleading use of a geographical indication under the Malaysian
Geographical Indications Act is not arbitrable, for reasons of policy. Even if the matter is
arbitrable, ATC’s use of the word “Ceylon” is not a misleading suggestion that ATC’s tea is
Ceylon tea from Sri Lanka.
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G. ATC is not liable for the tort of passing off by using the ATC’s Mark
It is incumbent on CTC to demonstrate goodwill, misrepresentation, and damage. Even if there
is sufficient goodwill associated with “Ceylon tea”, ATC has made no misrepresentation that
SAILOR’S CEYLON is connected to CTC. CTC has also not suffered any damage as a result
of ATC’s alleged misrepresentation. Further, the extended tort of passing off is not actionable
under Sri Lankan law as it does not satisfy the double-actionability approach.
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PLEADINGS
I. THE APPLICABLE PROCEDURAL LAW TO THE ARBITRATION IS SRI
LANKAN LAW
1. The procedural law is the law that will regulate the conduct of the present proceedings. The
procedural law is determined by the seat of the arbitration. The Respondent, the Almond
Tea Company (“ATC”) and Claimant, the Chelsea Tea Company (“CTC”) (collectively,
“the Parties”) have agreed that Sri Lanka is the seat of the present arbitration (A). The
procedural laws of Sri Lanka thus apply (B).
A. Sri Lanka is the seat of the present arbitration
2. Under Clause 22.2 of the Distribution Agreement (“the Agreement”), the Parties in the
present dispute have agreed for the place of arbitration to be Sri Lanka. This is therefore an
agreement for the arbitration to be seated in Sri Lanka, applying the KLRCA i-Arbitration
Rules (“KLRCA Rules”) selected by the Parties.1
3. Article 6(1) of the KLRCA Rules2 provides that parties “may agree on the seat of
arbitration”. The “place of arbitration” bears the same meaning as the “seat of arbitration”,3
except where an arbitration agreement expressly draws a distinction between the two.4 Thus,
1 Appendix A, Clause 22. 2 KLRCA Rules, Article 6(1). 3 Dicey, Morris and Collins on the Conflict of Laws (Lawrence Collins gen ed) (Sweet and Maxwell, 2012, 15th Ed) at [16-035]; Redfern and Hunter at [1.21]. 4 Redfern and Hunter at [3.59], citing the Singapore Court of Appeal’s decision in PT Garuda Indonesia v Birgen Air [2002] 1 SLR(R) 401 at [23]–[24].
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in ICC Case No. 5505 of 1987,5 the tribunal held that a clause stipulating that “[t]he
arbitration will take place in Switzerland” had the effect of “[implying] in any case the
application of the Swiss mandatory provisions”. Absent contrary agreement, the place of
arbitration is taken to be the seat of the arbitration.
4. The Parties have stipulated that “[t]he place of arbitration shall be Colombo, Sri Lanka” in
the Agreement.6 Accordingly, the seat of the arbitration is Sri Lanka.
B. The procedural laws of Sri Lanka apply to the present dispute
5. Since the arbitration is seated in Sri Lanka, the procedural laws of Sri Lanka apply to this
dispute.
6. An agreement as to the seat of arbitration shows an implied intention to submit to the
procedural laws of the seat.7 This intention is for the seat to be the venue of the arbitration
and also to serve as the connection between the arbitration and the curial laws of that
country.8
7. The Parties have selected Sri Lanka to be the seat of arbitration. Thus, Sri Lanka’s laws on
arbitration – specifically those found in the Sri Lanka Arbitration Act9 – govern the present
proceedings.
5 ICC Case No. 5505, Preliminary Award, 1987, XIII YBCA 110 (1988) 110. 6 Appendix A, Clause 22.2. 7 Compagnie Tunisienne de Navigation SA v Compagnie d'Armement Maritime SA [1971] 1AC 572 at 603. 8 Redfern and Hunter at [3.56], citing Claude Reymond, “Where is an Arbitral Award Made?” (1992) 106 LQR 1 at 3. 9 Arbitration Act (No. 11 of 1995) (Sri Lanka).
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II. THE LAW GOVERNING THE SUBSTANTIVE ISSUES IN THIS DISPUTE IS
MALAYSIAN LAW
8. The Tribunal must directly apply the substantive law it deems appropriate (A). The
appropriate law to govern the substantive issues arising from the dispute is Malaysian law
(B).
A. The Tribunal must directly apply the substantive law it deems appropriate
(1) Article 35(1) of the KLRCA i-Arbitration Rules applies to the dispute
9. Without a choice of law clause, the Tribunal must first decide the most appropriate
mechanism by which to select the applicable substantive law; this decision must be made
pursuant to the institutional rules and procedural laws that apply to the arbitration.10
10. By the Parties’ agreement, the present proceedings are governed by the KLRCA i-
Arbitration Rules. The relevant provision is Article 35(1), which states:11
The arbitral tribunal shall apply the rules of law designated by the parties as applicable
to the substance of the dispute. Failing such designation by the parties, the arbitral
tribunal shall apply the law which it determines to be appropriate. [emphasis added]
10 Doug Jones, “Choosing the Law or Rules of Law to Govern the Substantive Rights of the Parties” (2014) 26 SAcLJ 911 (“Jones”) at [1]. 11 KLRCA Rules, Article 35(1), adopted from the UNCITRAL Arbitration Rules.
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11. The Tribunal is accordingly obligated to directly select the law it deems to be most
appropriate.12
12. This is in harmony with the approach prescribed by the procedural law of the arbitration, as
enshrined in the Sri Lankan Arbitration Act (“AA”). Specifically, Section 24(3) states that
any choice of law rules contained in the Act “shall apply only to the extent agreed to by the
parties”. This reflects a deference to parties’ agreement on the choice of law rules. As the
Parties have selected the KLRCA Rules, its provisions on choosing the substantive law of
the arbitration must accordingly apply.
13. Even if Section 24 of the AA is interpreted to require Sri Lanka’s laws to apply to the
dispute, the approach prescribed by Article 35(1) of the KLRCA Rules should nonetheless
be preferred. Where there is a conflict between rules prescribed by institutional rules and
national procedural laws, party autonomy must be given priority.13 The only exception to
this is where institutional rules conflict with a mandatory provision in domestic legislation.14
Section 24 does not mandatorily apply in spite of party intention to the contrary.15
12 Jones at [9]. 13 Gary Born, International Arbitration: Law and Practice (Kluwer Law International, 2012) at p 237. 14 For example, Article 1(3) of the KLRCA Rules provides:
Article 1 - Scope of Application 3. These Rules shall govern the arbitration except that where any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail.
15 Justice Saleem Marsoof, “Arbitration Procedure, Law and Facilities in Sri Lanka”, Arbitration in Commonwealth Countries – An Anthology <https://www.academia.edu/12938711/Arbitration_Procedure_Law_and_Practice_in_Sri_Lanka> (accessed 10 July 2016) at p 782: “The Tribunal is bound to decide the dispute referred to it in accordance with the rules of law as chosen by the parties”, whereas failing designation, “the Act authorises the Tribunal to apply the... conflict of law rules it deems applicable” [emphasis added].
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14. The Parties have provided unequivocally for the arbitration to be conducted “in accordance
with” the KLRCA Rules.16 Accordingly, Article 35(1) applies, and the Tribunal should
directly apply the substantive law it deems appropriate.
(2) The Tribunal should apply the closest connection test
15. The Tribunal should apply the closest connection test to determine the most appropriate
substantive law. The approach under Article 35(1) of the KLRCA Rules invariably entails
the use of the closest connection test.17 The closest connection test is one that has achieved
status as a near-universal test for resolving conflicts of law using the voie directe approach.18
This test looks toward which country is most closely connected to the contract, and applies
the laws of that country to govern the rights and obligations of the parties arising out of the
agreement.19
16. Material factors that are considered to determine the country of closest connection include
the State where the contract is performed,20 the State of potential enforcement of the arbitral
award, the State that would have jurisdiction but for the arbitration,21 the currency reflected
in the agreement,22 and the domicile of the parties.23
16 Appendix A, Clause 22.1. 17 Rolf Shutze, Institutional Arbitration: An Article-by-Article Commentary (Verlag CH Beck, 2013) at p 723. 18 Jones at [34]. 19 Redfern and Hunter at [3.203]. Gary Born, International Commercial Arbitration (Kluwer Law International, 2009) (“Born, ICA”) at p 2132. 20 Carolina Saf, “A Study of the Interplay between the Conventions Governing International Contracts of Sale” (Queen Mary and Westfield College, 1999) (“Saf”) at [5.1]. 21 Jones at [31]. 22 Saf at [5.1]. 23 Jones at [36].
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B. Malaysian law is the most appropriate law to govern the contractual issues
17. The relevant factors point extensively to Malaysia being the country of closest connection
to the Agreement. First, the performance of the Agreement entailed the distribution of the
Products exclusively within the Malaysian territory.24 Secondly, CTC is seeking relief in
connection with a trademark infringement within the territory of Malaysia.25 Thirdly, all
reference to currency within the agreement is in Ringgit Malaysia, the national currency of
Malaysia.26
18. In this case, other relevant factors are negated as they do not point to one specific country.
The domicile of the parties, for instance, point to both Sri Lanka and Malaysia.27 On balance,
therefore, the above factors still point heavily to Malaysia being the country of closest
connection to the agreement.
19. Thus, Malaysian law, as the law of closest connection to the Agreement, governs the
substantive issues arising from the Agreement.
III. THE DOUBLE-ACTIONABILITY RULE APPLIES TO THE CLAIMS IN TORT
20. The double-actionability rule is applicable to CTC’s claims in tort. Absent a choice of law
clause for non-contractual claims, the Tribunal should apply the conflict of law rules under
24 Appendix A, Clause 2.1. 25 Moot Problem at [18]. 26 Appendix A, Clauses 2.1, 3.1, 7.6 and 11. 27 Appendix A, Preamble (Parties).
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the contract’s governing law.28 As Malaysian law governs the contract, its conflict of law
rules applicable to tort claims will apply.
21. Where tort claims are concerned, Malaysia applies the double-actionability rule.29 This rule
requires that a tort be actionable in both the law of the forum and in the lex loci delicti (the
place where the tort was committed).30 In the context of arbitration, the law of the forum is
substituted with the law of the seat. Actionability under the lex loci requires that “civil
liability” can be established under the foreign law, even where such liability is not strictly
tortious.31
22. Here, the law of the seat is Sri Lankan law. The lex loci delicti is Malaysia as the allegedly
tortious conduct, the distribution of SAILOR’S CEYLON, occurred within Malaysia.32
Accordingly, it is incumbent on CTC to show that any alleged tort is actionable in the law
of both jurisdictions.
IV. ATC IS NOT LIABLE FOR A BREACH OF CLAUSE 4.2 BY DISTRIBUTING
SAILOR’S CEYLON
23. Part III of the Malaysian Contracts Act 1950 governs the situations in which agreements are
void or voidable, subject to statutory exceptions. Clause 4.2 is void and unenforceable under
28 Simon Greenberg, Christopher Kee, Romesh Weeramantry, International Commercial Arbitration: An Asia-Pacific Perspective (Cambridge University Press, 2011) at [3.86]. 29 Chan Kwon Fong v Chan Wah [1977] 1 LNS 12, citing the English position in Phillips v Eyre (1870) LR 6 QB 1 (“Phillips”) and Boys v Chaplin [1971] AC 356. 30 Phillips at 28–29. 31 Red Sea Insurance Co Ltd v Bouygues SA [1995] 1 AC 190 at 230. 32 Moot Problem at [14].
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Section 28 of the Contracts Act as it is in restraint of trade and does not fall within any of
the statutory exceptions (A). Alternatively, Clause 4.2 is also unenforceable under the
common law test of reasonableness (B). Even if Clause 4.2 is enforceable, ATC is not in
breach of this clause (C).
A. Clause 4.2 is unenforceable under the Malaysian Contracts Act
24. Any clause in restraint of trade is prima facie void in Malaysia unless it falls within the
statutory exceptions in Section 28 of the Malaysian Contracts Act 1950.33 The section
provides: “Every agreement by which anyone is restrained from exercising a lawful
profession, trade, or business of any kind, is to that extent void.”
25. A contract is in restraint of trade where one party agrees with another to restrict his future
liberty to trade with third parties.34 In Polygram Records Sdn Bhd v The Search, it was held
that a clause in a recording contract that prevented musicians from making recordings for
two years after the contract expired was in restraint of trade.35
26. Clause 4.2 restricts ATC’s freedom to trade with third parties during the contract and for 12
months thereafter.36 ATC’s primary business is the manufacture, packaging and distribution
of tea,37 and it would ordinarily be entitled to contract with other suppliers if not for this
clause. Given that ATC had distributed tea products in Malaysia even before entering the
33 Contracts Act 1950 (Revised 1974) (Malaysia). 34 Millennium Medicare Services v Nagadevan Mahalingam [2016] 2 CLJ 36 (“Millennium Medicare”) at [17], citing Petrofina (Great Britain) Limited v Martin [1966] 1 All ER 126 at 138. 35 [1994] 3 CLJ 806 at 825. 36 Appendix A, Clause 4.2. 37 Moot Problem at [7]-[8].
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Agreement, Clause 4.2 effectively prevents ATC from returning to a business it was
originally engaged in. It is therefore a clause in restraint of trade that is prima facie void.
27. Clause 4.2 also does not fall within the limited statutory exceptions under Section 28 where
a restraint may be upheld. These exceptions are invoked where:
(a) a seller of goodwill is restrained from carrying on a similar business (“Exception
1”);
(b) a partnership is dissolved and a partner is restrained from carrying on a similar
business (“Exception 2”); or
(c) a partner agrees not to carry on any other business during the continuance of the
partnership (“Exception 3”).
28. These exceptions in Section 28 supplant common law principles on restraint of trade, as
observed by the Federal Court of Malaysia in Millennium Medicare Services v Nagadevan
Mahalingam.38 The Court held that the statutory exceptions represented the inclusion of
common law exceptions to the general rule in Section 28, and was “a clear manifestation of
the intention of the legislature to make the said provisions exhaustive”.39 Accordingly, if
none of these exceptions apply in the present case, Clause 4.2 is void.
29. Exception 1 is inapplicable as this applies only to restraints imposed on the seller of
goodwill of a business. This exception provides that “one who sells the goodwill of a
38 [2016] 2 CLJ 36. 39 Millennium Medicare at [17], referring to Polygram Records Sdn Bhd v The Search [1994] 3 CLJ 806 and Wrigglesworth v Wilson Anthony [1964] MLJ 269; Vision Cast Sdn Bhd v Dynacast (Melaka) Sdn Bhd [2014] 8 CLJ 884 (“Vision Cast”) at [63]-[64].
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business may agree with the buyer to refrain carrying on a similar business, within specified
local limits”, if such limits appear reasonable to the court.40 ATC, the party under the
restraint of Clause 4.2, would be the buyer rather than seller of CTC CEYLON’s goodwill,
if indeed there was such a sale of goodwill arising from the Agreement. The present situation
thus does not fall within the ambit of Exception 1.
30. Exceptions 2 and 3 are similarly inapplicable as ATC and CTC were not engaged in a
partnership, which is a relationship carried on between persons with a common view of
profits.41 Whether a partnership exists is determined from construction of the parties’
agreement,42 and their subsequent conduct.43
31. Clause 15.3, however, expressly states that “nothing in this agreement shall create … a
partnership” between ATC and CTC.44 The Parties also agreed for profits to be derived
independently. CTC’s profit was derived from ATC’s orders of CTC CEYLON products,
which was set at a minimum amount each year.45 Conversely, ATC generated its own profit
by selling these products through its distribution channels.46 ATC’s due performance under
the Agreement strongly suggests that the Parties had adhered to the target clauses above in
conduct.47 Both the Agreement and conduct of the Parties thus militate against the
suggestion of a partnership, and Exceptions 2 and 3 are also inapplicable.
40 Supra n 33 at Section 28. 41 Partnership Act 1961 (No 135 of 1961) (Malaysia), Section 3(1). 42 Malaysian International Trading Corp (Japan) Sdn Bhd v Bentini SPA [2014] 11 MLJ 255 at [167]. 43 MBF Capital Bhd v Tommy Thomas [1997] 3 MLJ 395. 44 Appendix A, Clause 15.3. 45 Appendix A, Clause 3.1. 46 Additional Clarifications, Question 22. 47 Moot Problem at [13].
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32. As none of the statutory exceptions apply, Clause 4.2 is void under Section 28 of the
Contracts Act for being in restraint of trade. It is therefore unenforceable against ATC in the
present dispute.
B. Clause 4.2 is also unenforceable under the common law test of reasonableness
33. As noted above, the statutory regime in Malaysia leaves no room for the application of
common law principles on restraint of trade.48 The only judicial support to the contrary is
the heavily criticised49 decision of Worldwide Rota Dies v Ronald Ong Cheow Joon
(“Worldwide Rota”).50 The Kuala Lumpur High Court considered the common law test of
reasonableness applied alongside Section 28 of the Contracts Act.51 Nevertheless, even if
this test were to apply, Clause 4.2 would be unenforceable.
34. In Worldwide Rota, the test entailed “consider[ing] the reasonableness of the restraint of
trade in the context of the interests of the parties as well as the public”.52 It is for the party
asserting it to establish that the restraint is reasonable in light of the interests of both
parties.53 Crucially, the restraint must be no wider than reasonably required to protect the
interests of the party employing the clause,54 and this applies to factors such as the
48 Respondent Memorial at [28]. 49 Millennium Medicare at [18], citing Vision Cast at [49] and Visu Sinnadurai, Law of Contract (LexisNexis, 2011, 4th Ed) at p 738: “this decision was clearly wrong in importing a test of reasonableness to determine the validity of a clause in restraint of trade”. 50 [2008] 8 MLJ 297. 51 Worldwide Rota at [126]. 52 Worldwide Rota at [128], citing Esso Petroleum Co v Harper’s Garage (Stourport) [1968] AC 269. 53 Thorsten Nordenfelt v Maxim Nordenfelt Gun and Ammunition Company [1894] 1 AC 535 at 565. 54 Herbert Morris Limited v Saxelby [1916] 1 AC 688 at 692, cited in Worldwide Rota at [114].
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geographical scope and duration of the restraint.55 Whether a clause is reasonable is,
ultimately, assessed in its totality.56
35. Clause 4.2 is wider than reasonably required to protect CTC’s interests. In terms of
geographical scope, the limits placed on ATC were unreasonable. A covenant of restraint
over an area is generally unenforceable unless it is a “solicitation covenant”,57 which
prevents one party from seeking business directly from the other’s customers.58 Even then,
all-encompassing area covenants which are regarded “pure restraints on competition” are
still unreasonable.59 No attempt was made to restrict Clause 4.2’s application only to ATC
approaching customers of CTC for business after the Agreement ended. CTC was in
possession of ATC’s customer lists60 and had the means to specify the customers ATC was
not to distribute to following the expiry of the Agreement. Instead, CTC chose to impose a
restraint which indiscriminately barred ATC from competition in the entire Malaysian
territory.
36. The effect of this geographical restraint is also disproportionately injurious to the interests
of ATC. ATC is prohibited from distributing throughout the Malaysian territory, which was
one of ATC’s main markets.61 In contrast, CTC’s main market is in Europe.62 Such a
prohibition would cause greater harm to ATC’s interests than it would benefit CTC.
55 Edwin Peel, Treitel: The Law of Contract (Sweet & Maxwell, 2011, 14th Ed) (“Treitel”) at [11-075]–[11-076]. 56 Amoco Australia d v Rocco Bros Motor Engineering Co d [1975] 1 AC 561 at 568, citing Stenhouse Australia Ltd v Phillips [1974] AC 391. 57 Treitel at [11-075], citing S W Strange v Mann [1965] 1 WLR 629, Glendhow Autoparts v Delaney [1965] 1 WLR 1366, T Lucas & Co v Mitchell [1974] Ch 129, Bridge v Deacons [1984] AC 705. 58 Treitel at [11-075], citing Fitch v Dewes [1921] 2 AC 158 at 169–170. 59 Supra n 57. 60 Appendix A, Clause 11. 61 Moot Problem at [7]; Clarifications, Question 8. 62 Clarifications, Question 9.
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37. Further, a long-term restraint is only justified if it is related to the nature of the business to
be protected.63 In Beckett Investment Management Group v Hall, a restraint of 12 months
was reasonable since a successful investment business required a long period to build
confidence with clients.64 In contrast, CTC did not need 12 months to regain their clients’
trust. CTC CEYLON is exclusively supplied in Malaysia by either ATC or CTC alone, and
customers would seek these products regardless of who supplied them. Clause 11 of the
Agreement already obligated ATC to keep a customer database to be owned by CTC,65
which would also facilitate a smooth handover of CTC CEYLON sales from ATC to CTC.
Hence, 12 months was an unreasonable duration to restrain ATC from conducting its own
business.
38. In totality, Clause 4.2 is unreasonable and is accordingly void and unenforceable against
ATC even under the common law test of reasonableness.
C. In any event, ATC is not in breach of Clause 4.2
39. Even if Clause 4.2 is enforceable, it only prohibits ATC from competing with CTC
CEYLON using a mark “arguably similar” to the Lion Logo.66 ATC has engaged in no such
conduct prohibited by Clause 4.2.
63 Beckett Investment Management Group v Hall [2007] EWCA Civ 613. 64 Id. at 1548-1549. 65 Appendix A, Clause 11. 66 Appendix A, Clause 4.2.
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(1) Clause 4.2 prohibits the use of a mark that is similar to the point of possible confusion
with CTC’s trademarks
40. The meaning of the words “arguably similar” should be interpreted objectively, as intended
by the parties considering the surrounding context of the agreement.67
41. The approach to assessing similarity of trademarks is well-established in law. This considers
the visual and conceptual similarities of the marks,68 from the perspective of an ordinary
consumer.69 In Symbion Pharmacy Services v Idameneo (“Symbion”),70 the Australian
Federal Court found that although a contractual clause was worded to prohibit use of a mark
“similar or capable of being confused with” the plaintiff’s mark, the framework of similarity
in the test of trademark infringement was still “useful” in determining the breach of the
clause.71 Hence, the framework of visual and conceptual similarity is applicable to
Clause 4.2.
42. “Arguable similarity”, however, must refer to similarity that has the effect of causing
possible confusion between ATC’s goods and CTC CEYLON. Where a clause is concerned
with the protection of trademarks, the concern underlying the provision is generally to guard
against the potential confusion by consumers between two similar-looking trademarks. Thus
67 Monument Mining Limited v Emas Kehidupan Sdn Bhd [2016] 1 LNS 111 at [39], citing Berjaya Times Square Sdn Bhd (dahulunya dikenali sebagai Berjaya Ditan Sdn Bhd) v M-Concept Sdn Bhd [2010] 1 CLJ 269, MBF Holdings Bhd and Anor v Dato' Loy Teik Ngan [2015] 1 AMCR 21, Kwan Chew Holdings Sdn Bhd v Kwong Yik Bank Bhd [2007] 2 CLJ 127 and following the English position in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98. 68 BRG Brilliant Rubber Goods v BHPC Marketing [2015] 1 LNS 423 (“BHPC Marketing”) at [25]; Kerly’s Law of Trade Marks and Trade Names (Sweet & Maxwell, 2011, 15th Ed); Sabel v Puma [1998] RPC 199. 69 MI & M Corporation v A Mohamed Ibrahim [1964] MLJ 392. 70 [2011] FCA 389. 71 Id. at [38].
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in Symbion, the Court held that the prohibition on using a mark “similar to” the respondent’s
mark could only be understood by reference to its effect of being capable of confusing other
persons.72 Similarly, Clause 4.2 which prevents ATC from using an “arguably similar” mark
must be read as prohibiting a mark which is similar to CTC’s trademarks to the point where
it would possibly confuse ATC’s goods with CTC’s.
43. The Claimant cannot rely on an interpretation adopting a lower threshold of similarity. It is
acknowledged that the standard of an “arguably similar” mark in Clause 4.2 was intended
to be lower than a “likel[ihood] to cause confusion or deception”, which features in Clause
9.3.7. However, the Parties could not have intended for the threshold of “arguable
similarity” to be as low as its literal definition suggests. “Arguable” in its plain and ordinary
meaning merely refers to a matter being “open to argument” or “capable of being argued”.73
Literally applied, this would mean that even hypothetical similarity in ATC’s marks might
fall afoul of Clause 4.2. This would not comport with commercial reality as there is no
objective standard by which ATC could regulate its conduct. Parties thus could not have
intended “arguably” to have such a wide and uncertain meaning as on its strict dictionary
definition.
44. Hence, the better interpretation of Clause 4.2 is that it prohibits ATC from distributing
competing products with a possibly confusing mark with CTC’s trademarks. To establish a
breach of this clause, it must be shown that the visual and conceptual similarities between
ATC’s Mark and the Lion Logo might lead to a real chance of confusion among consumers.
72 Supra n 70 at [35]. 73 Oxford English Dictionary (Oxford University Press, 2016).
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(2) ATC did not use a possibly confusing mark
45. Applying the above standard, ATC’s Mark is not arguably similar to the Lion Logo. The
distinctive elements of two marks must be looked at in determining if the two marks are
similar.74
46. Here, a distinctive element in both the ATC’s Mark and the Logo is the central pictorial
device, occupying a significant amount of space on both Marks. However, it would be a
mistake to consider that the two marks are similar simply because both purportedly contain
lions. On a visual analysis, the CTC’s Logo uses the heraldic lion insignia of Sri Lanka.
This lion is heavily stylised, bears extraordinary features and holds a sword. This depiction
is so unusual that, notwithstanding its label as the “Lion Logo”, the pictorial device would
only be recognisable as a lion to those familiar with Sri Lankan heritage, such as the Sri
Lankan public. The ATC’s Mark, however, bears the illustration of an ordinary lifelike lion.
The two marks present an apparent visual contrast rather than similarity.
47. As the two marks in this case are also composite marks, combining the pictorial device with
other graphic and textual elements, it is equally necessary to consider the whole impression
left by each Mark seen in its totality. As observed by the Malaysian High Court in BRG
Brilliant Rubber Goods v BHPC Marketing, “a mark must be viewed as a whole and not by
dissecting elements of the mark.”75 Where there is a common element between the two
74 BHPC Marketing at [44], citing Nokia Corporation v Truong [2005] 66 IPR 511. 75 BHPC Marketing [2015] 1 LNS 423 at [45].
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marks, it has been held that consumers are likely to pay more attention to the distinguishing
characteristics of both marks.76
48. Hence, even if ATC’s Mark and the Lion Logo have the same central device of a lion, other
elements, such as the inclusion of the words “CEYLON TEA” in the Lion Logo and not
ATC’s Mark, would negate the possibility of confusion among consumers.
49. In addition to these considerations, several other elements distinguish ATC’s Mark from the
Lion Logo. For instance: ATC’s Mark employs numerical elements, which are not present
in the Lion Logo; there are differences in the shading of the lions in both marks; and the
overall shape and proportions of both marks are different.
50. It is not enough, therefore, for CTC to point to several disparate elements within the Marks
which are similar and conclude that the public may possibly be confused. Seen in their
entirety, the Marks convey very different impressions. The ordinary Malaysian consumer,
chancing upon the Marks, is more likely to identify the ATC’s Mark as being a “lion
trademark” upon tea products while referring to CTC’s Logo as a “Ceylon tea trademark”.
51. As there is no possibility of confusion between the Marks, ATC has therefore not breached
Clause 4.2 by using an arguably similar mark on SAILOR’S CEYLON products.
76 BHPC Marketing [2015] 1 LNS 423 at [46], citing Harrods Application [1935] 52 RPC 65 at 70; BRG Brilliant Rubber Goods v Leong Choon Loy [2016] 1 CLJ 1001 at [37], citing Polo/Lauren Co LP v United States Polo Association [2002] 1 SLR(R) 129 at [8].
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V. ATC IS NOT LIABLE UNDER THE LAW OF GEOGRAPHICAL INDICATIONS
FOR USING THE BRAND NAME “SAILOR’S CEYLON”
52. By alleging a misleading use of the word “Ceylon” on ATC’s tea products, CTC is likely to
proceed against ATC under the law of geographical indications (“GIs”). GIs serve as labels
which inform consumers of where the product originates, if this place of origin imbues the
product with certain characteristics, quality or reputation which are appealing to
consumers.77 Examples of well-known GIs include Darjeeling tea from India, Scotch
whisky from Scotland and Parma ham from Italy. A trader who falsely uses a GI to describe
his products, in a manner as to mislead consumers that his goods come from that famous
place of origin, is liable for infringement of a GI.
53. Any claim against ATC for infringement of a GI must be brought under Malaysian
legislation. This is based on the principle that domestic statutes apply prima facie to all acts
within that jurisdiction.78 Since CTC bases its claim on ATC’s distribution of SAILOR’S
CEYLON within the Malaysian territory, the applicable legislation is the Malaysian
Geographical Indications Act 2000 (“GIA”).79 The applicability of the GIA is strengthened
by the Parties’ agreement that disputes “shall be governed by and construed according to
the relevant applicable legislation”.80 Having found that the applicable legislation in this
case is the Malaysian GIA, the Tribunal must apply its provisions to determine the dispute
at hand.
77 Chocosuisse Union v Maestro Swiss Chocolate [2010] 3 MLJ 676 (“Chocosuisse”) at [69]-[70]. See also Susanna Leong, Intellectual Property Law of Singapore (Academy Publishing, 2013) at [34.002]. 78 Ruth Sullivan, Driedger on the Construction of Statutes (Butterworths, 1994, 3rd Ed) at p 334. 79 Geographical Indications Act 2000 (Act 602 of 2000) (Malaysia). 80 Appendix A, Clause 22.
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54. Consequently, under the Malaysian GIA, the Claimant will not succeed in pursuing the
infringement of a GI. This because the dispute involves a non-arbitrable issue (A). In any
event, ATC’s use of the word “Ceylon” for its tea products is not misleading (B).
A. The claim for infringement of a geographical indication is a non-arbitrable issue
55. The arbitrability of a dispute generally turns on the law of the seat of arbitration,81 which is
Sri Lanka in the present case. Under Section 4 of the Sri Lankan AA, disputes are non-
arbitrable if they involve matters that are “not capable of determination by arbitration”.82
This occurs where a matter so pervasively affects the interests of third parties that the dispute
should be heard in the public domain by the national courts, and not in private arbitration
proceedings.83
56. Before any issues relating to potential infringement may be heard, a preliminary issue is
whether the label “Ceylon tea” is protected as a GI in Malaysia. This is a matter that has not
been definitively settled by national authorities as Ceylon tea is not a registered GI in
Malaysia84 and no judicial authority exists for whether Ceylon tea falls within the definition
of a protectable GI under the Malaysian GIA. Insofar as the present claim would require the
Tribunal to make a pronouncement on such an issue, it is non-arbitrable for policy reasons.
81 Julian Lew, Loukas A. Mistelis, et al., Comparative International Commercial Arbitration (Kluwer Law International, 2003) at [9]-[29]. See also ICC Case No. 6162 (Consultant v Egyptian Local Authority) XVII YBCA 153 (1992); ICC Case No. 4604, X YBCA 973 (1985) 975. 82 Supra n 9 at Section 4. 83 Born, ICA at p 768; Redfern and Hunter at [2.126]. 84 Larry Sait Muling, “Geographical Indications - What is New in the Asia-Pacific Region? Malaysia Perspective”, March 2013 (WIPO/GEO/BKK/13/INF/4).
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57. GIs are a unique species of intellectual property rights which are owned by entire local
communities, and not merely a specific producer.85 There is academic opinion that GIs are
in the nature of “collective … (or) public property” which belong to all producers of the
concerned good.86 If Ceylon tea is declared to be a protectable GI under the GIA, this creates
an intellectual property right within the Malaysian territory which should not be kept
exclusive to CTC in the present arbitration, since it is collectively owned by all Ceylon tea
producers. This however is at odds with the nature of arbitration as a private proceeding.87
Therefore, as this decision ought to be of consequence to many third parties beyond the
present arbitration, it is a non-arbitrable matter.
58. This conclusion is further supported by consideration of the public policy of Sri Lanka in
particular. The Sri Lankan economy as a whole relies overwhelmingly on its Ceylon tea
industry;88 therefore, under Sri Lankan law, a strict view is taken towards the protection of
Ceylon tea as a GI.89 Inferring from this context, Sri Lanka is unlikely to allow such a matter
of grave public interest to be resolved in private arbitration; rather, this may be regarded as
a matter for the national courts to decide. The present claim for infringement of a GI is thus
non-arbitrable, and the Tribunal should not proceed to hear the claims against ATC under
the Malaysian GIA.
85 Lisa P Lukose, “Rationale and Prospects of the Protection of Geographical Indications: An Inquiry” (2007) 12 Journal of Intellectual Property Rights 212 at 213. 86 Id. at p 214. 87 Redfern and Hunter at [2.126]. 88 Sanath Wijesinghe, “The Protection on Geographical Indications in Developing Countries: The Case of Ceylon Tea” (2015) 1 Multidisciplinary Law Jousrnal 6. 89 For example, the infringement of a GI is also a criminal offence in Sri Lanka: see Intellectual Property Act 2003 (No 36 of 2003) (Sri Lanka), Section 191.
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B. In any event, ATC’s use of the word “Ceylon” is not misleading
59. Even if the claim in infringement under the Malaysian GIA is arbitrable, ATC has not
contravened the provisions of the GIA. Under Section 5 of the GIA, a geographical
indication is infringed only where there has been the use of any sign or symbol upon goods
suggesting a false place of origin, “in a manner which misleads the public as to the
geographical origin of the goods”.90 ATC’s only use of the word “Ceylon” is in its brand
name “SAILOR’S CEYLON”.91 This alone is not misleading as SAILOR’S CEYLON is
not presented as an indication of the tea products’ source.
60. Not every use of a geographic term upon a product is taken to be an indication of the
product’s source, especially when it is part of a longer composite phrase.92 Rather, the
question is whether such a phrase will be construed by consumers to mean that the product
was made in a certain locale.93
61. The Malaysian High Court decision of Chocosuisse Union v Maestro Swiss Chocolate
(“Chocosuisse”)94 similarly illustrates that the impugned words must be viewed in the
whole context in which it is seen by consumers. An association of chocolate producers from
Switzerland brought proceedings under Section 5 of the GIA against the defendant who
used the words “Maestro SWISS” on Malaysian-made products. The Court held that
“Maestro SWISS” did not appear as a designation of the chocolate products’ origins, but
90 Supra n 79, Section 5(1)(a). 91 Moot Problem at [14]; Additional Clarifications, Question 4. 92 Forschner Group Inc v Arrow Trading Co Inc 30 F 3d 348 at 355 (2nd Cir, 1994). 93 Ibid. 94 Supra n 79.
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only as a corporate name of the defendants due to its small size and inconspicuous
positioning on the product packaging.95 Accordingly, there was no infringement of a GI as
consumers would not rely on those words and be misled into thinking that the products
originated from Switzerland. While the High Court decision was subsequently overturned
on the basis of the appellate court accepting evidence of market surveys, the High Court’s
contextual approach was not criticized by the appellate courts.96
62. The name “SAILOR’S CEYLON” is not presented as an indication that the tea products
sold under this brand are all Ceylon tea from Sri Lanka. Crucially, this is a brand name
applied to a wide range of tea products, some of which are clearly not Ceylon tea.97 For
example, English Breakfast tea is made from a blend of tea leaves of different origin.98 This
would never constitute Ceylon tea, which according to the Sri Lanka Tea Board must be
entirely grown and manufactured in Sri Lanka.99 All of SAILOR’S CEYLON products are
clearly labelled by their specific product description,100 and the average tea consumer is
unlikely to believe that such a diversity of tea products can all be Ceylon tea from Sri
Lanka. This is especially since ATC never advertises or describes its products as “Ceylon
tea”,101 but only by other descriptions such as “Earl Grey tea” or “English Breakfast tea”.
95 Chocosuisse at [53], [59] and [72]. 96 Chocosuisse Union v Maestro Swiss Chocolate [2013] 6 CLJ 53 at [60], [63]-[64]; Maestro Swiss Chocolate v Chocosuisse Union [2016] 3 CLJ 345 at [72]. 97 Additional Clarifications, Question 11. 98 Jane Pettigrew and Bruce Richardson, The Tea Lover’s Companion: A Guide to Teas Throughout the World (National Trust Enterprises Ltd, 2005) at p 54. 99 Sri Lanka Tea Board website <http://www.pureceylontea.com/index.php/features/why-ceylon-tea> (accessed 1 May 2016). 100 Additional Clarifications, Question 11. 101 Additional Clarifications, Question 4.
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63. Further, ATC’s tea products also state that China is the place of manufacture of its
SAILOR’S CEYLON products.102 The provision of such details relating to the product’s
true origin is a material factor in negating any deception or confusion to consumers. This
was the case in Chocosuisse, where the Malaysian manufacturers had also printed its place
of manufacture and company address at the back of the product packaging.103 The judge
held that “these compelling words tell both the defendants as Malaysian manufacturers and
the origin of the product”, and any reasonable person would not believe that the products
were Swiss chocolate.104 This reasoning similarly applies in the present case, to the effect
that the words “SAILOR’S CEYLON” would not mislead consumers into believing this
range of tea products to be Ceylon tea from Sri Lanka.
64. Thus, the use of ATC’s brand name SAILOR’S CEYLON is unlikely to mislead and ATC
has not infringed a geographical indication under Section 5 of the GIA.
VI. ATC HAS NOT BREACHED CLAUSE 9.3.7 AS IT DID NOT USE A MARK
LIKELY TO CAUSE CONFUSION WITH THE TRADEMARKS OF CTC
65. Clause 9.3.7 provides that ATC must not use in Malaysia “any trade marks … so resembling
the Trade Marks (of CTC) as to be likely to cause confusion or deception” [emphasis added].
This essentially prohibits conduct that would amount to statutory trademark infringement
under Section 38(1) of the Malaysian Trade Marks Act 1976, which employs substantially
the same wording as Clause 9.3.7.105 The Parties’ phrasing of Clause 9.3.7 evinces their
102 Additional Clarifications at Question 6; Moot Problem at [14]. 103 Chocosuisse at [57]. 104 Id. at [58]. 105 Trade Marks Act 1976 (No. 175 of 1976) (Malaysia), Section 38(1).
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intention to introduce the standard of trademark infringement into the clause. To succeed
under this provision, it is thus incumbent on CTC to establish a higher standard of similarity
than that of “arguable similarity” in Clause 4.2.
66. The test for infringement is whether a person who sees one trademark in the absence of the
other, in his “general recollection” of the other mark, would be likely to mistake the two.106
The likelihood of confusion is more difficult to prove where, as in the present case, the
relevant public is composed of highly literate consumers who are “more demanding,
discerning and observant than before” and better able to distinguish between trademarks and
businesses, as observed by the Malaysian High Court in Consitex SA v TCL Marketing.107
67. As set out above, the distinctive elements of both Marks are separate.108 While the ATC’s
Mark can be easily identified by consumers as a lion trademark, CTC’s Logo is likely to be
associated more with the readable words “CEYLON TEA” than the mythical lion which
appears on it. Further, even if the two Marks are considered similar, the Marks are
inconspicuous due to their small size and would be less likely to confuse considering the
separate brand names and types of tea products they are sold under.
68. ATC has therefore not breached Clause 9.3.7 as the ATC’s Mark is unlikely to deceive or
confuse literate Malaysian consumers that it is the same trademark as CTC’s Lion Logo.
106 Supra n 69. 107 [2008] 1 LNS 91. 108 Respondent Memorial at [45]–[48].
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VII. ATC IS NOT LIABLE FOR THE TORT OF PASSING OFF
69. ATC is not liable for the tort of passing off whether under Malaysian or Sri Lankan law, as
the elements of misrepresentation and damage are not satisfied (A). Further, the Claimant
cannot rely on the extended tort of passing off because it does not fulfill the double
actionability rule (B).
A. The elements of the tort are not made out in either Malaysia or Sri Lanka
70. The elements of the tort of passing off under Malaysian law were set out by the Court of
Appeal in Yong Sze Fun v Syarikat Zamani Hj Tamin (“Yong Sze Fun”):109
(a) the plaintiff has established sufficient goodwill, reputation and presence in the trade
name in question;
(b) the actions of the defendant constitute a misrepresentation, whether intentional or
otherwise, that is likely to cause or has already caused confusion and deception to
the public in thinking that the goods of the defendant are those of the plaintiff; and
(c) the plaintiff has suffered, or is likely to suffer damage to its business or goodwill as
a result of the defendant’s misrepresentation.
71. This test for determining liability in the tort of passing off is the same in Sri Lanka as it is
in Malaysia.110
109 [2006] 5 MLJ 262 at [73], citing the English position in Reckitt & Coleman Products Ltd v Borden Inc [1990] 1 All ER 873 (“Reckitt”) at 880. 110 Randenigala Distilleries Lanka v Distilleries Company of Sri Lanka SC (CHC) Appeal No 38/2010 at 4, citing Reckitt.
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(1) ATC has not misrepresented its products as being connected to CTC
72. Even if CTC may have sufficient goodwill associated with “Ceylon tea” in Malaysia, ATC
has not misrepresented its goods as being connected to CTC. A misrepresentation takes
place when the act of the respondent leads the public to believe that the claimant has control
or responsibility over the goods produced by the respondent.111 This is established from the
circumstances surrounding the use of the trade marks and names, such as similarity between
the names and logos used,112 the type of product sold and their packaging.113 The existence
of a misrepresentation is assessed from the perspective of a reasonable consumer.114
73. The ATC’s Mark and the Lion Logo are visually and conceptually distinct, as noted
earlier.115 Even if the marks are similar, their small size means that the marks are unlikely
to be prominent features of either ATC’s or CTC’s tea packaging, such that consumers
would notice and be confused. CTC’s claim in passing off thus fails as there has been no
misrepresentation by ATC that its goods are connected to CTC in any way.
111 British Legion v British Legion Club (Street) [1931] 63 RPC 555 at 564. 112 Intel Corp v Intelcard Systems [2004] 1 MLJ 595 (“Intel Corp”) at [21]. 113 McCurry Restaurant (KL) v McDonalds Corporation [2009] 3 MLJ 774 at [11]. 114 Ibid; Pelita Samudra Pertama (M) v Venkatasamy a/l Sumathiri [2012] 6 MLJ 114 at [48]. 115 Respondent Memorial at [67].
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(2) CTC has not suffered damage to its goodwill due to ATC’s actions
74. Damage to goodwill can be either actual or probable damage.116 Nevertheless, even for a
likelihood of damage to be shown, there must be “a real tangible risk of substantial damage”
and not merely the speculation of damage.117
75. CTC has not suffered either actual damage or probable damage. While the sales of CTC
CEYLON fell in 2013 and 2014,118 this is not wholly attributable to the presence of
SAILOR’S CEYLON since 2012. The fact that CTC CEYLON sales picked up again in
2015, while SAILOR’S CEYLON was still on the market,119 shows that there were
potentially other reasons for the fluctuations in CTC CEYLON’s fortunes. As CTC had just
begun taking over distribution of CTC CEYLON in 2013, the fall in sales of its products in
that same year is more reflective of CTC’s own difficulties in building up its own presence
as a new distributor in the Malaysian market. It cannot be said that ATC’s distribution of
SAILOR’S CEYLON was the likely cause of any losses suffered by CTC.
76. Thus, CTC’s claim in passing off fails in the absence of proof of actual or probable damage
to CTC’s goodwill.
116 Yong Sze Fun at [142]–[143], citing the English position in Bulmer (HP) Ltd v Bolinger SA [1978] RPC 79 and Erven Warnik BV v J Townend & Sons (Hull) Ltd [1979] AC 731. 117 Novelty Pte Ltd v Amanresorts Ltd [2009] 3 SLR(R) 216 at [105], citing Christopher Wadlow, The Law of Passing-Off: Unfair Competition by Misrepresentation (Sweet & Maxwell, 2011) at [4-40]. 118 Clarifications, Question 10. 119 Clarifications, Question 10; Additional Clarifications, Correction to Question 13.
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B. The extended tort of passing off is not actionable
77. The double-actionability rule requires that civil liability must be established under the laws
of both the lex loci and the seat.120 The extended tort of passing off does not fulfil this test.
78. The extended tort of passing off differs from the classic tort of passing off as it protects
different interests. While both guard against unfair competition,121 the classic tort of passing
off protects one business’ goodwill in relation to the good name and repute connected with
its trade name.122 This is based on misrepresentation as to the source of a trade name.123
79. Conversely, the extended tort of passing off protects a class of traders who share a particular
trade name distinctive of a particular class of goods.124 This is based on a misrepresentation
as to a product having certain distinctive qualities of a class of goods, which it does not
actually have.125 As the civil wrong sought to be protected under both forms of passing off
are different, they should be regarded as separate torts and not different interpretations of
the test under the tort of passing off.
80. While Malaysian law recognises the extended tort of passing off,126 the law of Sri Lanka
does not.127 An action in the extended tort of passing off would not be actionable in the law
120 Respondent Memorial at [20]–[22]. 121 Norchaya Talib, Law of Torts in Malaysia (Sweet & Maxwell Asia, 2003, 2nd Ed) at p 475. 122 Intel Corp at [21]. 123 Suman Naresh, “Passing off, Goodwill and False Advertising: New Wine in Old Bottles” [1986] 45 CLJ 97 at p 98. 124 Chocosuisse at [29]–[42]. 125 Id. at [38]. 126 Supra n 124. 127 Hebtulabhoy and Co Ltd v Stassen Exports Ltd S.C. Appeal No. 20/89 (unreported).
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of the seat. Thus, such a claim would fail the double-actionability test and is not actionable
in this arbitration.
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PRAYER FOR RELIEF
For the foregoing reasons, the Respondent respectfully requests the Tribunal to declare that:
1. Sri Lankan law is the procedural law and Malaysian law is the substantive law for this
dispute;
2. The Respondent is not liable under Clause 4.2 of the Distribution Agreement;
3. The Respondent has not breached Clause 9.3.7 of the Distribution Agreement;
4. The Respondent’s use of the word “Ceylon” in respect of its products is not misleading;
and
5. The Respondent’s use of ATC’s Mark does not amount to the tort of passing off.