UPDATED WITH LINK TO AWARD: A subsidiary of the creator of Chinese social media website Weibo has persuaded a Dutch court to partially annul a US$116 million award concerning alleged misuse of location-based services software, a dispute that has spawned enforcement proceedings in Hong Kong and the British Virgin Islands.
On 30 August, the Amsterdam Court of Appeal ruled that a Netherlands Arbitration Institute (NAI) tribunal wrongly upheld jurisdiction over Hong Kong-registered Sina Hong Kong.
The court therefore annulled the tribunal’s jurisdictional and final awards to the extent they upheld claims against Sina HK, whose parent entity Sina Corporation is the creator of the popular Weibo platform.
It upheld the awards as against the other respondent, GyPSii – a joint venture between Sina HK and the claimant in the arbitration, Dutch technology developer GeoSolutions.
GyPSii has not been operational since 2015, leaving GeoSolutions with the choice of trying to enforce against its own defunct joint venture vehicle or bringing a new claim against Sina HK in a different venue.
The final award is public after being filed as an exhibit in related US litigation. It was issued by an NAI tribunal chaired by Gary Benton, an independent arbitrator and founder of the Silicon Valley Arbitration and Mediation Center (SVAMC) in Palo Alto. He sat with Dutch professor Steef Bartman and IP disputes specialist Alan Loudermilk.
Sina HK was represented by a Linklaters team led by partner Gerard Meijer, who was part of a larger counsel team in the arbitration while at his former firm NautaDutilh. GeoSolutions was represented in the set-aside proceedings by Van Doorne, which also acted in the arbitration alongside Squire Patton Boggs.
One of the biggest social media platforms in China, Weibo spun off from Sina after it launched an initial public offering on the NASDAQ exchange in 2014, but Sina retains a stake in the company.
In 2011, GeoSolutions agreed to provide its location-based services software for Sina to use on Weibo and its other distribution channels. Soon after, Sina HK bought a 60% stake in GeoSolutions’ Chinese subsidiary GyPSii, which was thereafter treated as a joint venture between the parties. GyPSii was granted an exclusive royalty-free licence to use the software throughout China.
GeoSolutions and GyPSii also entered into a licence agreement in 2011 that was renewed three years later, with Sina HK also signing the renewed agreement beneath a line stating “acknowledged and agreed”.
In 2016, GeoSolutions filed its NAI claim against the Sina companies and GyPSii, alleging they had breached the licence agreement by failing to pay required royalties and allowing the technology to be used by Weibo and others without compensation. Sina HK and Sina Corporation contested the jurisdiction of the tribunal, while GyPSii did not appear in the arbitration.
In a 2017 jurisdictional award, the tribunal found there was a valid arbitration agreement between GeoSolutions and Sina HK, rejecting Sina HK’s arguments that its signature of the 2014 licence agreement was for a “limited purpose”. At the same time, it declined jurisdiction over Sina Corporation.
In its final award two years later, the tribunal found that Sina HK had interfered with the joint venture’s obligations under the licence agreement and had facilitated unlicensed use of the IP. It found Sina HK and the joint venture jointly liable to pay US$116 million in damages to GeoSolutions.
The panel rejected a host of non-contractual claims by GeoSolutions, including for copyright and database infringement, conversion, unjust enrichment, tortious breach of good faith and fair dealing, and abuse of legal identity.
In this week’s judgment, the Dutch court said it would assume that Sina could be treated as a party to the licence agreement in some respect. But the court said it was unclear how the the tribunal had concluded that the arbitration clause in the licence agreement is “generally attributable to all parties”.
The arbitration clause in the contract specified that it was binding on “both parties”, said the court, meaning GeoSolutions and GyPSii. The court said this language excluded Sina HK as also being subject to the clause.
The tribunal had described that phrasing as one of several “artifacts” from the earlier licence agreement that only GeoSolutions and GyPSii had signed. While this was an “awkward drafting error”, the tribunal said there was no reliable evidence that the phrase was intended to limit arbitration to the two original parties.
However, the Dutch court said the wording “both parties” did entail such a limitation. It rejected explanations by GeoSolutions that the failure to amend the wording to make Sina HK’s consent to arbitration more explicit was a result of time pressure caused by liquidity issues at GyPSii.
GeoSolutions argued that a ruling the tribunal lacked jurisdiction over Sina HK would have the “extremely far-reaching” consequence that its claim would have to be resubmitted before a competent ordinary court. The Dutch court said that it did not see that this consequence was “unacceptable”.
Counsel to GeoSolutions, Van Doorne partner Rogier Schellaars says the court “substituted its own views and judgment for that of a unanimous, three-member arbitral tribunal on key factual determinations, without having the benefit of, notably, seeing the witnesses’ demeanour and credibility in the underlying arbitration.”
He says GeoSolutions plans to appeal the judgment to the Dutch Supreme Court, adding that as far as his client is concerned the award remains “in full force and effect”.
“If allowed to stand,” he says the judgment will “allow national courts to interfere with matters that should be reserved for the arbitrators, casting a shadow over the Netherlands as a seat of international arbitration.”
Sina HK’s Dutch counsel tells GAR that Sina is “very content with the outcome, which we think is indeed the correct outcome.”
GeoSolutions has also sought to enforce the NAI award in Hong Kong and the British Virgin Islands. In an anonymised ruling in March, the Hong Kong Court of First Instance agreed to adjourn the enforcement action pending the Dutch set-aside proceedings, while refusing to order Sina HK to post security.
The Hong Kong ruling also revealed that GeoSolutions obtained a provisional charging order from the BVI courts in December last year against shares worth around US$600 million that Sina indirectly holds in a mainland Chinese company. The status of that attachment is unclear.
The Sina companies’ counsel team in the arbitration underwent various changes, with the companies using King & Wood Mallesons in Beijing and David Joseph QC of Essex Court Chambers along with NautaDutilh during the merits phase. During the jurisdictional phase, they initially used DeHeng Civil Code in The Hague and TransAsia Lawyers in Beijing before replacing them with Skadden in Hong Kong and NautaDutilh.
Sina Hong Kong v GeoSolutions BV and GeoSolutions Holdings NV
In the Amsterdam Court of Appeal
Counsel to Sina
Partner Gerard Meijer and counsel Bo Ra Hoebeke in Amsterdam
Counsel to GeoSolutions BV
Partner Rogier Schellaars in Amsterdam
In the Hong Kong Court of First Instance
Bench
- Judge of the Court of First Instance Mimmie Chan
Counsel to GeoSolutions
- Clifford Smith SC and Cyrus Chua of Des Voeux Chambers in Hong Kong
- RPC in Hong Kong
Counsel to Sina HK
- Benjamin Yu SC in Hong Kong
- Rimsky Yuen SC, James Man and Jennifer Fan of Temple Chambers in Hong Kong
- Stevenson Wong & Co in Hong Kong
- Wilmer Hale
Counsel Rina See in London
GeoSolutions BV and GeoSolutions Holdings NV v Sina Hong Kong, Sina Corporation and GyPSii (Shanghai) Co (NAI Case No. 4427)
Tribunal
- Gary Benton (US) (Chair)
- Alan Loudermilk (US) (appointed by GeoSolutions)
- Steef Bartman (Netherlands) (appointed by Sina)
Counsel to GeoSolutions BV
Partners Stephen Anway and Corinne Irish in New York, Adam Fox and Marisol Mork in Los Angeles, Peter Chow* in Singapore and Rostislav Pekař in Prague
* Until his move to King & Spalding in September 2019
Rogier Schellaars in Amsterdam**
** Brought the case with him from Simmons & Simmons in June 2019
Counsel to Sina HK and Sina Corporation
- King Wood & Mallesons in Beijing (merits phase)
Liu Yuwu, Huwang Tao, Constance Zhao, Lv Mengdan and Zhong Lingling in Beijing
- David Joseph QC and Wei Jian Chan of Essex Court Chambers in London (merits phase)
- NautaDutilh (jurisdictional and merits phase)
Partner Gerard Meijer* and counsel Bo Ra Hoebeke* in Amsterdam
Gerard Meijer*, Bastiaan Assink, Anne Marie Verschuur, Mirjam van de Hel-Koedoot, Kasper Krzeminski, Bo Ra Hoebeke*, Marieke Pols**, Tanja Schasfoort**, Juan Sanchez Pueyo* and Juan Pablo Valdivia Pizarro* in Amsterdam
* moved to Linklaters in 2019
** No longer with the firm
- Skadden Arps Slate Meagher & Flom (jurisdictional phase)
Partners Rory McAlpine in Hong Kong and associate Eleanor Hughes in Singapore
- DeHeng Civil Code in The Hague (jurisdictional phase)
Expert witnesses for GeoSolutions
- Martin Walker of Brass Rat Group
- Brian Napper of Ocean Tomo
Expert witnesses for Sina
- Christopher Bakewell of Kroll
- Sandeep Chatterjee of Experantis LLC
