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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.