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On February 13th 2025, Supreme People’s Court of The People’s Republic of China (“PRC”) issued the Reply on Validity of Agreements by Hong Kong and Macao-Invested Enterprises Registered in Mainland Cities of the Guangdong-Hong Kong-Macao Greater Bay Area to Choose Hong Kong or Macao Law as the Governing Law or to Designate Hong Kong or Macao as the Place of Arbitration (the “Reply”), which took effect on February 14th 2025.  The two key breakthroughs are as follows. 

1. Litigation

According to the Reply, “If one or both parties to an agreement are Hong Kong-[1] or Macao-invested[2] enterprises registered in Shenzhen or Zhuhai of the Guangdong-Hong Kong-Macao Greater Bay Area, and they have agreed to apply the laws of HKSAR or MSAR as the governing law of their contract and assert the application of such law in litigation, the People’s Court shall uphold the agreement, provided that it does not contravene the mandatory provisions of national laws or harm public interests.”

Prior to this, the People’s Court generally held that foreign-invested enterprises were not considered foreign-related cases, so the relevant dispute concerning the agreement has to be governed by the laws of the PRC.

2. Arbitration

According to the Reply, “If one or both parties to an agreement are Hong Kong- or Macao-invested enterprises registered in any of the nine Mainland cities of the Guangdong-Hong Kong-Macao Greater Bay Area and have designated Hong Kong or Macao as the place of arbitration, the People’s Court shall not uphold a party’s request to invalidate the arbitration agreement on the grounds that the dispute lacks Hong Kong or Macao-related elements.

If the parties submit their dispute to arbitration as agreed, and after an arbitral award is rendered, one party claims that the dispute lacks Hong Kong or Macao-related elements and asserts that the arbitration agreement is invalid to resist the recognition and enforcement of the arbitral award, the People’s Court shall not uphold such a claim. ”

Previously, according to Answers to Practical Issues in Foreign-Related Commercial and Maritime Trials (Supreme People’s Court Fourth Civil Division, December 2008), the Supreme People’s Court Fourth Civil Division held that the law does not permit domestic parties to submit disputes without foreign-related elements to foreign arbitration.

The Reply grants parties greater autonomy in the choice of governing law. Foreign investors looking to invest in Greater Bay Area through a Hong Kong or Macau entity may now be able to adopt the laws of HKSAR or MSAR and designate Hong Kong or Macao as the place of arbitration to resolve disputes in respect their investment agreements.  Such change further strengthens the convenience of Hong Kong seated arbitrations in addition to the existing “friendly policy” on the recognition of Hong Kong arbitration awards in Mainland China under the Arrangement Concerning Mutual Enforcement of Arbitral Awards and its subsequent Supplemental Arrangement.

Seyfarth has experience in advising on foreign investments in China and our attorneys has profound experience in cross-border transactions and litigations in the region of Greater Bay Area.

[1] Hong Kong-invested enterprises refer to enterprises wholly or partly invested by natural persons, enterprises, or other organizations from the Hong Kong Special Administrative Region and legally registered in Mainland China.

[2] Macao-invested enterprises refer to enterprises wholly or partly invested by natural persons, enterprises, or other organizations from the Macao Special Administrative Region and legally registered in Mainland China.

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President Trump has issued three executive orders imposing new tariffs on imports from Canada, Mexico, and China effective February 4th. Canada has responded with retaliatory tariffs on imports from the U.S. On February 3rd, the U.S. and Mexico reached a deal to delay the start of U.S. tariffs for one month. 

The de minimis exception for tariffs applied to small import shipments of less than US$ 800 has also been suspended. This exemption has been used frequently by online retailers, particularly in China, to sell products into the U.S. duty-free.

U.S. Tariffs on Imports from Canada 

  • Tariff rate:  25%, effective February 4th on almost all imports from Canada.
  • There is an exception for “energy or energy resources” imported from Canada. These will be subject to a lower tariff rate of 10%. However, Trump has also stated that tariffs will be increased on oil and gas from Canada, as soon as later this month. “Energy or energy resources” is defined as crude oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, and critical minerals. A list of critical mineral has been published by the Department of the Interior.

Canadian Tariffs on Imports from the U.S.

  • Two tranches of 25% tariffs, the first effective February 4 and the other going into effect 21 days later.
  • The initial target for the tariffs is a wide range of consumer products, including: food, cosmetic, hygiene and toiletry products, tires, clothing, footwear, accessories, wood and paper products, household appliances, glassware, flatware and utensils, and other consumer products.
  • The second round of products will be broader, and include cars, steel, aluminum, and a wide range of agricultural products.
  • Canadian importers may apply for refunds if inputs cannot be sourced within Canada or if there will be “severe adverse impacts on the Canadian economy.”

U.S. Tariffs on Imports from Mexico 

  • Tariff rate:  25% on all imports from Mexico.
  • No reduced tariff rate for energy imports from Mexico.
  • Mexico was reportedly planning tariffs on steel, aluminum, and food imported from the U.S., although an agreement has postponed the onset of U.S. tariffs and Mexican retaliatory tariffs.

U.S. Tariffs on Imports from China

  • New Tariff Rate: 10% on all imports from China. The new tariffs will apply in addition to any other customs duties and other fees applicable to the imports from China.
  • Hong Kong/Macao Exempt: Under the executive order, the tariffs do not appear to apply to products from Hong Kong or Macao.

Rationale for Tariffs

The executive orders state the president is imposing the tariffs under the broad powers granted to him under the International Emergency Economic Powers Act (IEEPA) and in response to drug smuggling (particularly fentanyl) from the countries targeted, as well as in response to illegal immigration.

Other Tariff Measures Coming

The executive orders state that the US will apply tariffs further if the targeted countries retaliate. In addition, Trump has discussed raising tariffs against the E.U., Brazil, Russia, India, Indonesia and various countries in the Middle East and Africa. In additional Trump has proposed tariffs on semiconductors, pharmaceuticals, oil, steel, aluminum, and copper imported from all countries.

Supreme Court of the United States located in Washington DC which interprets laws. It is the Judicial Branch of the US government.
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On December 3, 2024, the U.S. Supreme Court heard argument in Republic of Hungary v. Simon. The case involves Hungary’s theft of valuable items from Jewish families during the Holocaust. The plaintiffs sued the Republic of Hungary and its national railway in the United States, arguing that a federal court in Washington, D.C. could exercise jurisdiction over Hungary under the Foreign Sovereign Immunities Act (FSIA). FSIA provides that foreign sovereigns can be sued in the United States in cases where “rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States” and is used for a commercial activity. The plaintiffs argued that the valuable items stolen by Hungary were sold and the proceeds placed in Hungary’s bank accounts. Since Hungary currently uses funds in its bank accounts for commercial activities in the United States, the plaintiffs argued that Hungary could be sued there as a result of its conduct during the Holocaust.  

The D.C. Circuit Court of Appeals agreed. The Circuit Court held that the plaintiffs do not have to “trace funds in the foreign state’s…possession to proceeds from the sale of their property” because to do so “would render the FSIA’s expropriation exception a nullity for virtually all claims involving liquidation.” The Circuit Court relied upon “the fungibility of money” and contended that holding otherwise would “create a safe harbor for foreign sovereigns who choose to commingle rather than segregate or separately account for the proceeds from unlawful takings.” Hungary sought review in the U.S. Supreme Court, which agreed to hear the case. During oral argument on December 3, 2024, the justices heard from both sides and from the United States, which argued in favor of Hungary. The justices asked tough questions, but a majority appeared to disagree with the D.C. Circuit. 

Justice Elena Kagan appeared sympathetic to the D.C. Circuit’s holding, worrying that Hungary’s position would “provide a roadmap to any country that wants to expropriate property.” Other justices, such as Justice Ketanji Brown Jackson, questioned whether the D.C. Circuit’s approach was consistent with the statutory text, noting that under the FSIA, “we have to find the connection between the original expropriation and [the property] they’re pointing to today.” Justices Neil Gorsuch and Samuel Alito suggested that courts should apply “tracing rules from” cases outside the sovereign immunity context, such as cases involving misappropriation of funds by fiduciaries.

Justice Clarence Thomas suggested that once the proceeds from expropriated goods are deposited “in a general account,” the funds are “off limits to FSIA claims.” Justice Brett Kavanaugh worried about the “friction” the D.C. Circuit’s holding might create with other countries, while Chief Justice John Roberts raised concerns that the plaintiffs were advocating for “throwing out the whole sovereign immunity principles under which the rest of the world operates.” Justices Sonia Sotomayor and Amy Coney Barrett questioned whether, once property has been liquidated and the resulting cash used to purchase something else, that ultimate purchase meets the FSIA requirement that the property in the United States was “exchanged for” the stolen property, given the chain of transactions involved. 

Despite the dark underlying subject matter, the justices drew a few laughs during oral argument. When Justice Gorsuch asked the United States why it did not offer much argument on the issue of who bears the burden of proof on this issue, and the United States responded that “we are word-limited in our briefs,” Justice Gorsuch replied that “[y]ou can always use them wisely too.” When the United States later asked for more time during the argument to “push back” on a point Justice Gorsuch made, he responded “I think you’ve pushed back enough.” Justice Barrett caused some chuckles when she raised a hypothetical in which she “steal[s] Justice Gorusch’s car.”

Although the issue before the Court is limited to unique facts and the FSIA’s expropriation provision, the Court’s decision could potentially impact other aspects of FSIA jurisdiction. The Court’s opinion could address issues of who bears the burden of proof in establishing that FSIA’s jurisdictional exceptions do or do not apply, and the extent to which FSIA plaintiffs have to allege a nexus between the United States and certain funds or property at issue. The Court’s decision is one to watch.

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EJ Yao, Unsplash

On Wednesday, December 11th, Seyfarth attorneys Steve Kmieciak and Sara Beiro Farabow will present the third installment of a series of micro-webinars focused on key legal perspectives and considerations for those operating in the hospitality industry. This session will address key considerations for adapting construction forms for international hospitality renovations, including whether to modify or draft new contracts, navigating local laws and practices, working with local counsel, and crafting effective dispute resolution provisions.

Click here for more information and to register.

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Perhaps you represent a U.S. company that is entering into a contract with an overseas entity, or vice versa.  You are contemplating whether the contract should provide for arbitration or litigation in the event of a dispute.  In deciding that question, you may ask: if your client wins in the proceeding against the other party, is it easier to enforce a non-U.S. court judgment or a non-U.S. arbitration award in the United States?

As it turns out, each scenario presents unique challenges.  There is no uniform U.S. law governing the recognition of non-U.S. judgments, but rather a patchwork of varying state laws, which can make recognition more complicated.  Confirmation of non-U.S. arbitration awards, on the other hand, is governed by a single, uniform federal statute in the United States.  Even so, U.S. proceedings to confirm an arbitration award have to be made on a shorter timetable than proceedings to recognize a non-U.S. judgment, and confirmation of arbitration awards can raise other, complicated issues. 

Dispute resolution provisions in contracts are often treated as “boilerplate,” but the choice between arbitration and litigation can be an important one.  Lawyers drafting contracts involving both U.S. and non-U.S. parties should think carefully about the differences between enforcing judgments and arbitration awards in the United States to decide whether court or arbitration proceedings are the right choice for their clients.

Continue Reading Judgment Gymnastics: Enforcing Overseas Judgments and Arbitration Awards in the U.S.
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We’re excited to announce that Sara Beiro Farabow, Chair of Seyfarth Shaw’s International Dispute Resolution Group (IDRG), and Seyfarth partner Will Prickett, an IDRG member and head of International Litigation, will be guest lecturers at the Polytechnic University of Milan on October 22nd. Their lecture will cover critical topics in international dispute resolution and contracts.

With extensive experience in managing cross-border disputes and complex international commercial contracts, Sara and Will will offer valuable insights to the students at one of Italy’s premier academic institutions. Their session will explore global legal strategies, focusing on the nuances of contract drafting and the challenges of international arbitration and litigation.

This event highlights Seyfarth’s broad experience and dedication to excellence in international law and its ongoing commitment to fostering the academic development of future leaders in engineering, architecture, and design.

Stay tuned for more details on this exciting event.

This was originally posted as a Legal Update on Seyfarth’s website.

Seyfarth Synopsis:

The California Supreme Court reaffirmed that arbitration agreements are on equal footing with other types of contracts. Therefore, a court should apply the same principles that apply to other contracts to determine whether the party seeking to enforce an arbitration agreement has waived its right to do so. Quach v. California Commerce Club, Inc.

The Facts

In 2018, following his termination, Peter Quach sued his former employer, California Commerce Club, Inc., for discrimination, harassment, and retaliation, among other things. Commerce Club’s answer asserted an “affirmative defense” that Quach should be compelled to arbitrate his claims. Initially, Commerce Club was not able to locate a fully-executed copy of Quach’s 2015 arbitration agreement—it only found the signature page. Therefore, rather than filing a motion to compel arbitration based on the 2015 arbitration agreement, Commerce Club actively participated in discovery, including taking Quach’s deposition, and it indicated on a case management conference statement that it desired a jury trial.

Thirteen months after Quach filed his lawsuit, Commerce Club filed a motion to compel arbitration under the Federal Arbitration Act (FAA). In addressing its delay in filing the motion, Commerce Club asserted that it had only recently located the entire arbitration agreement. Quach opposed the motion, arguing that Commerce Club had waived its contractual right to compel arbitration.

The Trial Court’s Decision

The trial court denied Commerce Club’s motion. The court concluded that Commerce Club knew of its right to compel arbitration but, instead of moving to compel, it propounded written discovery and took Quach’s deposition, thereby demonstrating a position inconsistent with the intent to arbitrate and prejudicing Quach.

The Court of Appeal’s Decision

A divided Court of Appeal reversed the trial court’s decision, holding that Commerce Club did not waive its right to compel arbitration. The Court of Appeal reasoned that the trial court’s finding that Quach had shown prejudice was not supported by substantial evidence. Two weeks after the Court of Appeal published its decision, the United States Supreme Court issued its ruling in Morgan v. Sundance, Inc., 596 U.S. 411 (2022), holding that the FAA does not require a showing of prejudice to establish waiver of the right to arbitrate.

The California Supreme Court’s Decision

California courts have, for decades, applied a framework grounded in a “strong policy favoring arbitration” over litigation. Consequently, California courts have noted that parties seeking to establish waiver of the right to arbitrate must satisfy a “heavy burden of proof” in order to show prejudice. This has required the party opposing arbitration to show prejudice that goes beyond the loss of time and expenses normally associated with litigating a dispute, and the courts have resolved any doubts in favor of arbitration.

In its opinion, the California Supreme Court made clear that, in order to establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove, by clear and convincing evidence, that the waiving party knew of the contractual right and intentionally relinquished or abandoned it. The waiver inquiry is exclusively focused on the waiving party’s words or conduct; neither the effect of that conduct on the party seeking to avoid arbitration, nor that party’s subjective evaluation of the allegedly waiving party’s intent is relevant.

Relying on this analytical framework, the California Supreme Court concluded that there was  clear and convincing evidence that Commerce Club had waived its right to arbitrate. This conclusion was based on the facts that Commerce Club was aware of its right to compel arbitration (despite its inability to find a complete copy of Quach’s arbitration agreement sooner), and Commerce Club’s words and conduct demonstrated its intentional abandonment of the right to arbitrate.

What Quach Means for Employers

The lower standard of evidence for establishing waiver allowed by this ruling may result in more frequent claims of waiver in opposition to a party’s attempt to enforce an arbitration agreement. Therefore, employers should immediately investigate whether an employment dispute may be subject to an arbitration agreement and, if it is, take appropriate steps.

This post has been cross-posted from Seyfarth’s Employment Law Lookout blog.

Welcome to Decoding Appeals, where Seyfarth’s Appellate Team brings to in-house counsel our insights and expertise from the front lines of the appellate courts. Throughout this short video series, we break down the nuances of appellate advocacy, sharing tips and lessons we’ve learned to help companies’ in-house legal teams understand the complexities of the appeals process.

In this first episode, host Owen Wolfe is joined by Amanda Williams and Cat Johns, two former judicial law clerks who offer their unique perspectives on the appeals process, drawing from their firsthand experiences and behind-the-scenes knowledge of how it all works.

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On Tuesday, May 14, James Newland, partner in Seyfarth’s Construction practice and co-chair of the International Dispute Resolution group, will speak in a panel discussion on “Becoming an Owner, Designer, or Contractor of Choice” at the 2024 ACI-NA/ACC/AGC Airport Construction Strategy Summit in Chicago.

The panel will discuss the key characteristics of successful airport capital project partners. The summit features other panel discussions on topics such as airport project delivery systems and construction, and provides attendees networking opportunities and a tour of recent capital projects at Chicago-O’Hare International Airport.

Panel Participants

Linda Konrath, HKA

James Newland, Seyfarth Shaw

Chris George, San Diego County Regional Airport Authority

Dwight H. Pullen, Jr., AECOM

Iana Tassada Stuard, JE Dunn Construction

For more information and to register, click here.

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This blog has been cross-posted to Seyfarth’s Gadgets, Gigabytes & Goodwill site.

A whole host of creators have filed suit in the U.S. alleging that AI companies improperly used the creators’ content to train AI programs (if you need to catch up on these lawsuits, we recommend our video blog here).  In most cases, the creators don’t know for sure whether the AI companies copied their works, although they allege that copying can be inferred based on the AI programs’ outputs.  But a new law in the EU may soon provide creators with a mechanism to find out if their works have been copied, and may provide those creators with greater protections than those afforded to creators in the U.S.

On March 13, 2024, the European Parliament approved the Artificial Intelligence Act, known as the AI Act.  Formal adoption of the AI Act is expected in early Summer 2024, with implementation spearheaded by the newly-formed European AI Office.  The AI Act is the one of the first major legislative frameworks in the world to emerge in response to the spread and seeming ubiquity of the relatively new generative AI technologies. The Act aims to ensure safety and compliance with certain individual and property rights, including IP rights.

The AI Act will regulate AI programs based on the level of risk they present.  Generative AI programs that are capable of generating text, images, and other content, and may perform any number of functions with general or specific purposes, are classified as “high risk.”  The AI Act refers to these programs as “General Purpose AI” or GPAI.  The AI Act places the most stringent obligations on developers and deployers of high-risk AI systems that are put to use in the EU, even if the developer or deployer is not actually based in the EU.  This partly because the EU believes that application to non-EU companies whose programs will be used in the EU is “necessary to ensure a level playing field among providers of [GPAI] models where no provider should be able to gain a competitive advantage in the EU market by applying lower copyright standards than those provided in the [EU].”   

Under the AI Act, GPAI model providers must:

  1. provide technical documentation, including training, testing processes, and results of evaluations;
  2. provide information and documentation to supply to end providers that intend to integrate the GPAI model into their own AI system so that the latter understands the capabilities and limitations thereto and is able to comply with the AI Act’s requirements;
  3. establish a policy to abide by the EU Copyright Directive; and
  4. publish a detailed summary about the content used for training the GPAI model.

One goal of these provisions to ensure that AI developers are disclosing whether the used material subject to copyright protection to train their AI programs.  There are some exceptions, however, including for “open license” AI models, which only have to provide disclosures if their AI programs present a “systemic risk.”

For those companies required to make disclosures, they must prepare sufficiently technical summaries to encourage IP rightsholders or others with legitimate interests to exercise and enforce their rights in the EU.  The EU AI Office will not be conducting a “work-by-work” assessment to ensure that GPAI providers are abiding by copyright laws.  Instead, the Office has passed the onus on to GPAI providers to satisfactorily educate rightsholders about their enforcement rights and responsibilities vis-à-vis the use and incorporation of their content by GPAI.

Companies must also “establish a policy to abide by the EU Copyright Directive,” that “requires the authorization of the rightholder concerned” before using any copyright protected content “unless relevant copyright exceptions and limitations apply.” The Directive does have some exceptions to this requirement, such as allowing reproductions of works for the purposes of text and data mining in certain limited scenarios.  Unless that text/data mining is for scientific purposes, however, the rightsholder can opt out. 

If a rightsholder opts out, then under the terms of the Copyright Directive and the AI Act, companies must “identify and respect the reservations of rights expressed by rightsholders pursuant to Article 4(3) of Directive (EU) 2019/790.”  Accordingly, GPAI providers would have to obtain special permission from the rightsholder that opted out in order to proceed with text/data mining activities that would access or utilize their protected content.

The AI Act includes a carve-out for small GPAI providers, such as start-ups, to promote innovation even for those with fewer resources than large corporations.  The carve-out provides “simplified ways” for smaller providers to comply with the AI Act.  The idea is that compliance with the AI Act should not “represent an excessive cost” or “discourage the use of [GPAI] models.”

It remains to be seen what will happen once the AI Act is officially enacted, but we expect an uptick in copyright litigation and related counseling (as well as costs) in the EU brought by copyright owners and other rightsholders.  We also expect that the number of potential stakeholders will increase by virtue of the ubiquity of GPAI and the ease and accessibility of content via the Internet and connected devices.  With this may come niche legal practices and novel legal issues, which will likely result in changes to the AI Act or its interpretation.  It will be crucial for owners of IP and AI companies to understand their respective rights and obligations under the AI Act; otherwise, IP holders risk unfettered and unauthorized use of their creative content, while AI companies run the risk of being sued.