Merck kGaA v Merck Sharp & Dohme Corp & othrs: An example of why the English court system is an efficient neutral forum to resolve disputes between foreign parties

By Peter Brownlow, Steven Baker, Louise Lanzkron


Bird & Bird & First for Disputes

The recent case of Merck kGaA v Merck Sharp & Dohme Corp & othrs [2016] EWHC49 (Pat) illustrates why the English Court system is a good neutral forum to decide worldwide disputes. In this case, the claimant was incorporated in Germany and the defendant was incorporated in the USA. In 1955 the two businesses entered into a worldwide co-existence agreement (the "Agreement") relating to how and in which countries each of them could use the word 'Merck'. Minor amendments were made to the Agreement in 1970. The main dispute which arose was how the Agreement applied to the internet and in May 2013 proceedings were commenced for UK trade mark infringement and breach of contract. However, the focus of this article is how a dispute, which the Court determined was governed by German law and featured a German claimant and an American defendant, could be, and was successfully dealt with by the English Courts.

The English Courts have a variety of procedures which make them particularly suited for complex international dispute resolution. The approach to jurisdiction is a good example of this as parties are able to consent to the English Courts hearing the matter and in this case the defendants did not contest jurisdiction.

English civil procedure and case management encourages certain issues to be decided at a preliminary stage, again with the aim of saving time and expense for the parties involved. In Merck, a preliminary hearing was held to consider the governing law of the Agreement as it was silent on the issue ([2014] EWHC 3867 (Ch)). The resolution of such questions at an early stage in the action can be an efficient use of time and resources as the trial can focus solely on the issues between the parties and avoid duplication of expert evidence.

Further, in light of the time which had elapsed since the Agreement was executed there was no available witness evidence for consideration at the preliminary hearing and the facts were drawn from surviving documentary record. Once again, procedural rules allowed for an agreed schedule of facts to be drawn up thereby establishing the intention of the parties as to the governing law of the Agreement. The Court concluded that the Agreement was governed by German law.

During the trial the Court heard from witnesses and foreign law experts which enabled the judge to develop a complete picture regarding how the issues in dispute would be considered under German law. The Court, also adept at using technology, took advantage of video link cross examination of witnesses based in the USA, again with the requisite saving of time and costs for both parties.

Documentary evidence was very crucial to the case. Given that the relevant time period in this case was 1955 to 2013, the extent of the searches and volume of existing documents (particularly those in digital form), was considerable. However the Court adopted a sensible and pragmatic approach by encouraging the parties to agree a schedule of categories of documents to search for and a list of electronic search terms. Once located, in accordance with the rules on disclosure, copies of the documents were provided to the other party to consider.

At the trial the Court applied the principles of German contract law to the Agreement and construed its provisions in accordance with it. The English Courts outlook is particularly international in this respect as it will apply the relevant foreign law not just to the question of interpretation but also to issues in relation to breach and to any applicable defences. English judges sitting in the Commercial Court and the Chancery Division are often products of the commercial bar and show their considerable expertise by giving rulings which reflect the complex nature of the cases they are determining. In this example Norris J's judgment reflected both the foreign contractual law elements and the IP rights which had been infringed illustrating the depth and breadth of the subject matter in dispute.

Finally, a significant advantage of the English judicial system is that the losing party usually pays the costs of the action and to avoid a lengthy costs assessment procedure the Courts will award an interim payment to be paid by the losing party within a short period after the order being sealed. In this case the Defendants were ordered to make an interim payment of £1,700,000.00 in legal costs within 31 days with the rest to be assessed if not agreed.

The Merck case is an interesting illustration of the unique position the English Courts hold as a leading forum for resolving disputes with a strong international focus, as they have developed and are continuing to develop robust, efficient and flexible procedures for managing such cases. A recent example of this is the new Financial List for claims of more than £50 million or equivalent and which relate to banking or financial transactions. It is these tools which attract and will continue to attract disputes between foreign parties to our courts.

Bird & Bird represented the successful claimant in this action.