“This is a court of law, young man, not a court of justice.” Oliver Wendell Holmes, Jr.
The number of disputes in music and entertainment arising from agreements between musicians and their managers is on the rise. Some feuds arise from disputes over royalties, or over the artists’ intellectual property rights, or because artists wish to opt out of unfavourable contracts. With the copious publicity that usually surrounds these disputes, there is no lack of examples. The latest dispute of this nature broke out between Kesha and Dr. Luke, with Kesha seeking to invalidate the recording agreements that she signed with Dr. Luke and his recording company, making international headlines.
A vast majority of these disputes are resolved in the courts, and this is where two diametrically opposed worlds collide – the world of law and the world of music. Often the outcome of this collision is a fair result if one follows the dry dictum of law, but it is fundamentally unjust when one has regard to the fleeting nature of creativity and the fragile artistic freedom. Harsh lessons learned from one of Hong Kong’s most well-cited music judgments stand as a powerful call to resolve music and entertainment disputes through arbitration rather than in the courts.
In Hummingbird Music Limited v Dino Acconci and Giulio Acconci (HKCACV No. 40/2009 of 5 January 2010 on appeal from HCA No. 836/2007 of 22 January 2009), the Court had to consider a set of talent management agreements between Hummingbird, a talent agency backed by a well-off Macanese merchant family, and Dino and Giulio Acconci, a Hong Kong rock duo performing under the name Soler.
Soler claimed, before the Court of First Instance and further in the Court of Appeal, that Hummingbird failed to account for the artists’ earnings and treated them in a demeaning and humiliating manner, and that this in turn led to an irreversible breakdown of the parties’ relationship, and eventually to Soler’s termination of the management agreements. Hummingbird contested the termination before the Court of First Instance and sought specific performance, a declaration that the agreements were binding and enforceable, as well as damages for breach of contracts and various injunctions. In response, Soler sought injunctions, damages for breach of Hummingbird’s fiduciary duties and, in the alternative, a declaration that the parties’ agreements were void and unenforceable because they were in restraint of trade.
The Court of First Instance dismissed both parties’ applications for specific performance, holding that there can be no specific performance where the mutual trust between the parties is irreversibly broken, because by their very nature, talent management agreements require mutual trust. The Court of Appeal also dismissed Soler’s defences and counterclaims, in particular Soler’s claim that their talent management agreements were in restraint of trade, and awarded damages in the amount of more than HK$5 million in favour of Hummingbird. It was affirmed on appeal that a contract is not in restraint of trade simply because it ties the parties during the continuance of the contract, and that there is no restraint of trade where the negative ties are only those “which are incidental and normal to the positive commercial arrangements at which the contract aims.”
The Hummingbird judgment, well-reasoned as it is, led to Soler’s bankruptcy and much coverage in Asian and international press, while Hummingbird has remained essentially a local recording studio often treated with suspicion over their dispute with Soler. Was this a fair and intended outcome of the Hummingbird dispute? Would the outcome have been different if the parties had submitted their dispute to a panel of arbitrators with specific expertise in the music industry, of which at least one arbitrator would be a musician?
It is undisputed that arbitration offers numerous advantages, in particular in such a sensitive industry as entertainment and media. It is often private, as opposed to domestic litigation, as well as confidential and flexible. These latter advantages are essential, as one’s continued success in the music and entertainment industry often depends on one’s reputation and trustworthiness. Had Soler ventilated its dispute with Hummingbird in a confidential arbitration forum, it would not have had to face a plethora of demeaning mass media publications regarding their dispute and the ensuing bankruptcy. Hummingbird, on the other hand, may have risen to a new level of attracting and promoting international talent had their reputation not been tainted by allegations of unfair treatment of their artists. Importantly, if Hummingbird and Acconci each could have appointed arbitrators of their choice to decide the dispute, the tribunal with specific expertise in the music industry might have interpreted Soler’s relationship with Hummingbird differently and as a consequence, might have treated the parties “restraint of trade” arguments differently.
Chua Chian Ya
Singapore courts entertained a similar dispute shortly after the Hong Kong Court of Appeal dismissed the Soler application. In a well-cited judgment in Chua Chian Ya v Music & Movements (S) Pte (SGCA 167/2008 dated 6 November 2009), the disputing parties – a known Singaporean singer Tanya Chua and her record label studio – asked the Singapore Court to determine the extent of the studio’s accounting obligations towards Ms. Chua, as well as to decide whether Ms. Chua’s agreements with her recording studio were in restraint of trade. With reference to the Hummingbird judgment, the Singapore Court dismissed Ms. Chua’s arguments that the management agreements were in restraint of trade, on the same basis, but upheld Ms. Chua’s claims for proper accounting for her earnings.
Here, again, arbitration would have provided a confidential forum for Ms.Chua to resolve her disputes with Music & Movements, and neither Ms. Chua nor the record label would have had to face the publicity that surrounded the court proceedings. And again, a tribunal with expertise in the music industry might have come to a different conclusion with respect to Ms. Chua’s arguments that her contractual arrangements with Music & Movements were in restraint of trade.
Recognising the advantages of arbitration, recording studios and artists opt for arbitration clauses in their contractual arrangements. One of the most prominent examples involves the Rolling Stones and their dispute with Detto, as reported by Pierre Tercier in his Performance as a Remedy: Non-Monetary Relief in International Arbitration (ASA Special Series No. 38).
This penchant for arbitration in the music industry has led to a number of arbitration practitioners working exclusively in entertainment and music disputes. Arbitrating entertainment and music disputes has become a well-established practice in the US, where several specialised arbitral institutions have been founded to facilitate the resolution of music disputes through arbitration. For example, the JAMS Entertainment and Sports Group features a panel of arbitrators who work exclusively in music and entertainment dispute resolution. The Independent Film and Television Alliance Arbitration Group has a similar panel comprised of over 90 industry-experienced arbitrators. The IFTA Group has administered over 2,500 entertainment arbitrations involving nearly US$800 million in claims. The World Intellectual Property Organisation also assists music professionals, in particular in identifying their income streams based on their intellectual property rights.
As N. Weaver has observed, “[t]he entertainment industry is full of unconventional people and unconventional deals. Therefore, traditional courtroom legal resolutions do not necessarily create solutions that are workable.” There is no question that arbitration, mediation, and other forms of alternative dispute resolution would help preserve relationships in the entertainment industry where litigation might destroy them.
With its recently launched IP Arbitrator Panel, the HKIAC is leading the way in resolving music and entertainment disputes in Asia, and in particular those relating to intellectual property rights. The panel consists of 30 arbitrators and it is separate from HKIAC’s regular panel and list of arbitrators. These experts are open to accept appointments in a broad range of intellectual property matters, including licensing, copyright infringements, registration of trademarks and designs. The HKIAC’s initiative coincides with the Hong Kong Government’s proposed amendments to the Hong Kong Arbitration Ordinance, clarifying that intellectual property disputes are arbitrable in Hong Kong.
The SIAC is reported to have accepted into its panel a number of arbitrators with extensive expertise in resolving music and entertainment disputes.
With Hong Kong and Singapore fostering creativity and musical talent, artist-label disputes will be a more frequent occurrence in the years to come. While it is likely that these disputes will be increasingly resolved through arbitration rather than litigation, we must wait to see how Hong Kong and Singapore will accommodate this emerging area of arbitration practice.
The views expressed herein are the author’s and do not necessarily reflect those of Clifford Chance or its clients.