Applying logic to non-compete agreement disputes

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When a party allegedly breaches a non-competition agreement, what pieces of evidence are sufficient to establish competitive business activities? And if such competitive activities are found, what is the adequate amount of damages that should be awarded to the aggrieved party when actual monetary loss is uncertain?

BAC_picIn a recent contract dispute, the parties involved had entered into a non-competition agreement as part of a purchase and sale transaction in which the buyer agreed to acquire the seller’s company. In the non-competition agreement, the seller agreed not to engage in any competitive business activities against the buyer for a period of 20 years.

The buyer brought the case to the Beijing Arbitration Commission (BAC) claiming that subsequent to the close of the transaction, the seller failed to abide by the terms of the agreement by deliberately engaging in a series of correlated activities that competed with the buyer’s business. The buyer requested that the tribunal award it damages of multiple millions of renminbi for the seller’s breach. Conversely, the seller denied any direct involvement in these alleged activities and argued that, even so, these actions neither rose to the level of competition against the buyer’s business nor took away from the buyer’s bottom line.

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Tang Gongyuan is an arbitrator with Beijing Arbitration Commission/Beijing International Arbitration Centre, and a senior counsel of JunZeJun Law Offices. BAC/BIAC’s case manager, Wang Weiyi, also contributed to this article