A topic from AEG's L5R CCG Rules forum, copied for Oracle of the Void from a copy of the forum saved in October 2015, so pages it didn't save are missing. Players' names are left out; the rules officials are named. Rulings are as they stood on these dates; later rulings, the rulebooks and the Rules Archive may differ.
A player, 9 May 2013
Just a followup to the previous Berserker/Yurishi questions with regards to duelling, because it came up today and I want to make sure we're doing this correct.
Reaction: After another player's Battle action targets one of your Merchants, pay 2 Gold: Either negate its effects on him or make the player lose 2 Honor.
Bolded part is the important bit obviously. Does the duel still happen, and just the losing effects for it are negated?
I know it's basically the exact same question, but I'd rather have cast iron rulings for when someone inevitably argues
A player, 9 May 2013
Does the duel still happen, and just the losing effects for it are negated?
Why, you asume your Merchant is losing the duel!
By extension of the ruling you quote, yes, the duel happens, you just don't get cut if you lose it.
For reference, and because we can't make a ruling for every situation , the definition of what means "effects on a card" is here