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Anti-suit injunctions – the English positionA presentation to the Istanbul meeting of the AIDA Reinsurance Working Party

Michael MendelowitzPartnerNorton Rose LLP3 May 2012

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Key points

Restraining court proceedings commenced in breach of arbitration agreement

• Three different regimesStay of court proceedings in UK under section 9 of Arbitration Act

1996Anti-suit injunctions restraining foreign court proceedings in

– EU Member States where Regulation EC44/2001 (“Brussels I”) applies

– Rest of world• Anti-suit injunctions no longer granted where Brussels Regulation

applies, but available with respect to other jurisdictions• “Arbitration exception” to Brussels Regulation

Front Comor case shows exception currently of limited effectPractical solutions and proposals for EU legislative reform

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Foreign proceedings commenced outside EU English courts have – and will exercise – power to grant

injunctions restraining party over whom court has personal jurisdiction from commencing or continuing foreign court or arbitral proceedings in breach of agreement requiring dispute to be litigated or arbitrated exclusively in England

Statutory sources of courts’ powerSection 37 of Senior Courts Act 1981: “The High Court may

… grant an injunction … in all cases where it appears … just or convenient to do so.”

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Foreign proceedings commenced outside EU (continued)Statutory sources of courts’ power (continued)

Section 44 of Arbitration Act confers equivalent powers on court in relation to arbitral proceedings, but

– Only interim (not final) injunctions possible

– Court can only act if tribunal itself is powerless or ineffective

– Unless case is urgent, permission of tribunal or agreement of parties required

– Court’s power is discretionary and may be excluded by agreement of parties

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Juridical basis for exercise of court’s powers Breach of contract

Lord Millet in The Angelic Grace [House of Lords, 1995]:

“There is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.”

Vexatious or oppressive conductFor example, foreign proceedings commenced by third party

who has colluded with defendant to impede or frustrate English arbitration: BNP Paribas v Russian Machines [Commercial Court, 2011]

But in absence of exclusive English jurisdiction or arbitration clause, merely commencing proceedings in another available jurisdiction is not of itself vexatious or oppressive: Highland Crusader v Deutsche Bank [Court of Appeal, 2009]

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Practical issues to note● English court must have jurisdiction in personam over target of

injunctionUsually established by submission to jurisdiction as part of

arbitral agreement which applicant is seeking to enforceBut may be necessary to invoke “long arm” jurisdiction against

non-domiciled respondents who dispute jurisdiction, or third parties

Remedy is equitable and therefore discretionary, but will be granted fairly readily whereClaimant can demonstrate existence of arbitration agreementApplication for anti-suit relief brought promptlyNo substantial risk of injustice caused by inconsistent decisions

involving interests of third parties

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Practical issues to note (continued)

• In Sulamerica Companhia Nacional de Seguros and Others v Enesa Engenharia SA and Others [Commercial Court, 19 January 2012], injunction granted restraining continuation of proceedings in Brazil despite: insurers, insureds and subject matter of insurance (Jirau hydro-electric

project) all located in Brazil; CAR insurance policy subject to Brazilian law and exclusive jurisdiction

of courts of Brazil; and arbitration clause (which provided for seat of arbitration to be in London)

arguably limited to disputes over quantum, following failure of mediation●Comment:

Continues trend of English cases holding that seat of arbitration highly significant in determining arbitral law to be applied

Insurance arrangements (including arbitration clause) – and English litigation – acknowledged to be led by London reinsurance market

Reinsurers may have achieved dubious jurisdictional victory on basis of unclear contract drafting

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Proceedings commenced in another EU Member State Brussels I Regulation effectively precludes anti-suit injunctions,

even when foreign proceedings have been commenced in bad faith: Turner v Grovit [European Court of Justice, 2004] (decided under equivalent provisions of 1968 Brussels Convention)

But Regulation excludes from its scope “arbitration” (Article I(ii)(d)) Allianz SpA (formerly Riunione Adriatica de Sicurta SpA) v West

Tankers Inc (“The Front Comor”) [ECJ, 2009]Vessel owned by West Tankers and chartered to Erg Petroli SpA

collided with jetty in Syracuse, Sicily owned by ErgCharterparty provided for London arbitration under English lawErg commenced arbitration in London seeking damages West Tankers counterclaimed declaration of non-liability

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Proceedings commenced in another EU Member State (continued)

Erg’s insurers (having indemnified their insured) commenced subrogated proceedings (so-called “Italian torpedo”) in Tribunale di Siracusa against West Tankers

West Tankers obtained anti-suit injunction in English courtsOn appeal, House of Lords referred question to ECJ: is anti-suit

injunction in support of arbitration agreement consistent with Brussels Regulation?

ECJ took narrow view of exception in Article I(ii)(d): – What must be considered is not application for anti-suit

injunction itself, but nature of proceedings against which such injunction directed

– Exception therefore does not apply to dispute concerning jurisdiction involving determination of validity or scope of arbitral agreement where such determination arises as incidental question in claim for damages

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Proceedings commenced in another EU Member State (continued)

Rationale of ECJ: if anti-suit injunction could be granted in circumstances of this case, achievement of objective of Regulation – i.e. unification of jurisdiction conflict rules in civil and commercial matters – might be prevented

Consequences of Front Comor decisionChallenge to continuation of proceedings in Tribunale di Siracusa

must be brought before that court, which alone has power to determine matters relating to its own jurisdiction

More generally, English courts may not grant injunctions to restrain proceedings brought in court of another EU Member State in breach of agreement to arbitrate disputes in England

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Subsequent developments – EU legislation European Commission adopted Heidelberg Report (2007 study

evaluating application of Brussels I Regulation) and published Green (Consultation) Paper in April 2009, proposing (inter alia):Partial deletion of current arbitration exception, bringing all

arbitration-related court proceedings within scope of RegulationExclusive jurisdiction to be granted to courts of Member State of

place (i.e. seat) of arbitration in respect of all court proceedings in support of arbitration (subject possibly to contrary agreement between parties)

Introduction of uniform criteria for determination of place of arbitration

New provision requiring court seised of proceedings brought in breach of arbitral agreement to stay those proceedings pending decision on issue by court at place of arbitration

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Subsequent developments – EU legislation (continued) Reaction mixed – in particular, arbitral community argued against

Removal of arbitration exceptionApparent abandonment of Kompetenz-Kompetenz principle

(arbitral tribunal’s power to rule on its own jurisdiction)• Commission’s proposals published on 14 December 2010

Arbitration exception to be retained but amended Effect of Front Comor neutralised by provision that proceedings

in court in any other jurisdiction to be stayed where question of arbitral jurisdiction is before either arbitral tribunal or court at seat of arbitration

Next stage will be approval of European Parliament and Council; said to be expected within next two years (although process has to date already taken much longer than originally anticipated)

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Subsequent developments – English case law Front Comor saga not over yet While Italian proceedings pending –

insurers joined by Commercial Court as parties to English arbitration (October 2007);

tribunal rendered award (October 2008) declaring West Tankers not liable to Erg for loss arising out of collision

West Tankers commenced proceedings in Trieste (February 2009) for recognition and enforcement of arbitral award under New York Convention Insurers have challenged Convention applicationNo determination yet

On 24 January 2012, Court of Appeal affirmed decision of Commercial Court entering judgment in favour of West Tankers to enforce award

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Subsequent developments – English case law (cont’d)

Insurers’ argument that declaratory awards not subject to Section 66 of Arbitration Act (because not enforceable in same way as monetary or coercive award) rejected

Toulson LJ: “[I]n this case the owners perceive that there may be a possible advantage to them in having the award in the form of a judgment and the insurers evidently perceive a risk that the owners may be right. The reason has to do with a jurisdictional battle which has already taken the case to the House of Lords … and to the European Court of Justice ….”

● Commercial Court has recently (4 April) held arbitrators may award damages to West Tankers for breach of obligation to arbitrate – such award could includecosts incurred by reason of Italian proceedings; and indemnity against any sums payable to insurers following proceedings

to enforce Italian judgment (important if West Tankers has assets elsewhere – particularly in Italy)

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Conclusions

But what if “Italian torpedo” succeeds and Tribunale di Siracusa eventually holds West Tankers liable on merits of case?Application for enforcement of Italian judgment in England bound to

fail because inconsistent with finding of arbitral tribunal and decisions of English courts (and presumably vice versa for request for recognition of English judgment in Italy)

Party in position of West Tankers may protect itself by obtaining– (from arbitral tribunal) declarations of non-liability plus entitlement

to indemnity against any damages awarded by foreign court; and– (from English court) judgment recognising and enforcing

arbitrators’ declarations● But latest decision of Commercial Court likely to be appealed● Better solution: acceleration of amendment of Brussels I Regulation

to clarify and reform scope of arbitration exception

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Our international practice

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Disclaimer

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