Last month, the Lithuanian Supreme Court (the Supreme Court) made a preliminary reference to the Court of Justice of the European Union (CJEU) asking whether an EU member state court can refuse to recognise an arbitration award which restrains a party to the arbitration agreement from continuing proceedings in the courts of another member state (in essence, an anti-suit injunction). The Supreme Court considered that the enforcement of such an award may be contrary to the Brussels I Regulation in light of the reasoning in West Tankers.
The reference has been made to the CJEU under the current Brussels I Regulation but, given the likely proximity of the decision with the entering into force of the revised Brussels I Regulation (Regulation (EU) No. 1215/2012) (the Revised Regulation) on 10 January 2015, it is expected that the CJEU will give consideration to the language of the Revised Regulation in making its decision.
It is hoped that the CJEU’s decision will provide some guidance on the balance to be struck between (i) the rights of member state courts under the Brussels regime to rule on their own jurisdiction and enforce judgments made in breach of an arbitration agreement and (ii) the application of the New York Convention and the enforcement of conflicting arbitral awards by those same courts. Even more interesting will be the CJEU’s interpretation of the award in question and its decision on whether its effect as an anti-suit injunction renders it unenforceable, particularly in light of the precedence of the New York Convention under the Revised Regulation (for our previous commentary on the Revised Regulation, see here).
A dispute arose out of a Shareholders’ Agreement (the SHA) between, amongst others, Gazprom and the Ministry of Energy of Lithuania (the Ministry) relating to the running of the country’s main gas provider, Lietuvos Dujos. The Ministry commenced proceedings against Gazprom in the Lithuanian Courts in 2011. In response, Gazprom brought arbitration proceedings under the Rules of the Stockholm Chamber of Commerce, pursuant to the terms of the arbitration agreement in the SHA, seeking an award declaring that the Lithuanian court proceedings were brought in breach of the SHA.
The arbitral tribunal (comprised of Yves Derains, Sophie Nappert and Sophie Lamb) rendered an award in 2012 declaring that the Ministry had partially breached the arbitration agreement in the SHA by bringing the Lithuanian court proceedings against Gazprom (the Award). The Award ordered the Ministry to limit its requests in the Lithuanian proceedings to claims that could not be made before an arbitral tribunal established pursuant to the SHA.
Gazprom sought enforcement of the Award in the Lithuanian Supreme Court. By analogy with the reasoning in West Tankers (Allianz SpA v West Tankers (Case C-185/07),¹ the Supreme Court considered that recognition of an arbitral anti-suit injunction would effectively undermine the Brussels I Regulation by stripping the relevant member state court of the power to rule on its own competence under the Regulation. The Supreme Court held that “if the arbitration is equivalent to the court in resolving of disputes”, the same rules which applied to anti-suit injunctions restraining a party from bringing or continuing proceedings in an EU member state court based on an arbitration agreement should also apply to an arbitral award which had the same effect.
Reference to the CJEU
The Supreme Court referred three questions to the CJEU in order to clarify the relationship between the New York Convention and EU law where application of the former may violate the supremacy of EU law.
- Can an EU member state court governed by the Brussels I Regulation refuse to enforce an arbitral award that amounts to an anti-suit injunction on the grounds that the award would limit the court’s jurisdiction to decide on its own competence?
- If so, can an EU member state court governed by the Brussels I Regulation refuse to enforce an arbitral award that contains an anti-suit injunction if it requires the parties to limit their claims in the court of another member state governed by the Brussels I Regulation?
- Can an EU member state court “for the purpose of ensuring the supremacy of EU law and the full effectiveness of the Brussels I Regulation” refuse to enforce an award that limits the right of a national court to rule on its own jurisdiction?
The CJEU’s response to this reference will be of great interest to practitioners, particularly if the decision is given on the basis of the Revised Regulation. The CJEU’s decisions on references under the current language effectively extended the scope of the Brussels regime and brought certain arbitration matters within it. The text of the Revised Regulation has been drafted expressly to place arbitration outside the Brussels regime and reverse some (although not all) of the CJEU’s previous rulings.
The CJEU’s decision on this reference will show just how “hands off” the CJEU is willing to be on the question of arbitration and will set the tone for the interpretation of the Revised Regulation by national courts. Pending resolution of the reference, arbitral tribunals may be less inclined to issue arbitral anti-suit injunctions for fear that courts within the EU may be unwilling to recognise and enforce such awards.
For further information, please contact Nick Peacock, Partner, Anna Wren, Associate, or your usual Herbert Smith Freehills contact.
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¹ In its 2009 judgment in West Tankers, the ECJ (now the CJEU) held that it was contrary to the provisions of the Brussels I Regulation for a member state court to grant an anti-suit injunction restricting a party’s right to pursue proceedings in the court of another member state on the basis that such proceedings would be contrary to an arbitration agreement. For previous blog posts on West Tankers see here and here.