In the recent case of VTB Bank (PJSC) v Mejlumyan [2021] EWHC 718 (Comm), the English High Court granted an interim anti-suit injunction on a without notice basis. The anti-suit injunction application arose in relation to Armenian foreign proceedings under a share pledge agreement that contained an arbitration agreement providing for London seated arbitration. The court granted the claimant an interim anti-suit injunction against those foreign proceedings on a without notice basis to “hold the ring”. The court did so in circumstances where the defendant party was unwell with COVID-19 and the on-notice merits hearing of the anti-suit application had to be adjourned.

This decision is an example of the English courts’ exercise of its supervisory authority, balancing the claimant’s wish to proceed with the application against the defendant’s ill health and concerns regarding an appeal in Armenia, reaching a practical solution pending the hearing of the delayed on-notice application.

Background

The claimant, VTB Bank (PJSC) (VTB) had provided a loan to a company (Teghout), a member of the defendant’s (Mr Valeri Dzhanibekovich Mejlumyan (Mr Mejlumyan)) group of companies, for the construction of a mine in exchange for shares in Teghout. This loan was restructured in 2016 under a facility agreement which was guaranteed by four other companies of the same group. VTB additionally received further security under two share pledge agreements. These were, the “TIL pledge” (for shares in a certain Teghout Investments Limited) and the “ACP pledge” (for Mr Mejlumyan’s 100% ownership of shares in Armenian Copper Programme CJSC, Teghout’s parent company).

In June 2018, VTB alleged that Teghout had defaulted under the 2016 facility agreement as it had failed to pay interest. VTB unsuccessfully sought repayment from the guarantors. VTB therefore proceeded to exercise its rights under the TIL and the ACP pledges.

The TIL pledge fell within the exclusive jurisdiction of the Cypriot courts. The ACP pledge was governed by Armenian law and contained a London seated arbitration agreement. In response to VTB’s demands, Mr Mejlumyan sought an injunction in the Armenian courts against VTB enforcing the ACP pledge, submitting that the ACP pledge was discharged by VTB’s pursuit of the TIL pledge. In response, VTB challenged the Armenian court’s jurisdiction on the basis that the dispute fell within the scope of the arbitration clause. It also filed a substantive defence to Mr Mejlumyan’s injunction application in order that it to be able to defend itself should it lose the jurisdictional challenge. The jurisdictional challenge was heard by the Armenian court on 8 February 2021. While the judgment was initially expected on 22 February 2021, it had been delayed due to the presiding judge’s illness. However, the judgment was expected imminently.

On 19 February 2021, VTB filed an anti-suit injunction application before the English High Court. The Court permitted service on Mr Mejlumyan and listed the hearing for 23 March 2021. Subsequently, Mr Mejlumyan’s solicitors sought an adjournment of the hearing on the grounds that Mr Mejlumyan was sick with COVID-19 and could not issue instructions. The Court refused to adjourn the 23 March hearing, but ordered that the Court would decide at that hearing whether an adjournment of the substantive hearing should be issued and “whether to grant some form of ASI relief, even if that were to be treated as effectively on a without notice basis, in an effort to hold the ring in the meantime.”

Decision of the English High Court

The Court recalled that the test for an anti-suit injunction was that the claimant must satisfy the court on the material adduced at the interlocutory hearing that a binding and applicable arbitration agreement exists to a high degree of probability. The court would ordinarily restrain foreign proceedings unless the defendant shows “strong reasons” for not doing so. The Court added that an anti-suit injunction is a discretionary remedy and participation in foreign proceedings or delay in seeking the remedy are “well-established objections” to the grant of an anti-suit injunction.

Applying these principles, the Court noted that prima facie an applicable and binding arbitration agreement existed. The main issue was whether the court should nevertheless refuse to grant an anti-suit injunction given VTB’s participation in the Armenian proceedings.

However, the immediate questions at the current hearing were whether the Court should:

  1. adjourn the substantive hearing for a later date or continue with it “as is”; and
  2. provide some relief to VTB to protect it against the prejudice arising from the delay if an adjournment was granted.

In respect to the first question, VTB argued that the full substantive hearing should proceed. Mr Mejlumyan had had sufficient time to prepare his case and he had delayed making his application for an extension of time for the hearing. However, the Court accepted “without hesitation” that Mr Mejlumyan had been impeded from giving instructions in circumstances in which he was suffering from COVID-19. As a consequence, the Court agreed to adjourn the substantive hearing of the anti-suit injunction for a short time.

Regarding the second question, Mr Mejlumyan resisted the granting of an interim anti-suit injunction on the basis that the interim relief would practically operate as the final relief. He also argued that if he were to lose the jurisdiction challenge before the Armenian courts, he would have only seven days to appeal and the interim anti-suit injunction would prevent him from pursuing that appeal. The Court found that an interim, “hold the ring” anti-suit injunction to protect VTB while Mr Mejlumyan prepared his case would be appropriate. The Court resolved Mr Mejlumyan’s concern over pursuing a potential appeal by tailoring the order and drafting a carve-out that would cover that circumstance. As a result, Mr Mejlumyan would not need to obtain the Court’s leave to appeal in Armenia.

Mr Mejlumyan also argued that interim relief of this nature could only be granted in an ex-parte application subject to full and frank disclosure by the claimant. The Court underscored the importance of full and frank disclosure in both inter-partes and ex-parte applications. However, it noted that this was not a case where VTB was trying to misuse the procedure by obtaining interim relief and avoiding its duty to provide full and frank disclosure. The Court was satisfied that it had the jurisdiction to grant this relief as long as the safeguards followed in a without notice application were followed. It held that a “hold the ring”, anti-suit injunction for the period of a short adjournment, tailored to avoid prejudice to Mr Mejlumyan’s ability to appeal, met that threshold.

Accordingly, the Court granted an interim anti-suit injunction.

Comment

This judgment confirms the availability of “hold the ring” anti-suit injunctions in certain limited circumstances. In this case, the Court balanced the need to protect VTB against the prejudice arising from any delay against Mr Mejlumyan’s illness and need for more time to prepare his case. The Court reached a practical and pragmatic outcome, allowing a short delay to the substantive hearing, protecting VTB’s position with a “hold the ring” interim injunction, but also making provision for Mr Mejlumyan to appeal the Armenian court decision if required. As a consequence, the decision illustrates the active and flexible approach taken by the English court in exercising its supervisory jurisdiction to appropriately balance the competing interests of the parties.

For more information please contact Craig Tevendale, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills contact.

Craig Tevendale
Craig Tevendale
Partner
+44 20 7466 2445
Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112