English Commercial Court finds “torpedo” action ineffective where parties agreed asymmetric jurisdiction clause

The English Commercial Court has held that an asymmetric jurisdiction clause is an exclusive jurisdiction clause for the purposes of the recast Brussels Regulation. The English court was therefore entitled to continue with its proceedings where it was the chosen court but proceedings had been commenced earlier in Greece: Commerzbank Aktiengesellshcaft v Liquimar Tankers Management and another [2017] EWHC 161 (Comm).

The recast Brussels Regulation, which applies to proceedings commenced since 10 January 2015, contains a number of improvements over the previous version. These include provisions aimed at defusing so-called "torpedo" actions by which a party could seek to delay proceedings in the court the parties had chosen in their jurisdiction clause by commencing proceedings in breach of the clause elsewhere in the EU.

There has been doubt however as to whether these new "anti-torpedo" provisions would be effective where the parties had agreed an asymmetric jurisdiction clause rather than an exclusive jurisdiction clause binding on all parties. An asymmetric clause (also known as a unilateral or one-way clause) provides that one party, typically a borrower, can only sue in one jurisdiction whereas the other party, typically a finance party, can sue in any available jurisdiction.

The English Commercial Court in Perella Weinberg Partners UK LLP v Coder SA [2016] EWHC 1182 (Comm) considered the "anti-torpedo" provisions should apply equally to an asymmetric clause (see blog post here) but the comments were obiter. The present decision is significant in reaching the same conclusion after a detailed analysis of the arguments. In the court's view, however, whether a jurisdiction clause is exclusive for the purposes of these provisions is a question of autonomous interpretation of the Regulation, rather than English law, so until there is CJEU authority on the point there remains a risk of a torpedo action being effective.

The case is also of interest in once again rejecting the approach of the French courts which have held that asymmetric clauses are invalid, at least in some circumstances (see our blog posts on the decisions in Mme X v Societe Banque Prive Edmond de Rothschild 13, First Civil Chamber, 26 September 2012, Case no 11-26022 here, Societe eBizcuss.com v Apple, First Civil Chamber, 7 October 2015, Case No.  14-16898) here and Mauritius Commercial Bank Limited v Hestia Holdings Ltd and Another [2013] EWHC 1328 (Comm) here).

For more detail, please see our Litigation Notes blog post here.

When life gives you lemons, make lemonade: anti-suit injunctions and arbitration in London post-Brexit

London has long been a city associated with international arbitration. In 2015, even with the UK referendum on EU membership looming, according to analysis by theCity UK, London was the seat or centre of 4,738 international commercial arbitrations, mediations and adjudications in 2015. These were conducted under the auspices of numerous institutions, with the long-established LCIA governing only a relatively small percentage. In the year preceding the referendum, according to the Queen Mary University of London International Arbitration survey, 47% of participants included London amongst their top three choices of seat (Paris was the next most popular with 38%, followed by Hong Kong with 30%). Many different factors attract international parties to London as a seat of arbitration, including the legislative framework, the supportive powers of the English courts and the pro-arbitration attitude with which they are exercised, the common use of English contract law in commercial transactions (from which the choice of a London seat often follows), the infrastructure of London and the availability of legal, expert and other services to support arbitration.  

The referendum outcome has inevitably led to reflection on the commercial, legal and practical effects in so many areas, arbitration included. Whilst the relationship between the UK and the EU is yet to be re-defined, it is timely to consider the ways in which Brexit may have an impact on arbitration in London, whether negative, or indeed positive.

In general terms, Brexit should not have a substantive impact. Arbitration is excluded from EU legislation regarding jurisdiction and enforcement, and a tribunal seated in London is not obliged to follow EU rules regarding choice of governing law. The UK and all other EU Member States are party to the New York Convention, and their obligations under the Convention are entirely independent of EU membership. As such, following Brexit, an agreement to arbitrate in London and a resulting award will continue to be enforceable across the EU. Likewise, an agreement to arbitrate anywhere in the EU (and indeed, in any state which is a contracting party to the New York Convention) and a resulting award will still be enforceable in the UK. And the stability, certainty and predictability of common-law made English contract law will remain unaffected, and as an excellent choice to govern contractual relationships.

But there are of course many issues to consider at a more micro level. This post focuses on an issue which has been the subject of much discussion in the last few years: the significance of the availability of anti-suit relief to halt proceedings in breach of an arbitration agreement in an EU Member State court.  It also considers, among other things, whether Brexit could affect the pool of specialist arbitration practitioners which represents one of the many strengths of London as a seat of arbitration. 

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Dispute Resolution choices for Finance Parties: A practical look at recent developments affecting dispute resolution options

Thursday 14th July 2016, 12.45 – 1.45pm BST

Finance parties are often inclined to revert to favoured dispute resolution choices in their transactions. This default position is largely based on their perception of what offers the greatest flexibility or the lowest risk or both. However, the legal landscape moves fast and there have been a number of recent developments that have challenged the assumptions supporting these default choices. Indeed, with careful drafting, finance parties are in a better position than ever with regard to their choice of forum for resolving disputes. 

In this highly practical webinar our panel will explore a number of recent developments which have a significant impact on dispute resolution choices in finance transactions and affect how those clauses can be structured. The topics our speakers will explore include:

  • the end of the threat of an "Italian torpedo" within the EU?
  • the implications of Brexit for dispute resolution and governing law clauses
  • the potential for a summary judgment style process in arbitration
  • recent changes to the position on unilateral option clauses in transactions related to France
  • alternatives to arbitration in Asia Pacific: the Singapore International Commercial Court

Our speakers will also discuss the issue of "Brexit-proofing" contracts in the context of dispute resolution.

Chair:

Vanessa Naish, Professional Support Consultant, Herbert Smith Freehills LLP

Speakers:

Nick Peacock, Partner, Herbert Smith Freehills LLP

Adam Johnson, Partner, Herbert Smith Freehills LLP

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For further information or to register, please contact arbitration.info@hsf.com.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803
Adam Johnson
Adam Johnson
Partner
+44 20 7466 2064
Vanessa Naish
Vanessa Naish
Professional Support Consultant
+44 20 7466 2112

English Court reiterates warning not to delay application for anti-suit injunction, regardless of jurisdictional challenge in the foreign proceedings

In ADM Asia-Pacific Trading PTE Ltd v PT Budi Semesta Satria [2016] EWHC 1427, the English Commercial Court rejected an application for an anti-suit injunction on the basis of undue delay.

This decision mirrors the Court's approach in Ecobank v Tanoh and Essar v Bank of China, which we previously covered here and here. It also reiterates that the Court's discretion to reject an application for an anti-suit injunction is not limited to instances where the delay is unconscionable or has caused prejudice to the respondent.

The judgment confirms, once again, that parties facing foreign proceedings commenced in breach of an arbitration agreement should bring an anti-suit injunction application as soon as possible after receiving notice of the foreign proceedings, regardless of any jurisdictional challenge in the foreign proceedings.

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Delay causes English Court to deny anti-suit injunction in respect of foreign proceedings brought in breach of an arbitration agreement

A recent case in the English High Court (the Court) demonstrates the need to act promptly when seeking an anti-suit injunction in relation to proceedings in a foreign court. The claimant, Essar Shipping Ltd (ESL) sought an anti-suit injunction in respect of proceedings brought by the respondent, Bank of China Ltd (the Bank) in the Qingdao court in China (the Qingdao Proceedings) on the basis that the subject matter of the dispute was subject to a London-seated arbitration agreement.  ESL also sought a declaration that the arbitration agreement was valid and damages for breach of the arbitration agreement. 

The Court granted the declaration sought on the basis that, on the Bank’s case, the dispute was subject to the arbitration agreement. ESL was also allowed to proceed with its claim for damages.  However, the Court refused to grant the anti-suit injunction.  ESL had objected to the jurisdiction of the court in the Qingdao Proceedings but had not brought the application for an anti-suit injunction promptly. 

Parties intending to seek interim relief should take note of the Court’s emphasis on the requirement of promptness. This is the key factor, not whether it is reasonable to apply to the foreign court first to object to jurisdiction, or whether there will be a long delay in the foreign court.

Notably, whilst the point was not relevant in this case, the Court suggested that anti-suit injunctions cannot be granted in respect of proceedings in another EU Member State Court under the Recast Brussels Regulation.

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