West Tankers principle unaffected by Recast Brussels Regulation; mandatory foreign jurisdictional rules do not encroach on scope of widely worded arbitration clause

In Nori Holdings Limited et al v PJSC Bank Okritie Financial Corporation [2018] EWHC 1343 (Comm) the English court has applied the Recast Brussels Regulation, finding that the West Tankers principle remains applicable and, as a consequence, refused to grant an anti-suit injunction in relation to parallel EU court proceedings.

At the same time, it found alleged Russian mandatory jurisdictional rules referring an insolvency dispute to the Moscow Arbitrazh Court insufficient to displace the wide and general wording of an arbitration clause, with the result that it granted an anti-suit injunction in relation to non-EU proceedings. Continue reading

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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Anti-suit Injunctions within the EU: AG Wathelet delivers his Opinion in Gazprom

The Advocate General Wathelet (the AG) has delivered his much awaited Opinion in the reference to the Court of Justice of the European Union (CJEU) by the Lithuanian Supreme Court in the case of Gazprom (C-536/13). The Lithuanian Court referred to the CJEU three questions pertaining to the effect of the Brussels I Regulation (EC) No 44/2001 (the Regulation). The Regulation determines the member state courts’ jurisdiction and excludes arbitration from its scope. However, the exception has gradually been eroded by the CJEU in decisions such as West Tankers.

The Reference in the present case related to a request to enforce an arbitral award which has a similar effect to an anti-suit injunction and has therefore been of considerable interest to the arbitration community. The background to the reference is more fully explained in our blog post [here]. In his Opinion, AG Wathelet also considered in detail the effect of the Recast Brussels I Regulation (the Recast Regulation), which comes into force on 10 January 2015. This opinion is the first that considers its terms, and, if adopted by the CJEU, would set down a marker for the interpretation of the arbitration exception within the Recast Regulation, with the effect that an anti-suit injunction issued by an arbitral tribunal would be recognisable and enforceable by member state courts.

AG Wathelet concluded that:

  • the Regulation does not require the court of a member state to refuse to recognise and enforce an anti-suit injunction issued by an arbitral tribunal; and
  • the fact that an award contains an anti-suit injunction is not a sufficient ground for refusing to recognise and enforce it on the basis of Article V(2)(b) of the 1958 Convention because the Regulation is not a matter of public policy.

The Opinion holds great interest for its discussion of the implications of the Recast Regulation (even though it was the current Regulation that was in issue). In the AG’s view, the Recast Regulation aims to correct the boundary which the ECJ (now the CJEU) had traced between the application of the Regulation and arbitration in the West Tankers (Case C-185/07). The decision in West Tankers was seen by many as signifying the death of the anti-suit injunction in Europe. In the AG’s view, it is clear from its legislative history that the Recast Regulation seeks to reinstate the position in which the consideration of the validity of an arbitration agreement as an incidental question falls outside the scope of the Recast Regulation.

The AG also opined on what it means for a court to be seised on the question of the validity of an arbitration agreement in the context of the Recast Regulation. He noted that while a court may be seised on the incidental question of validity of an arbitration agreement, this falls outside the scope of the Recast Regulation. A court is not seised on the substance of the dispute (proceedings which do fall within the scope of the Recast Regulation), until it has decided the issue of the validity of the arbitration agreement.

AG Wathelet also observed that an anti-suit injunction issued by an arbitral tribunal could not be considered in the same way as that issued by a member state court.

Whilst it remains to be seen whether the AG’s opinion will be adopted by the CJEU, his interpretation of the effects of Recital 12 of the Recast Regulation offers hope that a party will be able to protect an arbitration agreement by virtue of an anti-suit injunction, even when parallel proceedings are threatened or brought within the EU.

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Does the Brussels I Regulation forbid recognition of arbitral anti-suit injunctions? Lithuanian Supreme Court refers question to CJEU

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).

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English High Court considers: arbitability of civil claims with a criminal aspect; its discretion to enforce awards under s66 of the Arbitration Act 1996; and the scope of the arbitration exception to immunity under s9 of the State Immunity Act 1978

In The London Steam-Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain and the French State [2013] EWHC 3188 (Comm), the High Court had to consider whether to exercise its discretion under section 66 of the English Arbitration Act 1996 (the Act) to permit enforcement of two arbitral awards giving declaratory relief to the protection and indemnity insurers (the Club) of the owners of a vessel that had sunk off the coast of Spain, causing a major oil spill. The arbitral awards made declarations limiting the liability of the Club in relation to claims brought by the Spanish and French States (the States) as a result of the oil spill. The application was made by the Club on an urgent basis, as it understood that a Spanish court would soon issue a judgment in respect of the same cause of action.

The States challenged the substantive jurisdiction of the tribunal that had rendered the two awards (the Tribunal) on the grounds that their rights of direct action against the Club were in essence independent rights under Spanish law, the claims were not arbitrable and (in relation to France’s claims only) waiver of the right to arbitrate by the Club. However, the Court dismissed all of the challenges, emphasising that the States’ claims were in substance claims under a contract of insurance between the Club and the owners of the vessel (the Contract) and that they fell within the scope of the arbitration clause in the Contract.

The States’ further contention that the English courts lacked jurisdiction over them in view of their state immunity under the English State Immunity Act 1978 (the SIA) was rejected by the Court. In bringing claims in relation to the Contract, the States had, for the purposes of the Act and the SIA, become parties to the Contract and the agreement in writing in the Contract to refer claims to arbitration. The States therefore came within one of the exceptions to state immunity in the SIA.

The Court held that the real prospect of establishing the primacy of the awards of the Tribunal over any inconsistent judgment which might be rendered in Spain meant that there was clear utility in granting the Club leave to enforce the awards as judgments under section 66 of the Act. It rejected the States’ arguments that exercise of its discretion to permit enforcement would be inappropriate as it would lead to a result not countenanced by EC Regulation No 44/2001 (the Brussels Regulation) or that the awards should not be enforced because of the importance of, and public interest in, the Spanish proceedings. The Court granted leave to enforce the awards as judgments of the Court to the same effect.

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UK Supreme Court confirms power to issue an anti-suit injunction even when no arbitration is underway or proposed

The Supreme Court has confirmed that the English court has jurisdiction to injunct the continuation or commencement of foreign proceedings brought in breach of an arbitration agreement, even in the absence of an actual, proposed or intended arbitration (Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent) [2013] UKSC 35). Following the now famous West Tankers¹ decision, it should be noted that this power only applies against jurisdictions which fall outside the Brussels Regulation and Lugano Convention (ostensibly, non-EU countries). Continue reading

The Revised Brussels Regulation: Are we back to where we started?

On 10 December, the Council of EU Justice Ministers voted to adopt the revision of Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, otherwise known as the Brussels Regulation. Because the Council voted to accept the draft without any amendment, there is no need for a second reading. The text will be adopted, signed and published.

As reported in our previous blog posts (available here and here), the text of the revised Brussels Regulation effectively reverses the gradual encroachment of the Brussels regime into arbitration. It clarifies that there is an absolute exclusion of arbitration from the ambit of the Regulation. The key effect of this clarification is that:

  • Each member state court has the right to refer parties to arbitration, stay or dismiss proceedings and examine whether an arbitration agreement is null, void or inoperative or incapable of being performed
  • A member state court need not wait for the decision of another member state on the validity of an arbitration agreement, even if the question has been referred to that other court first
  • In the event of a conflicting arbitral award and a member state court judgment, a member state may enforce the arbitral award (if considered valid) under the New York Convention in preference to the court judgment
  • The scope of “arbitration” has been clarified to include court proceedings surrounding or in support of arbitration (such as establishment of tribunals, powers of arbitrators etc.)
  • Whether arbitration is a principal or incidental issue will not matter, and it will still fall outside the Regulation.

The revised Regulation will take effect two years after it comes into force. Although, as described below, not all issues are ironed out, the amendments to the Brussels Regulation are certainly a positive step for arbitration and should give some comfort to parties that they no longer need to take steps to protect their arbitration agreements and awards by circumventing or mitigating the effects of the ECJ’s decision in West Tankers (Allianz SpA v West Tankers (Case C-185/07)).

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Arbitration agreements set to be protected by the pending Brussels Regulation reform

On 11 October, the European Parliament’s Legal Affairs Committee approved its report on reform of the Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the Brussels Regulation). The report takes into account the general approach adopted by the European Council in June and it is therefore highly likely that the report is now very close to what the amendments to the Brussels Regulation will look like when they take effect. The Parliament is expected to vote on the report on 19 November and the Council will formally vote on the amendments thereafter.

If the committee’s proposals are adopted, the controversial ‘anti-arbitration’ decisions in Endesa and West Tankers would be effectively reversed, and there would be an absolute exclusion of arbitration from the ambit of the Regulation. The key effect of this reversal is that parties will no longer be able to derail an arbitral process indefinitely by bringing proceedings in the court of another Member State in breach of an arbitration agreement. Also, primacy in relation to matters relating to the support of an arbitration will revert to the courts at the seat of the arbitration or the courts at the place of enforcement. For further information on these decisions please see our earlier blog posts here.

The proposals adopt the clear exclusion wording suggested by the Council and emphatically reject the Commission’s proposal for a partial inclusion of arbitration within the scope of the Brussels Regulation. This position has been lobbied for by the English MoJ and the wider international arbitration community.

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“West Tankers” Saga Continues: Court rejects Tribunal’s finding that it did not have jurisdiction to award damages for breach of an obligation to arbitrate

In the most recent of a long running series of decisions arising from a collision between the Appellant’s vessel, the “Front Comor”, and a Sicilian pier owned by the vessel’s charterers, the English court has found that the majority of the tribunal was wrong to decline jurisdiction over a claim for equitable damages for breach of an arbitration clause.  The judgment leaves scope for a tribunal to award damages for a breach of an arbitration clause or to make a declaration granting an indemnity with the effect of holding harmless an innocent party for the consequences of the breach.  Subject to any appeal, this case illustrates that a party facing parallel proceedings in breach of an arbitration agreement should consider amending its claim to include a claim for damages and/or a declaration for an indemnity as soon as the respondent brings parallel proceedings.  Of course, such a claim will be stronger if the relevant agreement contains an express indemnity in relation to any breach of the agreement to arbitrate.

The procedural history of this case is lengthy.  In short, the Respondents brought proceedings in Italy in breach of an arbitration agreement.  In the context of an attempt by the Appellant to halt those proceedings by way of an anti-suit injunction sought from the English court, the ECJ (now known as the CJEU) found that an anti-suit injunction granted by the courts of a member state restraining proceedings before the courts of another member state is not compatible with EC Regulation 44/2001 (the Regulation).  An arbitration continued in parallel with the Italian proceedings and the tribunal made a partial final award declaring that the Appellant was not liable to the Respondents.  In the last “West Tankers” decision before the English court, the Appellant obtained leave to enter judgment in the terms of the partial final award with a view to relying on that judgment should the Italian court rule in favour of the Respondents and the Respondents attempt to enforce the Italian judgment under the Regulation (please see here for further detail). With the Italian court yet to rule on jurisdiction, the Appellant sought an award of damages from the tribunal in respect of the costs of the Italian legal proceedings and an indemnity against any Italian judgment on the merits which exceeded the partial final award.  The majority of the tribunal having declined jurisdiction, the Appellant appealed to the English court under section 69 of the Arbitration Act 1996 on the ground that the tribunal had erred in law.

In finding that the tribunal had erred in law, the court concluded that the tribunal’s jurisdiction to award relief for breach of the arbitration agreement was not circumscribed by the ECJ’s judgment. Permission to appeal was granted and Flaux J commented that this case is likely to go further.

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Court of Appeal affirms West Tankers pro-arbitration decision endorsing an arbitral award in the face of a possible inconsistent Italian judgment

On 24 January 2012, the Court of Appeal handed down its keenly awaited decision in West Tankers Inc v Allianz SPA & Generali Assicurazione Generali SPA [2012] EWCA Civ 27. It has upheld Field J’s decision at first instance in which the court enforced a declaratory arbitral award under section 66 of the English Arbitration Act 1996. Enforcement under s.66 allows a judgment to be entered in the terms of the award. It remains unclear, however, whether the resulting judgment could be used to prevent the recognition of any inconsistent foreign judgment in England (Article.34 of the Brussels Regulation, EC Regulation 44/2001).

The decision provides a possible alternative to the anti-suit injunction that the European Court of Justice ruled out in its landmark 2008 ruling in this long running case. The ECJ declared that anti-suit injunctions should not be available to prevent proceedings in other European member state courts being brought in breach of an arbitration agreement. The Court of Appeal now goes some way to ensuring that arbitration agreements will be upheld.

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