Anti-Suit Injunctions After West Tankers – The Rise of Foreign Tactical Litigation

There could also be events when the involvement of a nationwide court docket is important with the intention to guarantee the correct conduct of an arbitration. One such instance is using an anti-suit injunction.

 

Within the context of worldwide arbitration, an anti-suit injunction is a nationwide court docket order used to guard the jurisdiction of the arbitration tribunal. Via such an injunction, a celebration might be ordered to not pursue court docket proceedings initiated in breach of an arbitration settlement. That is, partly, to carry the events to their contractual settlement and in addition out of concern that these court docket proceedings (except restrained) might frustrate the continuing arbitration.

 

The priority has all the time been that such tactical litigation leads to delay and expense. As these so-called “torpedo” actions are sometimes introduced in nations the place the judicial course of is sluggish or advanced, or is more likely to favour a neighborhood litigant, the danger of irritating the arbitration course of is actual. Historically, the anti-suit injunction has been considered in England as the first means to take care of such tactical litigation.

 

English courts can now not use their conventional weapon of selection. In February 2009 the European Court docket of Justice (“ECJ”) delivered its controversial choice on anti-suit injunctions within the case of West Tankers Inc v Allianz SpA (Case C-185/07). This case handled anti-suit injunctions as they apply inside Europe and, specifically, tips on how to apply EC Regulation 44/2001 (“the Judgments Regulation”) to instances involving arbitrations.

 

After West Tankers, the English courts can now not use their conventional weapon of selection, the anti-suit injunction, in response to proceedings began elsewhere in EU or Lugano states in breach of an settlement to arbitrate.

 

The impact of West Tankers is that in a case the place a celebration has first issued court docket proceedings in one other EU state court docket, in that case Italy, the Italian court docket shouldn’t be disadvantaged of its proper to find out its personal jurisdiction pursuant to the Judgments Regulation and shouldn’t be restrained by the English court docket pursuant to an anti-suit injunction.

 

The information of the case are these. West Tankers Inc had chartered a vessel known as The Entrance Comor to Erg SPA (Erg) pursuant to a charterparty which supplied for disputes to be resolved by arbitration in England. The vessel had a collision with a jetty within the Italian port of Syracuse, Sicily, inflicting substantial injury and Erg claimed compensation from its insurers, Allianz, for compensation as much as the restrict of its cowl. Erg additionally commenced arbitration proceedings in London in opposition to West Tankers to get well the stability of its losses.

 

Within the meantime, Allianz, who have been the insurers, commenced subrogated proceedings in opposition to West Tankers within the Italian courts with the intention to get well the sums they’d paid to Erg underneath the insurance coverage coverage.

 

West Tankers challenged the Italian proceedings within the English courts on the idea that the Italian courts lacked jurisdiction because the insurer’s declare was lined by the arbitration settlement. West Tankers requested, amongst different reduction, an anti-suit injunction requiring Allianz to discontinue the Italian proceedings.

 

The English Excessive Court docket upheld West Tankers’ claims and granted the anti-suit injunction. The insurers argued that the grant of such an injunction was opposite to the Judgments Regulation, since they’d a proper to deliver a declare within the Italian courts and, if the Italian courts took jurisdiction, then that must be the tip of the matter. On enchantment, the Home of Lords made a referral to the ECJ on the query whether or not anti-suit injunctions issued to present impact to arbitration agreements are appropriate with the Judgments Regulation.

 

The ECJ determined that anti-suit injunctions in help of agreements to arbitrate are incompatible with the Judgments Regulation. While acknowledging that due to the arbitration exception underneath artwork. 1(2)(d) of the Judgments Regulation an anti-suit injunction made to restrain the breach of an arbitration settlement fell exterior the scope of the Judgments Regulation, the ECJ targeted on the secondary results of such reduction on different proceedings which fell ostensibly inside the Judgments Regulation. Specifically, the ECJ characterised the insurers’ declare earlier than the Italian courts as a tort declare, which did fall inside the scope of the Judgments Regulation, and in addition regarded the query as as to whether these claims have been lined by an arbitration settlement to be a preliminary matter for willpower by the Italian court docket. As an anti-suit injunction might intrude with the Italian court docket’s means to train that jurisdiction, the ECJ determined that such reduction should be incompatible with the Judgments Regulation. In these circumstances, it was solely a matter for the courts first seised of the dispute – on this case the Italian courts – to find out the validity of an arbitration settlement relied upon by a respondent with the intention to contest its jurisdiction. In any other case, it might quantity to stripping that court docket of the facility to find out its personal jurisdiction underneath the Judgments Regulation.

 

The ECJ choice relies on the doctrine of sensible effectiveness (effet utile) in EC regulation, which offers that the applying of nationwide procedural guidelines should not prejudice the effectiveness of the Judgments Regulation in allocating jurisdictions. The precept relies on comity and “mutual belief”, particularly that the courts of every EU state are equally certified to find out whether or not the courts of one other such state have jurisdiction. The ECJ thought that an anti-suit injunction made by a fellow EU Member State was an impermissible interference with the precept underpinning the Judgments Regulation.

 

It’s price emphasising that West Tankers doesn’t have an effect on any anti-suit injunction in England that’s sought in opposition to proceedings in a rustic exterior of the Judgments Regulation or Lugano Conference states. The lengthy vary capabilities of the anti-suit injunction are, due to this fact, unchanged and reduction will proceed to be accessible in opposition to proceedings introduced in breach of an arbitration settlement in different states together with, amongst others, by means of instance the US, China, India and Russia. This necessary truth was confirmed by the current choice of Prepare dinner J in Shashou v Sharma in relation to an anti-suit injunction to restrain court docket proceedings in India.

 

The sensible impact of West Tankers is that the place a celebration to an arbitration settlement has introduced court docket proceedings in one other EU Member State, it won’t be doable to forestall him from persevering with with these court docket proceedings via injunction. These court docket proceedings will should be decided; however that doesn’t imply essentially that the arbitration proceedings have to attend for the result of the court docket proceedings (though that can finally be depending on the deserves of the court docket proceedings and the strategy of the arbitrators). In such circumstances, it could be doable to acquire an conscious nicely prematurely of a willpower by the overseas court docket. This may then imply, in precept a minimum of, that any award could be enforceable underneath the NYC (though there could also be issues with enforcement within the nation working parallel proceedings!).

 

The ECJ choice of West Tankers has been broadly criticised by commentators. A type of criticisms has been that the choice doesn’t respect one of many elementary ideas of arbitration regulation, which is that events choose particular jurisdictions as seats for his or her arbitration due to their arbitration-friendly judicial programs which may embrace such procedural guidelines as the facility to grant an anti-suit injunction. The ECJ ignored the prima facie case for giving precedence to the discussion board expressly chosen by the events within the arbitration settlement. And, by signing as much as an arbitration settlement, the events have elected to exclude the powers of the nationwide courts of any jurisdiction to take care of any disputes between them lined by their settlement. That is absolutely the very level of the arbitration exception to the Judgements Laws, as set out in artwork. 1(2)(d). And so, restraining overseas proceedings in such circumstances mustn’t quantity to a problem to the Regulation as a result of there isn’t a jurisdiction to be allotted within the first place.

 

The West Tankers choice additionally ignores the well-established precept of competence-competence, which offers that it’s for the arbitral tribunal to resolve on the applicability and validity of the settlement to arbitrate. Within the West Tankers case, the one problem that the Italian court docket wanted to contemplate was whether or not an arbitration settlement existed within the case.

 

In assessing the sensible affect of the West Tankers case when it comes to an opposed affect on events selecting London as a seat of arbitration sooner or later, two components should be borne in thoughts. Firstly, on condition that arbitration between events from completely different EU States and Lugano Conference States are thought of to comprise a relatively small proportion of London-based arbitrations, the general affect of the choice on London as a selection for events to pick as a centre for worldwide dispute settlement ought to, in actual phrases, be fairly restricted. Secondly, different key venues for international arbitration inside Europe, reminiscent of Paris, Geneva and Stockholm are in style however the truth that anti-suit reduction has by no means been accessible underneath these jurisdictions’ procedural guidelines. In mild of those two sensible components, there’s a threat that some commentators have overstated the probably sensible impact of West Tankers on worldwide industrial arbitration in London.

 

The ECJ choice in West Tankers was thought of by the Court docket of Attraction in November 2009 in Nationwide Navigation Co v Endesa Generacion SA (The Wadi Sudr). This case is price analyzing because it offers the primary detailed consideration of the affect of West Tankers on various reduction accessible to the English courts now that the opportunity of anti-suit injunctive reduction has been excluded.

 

Within the Wadi Sudr there was a London arbitration clause which was ruled by English regulation. The Spanish court docket took jurisdiction in proceedings introduced by Endesa and held that the arbitration settlement didn’t apply, partly as a result of it had not been validly integrated underneath Spanish regulation. Previous to the Spanish court docket delivering its judgment, NNC issued an arbitration declare and utilized for an anti-suit injunction and a declaration that disputes between the events have been referable to London arbitration and that the English court docket was not required to recognise the Spanish judgment. The anti-suit injunction software was dismissed following West Tankers; nevertheless Gloster J granted the applying for a declaration within the arbitration declare. That call was appealed.

 

The Court docket of Attraction held:

 

  1. The impact of the choice in West Tankers was {that a} judgment on a preliminary problem – together with one on whether or not an arbitration clause had been included within the related contract – was a Regulation Judgment if it shaped a part of proceedings the primary scope of which fell inside the scope of the Regulation;
  2. The judgment of the Spanish court docket on this explicit case was binding on the arbitration proceedings and gave rise to a problem estoppel;
  3. Within the mild of West Tankers, a celebration was entitled to problem the incorporation of an arbitration clause in one other EU court docket, and the English court docket had no various however to recognise such judgment.

 

Hefin Rees undertakes all kinds of Excessive Court docket and appellate litigation, worldwide arbitration and advisory work. He’s a UK barrister, part-time choose and speaker who has ceaselessly been instructed on excessive profile and substantial instances involving BAA, Barclaycard, Chelsea Soccer Membership, Leeds Soccer Membership, Npower, Bentley Motors and plenty of others. For extra details about Hefin and his revealed work you possibly can go to hefinrees.wordpress.com.

 

 

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