Author: Simon Ekins
Many commercial agreements provide for the resolution of disputes by arbitration as opposed to through national courts. This is often for reasons of confidentiality, enforceability of the final award or tribunal neutrality. But what if your contract counterparty, in breach of an agreement to arbitrate disputes in London, either threatens to, or does, issue court proceedings elsewhere? The High Court in England has long been willing to grant "anti-suit injunctions" in support of a party’s right to have disputes arbitrated in England. The anti-suit injunction may be an invaluable weapon. A counterparty which pursues foreign proceedings in the face of such an injunction will be in contempt of the English court, and any order obtained in the foreign court will usually be unenforceable in this jurisdiction. This article discusses the scope of the English courts’ jurisdiction to grant anti-suit injunctions in light of a recent ruling by the Supreme Court.
The jurisdiction of the English High Court to grant anti-suit injunctions arises from its inherent power to declare rights and from section 37 of the Senior Courts Act 1981, which provides: "The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so." The anti-suit jurisdiction has in recent years been curtailed in respect of proceedings issued anywhere within the European Union. In long-running litigation arising out of a collision involving a ship chartered by Erg Petroli SPA from West Tankers Inc, proceedings were issued in Italy by Erg Petroli in the face of an English arbitration clause. West Tankers obtained an anti-suit injunction from the High Court. However, that decision was appealed, and made its way to the European Court of Justice, which held that the grant of anti-suit injunctions restraining the issue of proceedings before the courts of Member States was incompatible with the Brussels Regulation, which unifies the rules relating to conflicts of jurisdiction within the EU. In essence, each Member State is obliged to accept that each other Member State is entitled to determine its own jurisdiction, and anti-suit injunctions are an unwarranted interference with that right.
The case of Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent)  UKSC 35 saw a further attempt to restrict the court’s jurisdiction to grant anti-suit injunctions. The appellant (JSC) is the owner of a hydroelectric power plant in Kazakhstan. The respondent (AES) is the current operator of the plant. The operating agreement between JSC and AES provided for disputes arising out of the agreement to be subject to ICC arbitration in London. Relations between JSC and AES had long been strained. JSC then issued proceedings in Kazakhstan seeking information and documents relating to the operation of the plant. JSC relied on a previous decision by the Kazakh Supreme Court obtained by the Republic of Kazakhstan, as the prior owner of the plant, that the arbitration agreement was invalid. In response, AES obtained an interim anti-suit injunction from the Commercial Court in London, which found that it was not bound to follow the Kazakh court’s conclusions in relation to an arbitration agreement governed by English law, and refused to do so. In the face of the interim anti-suit injunction JSC withdrew its Kazakh proceedings, seeking information and documents from AES. However, AES remained concerned that JSC would seek to bring further proceedings in Kazakhstan, and so continued its London proceedings, seeking to have the anti-suit injunction made final. The Commercial Court granted the final injunction, and JSC’s appeal has now been determined by the Supreme Court.
Before the Supreme Court JSC argued that the court’s jurisdiction to grant anti-suit injunctions is limited to the situation where there are arbitral proceedings on foot or proposed by a party. JSC therefore argued that since neither it nor AES had any current intention to begin an arbitration, the court did not have the power to grant an anti-suit injunction, effectively "just in case". The Supreme Court was dismissive of this argument. It held that an agreement to arbitrate inherently carries with it a negative obligation not to commence proceedings in any forum other than the agreed forum for the arbitration. The court enforces this negative obligation through the grant of anti-suit injunctions, and there is nothing in either section 37 of the Senior Courts Act 1981 or the Arbitration Act 1996 that restricts the use of this power where no arbitral proceedings are on foot or in prospect.
The Supreme Court’s judgment acknowledges that there are statements in previous case law that the anti-suit injunction may only be granted: (a) where one party can show that the other party has invaded, or threatens to invade, a legal or equitable right of the former for the enforcement of which the latter is amenable to the jurisdiction of the court; or (b) where one party to any action has behaved, or threatens to behave, in a manner which is unconscionable. AES argued that any such restrictions would in any case not preclude grant of the injunction as this was a situation (a) case.
In the event the Supreme Court declined even to impose these limits on its power to grant anti-suit injunctions. It stated only that its power must be exercised "sensitively, and in particular, with due regard for the scheme and terms of the 1996 Act when any arbitration is on foot or proposed". It also noted that there would be some circumstances where it would be appropriate to leave the foreign court to determine its own jurisdiction over proceedings brought in breach of an arbitration agreement. This was not such a case, as the Kazakh court’s reasons for accepting jurisdiction over JSC’s proceedings had been unsustainable in English law.
Parties to international contracts wishing to have disputes arbitrated in London will be heartened by this robust decision of the Supreme Court. It affirms the English courts’ commitment to support arbitration agreements and to intervene in appropriate circumstances to injunct court proceedings outside the EU in breach of such agreement.