Posts Tagged ASI
In Toyota v Prolat  EWHC 3649 (Comm) the High Court was asked by Toyota to confirm the existence of an agreement between parties to arbitrate. The arbitral panel, already seized by Toyota, agreed that it would be best for the Court preemptively to settle this issue since it suspects any ruling by the tribunal itself will be subject to litigation by Prolat. The agreement (existence of which is disputed by Prolat; it had employed an authorised agent, whose signings on behalf of Prolat are disputed) concerns the delivery of sugar by Toyota to Prolat. Prolat objects to the jurisdiction of the tribunal. It has itself started proceedings in Naples for damages for various alleged wrongdoing by Toyota, whether for breach of contract or tort.
The interest of the case for this blog lies in particular with the concurrent proceedings in Italy and the UK. Should the UK decline? The case is subject to Regulation 44/2001, not to the recast. Cooke J holds that ‘This Court is not being asked to interfere with the functions of the Italian court as no form of anti-suit injunction is being sought against Prolat. This Court is being asked to determine whether or not there is an arbitration agreement and to make a declaration in the light of its conclusion.‘ West Tankers is therefore distinguished. Would, had it applied, Regulation 1215/2012 made a difference? Cooke J held that it would not: ‘Article 1(2)(d) remains unchanged from the earlier Regulation but is more fully explained in paragraph 12 of the Preamble. I was also referred to Article 73 which states that the Regulation will not affect the application of the New York Convention. (…)‘ (at 16)
He concludes ibidem ‘Although it is not yet in force, it was suggested that some might regard the new Regulation as declaratory of the existing state of the law. . The jury on that, as is well-known, is out.
Cooke J further explores the issue of the applicable law to the contract per its putative law (Article 10(1) Rome I). Firm and justifiable conclusion (at 18) there, is: English law.
Gazprom, arbitral Antisuit Injunctions and the Judgments Regulation: Wathelet AG gets one or two things off his chest
Wathelet AG opined yesterday in Gazprom, Case C-536/13, re the fate of arbitral anti-suit injunctions. (See my posting on the application, for context). He takes the opportunity to add to the chorus of criticism of the ECJ’s West Tankers ruling, at considerable length; and to review the ‘new’ regime under the Brussels I recast, in light of recital 12 of that Regulation.
His review of the ‘new’ regime of the Brussels I recast, and the contrasting positions of the EC and a number of Member States, support my proposition that the recast, by incorporating a summary of previous case-law in its recitals, has certainly not clarified things beyond discussion. Wathelet in fact suggest that the recitals do rebuke the ECJ and return application of the Regulation to the Rich scenario – however I am not convinced that Rich itself necessarily clarifies things. (It, too, like Van Uden and like the current recital, uses a confusing variety of criteria. I have a paper forthcoming on the Brussels I recast (already in a Dutch version should readers be interested) which looks into this).
At any rate, the lengthy review of the position under the recast evidently is outside the scope of the preliminary review, since the recast does not apply to it, and the ECJ is certain not to entertain the AG’s review of the recast and his rebuke of West Tankers at all. (Although his critical views are not likely to endear him to the Court).
Returning to the actual questions, the AG suggests the Court reply that that the Brussels I Regulation is not applicable in the present case (it falling exclusively within the scope of the 1958 New York Convention) and that, in any event, (what is effectively) an anti-suit injunction issued by an arbitration tribunal is not contrary to that Regulation. Finally, that under the New York Convention, a Member State cannot classify Brussels I’s jurisdictional regime as being ‘ordre public’ and hence capable of leading to refusal of recognition of an arbitral award.
The AG decisively supports arbitration in this opinion, however the ECJ is bound to be much shorter (and perhaps less sympathetic) in its judgment. To be continued….
In Bank St Petersburg, the High Court issued an anti-enforcement injunction on 14 May. The Bank had obtained a number of Russian judgments in their favour (in interlocutory proceedings), which they aimed to have enforced in France and Bulgaria. Following the Russian judgments however parties agreed to have their core dispute (the control over a Russian company against the background of a restructuring operation of the Arkhangelskys’ financial interest) judged exclusively by the English courts. The anti-enforcement injunction bans the Bank from having the judgments enforced in France, Bulgaria, or anywhere else.
Prima facie the injunction escapes all attention under the Brussels I Regulation: the judgments, enforcement of which is sought, originate from outside the EU. The choice of court clause is agreed between two parties domiciled outside of the EU, whence also falling outside the Regulation in its current version (this will change following the Brussels I-recast). (Notwithstanding Article 23(3)’s limited protection by instructing courts not named in the clause to desist – however Article 27’s lis alibi pendens rule would still protect the courts who despite this instruction hear the case anyway). Of particular note is also the subject-matter of the underlying dispute, which might be caught, if the Regulation were applied reflexively (such as the High Court did in Ferrexpo), by reflexive application in favour of the Russian courts of the exclusive Jurisdictional rule of Article 22(2).
These are altogether not very forceful points of entry for the Brussels I-Regulation to have a calling in the matter. Therefore this also rules out that the injunction might be caught by the ECJ’s general aversion vis–a-vis ‘anti-suit’ injunctions.
Should arbitral anti-suit injunctions follow the West Tankers fate? Lithuanian court challenges the ECJ
In Case C-536/13 Gazprom, the Lithuanian Supreme Court has challenged the ECJ to specify the limits (or not) of its findings in West Tankers – on which I have reported extensively elsewhere. The Court of Justice ruled in February 2009 on the basis of effet utile that the English courts were out of their league in issuing an anti-suit injunction, prohibiting Allianz and Generali from pursuing the case in the Italian courts (on the basis of Article 5(3)’s special jurisdictional rule for tort) and obliging them to take the case to arbitration in London.
In Gazprom, A tribunal rendered an award holding that proceedings by Lithuania in Vilnius partially breached the arbitration clause in the shareholders’ agreement between parties. The arbitral tribunal ordered the Republic of Lithuania to withdraw certain claims filed before the Lithuanian courts and to amend other claims. Gazprom is seeking enforcement of the SCC award in Lithuania. Relevant summaries of the award and of the Lithuanian proceedings are available here. The instruction of restraint contained in the award is effectively an anti-suit injunction, albeit rendered by a tribunal instead of a court. The effect of both is the same: does the West Tankers rationale therefore hold (West Tankers, readers will remember, relied on the effet utile of the Regulation to extend its reach to anti-suit injunctions in support of arbitral proceedings, notwithstanding the latter’s clear exclusion from the Regulation)?
Where an arbitral tribunal issues an anti-suit injunction and thereby prohibits a party from bringing certain claims before a court of a Member State, which under the rules on jurisdiction in the Brussels I Regulation has jurisdiction to hear the civil case as to the substance, does the court of a Member State have the right to refuse to recognise such an award of the arbitral tribunal because it restricts the court’s right to determine itself whether it has jurisdiction to hear the case under the rules on jurisdiction in the Brussels I Regulation?
Should the first question be answered in the affirmative, does the same also apply where the anti-suit injunction issued by the arbitral tribunal orders a party to the proceedings to limit his claims in a case which is being heard in another Member State and the court of that Member State has jurisdiction to hear that case under the rules on jurisdiction in the Brussels I Regulation?
Can a national court, seeking to safeguard the primacy of European Union law and the full effectiveness of the Brussels I Regulation, refuse to recognise an award of an arbitral tribunal if such an award restricts the right of the national court to decide on its own jurisdiction and powers in a case which falls within the jurisdiction of the Brussels I Regulation?
No chamber has as yet been allocated to the case however I would not be surprised were it to be the Grand Chamber.
It’s not the grammar, stupid! The High Court in Anchorage on exclusive (or not) choice of court, anti-suit injunctions, Rome, Brussels and much more
In Anchorage (BNP Paribas v Anchorage Capital Europe et al). a bank and a hedge fund are at odds as to whether a handful of instant message communications resulted in a binding contract or contracts and if so, between which parties and on what terms. The issue for decision at the High Court was whether the disputes should be determined in London (home to the London Branch of BNP Paribas and allegedly identified as the exclusive – or not – court of choice in the alleged contracts), New York (home to the hedge fund which however also has a separate LLP domiciled in London) or possibly Luxembourg (home to two funds within Anchorage Group).
For review of the facts reference is best made to the text of the judgment, for there are many framework agreements etc at stake. The High Court’s review of the case though is most interesting for highlighting the limits to what Article 23 of the Brussels I Regulation harmonises. The Article aims to ensure a non-formalistic deference to parties’ agreement to have their disputes adjudicated in a particular court. As Males J notes (and the ECJ acknowledges), one should not be overly formalistic in applying Article 23.
Article 23 though does not harmonise the underlying contractual (or not) issues: with whom were contracts made, especially in an agent /principal context; what law applies to the (alleged) choice of court agreement (an issue more or less resolved in the new Brussels I Regulation). Males J applies English law to the issue of validity of the clause, on the basis it would seem of lex contractus (which arguably will no longer be possible come January 2015, as a result of the new Brussels I Regulation): either because of the express determination of such by the parties, or because the lex contractus of the agreement of which it forms part is English law by virtue of the Rome I Regulation (contract for the sale of goods; I am not sure though whether the underlying contract truly is a sale of a good). Arguments for the alternative (in particular, application of New York law to the choice of court agreement) are dismissed on the basis that they represent the kind of semantic approach to such clauses which English law has left firmly behind. Surely a poster-argument indeed for the use of English law in international commerce and an approach which is to be commended.
Even were the validity of the clause not to be upheld, the High Court outlines other jurisdictional grounds: Article 5(1) of the Jurisdiction Regulation on the basis of the place of performance of the obligation in question; Article 5(5) on the basis of a contractual dispute closely connected to the operation of a branch; Article 6(1) on the basis of the cases being closely connected. (Use of Anchorage London as an anchor defendant (lousy pun intended I fear) against the investment funds).
Forum non conveniens (potentially applicable should none of the jurisdictional grounds be valid and given the possibility of New York proceedings) was dismissed; the anti-suit injunction was granted. Here, Males J reviews the rather grammatical arguments made vis-a-vis the choice of court agreement being used transitively or not: again, the Court takes a non-formalistic approach and (respectfully) dismisses the grammatical argument as being elusive.
This is the kind of case upon which one could build an entire conflicts course. If you happen to be preparing one over the holidays period: good luck and enjoy. To all readers past, current and future: Merry Christmas and /or applicable and appropriate season’s greetings. Geert.
Anti-suit injunctions and the Insolvency Regulation – The High Court (and the US Bankruptcy court) in Kemsley
At least until late 2008, Mr Kemsley was a very wealthy individual. On 25 June 2008, Barclays granted him a personal loan of £5 million on an unsecured basis. The loan was repayable after a year but the loan period was subsequently extended. In 2009, Mr Kemsley’s business in England collapsed when his group of companies went into administration. Mr Kemsley was unable to keep up repayment to Barclays of instalments under the extended loan, and failed to stick to a repayment schedule for debts with another company. Mr Kemsley is a British citizen and had lived until 2009 in England. Following the collapse of his business here, he moved in June 2009 with his wife and family to Florida. They moved to New York City in about May 2010 but subsequently Mr and Mrs Kemsley became estranged and Mrs Kemsley moved back with their children to England in about June 2012. Mr Kemsley has remained in the United States.
On 13 January 2012, Mr Kemsley presented his bankruptcy petition to the High Court. His petition was based on his physical presence in England on the date of presentation, within the terms of the Insolvency Act 1986, and on his having had a place of residence in England within three years of presentation. On 26 March 2012, he was declared bankrupt on the basis of the EU’s Insolvency Regulation. On 1 March 2012, shortly before Mr Kemsley became bankrupt, Barclays commenced proceedings against him under the loan agreement in the Supreme Court of the State of New York. On 21 August 2012, he applied in the US Bankruptcy Court for the Southern District of New York under Chapter 15 of the US Bankruptcy Code for recognition of the English bankruptcy as a foreign main proceeding.
In the English case discussed in this post, Mr Kemsley seeks to restrain Barclays from pursuing proceedings in the United States: an anti-suit injunction. The anti-suit injunction was dismissed. The High Court sided in favour of a restrictive approach to ASIs in the case of bankruptcy, per precedent. It found that the US court was best placed to decide on COMI in the US.
The US bankruptcy court refused to recognise K’s UK bankruptcy as a foreign main or nonmain proceeding under chapter 15. The court held that K’s COMI needed to be adjudged as at the time of his English bankruptcy filing, not the time of the chapter 15 filing. Rejecting K’s statement at the time of his UK bankruptcy filing, the court found that his COMI was in the US at that time, focusing on K’s habitual place of residence and that of his family.
EU readers may be surprised that the High Court even considers an ASI, given the EU’s aversion to ASIs in the area of conflict of laws, post Gasser and Turner. However the High Court evidently must have considered the English court’s duties under and loyalties to the Insolvency Regulation fully met with the previous finding of insolvency. The current proceedings in that understanding fall outside that remit. Moreover, the aversion to anti-suit injunctions arguably only holds vis-a-vis fellow EU courts.
Of note are also the apparent limits to the international harmonisation of COMI as things stand.
The UK Supreme Court confirmed on 13 June the broad use of anti-suit injunctions in Ust-Kamenogorsk. I have reported earlier (e.g. here) on the tension between the common law and the ECJ over the use of anti-suit injunctions. The judgment only holds for injunctions served outside of the Brussels-I (and Lugano) States. The case at issue was peculiar in that no arbitral proceedings had been commenced or were as yet proposed – however the respondent remained concerned that the appellant would seek to bring further court proceedings in Kazakhstan in breach of the contractual agreement that such disputes should be subject to arbitration in London. As a result the respondent continued with the proceedings.
Supreme Court Press Release
Background to the appeals. The appellant is the owner of a hydroelectric power plant in Kazakhstan. The respondent is the current operator of that plant. The concession agreement between the parties contains a clause providing that any disputes arising out of, or connected with, the concession agreement are to be arbitrated in London under International Chamber of Commerce Rules. For the purposes of this appeal the parties are agreed that the arbitration clause is governed by English law. The rest of the concession agreement is governed by Kazakh law.
Relations between the owners and holders of the concession have often been strained. In 2004 the Republic of Kazakhstan, as the previous owner and grantor of the concession, obtained a ruling from the Kazakh Supreme Court that the arbitration clause was invalid. In 2009 the appellant, as the current owner and grantor of the concession, brought court proceedings against the respondent in Kazakhstan seeking information concerning concession assets. The respondent’s application to stay those proceedings under the contractual arbitration clause was dismissed on the basis that the Kazakh Supreme Court had annulled the arbitration clause by its 2004 decision.
Shortly thereafter the respondent issued proceedings in England seeking (a) a declaration that the arbitration clause was valid and enforceable and (b) an anti-suit injunction restraining the appellant from continuing with the Kazakh proceedings. An interim injunction was granted by the English Commercial Court and the appellant subsequently withdrew the request for information which was the subject of the Kazakh proceedings. However, the respondent remained concerned that the appellant would seek to bring further court proceedings in Kazakhstan in breach of the contractual agreement that such disputes should be subject to arbitration in London. As a result the respondent continued with the proceedings. The English Commercial Court found that they were not bound to follow the Kazakh court’s conclusions in relation to an arbitration clause governed by English law and refused to do so. The Commercial Court duly granted both the declaratory and final injunctive relief sought.
The appellant appealed to the Supreme Court of the United Kingdom on the grounds that English courts have no jurisdiction to injunct the commencement or continuation of legal proceedings brought in a foreign jurisdiction outside the Brussels Regulation/Lugano regime where no arbitral proceedings have been commenced or are proposed.
Judgment. The Supreme Court unanimously dismisses the appeal. The English courts have a long-standing and well-recognised jurisdiction to restrain foreign proceedings brought in violation of an arbitration agreement, even where no arbitration is on foot or in contemplation. Nothing in the Arbitration Act 1996 (“the 1996 Act”) has removed this power from the courts. The judgment of the court is given by Lord Mance.
- § An arbitration agreement gives rise to a ‘negative obligation’ whereby both parties expressly or impliedly promise to refrain from commencing proceedings in any forum other than the forum specified in the arbitration agreement. This negative promise not to commence proceedings in another forum is as important as the positive agreement on forum [21-26].
- § Independently of the 1996 Act the English courts have a general inherent power to declare rights and a well-recognised power to enforce the negative aspect of an arbitration agreement by injuncting foreign proceedings brought in breach of an arbitration agreement even where arbitral proceedings are not on foot or in contemplation [19-23].
- § There is nothing in the 1996 Act which removes this power from the courts; where no arbitral proceedings are on foot or in prospect the 1996 Act neither limits the scope nor qualifies the use of the general power contained in section 37 of the Senior Courts Act 1981 (“the 1981 Act”) to injunct foreign proceedings begun or threatened in breach of an arbitration agreement . To preclude the power of the courts to order such relief would have required express parliamentary provision to this effect .
- § The 1996 Act does not set out a comprehensive set of rules for the determination of all jurisdictional questions. Sections 30, 32, 44 and 72 of the 1996 Act only apply in circumstances where the arbitral proceedings are on foot or in contemplation; accordingly they have no bearing on whether the court may order injunctive relief under section 37 of the 1981 Act where no arbitration is on foot or in contemplation .
- § The grant of injunctive relief under section 37 of the 1981 Act in such circumstances does not constitute an “intervention” as defined in section 1(c) of the 1996 Act; section 1(c) is only concerned with court intervention in the arbitral process .
- § The reference in section 44(2)(e) of the 1996 Act to the power of the court to grant an interim injunction “for the purposes of and in relation to arbitral proceedings” was not intended to exclude or duplicate the court’s general power to grant injunctive relief under section 37 of the 1981 Act .
- Service out of the jurisdiction may be affected under Civil Procedure Rule 62.2 which provides for service out where an arbitration claim affects arbitration proceedings or an arbitration agreement; this provision is wide enough to embrace a claim under section 37 to restrain foreign proceedings brought or continued in breach of the negative aspect of an arbitration agreement .
Aficionados of arbitration law will be aware of the long-running West Tankers saga. It pitches the English courts’ urge to uphold commercial arbitration, against the European Court of Justice’s zeal in upholding a pure (and in the case of the arbitration exception, far-fetched) lis alibi pendens rule. The battlefield at issue is the Brussels I Regulation on jurisdiction in civil and commercial matters. The Court of Justice ruled in February 2009 [Case C-185/07] that the English courts were out of their league in issuing an anti-suit injunction, prohibiting Allianz and Generali from pursuing the case in the Italian courts (on the basis of Article 5(3)’s special jurisdictional rule for tort) and obliging them to take the case to arbitration in London. Thus two cases continued: one, an arbitration proceeding, in London, with West Tankers and Erg (the initial counterparty) participating, but not Allianz and Generali (the insurers, subrograted into Erg’s rights). The other, for the Italian courts in ordinary, the current fate of which is less clear.
It would seem that West Tankers is now attempting to turn the Italian torpedo (launching proceedings in an Italian court to delay them) into a boomerang, by having the English courts enforce the arbitral award rendered in the meantime.
While this intention is not as such formulated, one assumes that this manoeuvre in part at least is meant to ensure that any judgment eventually rendered in Italy, will not be enforceable in England (or indeed elsewhere in the EU) as the High Court’s enforcement might qualify as a ‘prior’ judgment between the same parties, per Article 34 of the Regulation. One gets the feeling that West Tankers will once again end up in Luxembourg… I have an article on all the above forthcoming and will put it on SSRN once finalised.