English Court has power to issue an anti-suit injunction in support of non-existent arbitration

In a unanimous decision, the UK Supreme Court held in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35 that the English courts have the power to issue anti-suit injunctions in support of arbitration agreements where proceedings have been brought in a court forum which is outside of the EU (Brussels/Lugano regime). This is the case even where the applicant for the anti-suit injunction has not commenced, and has no intention or wish to commence, any arbitration proceedings.

An arbitration clause is essentially a (exclusive) jurisdiction clause. Accordingly, an English/Singapore court will issue an anti-suit jurisdiction where there has been a breach of the arbitration agreement e.g. in commencing court proceedings and not arbitration (for more information on the interplay between arbitration clauses and jurisdiction clauses, see our post here). This is what is known as the negative aspect to a jurisdiction clause (see paragraph [1]).

Background

Ust-Kamenogorsk Hydropower Plant JSC (“UKHP“) is the owner and grantor of a concession to run a power plant in Kazakhstan. AES Ust-Kamenogorsk Hydropower Plant LLP (“AESUK“) is the grantee and lessee of that concession. The concession agreement contained a London arbitration clause, which in turn was governed by English law (see paragraph [6]).

On 12 June 2009, UKHP brought proceedings against AESUK in the Kazakhstan court. This was subsequent to a declaration from the Kazakhstan Supreme Court that the arbitration clause was invalid (see paragraph [9]). AESUK’s application to stay those court proceedings failed (see paragraph [11]).

AESUK then sought for and obtained a final anti-suit injunction from the English High Court against UKHP from continuing or bringing any claim in relation to the concession agreement save in accordance with the arbitration clause (see paragraph [14]), see AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC, [2010] EWHC 772 (Comm). This was upheld by the English Court of Appeal in AES Ust-Kamenogorsk Hydropower Plant Llp v Ust-Kamenogorsk Hydropower Plant JSC [2011] EWCA Civ 647.

Decision of the UK Supreme Court

The Supreme Court firmly rejected the contention that the so-called negative obligation inherent in an arbitration clause was “a mere ancillary to current or intended arbitration proceedings” (see paragraph [21]). The court considered that an arbitration clause was akin to an exclusive choice of court clause and accordingly, “[t]here is no reason why a party to either should be free to engage the other party in a different forum merely because neither party wishes to bring proceedings in the agreed forum“.

The UK Supreme Court undertook an analysis of English case law and came to the conclusion that “[b]oth prior to the [UK] Arbitration Act 1996 and indeed subsequently – until the present case – the negative aspect was well recognised, and it was well established that the English courts would give effect to it, where necessary by injuncting foreign proceedings brought in breach of either an arbitration agreement or an exclusive choice of court clause” (see paragraph [23]). The learned law lords concluded that “[u]nless the [UK] Arbitration Act 1996 requires a different conclusion, the negative aspect of a London arbitration agreement is therefore a right enforceable independently of the existence or imminence of any arbitral proceedings” (see paragraph [28]).

With respect to the relationship between the UK Arbitration Act 1996 and the power of the English court to issue an anti-suit injunction pursuant to the Senior Courts Act, two issues arose: (a) the extent to which the UK Arbitration Act 1996 was “a complete and workable set of rules for the determination of all jurisdictional issues in all situations“; and (b) the extent of minimal curial intervention as stipulated in section 1(c) of the same (“in matters governed by this Part the court should not intervene except as provided by this Part” (emphasis added)) (see paragraph [31] and [32]).

First, the learned law lords considered that section 1(c) of the UK Arbitration Act 1996 was “a deliberate departure from the more prescriptive “shall” appearing in article 5 of the UNCITRAL Model Law” and concluded that section 1(c) “implies a need for caution, rather than an absolute prohibition, before any court intervention” (see paragraph [33]).

Second, the court held that the provisions of the UK Arbitration Act 1996 which granted the English courts various powers in anticipation of or in aid of arbitration proceedings had no bearing on the issue of whether the English court had the power under the Senior Courts Act 1981 to issue an anti-suit injunction for a breach of an arbitration agreement (see paragraphs [21], [29], [35] to [54]).

Finally, the court rejected the proposition that “the Arbitration Act 1996 either limits the scope, or as a matter of general principle qualifies the use, of the general power contained in section 37 [of the Senior Courts Act], so that it is no longer permissible to deploy section 37 to injunct foreign proceedings begun or threatened in breach of an arbitration agreement” (see paragraph [55]). After all, “[s]ection 37 is a general power, not specifically tailored to situations where there is either an arbitration agreement or an exclusive choice of court clause” (see paragraph [56]).

The learned law lords also made the very pointed comment that UKHP was essentially seeking to have its cake and eat it (see paragraph [41]).

“…In denying that the court has any relevant jurisdiction, JSC is seeking to benefit by AESUK’s reliance on an arbitration agreement, while itself denying its existence. A party is entitled to benefit by the existence of an arbitration agreement, but normally only by asserting it, e.g. by commencing an arbitration or applying for a stay under section 9. Those must however be the last things that JSC is willing to do.

Singapore Position

There does not appear to be any Singapore case or legislative provision which addresses this issue directly. Section 6 of the Singapore International Arbitration Act (Cap. 143A) (“IAA“) provides that the Singapore courts have the power to stay its own proceedings where the applicant is a party to an arbitration agreement with the other party which had commence proceedings. The exercise of such a power is premised on the fact that an arbitration agreement exists between the two parties.

Furthermore, the Singapore courts have also held that they have an inherent power to stay their own proceedings in support of arbitration, for example, where the applicant is a third party to an arbitration agreement and in view of intended arbitration proceedings between the parties to the arbitration agreement (see our post for such an example here).

However, those provisions/powers relate to the Singapore courts determining whether to stay their own proceedings. The first successful application to the Singapore High Court for an anti-suit injunction in support of arbitration was in WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka, [2002] SGHC 104. The Singapore High Court held that its powers under section 12(6) of the IAA (see now section 12A(6) of the IAA) turned on whether the arbitration clause in a settlement agreement between the parties was an arbitration agreement for the purposes of the IAA. In that case, however, the applicant had already commenced arbitration proceedings and was seeking to restrain the respondent’s proceedings before the Sri Lankan court. It should be noted that section 12(6) of the IAA (now section 12A(6) of the IAA) makes explicit that the court’s exercise of its powers was contingent “only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively“.

Another point worth considering is whether the Model Law, and in particular the doctrine of minimal curial intervention in Article 5 of the Model Law, circumscribes the power of the (Singapore) courts to issue an anti-suit injunction except in accordance with the Model Law/IAA. As mentioned above, the UK Supreme Court considered that section 1(c) of the UK Arbitration Act 1996 was a deliberate departure from the prescriptive mandatory Article 5 of the Model (see paragraph [33]).

Conclusion

The importance of this case is two-fold. First, the power of the English court to issue an anti-suit injunction in support of an arbitration is not contingent on the arbitration being contemplated, let alone, commenced.

Second, this decision limits the applicability of the so-called Italian Torpedo. This is because the English court is entitled to exercise anti-suit powers where the contravening court proceedings are not in a Brussels/Lugano regime. We have previously written about the Italian Torpedo and how the commencement of court proceedings in an EU member state can delay and stymie an arbitration agreement (see our post touching on the issue here),

“…a party seeking to delay patent litigation or arbitration initiates proceedings in Italy. The idea behind that tactic is that once a court of a Member State is seized of a matter, courts of other Member States must stay proceedings relating to that matter before those courts (including arbitrations) until the initial court has determined the issue. The choice of Italy as the starting venue is deliberate given the Italian court’s reputation for lengthy process involved in taking proceedings to their finality and the fact that jurisdictional issues are only determined at the hearing on the merits.”

It will be interesting to see if this approach will be followed in the Singapore courts. We will keep our readers updated accordingly.

[Editors’ Note: A reader has very helpfully and rightfully pointed out that the Italian Torpedo is jurisdictionally limited by virtue of the Brussels Regulations and the West Tankers case. What we should have said is that this UKSC decision holds that parties will not be permitted to circumvent or otherwise stymie an English arbitration clause by starting proceedings in a foreign court. To that extent, the Italian Torpedo tactic is limited to member states of the Brussels/Lugano regime.]

About Shaun Lee

International Dispute Resolution and Arbitration lawyer. Fellow of the Chartered Institute of Arbitration. Panel of Arbitrators and Panelist for Domain Name Dispute Resolution at the KLRCA.
This entry was posted in Arbitration, Singapore, UK and tagged , , , , , , , . Bookmark the permalink.

6 Responses to English Court has power to issue an anti-suit injunction in support of non-existent arbitration

  1. Ivan Prandzhev says:

    Hi! Thank You very much! It’s this very useful read – an excellent summary of a judgment I’d been waiting for for long time.

    However, I have to disagree on Your conclusion in the final section:
    “…this decision limits the applicability of the so-called Italian Torpedo. This is because the English court is entitled to exercise anti-suit powers where the contravening court proceedings are not in a Brussels/Lugano regime.”

    1) An italian torpedo is a tactic based on section 27 of the Brussels Regulation which is of course applicable only within the European Union and does not concern courts in third countries. (=Courts outside the EU do not have to stay proceedings when the matter is brought before a court in an EU member state).

    2) Within the EU the West Tankers Jurisdicition of the Court of Justice of the EU is also applicable and prohibits the issuance of anti-suit injunctions to protect arbitral proceedings in one member state when the same matter has first been brought before a court in another member state.

    In summary, under european law English courts are still not allowed to issue anti-suit injunctions against other member states, no matter what the Supreme Court says about court proceedings in third countries – european law (the applicable 1)regulation and 2)jurisdicition) thumbs all 28 national laws of the member states.

    Kind Regards 😉

    • Ivan Prandzhev says:

      Sry, of course I meant to say “jurisprudence” and not “jurisdiction” 😉

      • Shaun Lee says:

        Dear Ivan,

        Much thanks for the comment! We have noted your point and clarified our post in a further Editors’ Note above.

        Best regards,
        Shaun

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