Injunction – Foreign proceedings – Respondent obtaining injunction restraining appellant from pursuing foreign legal proceedings in breach of arbitration clause in contract – Section 37 fo Senior Courts Act 1981 – Whether court having power to make such order where no arbitration contemplated – Whether such order inconsistent with scheme of Arbitration Act 1996 – Appeal dismissed
The respondent operated a hydro-electric plant in Kazakhstan pursuant to a concession held from the appellant. The concession agreement was governed by Kazakh law but contained an arbitration clause governed by English law; this provided for disputes arising in connection with the concession agreement and the transactions contemplated by its parties to be settled by an arbitration to be conducted in London pursuant to the Rules of Conciliation and Arbitration of the International Chamber of Commerce.
Relations between the owners and holders of the concession had proved fraught and there had previously been legal proceedings between the parties’ predecessors in title in the Kazakh courts, which had held the arbitration clause to be invalid. In 2009, the appellant brought further Kazakh proceedings against the respondent, alleging that it had failed to supply information concerning concession assets pursuant to a request duly made under the concession agreement.
The respondent applied to the English courts for: (i) a declaration that the appellant’s claim could only be brought in arbitration; and (ii) an injunction against the continuation or commencement of the foreign proceedings. The respondent did not itself intend to commence an arbitration proceedings but merely sought to establish that the appellant could not pursue court proceedings against it. A High Court judge held that the grounds on which the Kazakh courts had found the arbitration clause to be invalid were unsustainable and he granted the relief sought: see [2010] EWHC 772 (Comm). That decision was upheld by the Court of Appeal: see [2011] EWCA Civ 647.
The appellant appealed to the Supreme Court. It contended that the relief granted by the courts below: (i) could not be granted unless arbitral proceedings had been brought or were intended; and (ii) was contrary to the scheme and purpose of the Arbitration Act 1996, which was intended to provide a complete set of rules for the determination of jurisdictional issues.
Held: The appeal was dismissed.
(1) A party seeking relief within the scope of an arbitration agreement undertook to do so in whatever forum was prescribed by the agreement; the concomitant of that was a negative obligation requiring that neither party would seek such relief in any other forum. The negative obligation was not merely ancillary to current or intended arbitral proceedings but was as fundamental as the positive aspect. Its enforcement was not limited to situations where an arbitration was on foot or proposed. If the other forum was the English court, then the remedy for the party aggrieved was to apply for a stay under section 9 of the Arbitration Act 1996. Such a stay was not conditional on arbitration being on foot, proposed or brought. The counterpart of a statutory stay of domestic proceedings was an injunction against foreign proceedings brought in breach of either an arbitration agreement or an exclusive choice of court clause. Both prior to the 1996 Act and subsequently, it was well established that the English courts would give effect to the negative aspect where necessary by granting such an injunction. Although it was now impermissible for them to do so in relation to a foreign jurisdiction that fell within the European regime of the Brussels Regulation (EC) No 44/2001 and the Lugano Convention, that limitation did not apply in the instant case. Since a stay of domestic proceedings was not conditional on arbitration being on foot, proposed or brought, there was no reason why such a condition should attach to the making of an injunction against foreign proceedings: Pena Copper Mines Ltd v Rio Tinto Co Ltd (1911) 105 LT 846, Aggeliki Charis Compania Maritime SA v Pagnan SpA (The “Angelic Grace”) [1995] 1 Lloyd’s Rep 87, Donohue v Armco Inc [2001] UKHL 64; [2002] 1 All ER 749 and Turner v Grovit [2001] UKHL 65; [2002] 1 WLR 107 applied. Accordingly, the negative aspect of a London arbitration agreement was a right enforceable independently of the existence or imminence of any arbitral proceedings.
(2) The exercise of the power under section 37 of the 1981 Act was not inconsistent with any of the specific provisions of the 1996 Act. So far as section 1(c) of the 1996 Act restricted intervention by the courts, that restriction was limited to matters governed by Part 1 of the Act and it was clear that the drafters had not sought to create a complete code of arbitration law. Moreover, even in matters that fell within Part 1, the use of the word “should” in section 1(c) implied only a need for caution rather than an absolute prohibition on any court intervention. Further, the provisions of the 1996 Act dealing with disputes over jurisdictional issues had no application where no arbitration proceedings were on foot and the respondent did not intend to institute any: see sections 30, 32, 44 and 72. Likewise, section 9, dealing with cases where the court, rather than the arbitral tribunal, ruled in the first instance on arbitral jurisdiction, could not be construed as implicitly excluding any power to injunct the commencement or continuation of foreign proceedings.
(3) More generally, the scheme and purpose of the 1996 Act was not such as to limit the scope, or qualify the use of, the general power contained in section 37 of the 1981 Act, so as to make it impermissible to deploy that power to injunct foreign proceedings begun or threatened in breach of an arbitration agreement. Section 37 of the 1981 Act was a general power, not one specifically tailored to situations involving an arbitration agreement or an exclusive choice of court agreement. It was not possible to imply from the 1996 Act any intention that the general power should never be used in any context associated with arbitration. Had the 1996 Act been intended to abrogate or preclude the use of the well-established jurisdiction in respect of foreign proceedings commenced or threatened in breach of the negative aspect of an arbitration agreement, resulting in a radical diminution in the protection afforded by English law to such an arbitration agreement, that would have been made very clear in the Act. The only sensible inference was that the drafters of the 1996 Act had never contemplated that it could or would undermine the established jurisprudence on anti-suit injunctions.
(4) The general power under section 37 of the 1981 Act should be exercised sensitively and with due regard for the scheme and terms of the 1996 Act. Moreover, in some cases where foreign proceedings were brought in breach of an arbitration clause or exclusive choice of court agreement, the appropriate course would be to leave it to the foreign court to recognise and enforce the parties’ agreement on forum. However, where the foreign court in the instant case had refused to do so, on grounds that were unsustainable under English law, which was accepted to govern the arbitration agreement, there was every reason for the English courts to intervene to protect the prima facie right of the respondent to enforce the negative aspect of the arbitration agreement.
Sally Dobson, barrister
