A recent decision from the Court of Justice of the European Union (“CJEU”) has shed some light on the continuing problem of whether anti-suit injunctions can be issued to restrain the breach of an arbitration agreement.
Why is this an issue?
Parties to contracts that contain arbitration clauses will sometimes try to take disputes to court instead. Courts in certain European countries such as Italy and Spain are sometimes inclined to disregard foreign arbitration clauses and determine the issues themselves. Until the West Tankers1 decision, the English courts protected English arbitrations by issuing anti-suit injunctions. But the position became uncertain following that decision.
A recap of the West Tankers decision
The charterparty entered into between the parties was expressly governed by English law and contained a clause providing for arbitration in London. Following a collision, the charterers’ insurers exercised their rights of subrogation to commence proceedings in Italy against the shipowners, to recover the amounts which they had paid to the charterers.
The shipowners commenced proceedings in England to obtain an anti-suit injunction restraining the Italian proceedings. Under EU Regulation 44/2001 (“the Regulation”), the court of a Member State may not issue an anti-suit injunction to restrain proceedings which have already been brought in another Member State (that other Member State being “first seized”). The European Court of Justice (“ECJ”) cases of Turner v Grovit (2004) and Gasser v MISAT (2003) confirmed that that is the position even where the proceedings in the other Member State have been brought in breach of an exclusive jurisdiction clause.
However, arbitration is excluded from the scope of the Regulation and the House of Lords in this case took the view that the shipowners were entitled to an anti-suit injunction to protect their contractual right to arbitration. Nevertheless, the House of Lords felt the answer was far from obvious and so referred the question to the ECJ.
The ECJ ruled that the application for an anti-suit injunction from the English courts in this case did not fall within the scope of the Regulation. However, it said that such an injunction would undermine the effectiveness of the Regulation, especially since the Italian court would be prevented from exercising the jurisdiction conferred on it by the Regulation. In this case, it was for the Italian court alone to rule on its own jurisdiction. Member State courts must not grant anti-suit injunctions on the grounds that the proceedings have been brought in breach of an arbitration agreement.
Accordingly, the courts of the Member State first seized were to be left with the decision whether they have jurisdiction despite an arbitration agreement between the parties providing for an alternative dispute resolution procedure. Although it might be hoped that a Member State would uphold the agreement made between the parties, there was no guarantee that this would be the case and decisions might vary according to how different jurisdictions approach this issue.
The Recast Regulation
The Regulation was recently recast when Brussels Regulation 1215/2012 (“the Recast Regulation”) came into force on 10th January 2015.Under the Recast Regulation, it is now possible to bring proceedings before the courts of a Member State even though the courts of another Member State have been first seized, if those proceedings are brought “in support of arbitration” (eg they are started in order to obtain a declaration that there is a valid arbitration agreement between the parties). However, the recast Regulation is silent on whether an anti-suit injunction can be obtained to restrain proceedings in the court first seized. For that reason, a recent Opinion issued by Advocate General Wathelet at the end of last year in a CJEU case, in which he opined that the recast Regulation overturns West Tankers (and that an anti-suit injunction would not be incompatible with the Regulation), was of widespread interest. The Opinion was arguably incorrect though, given that the Recast Regulation would appear to countenance both proceedings continuing before the courts of the respective Member States (although an eventual New York Convention award is likely to have primacy over the judgment of the EU court first seized (which finds that there is no valid arbitration agreement) in these circumstances).The CJEU case for which the Opinion was issued was “Gazprom” OAO, and the Court has now handed down its judgment in the case.
When a dispute arose between Gazprom OAO and the Lithuanian Ministry of Energy (“LME”), LME commenced court proceedings in Lithuania (which was therefore the court first seized). Gazprom alleged that those proceedings breached an arbitration agreement between the parties and commenced arbitration, before obtaining an anti-suit injunction from the arbitrators to restrain the pursuit of the Lithuanian proceedings. However, the Lithuanian courts refused to recognize and enforce the award and referred the matter to the CJEU. The CJEU’s decision unfortunately does not resolve the position under the Recast Regulation, since the decision is based on the Regulation instead. It held that the Regulation does not preclude a Member State’s courts from recognizing and enforcing (or refusing to recognize and enforce) an arbitral award (obtained from a tribunal in another Member State) which prohibits a party from bringing certain claims before it.
In effect, therefore, this decision confirms that an anti-suit injunction can be obtained from the arbitrators to restrain proceedings brought in a Member State in breach of the arbitration agreement (assuming that the arbitrators have the power to grant the injunction). However, it does not resolve the problem that that Member State’s courts may still refuse to recognize and enforce the arbitral anti-suit injunction. Nor does it resolve the wider issue of whether the courts of a Member State might also grant an anti-suit injunction under the recast Regulation (the penalties for the breach of such an injunction being potentially more serious for a litigant than an injunction obtained from arbitrators, which can only be enforced by an order from the supervisory court (if such an order can be obtained following West Tankers)).
Source: Clyde & Co through Daily Collection of Maritime Press Clippings 2015 – 228, www.maasmondmaritime.com