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1 FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE, MINING AND COMMODITIES TRANSPORT TECHNOLOGY AND INNOVATION PHARMACEUTICALS AND LIFE SCIENCES Anti-suit injunctions – the English position A presentation to the Istanbul meeting of the AIDA Reinsurance Working Party Michael Mendelowitz Partner Norton Rose LLP 3 May 2012

2 2 Key points Restraining court proceedings commenced in breach of arbitration agreement Three different regimes Stay of court proceedings in UK under section 9 of Arbitration Act 1996 Anti-suit injunctions restraining foreign court proceedings in – EU Member States where Regulation EC44/2001 (Brussels I) applies – Rest of world Anti-suit injunctions no longer granted where Brussels Regulation applies, but available with respect to other jurisdictions Arbitration exception to Brussels Regulation Front Comor case shows exception currently of limited effect Practical solutions and proposals for EU legislative reform

3 3 Foreign proceedings commenced outside EU English courts have – and will exercise – power to grant injunctions restraining party over whom court has personal jurisdiction from commencing or continuing foreign court or arbitral proceedings in breach of agreement requiring dispute to be litigated or arbitrated exclusively in England Statutory sources of courts power Section 37 of Senior Courts Act 1981: The High Court may … grant an injunction … in all cases where it appears … just or convenient to do so.

4 4 Foreign proceedings commenced outside EU (continued) Statutory sources of courts power (continued) Section 44 of Arbitration Act confers equivalent powers on court in relation to arbitral proceedings, but – Only interim (not final) injunctions possible – Court can only act if tribunal itself is powerless or ineffective – Unless case is urgent, permission of tribunal or agreement of parties required – Courts power is discretionary and may be excluded by agreement of parties

5 5 Juridical basis for exercise of courts powers Breach of contract Lord Millet in The Angelic Grace [House of Lords, 1995]: There is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them. Vexatious or oppressive conduct For example, foreign proceedings commenced by third party who has colluded with defendant to impede or frustrate English arbitration: BNP Paribas v Russian Machines [Commercial Court, 2011] But in absence of exclusive English jurisdiction or arbitration clause, merely commencing proceedings in another available jurisdiction is not of itself vexatious or oppressive: Highland Crusader v Deutsche Bank [Court of Appeal, 2009]

6 6 Practical issues to note English court must have jurisdiction in personam over target of injunction Usually established by submission to jurisdiction as part of arbitral agreement which applicant is seeking to enforce But may be necessary to invoke long arm jurisdiction against non-domiciled respondents who dispute jurisdiction, or third parties Remedy is equitable and therefore discretionary, but will be granted fairly readily where Claimant can demonstrate existence of arbitration agreement Application for anti-suit relief brought promptly No substantial risk of injustice caused by inconsistent decisions involving interests of third parties

7 7 Practical issues to note (continued) In Sulamerica Companhia Nacional de Seguros and Others v Enesa Engenharia SA and Others [Commercial Court, 19 January 2012], injunction granted restraining continuation of proceedings in Brazil despite: insurers, insureds and subject matter of insurance (Jirau hydro-electric project) all located in Brazil; CAR insurance policy subject to Brazilian law and exclusive jurisdiction of courts of Brazil; and arbitration clause (which provided for seat of arbitration to be in London) arguably limited to disputes over quantum, following failure of mediation Comment: Continues trend of English cases holding that seat of arbitration highly significant in determining arbitral law to be applied Insurance arrangements (including arbitration clause) – and English litigation – acknowledged to be led by London reinsurance market Reinsurers may have achieved dubious jurisdictional victory on basis of unclear contract drafting

8 8 Proceedings commenced in another EU Member State Brussels I Regulation effectively precludes anti-suit injunctions, even when foreign proceedings have been commenced in bad faith: Turner v Grovit [European Court of Justice, 2004] (decided under equivalent provisions of 1968 Brussels Convention) But Regulation excludes from its scope arbitration (Article I(ii)(d)) Allianz SpA (formerly Riunione Adriatica de Sicurta SpA) v West Tankers Inc (The Front Comor) [ECJ, 2009] Vessel owned by West Tankers and chartered to Erg Petroli SpA collided with jetty in Syracuse, Sicily owned by Erg Charterparty provided for London arbitration under English law Erg commenced arbitration in London seeking damages West Tankers counterclaimed declaration of non-liability

9 9 Proceedings commenced in another EU Member State (continued) Ergs insurers (having indemnified their insured) commenced subrogated proceedings (so-called Italian torpedo) in Tribunale di Siracusa against West Tankers West Tankers obtained anti-suit injunction in English courts On appeal, House of Lords referred question to ECJ: is anti-suit injunction in support of arbitration agreement consistent with Brussels Regulation? ECJ took narrow view of exception in Article I(ii)(d): – What must be considered is not application for anti-suit injunction itself, but nature of proceedings against which such injunction directed – Exception therefore does not apply to dispute concerning jurisdiction involving determination of validity or scope of arbitral agreement where such determination arises as incidental question in claim for damages

10 10 Proceedings commenced in another EU Member State (continued) Rationale of ECJ: if anti-suit injunction could be granted in circumstances of this case, achievement of objective of Regulation – i.e. unification of jurisdiction conflict rules in civil and commercial matters – might be prevented Consequences of Front Comor decision Challenge to continuation of proceedings in Tribunale di Siracusa must be brought before that court, which alone has power to determine matters relating to its own jurisdiction More generally, English courts may not grant injunctions to restrain proceedings brought in court of another EU Member State in breach of agreement to arbitrate disputes in England

11 11 Subsequent developments – EU legislation European Commission adopted Heidelberg Report (2007 study evaluating application of Brussels I Regulation) and published Green (Consultation) Paper in April 2009, proposing (inter alia): Partial deletion of current arbitration exception, bringing all arbitration-related court proceedings within scope of Regulation Exclusive jurisdiction to be granted to courts of Member State of place (i.e. seat) of arbitration in respect of all court proceedings in support of arbitration (subject possibly to contrary agreement between parties) Introduction of uniform criteria for determination of place of arbitration New provision requiring court seised of proceedings brought in breach of arbitral agreement to stay those proceedings pending decision on issue by court at place of arbitration

12 12 Subsequent developments – EU legislation (continued) Reaction mixed – in particular, arbitral community argued against Removal of arbitration exception Apparent abandonment of Kompetenz-Kompetenz principle (arbitral tribunals power to rule on its own jurisdiction) Commissions proposals published on 14 December 2010 Arbitration exception to be retained but amended Effect of Front Comor neutralised by provision that proceedings in court in any other jurisdiction to be stayed where question of arbitral jurisdiction is before either arbitral tribunal or court at seat of arbitration Next stage will be approval of European Parliament and Council; said to be expected within next two years (although process has to date already taken much longer than originally anticipated)

13 13 Subsequent developments – English case law Front Comor saga not over yet While Italian proceedings pending – insurers joined by Commercial Court as parties to English arbitration (October 2007); tribunal rendered award (October 2008) declaring West Tankers not liable to Erg for loss arising out of collision West Tankers commenced proceedings in Trieste (February 2009) for recognition and enforcement of arbitral award under New York Convention Insurers have challenged Convention application No determination yet On 24 January 2012, Court of Appeal affirmed decision of Commercial Court entering judgment in favour of West Tankers to enforce award

14 14 Subsequent developments – English case law (contd) Insurers argument that declaratory awards not subject to Section 66 of Arbitration Act (because not enforceable in same way as monetary or coercive award) rejected Toulson LJ: [I]n this case the owners perceive that there may be a possible advantage to them in having the award in the form of a judgment and the insurers evidently perceive a risk that the owners may be right. The reason has to do with a jurisdictional battle which has already taken the case to the House of Lords … and to the European Court of Justice …. Commercial Court has recently (4 April) held arbitrators may award damages to West Tankers for breach of obligation to arbitrate – such award could include costs incurred by reason of Italian proceedings; and indemnity against any sums payable to insurers following proceedings to enforce Italian judgment (important if West Tankers has assets elsewhere – particularly in Italy)

15 15 Conclusions But what if Italian torpedo succeeds and Tribunale di Siracusa eventually holds West Tankers liable on merits of case? Application for enforcement of Italian judgment in England bound to fail because inconsistent with finding of arbitral tribunal and decisions of English courts (and presumably vice versa for request for recognition of English judgment in Italy) Party in position of West Tankers may protect itself by obtaining – (from arbitral tribunal) declarations of non-liability plus entitlement to indemnity against any damages awarded by foreign court; and – (from English court) judgment recognising and enforcing arbitrators declarations But latest decision of Commercial Court likely to be appealed Better solution: acceleration of amendment of Brussels I Regulation to clarify and reform scope of arbitration exception

16 16 Our international practice

17 17 Disclaimer The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose LLP on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a partner) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose Canada LLP or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.



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