Anti suit injunctions – are they still available in the EU?
In the recent case of Nori Holdings and others v. Public Joint Stock Company – Bank Otkritie Financial Corporation, the English High Court was asked to decide whether anti-suit injunctions could now be granted to restrain proceedings in another EU state. They decided that the answer was still "no".
The decision in Nori Holdings ( EWHC 1343 (Comm)) can be traced back to Allianz SpA and Others v. West Tankers Inc. ( EUECJ Case C-185/07) That case focussed on anti-suit injunctions and involved a vessel owned by West Tankers and chartered by ERG Petroli S.p.A., which collided with a jetty in Italy. It generated a significant amount of controversy as follows:
- There was an arbitration clause in the charterparty, which said that disputes between the parties had to be resolved by arbitration in London and ERG commenced an arbitration in London;
- However, proceedings were also commenced in the Italian courts by insurers as a subrogated claim under the charterparty;
- In response, West Tankers applied in the English courts for and was granted "an anti-suit injunction", ordering than the Italian court action had to come to an end because of the presence of the arbitration clause;
- Because of a potential conflict with EU law, the English House of Lords referred the matter to the European Court of Justice who decided that courts of EU member states cannot prevent parties from bringing claims before the courts of another member state in breach of an arbitration clause;
- The ECJ decided that this would be incompatible with the EU regime for recognition and enforcement of judgements, based on reciprocal respect between the courts of EU Member States.
The ECJ's decision focussed on the scope of the Brussels Regulation. The ECJ decided that issues such as the applicability and validity of an arbitration agreement would fall within the Brussels Regulations and would therefore be subject to the general principle that the court first seized of the matter should be allowed to determine jurisdiction. This meant that one party could start proceedings in the courts of one member state whilst an arbitration was underway in another member state. Because the court proceedings would fall within the Brussels Regulations, the second party would not be able to secure an anti-suit injunction from the arbitral tribunal to prevent the court proceedings. The arbitral tribunal could continue to determine its jurisdiction, but, at the same time, there would be a risk that a different decision on jurisdiction might be reached in the court proceedings.
This decision gave rise to an obvious concern on the part of commercial parties in sectors such as shipping, construction, energy and infrastructure where contracts regularly contain arbitration clauses and involve different jurisdictions. The concern was that you could start an arbitration, but it could be "torpedoed" by court proceedings in another country.
Partly in response to this concern, the Brussels Regulations were recast to apply to proceedings commenced on or after 10 January 2015. Much of the original Regulations remained unchanged, but changes were made to the lis pendens rule (which allow the courts first seized of a matter to determine the matter) in favour of an exclusive jurisdiction clause conferring jurisdiction on a Member State and changes were made to enhance the arbitration exclusion confirming that the New York Convention has precedence over the Brussels Regulations.
Gazprom, the recast Brussels regulation and the advocate general
This issue was looked at in what is known as the Gazprom case, a matter which involved shareholders' agreements relating to a Lithuanian gas provider. ( EUECJ Case C-536/13)
In Gazprom the ECJ was asked, as one of two questions, to consider whether an arbitral award restraining claims in the Lithuanian courts restricted the rights of the member state's court to determine its jurisdiction under the Brussels Regulation. In the Advocate General's opinion, the independent legal solution to a case provided by one of the Advocate Generals to the ECJ prior to giving its decision, the Advocate General commented on the applicability of the decision in West Tankers in light of the recast Brussels Regulations which sought to address the implications of West Tankers.
The Advocate General agreed that the arbitral award prevented the Lithuanian court from determining its own jurisdiction. However, having consideration of the recast Brussels Regulation and distinguishing Gazprom from West Tankers (which involved an anti-suit injunction from a court rather than arbitral tribunal), it was his opinion that the Brussels Regulations did not govern the recognition or enforcement in one member state of an arbitral award issued in another member state. The validity of an arbitration agreement was, he said, excluded from the Brussels Regulations. In his opinion, if West Tankers had been brought under the recast Brussels Regulations then the anti-suit injunction against Italian proceedings would not have been held incompatible with those regulations. Although, the Advocate General's opinion was not followed by the ECJ in Gazprom, the opinion still held significance for member states' courts.
West Tankers remains good law – so says Nori Holdings
In Nori Holding the English High Court was required to address the applicability of the judgment in West Tankers. The case involved applications for anti-suit injunctions to restrain court proceedings in Russia and Cyprus which were said to have been brought in breach of arbitration clauses. An injunction was granted in respect of the Russian proceedings which were not, of course, affected by the Brussels Regulations. The English High Court was asked to decide whether it would issue an anti-suit injunction in relation to the proceedings in Cyprus.
The English High Court confirmed that anti-suit injunctions were still not available to protect arbitration agreements under the Brussels Regulation. The High Court followed the decision in West Tankers and decided that an anti-suit injunction could not be granted to restrain proceedings in another EU state – the court said that to decide otherwise would be incompatible with the Brussels Regulation which permits a member state first seized to decide its jurisdiction.
In reaching this decision, the English High Court disagreed with the Advocate General's opinion on Gazprom, that the recast Brussels Regulation reversed the decision in West Tankers, and concluded that "there is nothing in the Recast Regulation to cast doubt on the continuing validity of the decision in West Tankers".
At paragraphs 70 to 78 of the judgment, the court provided an explanation of the analysis required to determine whether or not a matter would fall within the Brussels Regulations. The court explained, with regards to West Tankers, "that even though the application in England for an anti-suit injunction was not itself within the scope of the Regulation, it was an action with consequences which undermined the effectiveness of the Regulation". The court went on to consider the examples the ECJ gave of ways in which an injunction could undermine the effectiveness of the Brussels Regulation. A court order which undermined the effectiveness of the Brussels Regulation by preventing the court in another member state from deciding whether it had or should exercise jurisdiction under the Regulation was incompatible with the Regulation, regardless of whether the related proceedings fell within the scope of the Regulation or not. The general principle, repeated from Gazprom, being that every court seized can determine, under the relevant rules, whether it has jurisdiction or not. An injunction which prevents a court from doing so contradicts the trust which member states accord to another's legal system.
The judgment in Nori Holdings is helpful as confirms that, generally speaking, the court of one member state will not have the power to grant an anti-suit injunction against proceedings in another member state's courts.
This decision is only relevant to the courts of countries which are members of the EU. From an English law perspective, the elephant in the room is the extent to which the English Courts will continue to be subject to the jurisdiction of the ECJ once the United Kingdom leaves the EU.