1. The Supreme Court has today handed down judgment in the important case of Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent) [2013] UKSC 35.1 In their decision the Court has held that, in certain circumstances, parties who have the benefit of an English arbitration clause can obtain anti-suit injunctions from the English Court even though there is no actual arbitration in existence or contemplated. The Arbitration Act 1996 does not restrain the Court's powers under s. 37 of the Senior Courts Act to grant such relief. Permission to serve out of the jurisdiction under CPR 62.2 (an arbitration claim) is also valid in such circumstances. The decision in Ust-Kamenogorsk greatly assists clients who have the benefit of an English arbitration clause. The judgment merits careful reading.
  2. Ust-Kamenogorsk involves a long-running arbitration anti-suit injunction case arising out of a concession agreement relating to a hydroelectric power plant in Kazakhstan. The concession agreement contained an English arbitration clause that had been declared invalid from the Kazakh Supreme Court, and the Kazakh Courts had refused to stop proceedings before it brought by the Kazakh owners against the holders of the concession.
  3. The English Commercial Court had granted an interim anti-suit injunction against the Kazakh appellants, holding that it was not bound to follow the Kazakh Court's previous ruling on the validity of the arbitration agreement. Concerned about the Appellant's continuing with their claims in breach of the arbitration clause, the Respondents decided to press on with the Commercial Court proceedings. At a final hearing, the Commercial Court had granted a declaration that the arbitration clause was valid and enforceable, and granted a final anti-suit injunction.
  4. The appellant appealed to the Supreme Court of the United Kingdom on the grounds that English courts have no jurisdiction to injunct the commencement or continuation of legal proceedings brought in a foreign jurisdiction outside the Brussels Regulation / Lugano regime where no arbitral proceedings had actually been commenced or are proposed.
  5. In a unanimous judgment, given by Lord Mance, the appeal was dismissed. The Court held that English courts have a long standing jurisdiction to restrain foreign proceedings brought in violation of an arbitration agreement, even when there was no arbitration on foot or in contemplation. Nothing in the Arbitration Act 1996 ("the 1996 Act") has removed this power from the courts. It was held, inter alia, that:
    1. An arbitration agreement gives rise to a 'negative obligation' whereby both parties expressly or impliedly promise to refrain from commencing proceedings in any forum other than the forum specified in the arbitration agreement. This negative promise not to commence proceedings in another forum is as important as the positive agreement on forum [paragraphs 21-26].
    2. Independently of the 1996 Act the English courts have a general inherent power to declare rights and a well-recognised power to enforce the negative aspect of an arbitration agreement by injuncting foreign proceedings brought in breach of an arbitration agreement even where arbitral proceedings are not on foot or in contemplation [paragraphs 19-23].
    3. There is nothing in the 1996 Act which removes this power from the courts. The fact that there are no arbitral proceedings on foot or in prospect under the 1996 Act neither limits the scope nor qualifies the use of the general power contained in section 37 of the Senior Courts Act 1981 ("the 1981 Act") to injunct foreign proceedings begun or threatened in breach of an arbitration agreement [paragraph 55]. To preclude the power of the courts to order such relief would have required express parliamentary provision to this effect [paragraph 56].
    4. The 1996 Act does not set out a comprehensive set of rules for the determination of all jurisdictional questions. Sections 30, 32, 44 and 72 of the 1996 Act only applies in circumstances where the arbitral proceedings are on foot or in contemplation; accordingly they have no bearing on whether the court may order injunctive relief under section 37 of the 1981 Act where no arbitration is on foot or in contemplation [paragraph 40].
    5. Similarly, the grant of injunctive relief under section 37 of the 1981 Act in such circumstances does not constitute an "intervention" as defined in section 1(c) of the 1996 Act; section 1(c) is only concerned with court intervention in the arbitral process [paragraph 41].
    6. The reference in section 44(2)(e) of the 1996 Act to the power of the court to grant an interim injunction "for the purposes of and in relation to arbitral proceedings" was not intended to exclude or duplicate the court's general power to grant injunctive relief under section 37 of the 1981 Act [paragraph 48].
    7. Importantly, service out of the jurisdiction may be affected under Civil Procedure Rule 62.2 which provides for service out where an arbitration claim affects arbitration proceedings or an arbitration agreement; this provision is wide enough to embrace a claim under section 37 to restrain foreign proceedings brought or continued in breach of the negative aspect of an arbitration agreement [paragraph 49].

Footnote

1. On appeal from [2011] EWCA Civ 647.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.