What should prevail – an already commenced foreign court
proceeding or an unexercised arbitration clause? The answer,
according to the UK Supreme Court, may surprise you. In a
recent ruling of relevance to Canadian practitioners and business,
the UK Supreme Court granted an injunction to prevent the
continuance of a foreign court proceeding (a so-called
"anti-suit injunction") on the basis of an arbitration
clause which had not been invoked. In other words, a foreign
court proceeding was enjoined even though there was no competing
domestic arbitral proceeding underway.
The key facts of the decision in Ust-Kamenogorsk Hydropower
Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP
(Respondent) UKSC 35 are as follows. JSC is
the owner of a hydroelectric power plant in Kazakhstan. AESUK
is the current operator of the plant. JSC and AESUK entered
into an agreement regarding the operation of the plant (the
"Agreement"). The Agreement was generally governed
by Kazakh law. However, the Agreement contained a clause
providing for arbitration in London (the "Arbitration
Clause"). The Arbitration Clause, it was agreed, was
governed by English law.
The relations between the parties were strained. JSC
brought proceedings against AESUK in Kazakhstan as a result of a
dispute pertaining to the Agreement. AESUK unsuccessfully
moved before the Kazakh court to stay the proceeding on the basis
of the Arbitration Clause, as the court ruled that it was invalid
under Kazakh law. AESUK then issued a court proceeding in
England. The English court at first instance granted an
anti-suit injunction enjoining the Kazakh court proceeding.
The English Court of Appeal affirmed that judgment.
On further appeal, the UK Supreme Court upheld the anti-suit
injunction. Lord Mance, who penned the speech for the Supreme
Court, began by noting the dual aspects of an arbitration agreement
(at para. 1):
"An agreement to arbitrate disputes has positive and
negative aspects. A party seeking relief within the scope of the
arbitration agreement undertakes to do so in arbitration in
whatever forum is prescribed. The (often silent) concomitant is
that neither party will seek such relief in any other
Lord Mance acknowledged that it was an "unusual
feature" of this case that no arbitration proceedings had been
commenced or imminent in England (at para. 4). Nonetheless,
Lord Mance ruled that, at common law, "the negative aspect of
a London arbitration agreement is...a right enforceable
independently of the existence or imminence of any arbitral
proceedings" (at para. 28). Approvingly citing an
earlier judgment, Lord Mance affirmed that "an injunction
should be granted to restrain foreign proceedings in breach of an
arbitration agreement 'on the simple and clear ground that the
defendant has promised not to bring them'" (at para.
Lord Mance then went on to conclude that this general inherent
power was not ousted by the terms of the Arbitration Act
1996. Indeed, Lord Mance ruled that express statutory
language would be required to preclude the exercise of such a power
by the Court (at para. 56). Moreover, Lord Mance found that
the Arbitration Act 1996 did not provide a "complete
code" for the determination of all jurisdictional questions as
the statute did not apply when there was no imminent arbitration
proceeding. In other words, AESUK could not look to an
arbitrator to address this issue because there was no pending
arbitration. Accordingly, the court could "intervene
directly, by an order enforceable by contempt" (at para.
Although acknowledging that in some cases, the appropriate
course will be to leave it to the foreign court to recognise and
enforce the parties' arbitration agreement, given that the
foreign Court had refused to do so in this case on grounds
unsustainable under English law, Lord Mance ruled that it was
incumbent on the English Courts to intervene and give effect to the
"negative" aspect of the arbitration agreement (at para.
The decision in the Ust-Kamenogorsk mirrors the
jurisprudential trend in Canada which favours arbitration over
court proceedings and injects additional power into arbitration
clauses which are already treated as formidable. The existing
Canadian jurisprudence confirms that an arbitration will generally
trump a competing court proceeding. The
Ust-Kamenogorsk decision now suggests that even the shadow
of an unexercised arbitration clause can prevail over a foreign
court proceeding. The ascendency of arbitration clauses may
thus have reached new heights.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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