UK: Anti-Suit Injunctions Available To Restrain Non-EU Proceedings

Last Updated: 31 January 2012
Article by Elliot Woodruff and Chris Crane

Niagara Maritime SA v. Tianjin Iron & Steel Group Company Limited (MV Good Luck) [2011] EWHC 3035 (Comm)

The English Commercial Court has granted an anti-suit injunction to restrain proceedings commenced by cargo interests in China in breach of a London arbitration clause incorporated into a bill of lading. This decision is a welcome reminder that, although anti-suit injunctions are no longer available to restrain proceedings commenced in other European Union member states contrary to an arbitration jurisdiction clause (as decided by the ECJ in the Front Comor in 2009), they are still available where those proceedings have been commenced outside the EU.

The Niagara decision provides a useful summary of the circumstances in which the English courts are prepared to exercise their discretion to grant anti-suit injunctions.

The background facts

This case arose when the unfortunately-named MV Good Luck collided with seven vessels in succession and then grounded off Singapore while carrying a cargo of iron ore for delivery in China. General Average was declared and a Lloyd's Open Form ("LOF") was signed. Vessel and cargo were salved and the cargo was eventually delivered in October 2009. Cargo interests were required to put up salvage security. In March 2010, a general average adjustment was published which assessed cargo interests' contribution at about US$240,000. This was not paid.

The cargo was carried under a bill of lading in the Congen Bill form dated 7 July 2009, which contained a clause expressly incorporating an arbitration clause providing for English law and LMAA arbitration.

Despite this, cargo interests (the receivers and their subrogated cargo insurers) commenced proceedings in the Tianjin Maritime Court in China in October 2010, seeking an indemnity in respect of their salvage contribution. In December 2010, the owners challenged the jurisdiction of the Chinese court on the grounds that the claim was plainly a claim "relating to or arising out of or in connection with" the bill of lading and thus within the scope of the arbitration clause incorporated into the bill of lading. In June 2011, the Tianjin Maritime Court rejected the owners' objection to jurisdiction, stating that the arbitration clause had not been effectively incorporated. The owners appealed that decision and at the time of the owners' application to the Commercial Court for an anti-suit injunction, the outcome of that appeal was pending.

In the meantime, the owners had commenced arbitration in London in February 2011. When cargo interests denied the existence of an arbitration agreement, the owners made an urgent application for the tribunal to rule on its own jurisdiction. After hearing submissions from both sides, the tribunal issued an award in July 2011 confirming that it had jurisdiction. It was against this background that the owners sought an anti-suit injunction against cargo interests to restrain them from continuing the Chinese proceedings.

The Commercial Court decision

The Commercial Court held:

1. That it had jurisdiction to issue an injunction against the cargo receivers. Section 37(1) of the Senior Courts Act 1981 gives the court jurisdiction to grant an injunction in all cases in which it appears to the court to be just and convenient. When exercising its discretion under S. 37, the court has to take account of S. 44 of the Arbitration Act 1996 which lists the courts' powers to make orders in relation to arbitral proceedings (including granting an interim injunction). Under S.44(3), the court may make such orders as it thinks necessary for the purpose of preserving assets. In exercising its powers under S.44, the court must also be satisfied that the matter is one of urgency. The court held that this was the case as the Chinese appeal court was expected to render its decision on the owners' jurisdiction appeal imminently, after which the Tianjin Maritime Court would then proceed to consider the substantive merits within a short timeframe. In addition, the court held that the tribunal was unable to act effectively because it was unable to issue an injunction against the insurers and unable to issue final injunctions.

2. Applying the Jay Bola [1997] 2 LLR 279, as a matter of English law, subrogated insurers are also bound by the arbitration clause in the bill of lading because the duty to arbitrate is an inseparable component of the claim transferred to the insurers as part of the subrogated rights (per Mr Justice Colman at first instance in the Front Comor). It followed that the court dismissed as irrelevant the insurers' argument that they were not bound by the arbitration clause as a matter of Chinese law because the cargo claim gives rise to the dispute "arising under the contract" and is therefore arbitrable.

The court was therefore satisfied that it had jurisdiction to grant the anti-suit injunction against both the receivers and the insurers.

3. Turning to the court's discretion, the court applied the principle that it will enforce an arbitration agreement where it is satisfied to the requisite high degree of probability that there is such an agreement which it should enforce, unless a strong reason to the contrary can be shown. As to the existence of a binding agreement, the court relied on the arbitration award in which the tribunal had fully addressed the issue. The court emphasised that the tribunal had followed well-established principles of English law to find that the arbitration clause had been validly incorporated into the bill of lading. The bill of lading stated on its reverse side that "all terms and conditions, liberties and exceptions of the charter party dated as overleaf, including the law and arbitration clause are herewith incorporated". According to the principle in the Nerano [1996] 1 LLR 1, a charterparty arbitration clause is incorporated into a bill of lading if there is express reference to the arbitration clause in the incorporating clause.

4. Having found that the owners could show to the requisite standard that there was an enforceable arbitration agreement, the court considered whether there was any strong reason not to grant the injunction. The only reason put forward by cargo interests was that the owners had delayed seeking the relief from the court and this should count against the grant of relief. However, the court held that on a proper analysis of the chronology, no real criticism could be laid against the owners for any delay in bringing the application. As a result, delay was not a strong or good reason why as a matter of discretion, the court should not grant an injunction to protect the owners' rights. In reaching this conclusion, the court had regard to three considerations: (a) the length of delay is less important than the extent to which the foreign proceedings have progressed during the delay; (b) justifiable delay will not be given serious weight against the grant of an injunction; and (c) waiting for a foreign jurisdictional challenge to be determined is less important than permitting foreign proceedings on the merits to unfold.

Comment

This case serves as a useful reminder that anti-suit injunctions remain available in support of jurisdiction clauses in arbitration agreements where competing proceedings are brought in a non-EU member state. It also reminds us that the English courts do have the power to grant anti-suit injunctions against subrogated insurers. Finally, it should be remembered that the owners would not have moved off first base but for the fact that the charterparty arbitration clause had been properly incorporated into the bill of lading in the first place.

Although the Front Comor decision may have cast a shadow over London arbitration, the fact that in a case where it does not apply, the tribunal was able and willing to issue a clear award on its jurisdiction that was upheld in clear terms by the Commercial Court and supported by the granting of an anti-suit injunction clearly puts London arbitration in a good light.

This does not mean to say that an anti-suit injunction will be granted on every occasion. The court must still consider whether strong reason has been shown as to why the court should not grant an injunction. Delay was raised as one such good reason. Although the judge was satisfied that the delay was not a good reason on this occasion, it is reasonable to infer that there may be circumstances where an applicant's delay in applying for an anti-suit injunction might count against him. In Niagara, the Chinese proceedings were also at a fairly early stage and an examination of the merits had not yet been started by the Tianjin Maritime Court. This begs the question as to whether the English court would grant an anti-suit injunction were the foreign proceedings to be much further advanced. It was to the owners' credit that they made their application promptly once cargo interests raised the issue that there was no agreement to arbitrate.

What we do not know, however, is the extent to which parties will ignore the rulings of the Commercial Court and continue foreign proceedings or how far or to what extent the English courts will apply sanctions to them for breaching such injunctions.

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.

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