UK: Anti-Arbitration Injunctions And Parallel Proceedings

Last Updated: 14 August 2008

What principles does the court apply? Intermet v. Ansol [2007] All ER (D) p.221, and Elektrim v. Vivendi (No 2) [2007] 2 LLR p.8 and Weissfich v. Julius [2006]

1 LLR p.716, considered these.

In Elektrim v. Vivendi (No 2) disputes between E and V under an agreement ("TIA") were arbitrated before an LCIA tribunal. In May 2006 the LCIA tribunal issued a Partial Award in favour of V which E challenged under s.68(2)(g) of the Arbitration Act 1996 ("the 1996 Act"). Thereafter, the LCIA tribunal considered a declaration sought by V that E was in breach of the TIA.

In March 2006 the parties attempted to settle the dispute. A draft Settlement Agreement ("SA") was produced and which was subject to Swiss law and Swiss ICC arbitration. V claimed that the SA was binding, but E disputed this. V initiated an arbitration under the SA and sought a declaration that the SA was binding. E disputed this but pending a decision of the Swiss tribunal wanted the LCIA tribunal to stay its proceedings and made three unsuccessful applications to the LCIA tribunal to do so. E then applied to the English court for a final injunction under s.37 of the English Supreme Court Act ("SCA") restraining V from pursuing the LCIA arbitration pending determination by the Swiss tribunal. The court refused E's application.

Did the court have jurisdiction to grant such an injunction?

  • Yes, under s.37(1) and (2), but the power is discretionary. The injunction (whether final or interim) is granted on one of two bases. First, to enforce an underlying legal or equitable right. Second, where the foreign proceedings are vexatious, oppressive or unconscionable and where the ends of justice require it.
  • Where a final injunction is sought, s.37 can only be invoked if the underlying right is subject to the jurisdiction of the English court. However, what legal or equitable right had been infringed and how could allowing the LCIA arbitration to continue be vexatious, oppressive or unconscionable towards E?
  • E argued that the legal or equitable right was to obtain an award in a manner reflecting the duty placed upon the LCIA tribunal by Art. 32 of the LCIA Rules. E also considered that parallel proceedings between the LCIA and ICC arbitrations plus other proceedings (there were Polish proceedings also) were oppressive and vexatious. The court rejected E's argument because no new legal or equitable right was created for E in the LCIA arbitration when V started the ICC arbitration.
  • Even if E did have a right to have duties carried out in a manner consistent with the 1996 Act and the tribunal failed in that duty, E could not invoke the court's jurisdiction for two reasons. First, under the 1996 Act the court should not intervene except as provided in Part I of the 1996 Act. Second, the 1996 Act provides a remedy for a breach of the duty under s.24(1)(d)(i) or s.68(2)(b).
  • Why is facing two arbitrations oppressive or vexatious? They concerned different subject matters and disputes, and the contracts were freely agreed by the parties albeit E does not accept that the SA was binding, the ICC tribunal can determine this issue.

S.37 of the SCA and s.44 of the 1996 Act.

Careful consideration is required before exercising the jurisdiction. S.37 has to be considered in the light of the limitation on court intervention as set out in Part I of the 1996 Act. The approach of the 1996 Act is to reduce the court's role to that only of a supporter of the arbitration process. Even if E satisfied the court that continuation of the LCIA arbitration was vexatious etc, the court would still not grant an injunction for the following reasons:-

  • It would be contrary to the parties' agreement. The LCIA had the power to stay that arbitration pending determination of the ICC arbitration but declined to do so on three separate occasions.
  • The 1996 Act does not give the court power to review or overrule those decisions. To invoke s.37 to review the tribunal's decision would undermine the principles of the 1996 Act.

The court added that the test for an anti-arbitration injunction was different from an anti-suit injunction. If the decision of the court in Intermet v. Ansol was to say they were the same, the court disagreed.

Discretion

An injunction would have been refused for the following reasons.

  • Delay. V relied upon the decision in The Oranie and The Tunisie [1966] 1 LLR p.477. There had been delay by E who participated in the LCIA arbitration process.
  • It is inevitable in international arbitration that there will be multi-party and multi-jurisdictional disputes involving the same parties.

In Weissfich v. Julius the court was asked to grant an anti-arbitration injunction preventing an arbitrator (who was party to the arbitration agreement) determining his jurisdiction. The curial law was Swiss and the arbitration seat was Switzerland. The application was refused by both the court of first instance and the Court of Appeal.

  • Although s.37 of the SCA gave the court jurisdiction to grant an anti-arbitration injunction, it was; "... a jurisdiction that should be exercised with great caution ..." and only exceptional circumstances may justify granting such an injunction.
  • The obvious forum for challenging the jurisdiction of the tribunal was Switzerland. Swiss law recognised Kompetenz-Kompetenz and Swiss law obliged a tribunal to decide its jurisdiction. That decision could be appealed under the Swiss Federal Act. To grant an injunction in the terms sought would infringe the mandatory Kompetenz-Kompetenz principle under Swiss law, preclude access to the Swiss courts and infringe the principles of the New York Convention.

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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