Advocate General opinion deals blow to anti-suit injunctions to restrain court proceedings in EU in breach of the arbitration agreement and holds that arbitral tribunals and the supervisory court do not have exclusive jurisdiction to determine the validity of arbitration agreements.

The Advocate General of Germany (" the AG") has issued her much-awaited opinion in the West Tankers case currently before the European Court of Justice ("the ECJ") (Allianz SpA and Others v West Tankers Inc Case C- 185/07). She has found that EC Regulation No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial matters ("the Regulation") precludes a court of a Member State from restraining a person by injunction from commencing or continuing proceedings before the courts of another Member State because, in the opinion of the restraining court, such proceedings are in breach of an arbitration agreement.

Whilst the AG's opinion is not binding on the ECJ, it is regarded as being highly persuasive and such an opinion is adopted by the ECJ in the majority of cases. If the ECJ decides to follow the AG's opinion, this would mean that a party domiciled in an EU Member state who commences court proceedings in that EU Member State in breach of an arbitration agreement cannot be prevented from doing so by an anti-suit injunction issued from the supervisory court in another EU Member State. The AG recognised that the Regulation does not apply to arbitration.

The AG's opinion extends the principle in Turner v Grovit ([2004] ECR I-3565) to the context of arbitration. In Turner v Grovit, the ECJ held that the Brussels Convention, which was the predecessor to the Regulation, precluded anti-suit injunctions restraining court proceedings brought in breach of an exclusive jurisdiction clause before another Member State. In Erich Gasser [2003] ECRI-14693, the ECJ held that if proceedings have been wrongly brought in a Member State in breach of the agreed jurisdiction clause, the court first seized nevertheless has jurisdiction to determine whether or not the jurisdiction clause applies.

In West Tankers, one of the parties, Erg Petroli, had commenced arbitration proceedings in London pursuant to an arbitration agreement contained in a charterparty. Erg Petroli's insurers, Allianz, subsequently commenced proceedings in Italy to recover the amounts which they had paid Erg Petroli under the insurance policies. The issues of liability in the Italian court proceedings were essentially the same as those in the arbitration, and West tankers considered that Allianz, upon exercising their right of subrogation under the charterparty, were bound by the arbitration agreement.

In response to the Italian proceedings, West Tankers applied to the English High Court for an anti-suit injunction against Allianz, restraining the commencement and continuation of the Italian proceedings. The English High Court granted the anti-suit injunction in reliance upon an existing Court of Appeal authority which held that the principle in Turner v Grovit was restricted to the Regulation and had no application to arbitration (see Through Transport Mutual Insurance Association (Eurasia) Ltd v New India Assurance Co [2005] 1 Lloyd's Rep 67). The Court of Appeal and House of Lords upheld the decision. However, in view of the uncertainty surrounding the point following Turner v Grovit, the House of Lords referred the matter to the ECJ for consideration. Before reaching its decision, it is the practice of the ECJ to ask the Advocate General in one of the Member States for an opinion.

In reaching the conclusion that the Regulation does apply to the proceedings and that anti-suit injunctions should be prohibited under the Regulation, the AG put forward the following arguments:

  1. It is not correct to say that only the arbitral tribunal and the supervisory court of the place of the seat of the arbitration has the power to determine the validity of the arbitration agreement. That right is not exclusive to the tribunal and the supervisory court, and courts in Member States may also exercise that power. The AG considered the analogous position under the 1958 New York Convention ("NYC") and considered that it demonstrated that in some situations the courts of NYC contracting states also have power to review the arbitration agreement (we find it difficult to see what power has been given to a court in another Member State to determine the validity of the arbitration agreement, especially where that state is also party to the NYC. Under the NYC, the contracting states are bound to uphold the validity of the arbitration agreement and to stay proceedings in their jurisdiction brought in breach of the arbitration clause. They have no right to determine the validity of the arbitration agreement).

  2. In order to determine whether a dispute falls within the scope of the Regulation, reference must be made solely to the subject matter of the dispute. The proceedings brought in Italy were a claim for damages in tort, or possibly contract, which fell within the Regulation and not the arbitration. The existence and applicability of the arbitration clause merely constitute a preliminary issue which the court seized must address when examining whether it has jurisdiction. If the court in the Member State takes the view that the dispute falls within the arbitration agreement, this does not change the nature of the classification or the right of that court under the Regulation to determine that issue.

  3. Interestingly enough, the AG recognised that her opinion may result in conflicting decisions between the supervisory court and the court of the other Member State (which is one of the main mischiefs which the Regulation was designed to avoid). However, the AG considered that an anti-suit injunction was not the appropriate remedy to avoid that situation. She suggests that the solution would be to amend the Regulation to include arbitration. Until then, if necessary, divergent judgments must be accepted within Member States.

The ECJ is expected to deliver its decision within the next two to three months. In view of the ECJ's dislike of anti-suit injunctions, the fact that they do not exist within the civil law systems within the EU, and that they interfere with the rights of courts in Member States to determine issues brought before them, it is expected that the ECJ will adopt the reasoning of the AG and outlaw anti-suit injunctions in the EU even though they refer to arbitrations.

The Ramifications Of The Opinion

If the opinion is adopted by the ECJ when giving its judgment, it will be a blow to the popularity of international arbitration within the EU and it may encourage arbitration in those jurisdictions where courts still retain the right to grant anti-suit injunctions to restrain a breach of the arbitration agreement, for example New York, Bermuda and Singapore.

The opinion, if correct, is a major setback on the hard fought powers of arbitral tribunals to determine their own jurisdiction and will lead to tactical applications throughout the EU to delay the prosecution of arbitrations. The role of the supervisory court will be diminished as all courts within the EU will have the right to determine the validity of an arbitration agreement.

If the ECJ adopts the opinion, the English court will still have the right to grant anti-suit injunctions where the party sought to be injuncted is resident or domiciled outside the EU.

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