|
Anti-arbitration injunctions: when can the courts intervene?
Written by Paul Friedman
First published in the Commercial Litigation Journal, July 07
Elektrim S.A. v Vivendi Universal S.A. et al[1]
The English courts’ support of arbitration and their willingness to restrain proceedings brought in breach of an arbitration agreement was demonstrated recently in the House of Lord’s decision in West Tankers v RAS[2]. There, the Law Lords noted that commercial parties choose arbitration as a means of bringing themselves outside the procedures of any national court and argued that the parties’ right to choose should be protected. In a wider context, it felt that, in order for the European Community to be able to compete internationally, it must retain the right to restrain parties from acting in breach of arbitration agreements (such a right being exercised in other leading centres of arbitration, such as New York and Bermuda).
The West Tankers case involved a request for an anti suit injunction to restrain proceedings brought elsewhere in the EC in breach of an arbitration agreement and after an arbitration in London had begun. The House of Lords felt that it was its duty to refer the issue to the European Court of Justice (ECJ), but was of the opinion that the injunction should have been granted. The case continued the well-noted trend amongst the English courts to grant anti-suit injunctions liberally unless restricted by European law. ECJ caselaw has confirmed that courts in an EU member state cannot grant anti-suit injunctions to restrain proceedings brought in another EU member state court, where that other court was first seised. However, the English courts have consistently adopted the view that EC Regulation 44/2001 does not apply to arbitrations and hence they can still issue anti suit injunctions to restrain proceedings brought in breach of an arbitration agreement. The ECJ has yet to rule on that stance.
In the recent case of Elektrim v Vivendi, the English courts turned their attention to a request to grant an “anti-arbitration” injunction, i.e., an application to restrain arbitration, rather than court, proceedings. It was concluded that the test for this kind of injunction differs significantly from the test for anti-suit injunctions. As will be seen below, that test may indirectly conflict with the House of Lord’s aim to bolster the competitiveness of arbitration centres within the EC generally and, no doubt, London in particular.
Facts
This case involved a long-running dispute between the parties which, as the judge, http://www.ukassignment.org/ Aikens J, put it, had been “carried into several theatres of litigation and arbitration”. Of relevance to this case though were two arbitrations.#p#分页标题#e#
The first was commenced by Vivendi against Elektrim (and other parties) in the London Court of International Arbitration (“LCIA”) in 2003, pursuant to the terms of an investment agreement between, inter alia, itself and Elektrim. This arbitration concerned a dispute regarding the terms of the investment agreement. The second was also commenced by Vivendi against Elektrim (and others), this time in Geneva, in 2006. Vivendi commenced this latter arbitration in reliance on the terms of a purported (unsigned) settlement agreement, which had provided for the seat of arbitration to be Geneva. This second arbitration sought a declaration that the settlement agreement was binding on Elektrim and that all proceedings defined in the settlement agreement would be discontinued.
Elektrim then asked the LCIA to stay its proceedings, but Vivendi opposed the application and the LCIA arbitrators refused a stay. Two further applications to the LCIA for a stay were also refused. At the beginning of 2007, Elektrim asked the English Commercial Court for an injunction.
Arguments
Elektrim accepted that there is no provision in the Arbitration Act 1996 (“the Arbitration Act”) allowing the courts to grant an injunction to restrain a party from pursuing arbitration. However, it argued that, despite the enactment of the Arbitration Act, the English courts have retained their power to grant an injunction restraining an arbitration by virtue of section 37 of the Supreme Court Act 1981 (“section 37”)[3] where the arbitration was brought in breach of contract or, as was said to be the case here, the prosecution of the arbitration was “oppressive, vexatious or unconscionable”. In each case, a “legal or equitable right” of the party seeking the injunction must be infringed by the other party.
Vivendi countered that section 37 gives the courts only a very limited residual power to intervene in an arbitration, which can be used only in exceptional circumstances. Furthermore, the court’s discretion under section 37 ought only to be exercised if it is consistent with the regime established by the Arbitration Act.
Judgment
Aikens J “assumed” that section 37 could be invoked to restrain arbitrations as well as court proceedings but went on to consider the scope of that jurisdiction. In this case, the injunction was intended to restrain an arbitration whose seat was in England, and hence was governed by the Arbitration Act. Accordingly, it had to be shown that Elektrim was entitled to the injunction under section 37 and that such an injunction would not conflict with the scheme of the Arbitration Act.
On the facts, Elektrim failed to overcome the first hurdle - namely that the court’s discretion under section 37 ought to be exercised. In this case, Elektrim could not show a substantive “legal or equitable right” which Vivendi had infringed by pursuing the LCIA arbitration. Indeed the opposite was the case- when entering into the investment agreement, Elektrim had agreed to submit disputes to the LCIA. With regard to the arbitrators’ decision not to stay their arbitration pending resolution of the ICC arbitration, the English courts had no power to grant injunctions compelling arbitrators to take a particular course or to interfere with the arbitral process. Furthermore, it could not be shown that continuing the LCIA arbitration was vexatious or oppressive. The two arbitrations concerned different subject matters – the LCIA dealt with a dispute arising out of the investment agreement and the ICC with a dispute concerning the settlement agreement.#p#分页标题#e#
Aikens J then examined the relationship between section 37 and the Arbitration Act. The basic principle is that there should be minimal court interference in the arbitral process, at least before an award is made. Even if Elektrim had satisfied the test for exercise of the court’s power under section 37, Aikens J would not have invoked his power to grant an injunction. To use section 37 as a means of reviewing or overruling the tribunal’s decisions “would undermine the principles of the 1996 Act and would grant the court a general supervisory power which it never had”.
In his judgment, Aikens J referred to the recent decision of Gloster J in Intermet FZCO v Ansol Limited[4]. In that case, some of the parties had commenced an arbitration before the Zurich Chamber of Commerce some five months before commencing proceedings in the High Court in London. Accordingly, the arbitration in question was not governed by the Arbitration Act. Gloster J refused to grant an injunction restraining the Swiss arbitration, on the ground that it would not, on the facts, be vexatious or severely prejudicial to allow the arbitration to continue. The judge also found that the application for the injunction had been made too late and that the claimants had not acted in an oppressive or unconscionable manner.
Aikens J commented that he did not agree with Gloster J's decision insofar as it suggested that the test for an anti-arbitration injunction is the same as that for an anti-suit injunction (where the applicant relies on section 37 alone). He also appeared to suggest that Gloster J's judgment should have considered the relationship between section 37 and the scheme and provisions of the Arbitration Act (notwithstanding that the arbitration in question was not governed by that Act). The rationale for that view is not entirely clear from the judgment, although Aikens J does note that even before the Arbitration Act was implemented, the courts did not have a general supervisory power to intervene in arbitrations before an award was made, either by injunction or some other method.
Accordingly, Aikens J refused to grant the injunction sought by Elektrim.
Comment
In seeking to uphold the tradition of the English courts to support the arbitral process, Aikens J relied on the scheme laid down by the Arbitration Act to narrow the scope of the court’s power to invoke section 37 to restrain arbitral proceedings. It seems to be the case that the judge believed the same considerations should apply in the case where an injunction under section 37 is sought to restrain arbitration proceedings pursued outside England, Wales or Northern Ireland (i.e. arbitrations not governed by the Arbitration Act).
Certainly, there would seem to be no rationale for distinguishing between arbitrations brought here and those brought in other jurisdictions where the arbitrators have the power to rule on whether their arbitration ought to be stayed themselves. If that is so, then how will the courts here justify an injunction restraining an arbitration brought, say in New York where an alternative arbitration or proceedings had been commenced here (or, indeed, elsewhere in the EC). To refuse such an injunction, though, would be to conflict with the view of the House of Lords in West Tankers that the EC must be able to compete with other seats of jurisdiction around the world. How the English courts resolve this potential conflict of views remains to be seen.#p#分页标题#e#
________________________________________
[1] [2007] EWHC 571 (Comm)
[2] [2007] UKHL 4
[3] Section 37 provides: “(1) The High Court may by order…grant an injunction…in all cases where it appears to the court to be just and convenient to do so”.
[4] [2007] EWHC 266 (Comm)
|
