Anti-suit injunction to prevent challenge to English arbitration award in New York

United Kingdom

Where parties to a contract agree to arbitrate their disputes under English procedural laws in England, any challenge to the eventual award must be made to the English court under those rules, regardless of the governing law of the contract. The English court will grant an anti-suit injunction to prevent an attempt to avoid this result.

In C v. D, “D”, a US incorporated insurer, issued an insurance policy to “C” (also US incorporated) governed by New York law. The policy provided for disputes to be settled “in London, England under the provisions of the English Arbitration Act” and that any award would be “final and binding… a complete defence to any attempted appeal…”. An arbitration was commenced and the tribunal made a partial award in favour of C.

D wrote to the tribunal applying for correction of the award. It said that the award fell outside the New York Convention 1958 as a matter of US law and was reviewable for error by the US courts. D threatened an application to the US Federal court to set aside the award on the basis that it was based on a “manifest disregard of New York law”. C obtained an interim anti-suit injunction to restrain D from commencing proceedings in the US.

At the final hearing, the court held that New York law was irrelevant. By choosing England as the seat, all mandatory provisions of the Arbitration Act applied. Only express contrary agreement or, unusually, a choice of a different procedural law to that of the seat, would affect the non-mandatory provisions of the Act. The choice of New York as the governing law of the contract could not by itself alter the non-mandatory Arbitration Act framework for challenging an award. In fact, the parties had expressly excluded non-mandatory rights of challenge, including a challenge on a point of law.

The English court, as the court of the chosen seat, had exclusive supervisory jurisdiction and, absent express agreement to the contrary, any challenge to an award must be made to that court. On the facts, the law of the arbitration agreement was English law and so it was also an implied term that the parties agreed to perform the award.

The attempt to challenge in another jurisdiction was both a breach of the arbitration agreement and an abuse of process. The court granted injunctions to prevent challenge of the award in any jurisdiction other than England & Wales.

This case is further evidence of the English court’s desire to support and enforce parties’ choice to arbitrate even by granting injunctions to prevent foreign proceedings, in this case in the US. It remains to be seen whether this power will be curtailed for proceedings threatened elsewhere in Europe, following the House of Lords’ referral of this question to the European Court of Justice in the West Tankers Inc case.

Case references:

C v. D [2007] EWHC 1541 (Comm)
West Tankers Inc v. RAS Riunione, The Front Comor [2007] UKHL 4