Arbitration clauses and anti-suit injunctions

An English court will, in appropriate cases, grant an anti-suit injunction in favour of arbitration to preclude a party from pursuing litigation in another jurisdiction, provided that the matter is not governed by EU Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (and the Lugano Convention as well) (the “EU Regulation”). Where a dispute is governed by an arbitration clause which identifies the seat of the arbitration that court has exclusive supervisory jurisdiction over the arbitration. As such, any challenge to any award of the arbitration must be brought in that court alone, and an English court will, provided the EU Regulation does not apply, order that the party must not continue proceedings in another court.

In a recent case, claimants sought an anti-suit injunction in this situation. The claimants had benefited from a favourable costs award made by an arbitral tribunal. The defendant challenged the costs award in the Indian courts. The claimants brought proceedings to enforce the award in England. They also sought to restrain the defendant from continuing with the Indian proceedings through an anti-suit injunction.

The court’s judgment can be summarised as follows.

1. The underlying claim concerned alleged breaches of a shareholder agreement. The agreement contained an arbitration clause whereby all disputes were to be referred to arbitration in accordance with ICC Rules. The governing law of the agreement was Indian law.

2. The Arbitration Act 1996 states that the seat of the arbitration means the juridicial seat of the arbitration to be designated by the parties or the tribunal or other institution if so authorised by the parties. If there is no such choice, it is to be determined having regard to the agreement of the parties and all the relevant circumstances.

3. The seat of the arbitration designates the court which has jurisdiction to supervise the arbitration, including the enforcement of awards.

4. Seat is not the same as venue - the two places may be different.

5. In this case, however, the fact that arbitration clause stated that the venue of the arbitration was to be London and that it would be conducted in English was used by the court to reach the conclusion that the parties had identified London as the seat of arbitration.

6. The ECJ had decided in the West Tankers decision that anti-suit injunctions were not permitted under the EU Regulation and that this applied to proceedings regarding the enforceability of an arbitration clause (for our law now on that decision, please click here). In this case, it was conceded that the EU Regulation did not apply. Therefore they did not preclude the court from granting the anti-suit injunction.

7. The court was unable to reach a decision on the injunction itself because there were some questions of fact on which evidence was required (for example whether or not the claimant had in fact already submitted to the Indian court).

The decision shows, amongst other things, that the English court is still willing in matters outside the scope of the EU Regulation to grant anti-suit injunctions in appropriate cases. One such case is where the other party is seeking to circumvent an agreed arbitration clause through a court other than the court of the seat of the arbitration.

Further reading: Shashoua & Others v Sharma [2009] EWHC 957 (Comm)