In Essar Shipping Ltd v Bank of China, Comm. 13 November 2015, the English Commercial Court refused to grant an anti-suit injunction for breach of an arbitration agreement on the grounds of delay. Anti-suit injunctions (ASIs) are an equitable and discretionary form of relief, so delay alone can constitute a strong reason to decline to grant an ASI.

Background

The respondent granted a letter of credit to a third party to fund the purchase of a cargo shipped on a vessel, MV Kishore. Ownership of the cargo was evidenced by a bill of lading, which was held by the respondent as security for the letter of credit. The applicant had time-chartered the vessel under a charterparty governed by English law which provided for disputes to be arbitrated in London under the rules of the London Maritime Arbitrators' Association. The bill of lading incorporated the charterparty terms and conditions.

The third party failed to repay the respondent in accordance with the letter of credit and the cargo was seized by the authorities in China in respect of other debts of the third party. The respondent brought a claim against the applicant in China in September 2014, pursuant to the bill of lading, and obtained an order from the Chinese Court to arrest the vessel.

The applicant unsuccessfully challenged the jurisdiction of the Chinese court. The substantive proceedings had (apparently) not progressed at all during that challenge. In July 2015 (more than 9 months after the Chinese claim was started), the applicant issued a claim form in the Commercial Court in London for an ASI to prevent the respondent prosecuting the claim in China.

Relevant principles

Where parties have agreed to resolve disputes by arbitration, the courts will generally enforce that agreement by granting an ASI to prevent the respondent continuing with the foreign proceedings brought in breach of the arbitration agreement. The injunction is directed at the party bringing the foreign claim, not at the foreign court. However, the grant of an ASI is an equitable, and therefore discretionary, form of relief. An injunction will not be granted if there are "strong reasons" not to do so.

Recent case law on delay

There has been some debate about whether delay is a "strong reason" to refuse an ASI. Earlier this year, in Ecobank Transnational Incorporated v Tanoh, Comm. 3 July 2015, it was argued by the respondent that (1) periods when jurisdiction was being challenged in the foreign courts do not constitute delay; (2) delay alone was insufficient to decline to order the injunction ; and (3) detriment to the respondent caused by the delay (such as incurring significant wasted cost in the foreign proceedings) was necessary. But Mr Justice Knowles held in that case that delay alone could be a strong reason. However, Ecobank related to an anti-enforcement injunction, rather than an ASI so could be distinguished from the Essar case.  Also the injunction had already been granted at a without notice hearing, so the decision for the court was whether to continue it. It was not clear that Ecobank was good authority for the proposition that delay would inevitably lead to the application being refused.

Decision

Mr Justice Walker refused the application in Essar, citing Ecobank. Each case should be decided on the facts, in accordance with the discretionary nature of anti-suit relief, he said. However, there is a strong public interest in requiring that those seeking an ASI should act promptly. An application made promptly is likely to be inherently less complicated. Whilst ASIs are directed at the party in breach rather than at the foreign court itself, a delay will increase the danger that they will be seen as inappropriately interfering with the foreign court's jurisdiction. Delay and the substantive progress of the foreign proceedings can be independent considerations. Delay alone is sufficient to justify refusal. There is no obligation to challenge the jurisdiction of the foreign court first, and it is not always necessary to demonstrate that the delay has caused detriment to the respondent.

Comment

An ASI can be powerful in helping to enforce contractual rights to arbitrate. Where foreign proceedings have been issued in breach of an arbitration agreement, the court is likely to grant an injunction unless there are strong reasons not to. However, the applicant will need to move quickly to obtain such relief. Consideration should be given, and local advice taken, as to whether also to engage in the foreign proceedings, in order to challenge jurisdiction. Doing so will not prevent an application for an ASI succeeding, but the longer the wait and the more the foreign proceedings progress (even if just in relation to jurisdiction, rather than substantively), the less likely the English courts will be to grant a ASI.

Essar Shipping Ltd v Bank of China, Comm. 13 November 2015