Updates

The Hong Kong courts have supported the use of anti-suit injunctions to prevent a party from commencing or continuing proceedings in breach of an arbitration agreement.1 In the most recent case of Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2016] HKCFI 39, however, the Hong Kong Court of First Instance declined to grant an anti-suit injunction where the party seeking relief had not timely sought the anti-suit injunction, even though the opposing party suffered no prejudice from the delay.2 The Court took a strict view, finding that parties should not wait for the outcome of a jurisdictional challenge in the foreign proceedings before commencing an anti-suit injunction. Where, however, the anti-suit injunction was sought promptly and before the foreign proceedings were too far advanced, it would likely be awarded unless good reason was shown otherwise.3

Background

The plaintiff in the Hong Kong case, a shipowner, entered into a contract of carriage through a bill of lading, which incorporated the terms of a charter party that expressly provided that the choice of governing law was English and that any dispute would be referred to arbitration in Hong Kong. Further, the arbitration clause provided that any claim was required to be made in writing within 12 months of the final discharge of the cargo, failing which the claim would be time barred. The defendant, Bank of China, Ltd., superseded the charterer when it became the holder of the bill of lading.

Within the 12 month limitations period, the Bank of China filed a claim in the courts of the People’s Republic of China (the “PRC Proceedings”). However, that claim was only served on the shipowner after the 12 month limitations period had expired as a result of the shipowner’s alleged attempts to evade service. One month after being served through public notice, the shipowner filed a jurisdictional challenge based on the arbitration and limitations period clause in the PRC Proceedings. This challenge, and a subsequent appeal, were rejected.4 Only then did the shipowner seek an anti-suit injunction in Hong Kong to restrain the Bank of China from continuing the PRC Proceedings on the basis of the agreement to arbitrate in Hong Kong.

Decision

The court held that it could be inferred from the evidence that the plaintiff had been evading service and delaying the PRC Proceedings in order for the limitations period to expire before presenting its defense based on the arbitration clause. The crucial issue, the court held, was whether the plaintiff’s delay in seeking an anti-suit injunction weighed against granting that relief. The Hong Kong Court observed that if the injunction had been sought promptly and before the foreign proceedings were too far advanced, then an anti-suit injunction would likely have been awarded unless good reason was shown otherwise. However, the Court found that delay alone was a sufficient ground for denying an anti-suit injunction, and that while detriment or prejudice to the non-moving party from the delay may be a relevant factor, it was not a necessary factor to deny the requested relief.

Rather, delay was the fundamental factor to be taken into consideration due to the overriding public policy of ensuring that those who seek anti-suit—or, for that matter, anti-enforcement—injunctions act promptly. Indeed, while anti-suit injunctions are directed at the party commencing the foreign proceeding and not the foreign court that is seized with the dispute, the Hong Kong Court recognized that where foreign proceedings have continued for some time, some foreign courts may take the view that an anti-suit injunction inappropriately interferes with that foreign court’s jurisdiction.

The Court provided no specific guidance on how long is too long to wait, but said that it would examine all the relevant circumstances including, in this case, the 12 month limitations period. As discussed above, the Court found that the shipowner had deliberately delayed taking action to assert its right to object to the PRC Proceedings until eight months after the start of the PRC Proceedings. The court observed that it violated notions of justice to wait until “the 11th hour or later” to seek the anti-suit injunction in order to take advantage of a limitations period. Notably, the court made this observation despite finding that the defendant had failed to act reasonably in failing to protect itself against the expiration of the limitations period.

Further, almost four months had elapsed between the filing of the shipowner’s jurisdictional challenge in the PRC and when it actually sought the anti-suit injunction in Hong Kong. The Court stated that parties should not adopt the approach of waiting to see whether a foreign court would allow a jurisdictional challenge, because the fact that a foreign court had ruled in favor of its own jurisdiction was not a bar to an anti-suit injunction. Rather, the parties should act promptly and claim injunctive relief at an early stage in order to ensure comity between courts and avoid wasting time and money. In the circumstances of this case, the Court found that the plaintiff chose to “blow hot and cold” with the jurisdictional challenge in the PRC and waited for that outcome before seeking an anti-suit injunction in Hong Kong.

Conclusion

Section 45(2) of the Arbitration Ordinance (Cap 609) gives the Hong Kong courts the power to grant interim measures in relation to arbitral proceedings, whether inside or outside of Hong Kong, including restraining parties from pursuing court proceedings. While the anti-suit injunction is designed to uphold the parties’ agreement to arbitrate in a particular forum, this case demonstrates that parties can lose their right to such relief through delay.

In light of the plaintiff’s conduct in avoiding receipt of service of the PRC Proceedings until after the limitations period had expired, followed by the delay of four months to file anti-suit proceedings in Hong Kong while it awaited the outcome of the jurisdictional challenge in the PRC, the Hong Kong High Court denied anti-suit injunctive relief. The case delivers a clear warning from the Hong Kong courts that a party should seek an anti-suit injunction as promptly as possible and without delay. And, in particular, parties should not adopt a “wait and see” approach with respect to jurisdictional challenges in foreign proceedings before taking steps to obtain an anti-suit injunction.