The European Court of Justice (ECJ) has handed down its eagerly anticipated decision on the enforcement of arbitral awards containing anti-suit injunctions in the EU.
The decision confirms that anti-suit injunctions issued by arbitral tribunals are not prohibited by the Brussels I Regulation (EC) No 44/2001 (the Regulation).
The decision arises from a reference by the Lithuanian Supreme Court to the ECJ in the disputed enforcement of an arbitral award in favour of Gazprom (‘Gazprom’ OAO (C-536/13)). The request sought clarification on whether the Lithuanian Supreme Court could refuse to enforce an award (which had a similar effect to an anti-suit injunction) that it believed might conflict with the Regulation.
The Regulation, which governs the jurisdiction of Member State courts over civil and commercial matters, excludes arbitration from its scope. However, in a landmark decision the ECJ previously ruled in Allianz and Generali Assicurazioni Generali (West Tankers) that it was incompatible with the Regulation for a court of one Member State to grant an anti-suit injunction against the court of another (click here to see our previous Law-Now on this issue). The decision in West Tankers attracted much criticism and it was previously unclear whether the enforcement of anti-suit injunctions in arbitration would also be contrary to EU law. It was also unclear whether the ECJ would use the reference as an opportunity to revisit West Tankers, in light of an opinion of the Advocate General in the reference that West Tankers could no longer apply based on revisions to the arbitration exception in the “recast” Regulation, which was adopted in 2012 and took effect from 10 January 2015 (please see below for summary of the changes in the “recast” Regulation in relation to arbitration).
In reaching its decision, the ECJ confirmed that arbitration does not fall within the scope of the Regulation, since the Regulation governs only conflicts of jurisdiction between courts of Member States. As arbitral tribunals are not courts of a State, the ECJ held that enforcement of an anti-suit injunction in an award did not conflict with the Regulation. Instead, the ECJ found that proceedings for such enforcement are covered by national and international law (i.e. the New York Convention) and not the Regulation. Whether the award was unenforceable was therefore a matter for Lithuania to determine based on its own national legislation and the New York Convention.
The ECJ declined to reconsider the effect of West Tankers in light of the “recast” Regulation. Accordingly, it remains to be seen whether a Member State court will refer to the ECJ the question of whether court anti-suit injunctions are still prohibited by the “recast” Regulation notwithstanding the clarifications set out in the “recast” Regulation, as explained below.
Summary of “recast” Regulation in relation to arbitration
Arbitration is still excluded from the scope of the “recast” Regulation and no changes have been made to the wording of this exclusion. However, two changes have been made in the “recast” Regulation to strengthen support for the parties’ choice of arbitration. These are:
1. Recital 12: a new Recital 12 has been inserted in the “recast” Regulation to clarify the scope of the arbitration exception as follows:
- The Regulation does not prevent the court of a Member State from referring parties to arbitration, staying or dismissing proceedings, or from examining whether an arbitration agreement is null and void, inoperative or incapable of being performed in accordance with their national law.
- The Regulation does not apply to any matters concerning the arbitration proceedings or to any arbitral award.
- Any ruling relating to whether an arbitration agreement is null and void, inoperative or incapable of being performed is not subject to the recognition and enforcement rules in the recast Regulation.
2. Precedence of New York Convention: Article 73(2) of the “recast” Regulation states that the Regulation shall not affect the application of the New York Convention. This is a key change as it gives Member State courts the ability to recognise and enforce arbitral awards without having to take into account the rules imposed by the “recast” Regulation. It is expected that this will deter parties from bringing proceedings in breach of arbitration agreements as in doing so, they will face the risk that an arbitral award that will take precedence over judgments of an EU Member State court.
The ECJ’s decision will undoubtedly be welcomed by users of arbitrations seated in the EU. Indeed, there is little point in arbitrating if the final award cannot be enforced and used to prevent a party who agrees to arbitrate but then attempts to pursue litigation in another Member State. For now, arbitrators have greater anti-suit powers in Europe than judges, but that may change should the ECJ re-consider West Tankers in the future.
Click here to read the decision in ‘Gazprom’ OAO (C-536/13)