In Nomihold Securities Inc v Mobile Telesystems Finance SA(1) an anti-arbitration injunction was sought to prevent the progress of two arbitrations that, it was said, had been commenced as part of a war on the enforcement of an award issued in an earlier related arbitration. The High Court did not grant the injunction, as it was for the arbitral tribunal to determine whether it had jurisdiction to hear the two later arbitrations.
The claimant, Nomihold, applied for an injunction requiring the defendant, Mobile Telesystems Finance SA (MTSF), to discontinue two arbitrations that it had commenced against Nomihold pursuant to the Rules of the London Court of International Arbitration. MTSF applied for an order that Nomihold's application be stayed.
The applications arose out of a longstanding dispute between Nomihold and MTSF concerning a sale and purchase agreement under which MTSF agreed to acquire from Nomihold a 51% holding in Tarino Limited for $150 million. MTSF also entered into a put-and-call option agreement for the other 49% of Tarino's shares for $170 million. Tarino is the indirect owner of Bitel LLC, a mobile telecommunications company in Kyrgyzstan.
A dispute arose when Bitel's offices were seized by a third party following a decision of the Kyrgyz Supreme Court. Nomihold purported to exercise the put option. MTSF refused to pay, claiming that Tarino was valueless.
Nomihold commenced arbitration against MTSF under the option agreement, seeking specific performance of the put option. In this first arbitration, the tribunal ordered MTSF to pay $170 million in exchange for 49% of the shares in Tarino and damages and interest.
A year and a half later, MTSF commenced arbitration under the sale and purchase agreement, claiming misrepresentation, mistake and breach by Nomihold. This second arbitration has not progressed. The tribunal in the first arbitration decided to determine the sale and purchase agreement issue.
Following the issue of the award in the first arbitration, MTSF submitted an amended request for arbitration in the sale and purchase agreement arbitration (ie, the second arbitration) and commenced another arbitration against Nomihold - the third between the parties. MTSF raised money-laundering issues in both of these arbitrations.
The two issues were whether the court:
- had jurisdiction under Section 37 of the Senior Courts Act 1981 to issue an anti-arbitration injunction; and
- should stay the application for an anti-arbitration injunction pursuant to Section 9 of the Arbitration Act 1996.
Section 37 of the Senior Courts Act
The High Court stated that it had jurisdiction under Section 37 of the Senior Courts Act 1981 to grant an anti-arbitration injunction. The question was whether it was just and convenient to do so: it was found that it was not.
The High Court stated that an anti-arbitration injunction would be issued in unusual circumstances only. It considered the care and thoroughness with which the first arbitration was conducted, as well as the detailed and closely reasoned award. It also considered the new issues raised in the two new arbitrations, acknowledging that they might not be as straightforward as portrayed, as well as the potential costs that might be incurred in those two arbitrations. The court determined that it was for the arbitral tribunal to determine whether it had jurisdiction to hear the new arbitrations or whether they were barred by issue estoppel, the principle of res judicata (a matter already judged) or the Henderson v Henderson principle.
Section 9 of the Arbitration Act
In considering whether to stay Nomihold's injunction application pursuant to Section 9 of the Arbitration Act, the court emphasised the importance of its supervisory powers in relation to arbitration. When a party agrees to arbitration in London, it also agrees to the supervisory jurisdiction of the English courts, including their powers to protect and uphold an arbitral award and its enforcement.
The court took account of MTSF's undertakings that:
- it would not claim in the two new arbitrations that it was not required to carry out the existing award; and
- it would not claim that it should be released from its obligation to pay $170 million, as determined by that award.
On the strength of these undertakings, the court accepted that it should not stay the injunction application; otherwise, it would have been appropriate to restrain the two new arbitrations, not only as part of the court's supervisory jurisdiction of the award, but also to protect the integrity of previous court orders.
The court's confirmation that it has the power to issue an anti-arbitration injunction in appropriate circumstances may come into play when proceedings are fought on more than one front, as in this case. However, the court's decision demonstrates its cautious approach to using this exceptional power. The decision also demonstrates the court's awareness of the need to balance its supervisory powers with the need to support the arbitral process by deferring appropriate issues to the tribunal's determination, such as the issue of the tribunal's jurisdiction.
For further information on this topic please contact Robert Lambert or Jo Delaney at Clifford Chance LLP by telephone (+44 20 7006 1000), fax (+44 20 7006 5555) or email (firstname.lastname@example.org or email@example.com).