Where a party starts court proceedings in violation of an arbitration agreement, it may be possible for the other party to apply to that court for dismissal of the proceedings.
However, some jurisdictions have no process for an early application of that kind. Others are not “arbitration-friendly” so an application might fail. In such cases, an alternative is to apply to the court where the arbitration should be seated for an anti-suit injunction restraining the party from continuing the litigation.
The foreign court may be happy to continue it in any case, but the injuncted party may have reason to fear being in contempt (see below).
The “Italian Torpedo”
A party might commence foreign proceedings for tactical reasons, because it fears an arbitral claim against it so, to frustrate that claim, it commence its own spurious related claim in a country which is not arbitration-friendly or which has slow-moving courts which will take years to determine their own (lack of) jurisdiction.
Such proceedings are dubbed “Italian Torpedoes” as Italy is a frequently chosen venue for them. An anti-suit injunction is a valuable countermeasure against the torpedo, halting the disruptive proceedings to enable arbitration of the matter as agreed.
Anti-suit injunctions and the EU
However anti-suit injunctions may not prevent an Italian torpedo, as they are probably not available if the court where proceedings are commenced and the court where the injunction is sought are both in the EU.
The Brussels Regulations contain a “lis pendens” rule: that, if proceedings over the same dispute are brought in the courts of different Member States, the later-commenced proceedings must be stayed until it is established whether or not the court first seised has jurisdiction. A side-effect of this rule is that it prevents application for an anti-suit injunction in one Member State to restrain litigation already started in another.
This does not mean a party is powerless if litigation is commenced against it elsewhere in the EU in violation of an arbitration agreement. Indeed, we say injunctions are “probably not available” as it has recently been suggested they might be.
For more details, see our separate knowhow: Interim Relief in Arbitration (Anti-Suit Injunctions and the EU).
English anti-suit injunctions restraining proceedings outside the EU
The court’s power
The English courts’ power to grant an anti-suit injunction is derived from s37 of the Senior Courts Act 1981.
Until recently, anti-suit injunctions were also sought under s44 of the Arbitration Act 1996, but this option has probably been closed down by the Supreme Court in Ust-Kamenogorsk v AES (§48). Anti-suit injunctions therefore differ from other injunctions in support of arbitration which are under s44.
It is important to check the arbitration agreement or any institutional rules under which the arbitration is to be conducted in case they constrain an application to court, e.g. because they prescribe that such an application should be to the tribunal. In practice, this is rarely problematic. Many institutional rules empower the arbitral tribunal to order injunctions, but the main ones – LCIA, ICC, UNCITRAL, etc. – permit application to court instead in appropriate circumstances.
Grounds for defeating an application
Applications for anti-suit injunctions can be defeated if the other party disputes:
- the validity of the agreement to arbitrate; or
- that the dispute being litigated is covered by that agreement.
Current case law suggests the burden of proof in obtaining an injunction is relatively high.
Three first-instance cases have held that the applicant must show a“high degree of probability” that the dispute should be arbitrated. This is above than the normal standard for injunctions under American Cyanamid principles, which is just that the applicant shows there is a“serious question to be tried”.
Applications may be defeated on other grounds too. These tend to be based on specifics of the case. For example, in Verity Shipping, continuation of the injunction was refused because the foreign proceedings had been consolidated with proceedings involving a third party. However, one ground of universal relevance is that the injunction may not be granted if the application is delayed and the litigation is too far advanced.
Anti-suit injunctions against third parties
It is possible to get an anti-suit injunction against a third party who commences foreign proceedings against the applicant if the third party is closely connected with the other party to the arbitration agreement and colluded with it in bringing the proceedings – Joint Stock Asset Management v BNP Paribas.
Enforcement of the injunction
An anti-suit injunction should be endorsed with a Penal Notice so that breach of it is a contempt of court for which the injuncted party may be fined or imprisoned. If the party is a company, it may be fined or have its assets seized, and its directors may be fined or imprisoned.
The injunction may be sent to the foreign court, but whether the foreign proceedings are halted is a matter for that court.