In 2007 Greek company Crescendo Maritime Company (Crescendo) engaged a Chinese shipbuilder to construct a vessel. The contract was governed by English law with disputes to be resolved by arbitration in London. The contract provided for payment to be made in instalments. In the event of cancellation, it was agreed that the builder would return instalments paid to date. As security for repayment of the instalments, Refund Guarantees were provided by the Bank of Communications Company Limited (the Bank). The Refund Guarantees were also governed by English law and provided for disputes to be settled by arbitration in London.  

In 2011 the builder purported to terminate the contract. Arbitration proceedings were commenced in London in which Crescendo claimed to be entitled to terminate the contract and seek return of the instalments paid to date. The builder refused to return the instalments, causing Crescendo to make a claim under the Refund Guarantees. The Bank also refused to pay under the Refund Guarantees and Crescendo commenced arbitration against the Bank. 

The dispute

During proceedings the Bank alleged that the Refund Guarantees had been procured by fraud because the shipbuilding contract had been backdated to avoid new regulations relating to tank coatings. It also alleged that Crescendo had assigned its rights under the shipbuilding contract to a Greek bank (Alpha), which had provided finance for the purchase, and was not therefore entitled to commence arbitration proceedings. 

In July 2014, Alpha applied to the Tribunal to be joined as a party to ensure that whichever party was entitled to bring proceedings was before the Tribunal. The Bank argued that the Tribunal had no jurisdiction over Alpha but otherwise refused to respond to the application. The Tribunal ultimately decided to join Alpha as a party to the proceedings. 

The Bank took no further part in the arbitration proceedings, saying that it was let down by the Tribunal's decision to join Alpha as a party. Instead, it commenced proceedings in China against the builder, Crescendo, Alpha and another party, seeking a declaration that the Refund Guarantees had been procured by fraud. The Chinese court issued a ruling preventing the Bank from making any payment to Crescendo or Alpha under the Guarantees.

The anti-suit injunction

On learning of the Chinese proceedings, both Crescendo and Alpha applied to the English courts for an anti-suit injunction. An interim injunction was granted and thereafter the Tribunal went on to conduct a hearing (the Bank did not participate) and issue an award in Crescendo's favour, ordering the Bank to honour the Refund Guarantees. 

On the return date, Teare J held that English law was "very clear" that where foreign proceedings were brought in breach of an arbitration agreement, the English courts would issue an anti-suit injunction unless there were "strong reasons" for not doing so.  

The Bank raised three reasons which it said were strong reasons not to grant the anti-suit injunction:

  1. The claims in the Chinese proceedings were different to those in the London arbitration.Teare J acknowledged that there were differences in the way the allegations were put in the two sets of proceedings, but held that in substance the claims were the same – in both proceedings the Bank was seeking to avoid liability on the basis that it had been deceived into giving the Refund Guarantees.
  2. The natural forum for the resolution of the fraud claim was China. Teare J accepted that China might well be the natural forum for the fraud claim. Where parties had chosen another location as a neutral forum, however, he said the question of the most natural forum was of "little consequence".  
  3. The Chinese proceedings were brought against Alpha and other parties who were not parties to the arbitration. The Bank wanted to make allegations of fraud against Alpha and other parties who were not parties to the London arbitration proceedings. Such claims, it said, could only be brought in China and not in the arbitration proceedings. The consequent risk of inconsistent findings therefore was a strong reason not to grant an anti-suit injunction. Teare J held that the risk of inconsistent findings was real but was not a strong reason for refusing to grant the anti-suit injunction.

The Court therefore granted Crescendo's application for an anti-suit injunction. It declined, however, to grant Alpha's application for an injunction on the grounds that Alpha was not a party to the arbitration agreement. Moreover, Teare J said the damages sought against Alpha in China would only arise in the event the Bank did not avoid liability under the Refund Guarantees, i.e. if the Chinese courts agreed with the Tribunal in that respect, and so the claim against Alpha could not be said to be a "collateral attack" on the arbitration award. 

Comment

The decision provides another example of the English courts' willingness to grant anti-suit injunctions where proceedings are commenced in breach of an arbitration agreement. In the present case the injunction was also sought on the alternative basis that the Chinese proceedings were "vexatious and oppressive". Unfortunately, because there was a valid arbitration clause in this case, this alternative and arguably more interesting ground was not given much consideration by the court. Ultimately, the injunction may be of little use to Crescendo because, as the English court itself acknowledged, it is not easy to enforce an English judgment in China. 

Crescendo Maritime Co & Anor v Bank of Communications Company Limited & Ors [2015] EWHC 3364 (Comm)