The recent judgment of the English Commercial Court in Essar Shipping Ltd v Bank of China Ltd[1] has highlighted the importance of applying for anti-suit injunctions swiftly once the dispute arises.

Background 

The respondent, Bank of China (the "Bank"), as holder of original bills of lading, commenced proceedings in China against the applicant bareboat charterer, Essar Shipping Ltd ("ESL"), alleging a cargo misdelivery claim of over US$11million.

The vessel concerned, the "KISHORE" (the "Vessel"), was arrested in Tianjin to obtain security for the Bank's claim.  However, the Bank also commenced substantive proceedings in Qingdao despite the incorporation into the bill of lading an arbitration clause stipulating London arbitration.

ESL first applied to the Tianjin Court to set aside the arrest.  That application was rejected. Subsequently, 2 months after proceedings were commenced, ESL filed a formal challenge to the Qingdao Court's jurisdiction.  ESL then waited a further 7 months before applying to the English Court for a declaration that the dispute was subject to English law and London arbitration and an injunction restraining the Bank from pursuing its claim in China.

The rival arguments

In opposing the injunction, the Bank argued that:

  • There was a significant delay of more than 9 months between the Bank's commencement of proceedings in China and the issue of ESL's claim form and application for an anti-suit injunction in England.
  • Even if the Bank had acted unreasonably in commencing proceedings in China, as opposed to London arbitration, the time bar had expired and it would not be in the interests of justice for the Court to grant an anti-suit injunction which would essentially deprive the Bank of its claim.

ESL responded that:

  • It was entitled to first challenge the Qingdao Court's jurisdiction before seeking an anti-suit injunction.
  • The length of delay in itself is of less importance than the extent to which foreign proceedings have progressed.
  • Justifiable delay should not be given serious weight against the grant of an injunction.
  • Waiting for a foreign jurisdictional challenge to be determined, although significant, is less important than permitting foreign proceedings on the merits to unfold.
  • There were no strong reasons why the arbitration agreement should not be enforced by injunction.

Decision 

The Judge noted that the grant of an anti-suit injunction is discretionary.  The underlying principle is that the English courts can grant anti-suit injunctions in situations where the injunction is "sought promptly and before the foreign proceedings are too far advanced" (The Angelic Grace)[2].

The Court held that, whilst the dispute was indeed subject to English law and London arbitration, an injunction would be refused because the application was not made promptly.  The fact that the Qingdao Court proceedings were not "too far advanced" did not affect this conclusion. 

However, the Judge did not accept the Bank's alternative argument based on specific prejudice.  Since foreign shipowners often seek anti-suit injunctions against cargo owners who pursue claims in the Chinese Courts, it was unreasonable of the Bank not to commence protective arbitration proceedings before the time bar expired. 

Comment 

Two key points arise out of this case.

First, even where an arbitration agreement is valid and covers the disputes in question, an anti-suit injunction may be refused where there is delay in seeking the injunction. In such circumstances, however, there will still be a claim for any damages flowing from the breach of the arbitration agreement.

Secondly, what constitutes delay will depend on the circumstances of each case. Most bills of lading stipulate a time bar of 9 or 12 months. What is clear is that "delay" must be considered in context and, in this case, a delay of 9 months was considered far too long against the backdrop of a 12 month time bar. 

The lesson to be drawn is that anti-suit injunctions should be sought as soon as possible after proceedings are brought in breach of an arbitration agreement.