The ability to enforce arbitration clauses through the English courts is diminished following a Judgment from the European Court of Justice.
English Courts have long exercised the power to restrain parties from breaching arbitration agreements by issuing so-called “anti-suit injunctions”. An anti-suit injunction forbids the party against whom the order is made from commencing or continuing proceedings in a foreign court in breach of an arbitration agreement. However, in a landmark decision in Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) and Generali Assicurazioni Generali SpA v. West Tankers Inc. Case C-185/07, the European Court of Justice (ECJ) held that anti-suit injunctions are contrary to EU law.
Following the ECJ judgment, the English courts are no longer able to issue anti-suit injunctions restraining parties from breaching arbitration agreements by commencing proceedings in other EU jurisdictions.
The facts of the West Tankers case are complex but not unusual. Erg Petroli SpA (“Erg”) was the owner of an oil jetty in Syracuse, Italy. West Tankers was the owner of the Front Comor, an oil tanker that was chartered to Erg. The Front Comor collided with Erg’s jetty, causing it significant damage. The Charter Agreement (“Charterparty”) contained a London arbitration clause and Erg commenced arbitration against West Tankers in London, in respect of the uninsured damages caused by the collision. However, Erg’s insurers (Allianz and Generali – “the Insurers”) commenced proceedings against West Tankers before the local Italian court in Syracuse, seeking to recover the amounts they paid Erg under the insurance policies.
In 2004, West Tankers obtained an anti-suit injunction from the English Court against the Insurers restraining them from proceeding with the Italian Court action. West Tankers claimed that any rights the Insurers had against West Tankers were derived under the Charterparty and therefore subject to the arbitration clause.
On appeal to the House of Lords, the Insurers argued that the practice of granting anti-suit injunctions was contrary to EU Regulation (EC) No 44/2001 (the “Brussels Regulation”). The Brussels Regulation establishes a binding hierarchy among EU courts with competing jurisdiction over claims. The Insurers argued that under the Brussels Regulation it was for the court seized with a matter to determine whether to accept jurisdiction in an action that was commenced in breach of an arbitration agreement. Anti-suit injunctions frustrated that right. West Tankers argued that the English Court’s power to issue an anti-suit injunction enforcing an arbitration agreement was exempted from the Brussels Regulation pursuant to the arbitration exclusion in Article 1(2)(d) of the Regulation.
The House of Lords referred the question for determination by the ECJ. In its 10 February 2009 judgment, the ECJ sided with the Insurers. It held that anti-suit injunctions were contrary to the Brussels Regulation principle that “every court seized itself determines, under the rules applicable to it, whether it has jurisdiction to resolve the dispute before it”. The ECJ also reasoned that under 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a court was only required to stay proceedings to arbitration where there was an arbitration agreement between the parties that was not null and void or contrary to public policy – these were questions each court had to decide for itself. According to the ECJ, anti-suit injunctions were contrary to the trust that each EU court must accord to the courts and legal systems of other EU states.
The stance adopted by the ECJ will disappoint many English lawyers and parties, who have come to rely on anti-suit injunctions as an effective remedy for actual or threatened breaches of arbitration agreements. The ECJ judgment could make it easier for recalcitrant parties to derail the agreed dispute resolution procedure by seeking remedies from hometown courts. While every EU Court deserves to be trusted and respected by other EU Courts, commercial parties can become frustrated by the slowness, cost and unpredictability of the courts in some European jurisdictions. The risk of conflicting decisions has also increased as a result the ECJ’s judgment.
The ECJ’s Judgment does not prevent the English court from issuing anti-suit injunctions in connection with proceedings commenced outside of the EU. Considering that some Courts are most willing to assert jurisdiction in face of valid arbitration agreements, this is indeed a relief.