The Advocate General of the European Court of Justice (“ECJ”) has now delivered her opinion on a question referred to the ECJ by the House of Lords earlier this year in the case of the “Front Comor” concerning the use of anti-suit injunctions by the English Courts. The implications of this opinion, if it is accepted by the ECJ as is widely expected, are far reaching and have potentially serious consequences. The effects of a decision in line with the Advocate General’s opinion would be widely felt, particularly in sectors where parties regularly agree to arbitrate their disputes in a chosen country.
The facts of the “Front Comor” are straightforward. The Vessel was chartered by West Tankers (“Owners”) to Erg Petroli SpA (“Erg”) and during that charter she struck a jetty at a Syracuse oil terminal owned by Erg. The charterparty was governed by English law and was subject to arbitration in London. Erg claimed on its insurance up to the limit of the policies and proceeded in London arbitration against Owners for the balance of the damage suffered. Erg’s insurers subsequently asserted a right of subrogation under Italian law and began proceedings on a claim against Owners in the Tribunale di Syracuse to recover the payments made to Erg.
The Tribunale di Syracuse had jurisdiction over the claim under the provisions of the Brussels Regulation (Regulation 44/2001) that governs jurisdiction between member states of the EU. This was not in dispute. However, Owners applied to the English court for various declarations and an injunction to restrain the Italian proceedings. Owners argued before the Court that the dispute arose out of the charterparty, which contained an arbitration agreement, and that the insurers were therefore bound by that arbitration agreement in the exercise of their subrogated rights. At first instance Colman J. held that the proceedings in Italy did arise out of the charterparty, the insurers were bound to refer their dispute to arbitration and that the Owners were entitled to an injunction restraining the Italian proceedings.
On appeal directly to the House of Lords, their Lordships agreed with Colman J.’s decision, but, referred the question as to whether the antisuit injunction could be granted to the ECJ for a ruling.
Their Lordships asked the ECJ:
“Is it consistent with EC Regulation 44/2001 for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings in another Member State on the ground that such proceedings are in breach of an arbitration agreement?”
The position thus far
Although they referred this question to the ECJ, the view of the House of Lords was expressed (unanimously) by way of assistance to the ECJ. That view was that the proceedings fell outside the Brussels Regulation and were not inconsistent with it. Their Lordships’ opinion was that the exclusion of arbitration from the Brussels Regulation extended to court proceedings whose subject matter was arbitration and, from the perspective of English law (which governed the charterparty), this includes actions that are aimed at protecting the right to have a dispute determined by arbitration.
Simply put, the action by Owners was to protect a right to have disputes referred to arbitration: the subject matter of those proceedings was arbitration and therefore outside the scope of the Brussels Regulation.
The European perspective
The ECJ has previously held that, as a consequence of the provisions of the Brussels Regulation, anti-suit injunctions cannot be made in relation to court proceedings (Turner v Grovit Case C-159/02  2 Lloyd’s Rep. 169). The key question for decision in the “Front Comor” was whether that restriction extended to injunctions that were in support of arbitration proceedings. As noted above, arbitration proceedings are outside the scope of the Brussels Regulation.
The English view, which was expressed by the House of Lords in this case, is that the exclusion of arbitration should be looked at widely and be interpreted as covering all disputes connected with the arbitration. The Advocate General has taken the view that the exclusion of arbitration proceedings in the Brussels Regulation should be construed narrowly. Following this view, the subject matter of the proceedings before the Tribunale di Syracuse was a claim in tort for damages and not arbitration. It was therefore not excluded from the Brussels Regulation.
In the Advocate General’s opinion, the Brussels Regulation does prevent a court in a Member State from making orders that seek to restrain proceedings in the courts of another Member State on the basis that, in the opinion of the court making the order, the proceedings are in breach of an arbitration agreement.
Although the ECJ has not yet ruled on the question referred to them in this case, it is likely that it will follow the views of the Advocate General. The decision of the Advocate General is perhaps not surprising given the historical tension over this subject between the systems of law on either side of the channel. It is, however, disappointing and appears to ignore the practical reality of commerce where arbitration clauses are routinely used. Assuming the opinion is followed by the ECJ, this has the potential to cause severe disruption to the resolution of commercial disputes.
The “Front Comor” decision means that a party to an arbitration agreement, where the seat is to be in a Member State of the EU, is at risk where his contractual counter-party is bringing an action before the courts of another Member State. Although that action would be in breach of the arbitration agreement, the aggrieved party would need to appear before the court to ask that they decline jurisdiction, with uncertain results. An application would likely be made under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which mandates a court seized of an action where there is an arbitration agreement to refer the parties to arbitration. However, that requirement is conditional and does not apply if the court finds the arbitration agreement “null and void, inoperative or incapable of being performed”. In deciding this question the relevant national court would apply its own procedures and national law; a circumstance that the parties may have sought to avoid by choosing the law of their contract and the agreement to arbitrate.
The parties to an arbitration agreement are likely to have chosen to arbitrate for any one or more of a variety of reasons such as privacy, speed, cost or to allow a more commercial approach to dispute resolution than a court could offer. Perhaps most importantly the agreement to arbitrate, as their Lordships observed, is an agreement to take the parties outside the procedures of any national court.
A consequence of the Advocate General’s opinion will be that parties who had sought to avoid national courts may be forced to appear before a court first seized in order to argue that that court should stay its own process and refer the parties to arbitration. This is very far from what the parties are likely to have bargained for and could see contracting parties seeking to take alternative non-arbitral measures to protect their right to arbitrate.