The UK Supreme Court has confirmed the jurisdiction of the senior courts to grant anti-suit injunctions to restrain parties from commencing foreign court proceedings in breach of an arbitration agreement in circumstances where no arbitration is in prospect.
Section 44 of the Arbitration Act 1996 (1996 AA) grants the senior courts power to issue an anti-suit injunction to restrain parties from pursuing foreign court proceedings when arbitral proceedings have been commenced or are proposed to be commenced in England in accordance with an arbitration agreement.1 The recent decision of the Supreme Court in Ust-Kamenogorsk Hydropower Plant JSC v AESUK Ust-Kamenogorsk Hydropower Plant LLP2 concerned the power of the court to restrain a party from commencing foreign court proceedings when none of the parties to an arbitration agreement had commenced nor proposes to commence any arbitration.
The Supreme Court, affirming the decisions at first instance and before the Court of Appeal, held that the general power under Section 37 of the Senior Courts Act 1981 (SCA) to grant injunctions was unfettered by the introduction of the 1996 AA.
The judgment provides guidance on the relationship between the wide power under s. 37 of the SCA to grant an injunction in all cases in which it appears to the court to be just and convenient to do so, and the narrower powers exercisable by the court under s.44 of the 1996 AA in support of arbitral proceedings.3
The decision is a further example of the pragmatic and pro-arbitration approach taken by English courts to give effect to valid arbitration agreements.
Background to the dispute
The dispute concerned a concession agreement for the operation of a hydroelectric plant in Kazakhstan. The contract was expressly governed by Kazakh law, but contained an arbitration agreement governed by English law providing for disputes to be resolved by arbitration in London under the ICC Rules.
In 2009, JSC commenced court proceedings in the local Kazakh courts, alleging that AESUK had failed to supply certain information concerning concession assets. AESUK responded by issuing proceedings before the English Commercial Court, seeking and obtaining an interim anti-suit injunction restraining JSC from pursuing the Kazakh proceedings in breach of the parties' arbitration agreement.
JSC appealed to the Court of Appeal, contending that the general power under s.37 of the SCA had been supplanted by s.44 of the 1996 AA with regard to the grant of injunctions in support of arbitral proceedings. Section 44 of the 1996 AA provides that the court's powers in support of arbitral proceedings are exercisable only when arbitral proceedings are either on foot or proposed, neither of which applied on the facts of this case.
The Court of Appeal dismissed the appeal, holding that s.44 of the 1996 AA did not apply since arbitral proceedings were neither on foot nor in prospect and that, in any event, the 1996 AA does not restrict the court's jurisdiction under s.37 of the SCA to grant the injunction. JSC appealed to the Supreme Court.
The Supreme Court judgment
In recognition of the sensitivities associated with anti-suit injunctions, the court acknowledged that it may in some cases be appropriate to allow the foreign court in issue an opportunity to "recognise and enforce" an arbitration agreement before granting an anti-suit injunction. In this case, the Supreme Court acted only after the Kazakh court ruled that the arbitration agreement was invalid (both Burton J at first instance and the Court of Appeal held that they were not bound by the decision of the Kazakh court, with which they noted their disagreement).
JSC's case on appeal depended upon a conclusion that the 1996 AA either limited the scope, or otherwise qualified the use, of the general power available to the court under s.37 to injunct a party to foreign proceedings commenced in breach of an arbitration agreement. JSC argued that it was "contrary to the terms, scheme, philosophy and parliamentary intention" of the 1996 AA for an anti-suit injunction to have been granted in the absence of existing or foreshadowed arbitral proceedings. JSC relied upon the general principle that the court should not intervene unnecessarily in the arbitral process in support of its position that it was at best premature for the court to injunct it, given that neither party even intended to commence arbitral proceedings.
The Supreme Court unanimously dismissed the appeal by JSC, affirming the jurisdiction under s.37 of the SCA to grant the injunction. The court rejected JSC's argument that s.37 must be read down by s.44 of the AA 1996, and was similarly unconvinced that the general principle enshrined in the 1996 AA that the court should not intervene lightly in the arbitral process was grounds to refuse to grant an injunction if such is necessary to give effect to an arbitration agreement.
Lord Mance, who delivered the judgment, held that it was "inconceivable"that the 1996 AA was intended to or should be treated as abrogating the protection provided by s.37 to parties which have agreed to resolve their disputes by arbitration seated in England.
Providing comfort to users of arbitration
Both the substance of the judgment and the pro-arbitration approach that was adopted by the court will be pleasing to proponents of international arbitration.
The court strongly resisted watering down the power under s.37 to grant injunctions in support of arbitral proceedings, finding that it would be "inconceivable" and "astonishing"if Parliament intended silently to dilute this well-established general power by enacting the 1996 AA.
The co-existent powers available under s.37 and s.44 should provide comfort to users of arbitration that English courts can and will exercise their discretion to protect arbitration agreements, irrespective of whether or not arbitration is in existence or prospect.
As well as protecting the rights of parties to arbitration agreements with an English seat, the decision makes clear that a party seeking to restrain proceedings in breach of an arbitration agreement need not commence arbitration purely to obtain a ruling on the validity of the agreement. This pragmatic approach is further confirmation of the commitment by the courts in this jurisdiction to facilitate the enforcement of valid arbitration agreements.