The recent English Supreme Court decision of Ust-Kamenogorsk Hydropower Plant JSC (Appellant) v AES Ust-Kamenogorsk Hydropower Plant LLP (Respondent) [2013] UKSC 35 has confirmed that the English courts have jurisdiction to injunct foreign proceedings that are in breach of an arbitration agreement, even when no arbitration has commenced or is contemplated.

The case arose as a result of the issue of court proceedings in Kazakhstan by one of the parties to a concession agreement. The English Commercial Court granted an interim anti-suit injunction restraining those proceedings, on the basis of an arbitration clause in the agreement. Although the Kazakh proceedings were withdrawn, the applicant remained concerned that further action would be taken in the Kazakh Courts and sought and received a final injunction.

The Supreme Court upheld the injunction, holding that an arbitration agreement gives rise to a 'negative obligation', whereby both parties promise not to commence proceedings other than in the forum specified in the agreement. Independently of the English Arbitration Act 1996 the Courts have an inherent power to declare rights and enforce this 'negative obligation' by injuncting foreign proceedings brought in breach of an arbitration agreement even when arbitration is not on foot or contemplated.

In the New Zealand context, this decision has two practical implications:

  • The English courts may issue anti-suit injunctions against New Zealand legal proceedings, where an English law agreement provides that the dispute which is the subject of those proceedings is to be arbitrated, even if no arbitration is contemplated or on foot by the other party.
  • The New Zealand courts have the power to stay court proceedings where the parties have agreed to arbitrate their disputes. Therefore, they may look to the decision for guidance as to how to deal with foreign proceedings brought in contravention of a New Zealand law arbitration agreement. Of course if they were to grant an injunction, its effectiveness would depend on whether a foreign court and the other party would abide by the orders of the New Zealand courts.