Judgement clarifies that the Brussels Recast Regulation does not reverse the West Tankers decision.
In Nori Holdings v Bank Otkritie, Justice Males in the High Court issued an anti-suit injunction to restrain court proceedings commenced in Russia in breach of an arbitration clause, but refused to issue an anti-suit injunction to restrain similar court proceedings commenced in Cyprus on the grounds that he was bound by the Court of Justice of the European Union’s (CJEU) decision in West Tankers, affirmed in Gazprom, which prevented the grant of such anti-suit injunctions.
Prior to the CJEU’s West Tankers decision, the English courts had the authority to grant, and indeed did grant, anti-suit injunctions restraining court proceedings commenced in breach of an arbitration clause, see for example The Angelic Grace cited with approval by the Supreme Court in AES Ust-Kamenogorsk. The CJEU in West Tankers however held that such anti-suit injunctions were in breach of EU law as such injunctions undermine the effectiveness, or effet utile, of the Brussels Regulation by “obstructing the court of another Member State in the exercise of the power conferred on it by [the Brussels Regulation]”.
West Tankers was a controversial decision as Article 1(2)(d) of the Brussels Regulation contained an arbitration exception by virtue of which Turner v Grovit was understood not to apply to arbitration clauses. Further, such anti-suit injunctions are not issued against the court of another EU Member State, but rather against the party in breach of an arbitration clause.
The Brussels Recast Regulation, which clarified the scope of the arbitration exception by adding Recital 12 and Article 73(2), along with retaining Article 1(2)(d), seemed to have swept away the West Tankers decision thus allowing anti-suit injunctions to be issued. Indeed, AG Wathelet was of that opinion when the Gazprom case came up. The CJEU however did not engage with AG Wathelet’s opinion on the Brussels Recast Regulation. Instead, the CJEU decided the case on the Brussels Regulation and left the position of anti-suit injunctions under the Brussels Recast Regulation entirely open.
Justice Males held that the CJEU in Gazprom was “crystal clear” that an anti-suit injunction was incompatible with the Brussels Regulation. He considered Recital 12 of the Brussels Recast Regulation and observed that nothing in it undermines the principles affirmed in West Tankers and Gazprom. He therefore held that AG Wathelet’s opinion in Gazprom was “fundamentally flawed” and that if the EU legislation had wanted to reverse West Tankers through the Brussels Recast Regulation it “chose an odd way in which to do so”.
Justice Males therefore did not grant an anti-suit injunction to restrain Cypriot court proceedings commenced in breach of the arbitration agreement, and left it either to the Cyprus court to stay the proceedings, or to the claimants to apply to the arbitrators to issue such an anti-suit injunction (as Gazprom allows).
This decision decides the question that the CJEU left open in Gazprom, that the Brussels Recast Regulation does not reverse West Tankers and therefore anti-suit injunctions cannot be issued by courts to restrain court proceedings in other EU Member States. This gives rise to the odd situation that an arbitral tribunal has more power than the English courts to protect arbitration agreements by virtue of their ability to grant anti-suit injunctions restraining EU court proceedings commenced in breach. It is worth questioning whether this position is consistent with Article 48(5)(a) of the Arbitration Act 1996, which provides that an arbitral tribunal has the “same powers” as the court to order a party to do or refrain from doing anything.
This post was prepared with the assistance of Benjamin Xie in the London office of Latham & Watkins.