On 4 September 2008, the Advocate General ("AG") of the European Court of Justice ("ECJ") delivered her Opinion that anti-suit injunctions should not be brought to restrain court proceedings in another EU Member State even where they are brought apparently in breach of an arbitration agreement. The Courts of a Member State must be allowed to determine their own jurisdiction.
Summary and business impact
The Opinion of the AG follows a request from the House of Lords on 21 February 2007 for clarification on this point, which arose from the West Tankers case.1 Whilst the Opinion is persuasive, the actual ruling of the ECJ is expected to be handed down in two to three months’ time. However, it is likely that the judgment will follow the Opinion.
The effect of this Opinion, if it becomes law, is that arbitration in England or any other Brussels Regulation jurisdiction could have to wait until any proceedings brought in a foreign court have been stayed or jurisdiction has been declined by that court. Potentially, this could be a protracted process, involving a full review and possible appeals, depending on the procedural rules of the court in question.
This undermines the concept of party autonomy as regards choice of seat, denying some of the benefit of ‘arbitration-friendly’ jurisdictions where courts limit any pre-award review to a minimum. It is also inconsistent with the concept of competence-competence; allowing arbitrators primarily to determine their jurisdictions. The underlying rationale of the Opinion, however, is that each State should respect the procedures of the courts of each other Member State, regardless of any issues relating to the effective resolution of disputes between parties, especially the commercial parties that often use arbitration.
The Opinion follows the principle endorsed by cases such as Turner v Grovit2 in the context of proceedings being brought in apparent breach of exclusive jurisdiction clauses. It had been hoped, however, that a distinction would be made between exclusive jurisdiction clauses and arbitration agreements, given the specific exclusion of arbitration from the scope of Brussels Regulation 44/2001.3
The case arose from an incident where West Tanker’s vessel, chartered to Erg Petroli SpA ("Erg"), collided with Erg’s jetty. Erg claimed from its insurers, Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) and also commenced arbitration proceedings in London under the charterparty agreement against West Tankers. Some time later, Allianz SpA began proceedings against West Tankers in an Italian court seeking to recover the sum it had paid to Erg. West Tankers applied to the English courts to issue an injunction restraining Allianz SpA from continuing the Italian proceedings, arguing that the dispute arose out of the charterparty and, therefore, Allianz SpA (which was claiming by right of subrogation) was bound by the arbitration clause in that agreement. At first instance, Coleman J in the High Court agreed that the right of Allianz SpA to claim against West Tankers was subject to the arbitration clause in the charterparty, issuing a declaration to this effect and granting the requested injunction. During the proceedings, Allianz SpA questioned whether it would be consistent with the Brussels Regulation for an English court to grant an injunction restraining proceedings in another Member State. Leave was granted to appeal on this issue directly to the House of Lords. On 21 February 2007, the House of Lords referred the question to the ECJ for final determination, concluding that there were varying views on the issue and that it was a matter of considerable importance. However, they suggested that granting an injunction in this case would not be inconsistent with the Regulation as the proceedings fell outside its scope. AG's Opinion
The Opinion dealt with two main issues:
- whether proceedings that are inconsistent with an arbitration agreement but not related to the conduct of the arbitration fall within the scope of the Regulation; and
- whether the considerations regarding the practical reality of arbitration proceedings, as opposed to litigation proceedings, justify the exclusion of arbitration from the Regulation.
- Whether proceedings in an arbitration agreement fall within the scope of the Regulation
In the AG’s view, the important issue was “not whether the application for an anti-suit injunction… falls within the scope of application of the Regulation, but whether the proceedings against which the anti-suit injunction is directed… do so”. This will depend upon the substantive subject matter of those proceedings. In this case, the injunction was sought against the party attempting to bring a tortious claim in the Italian court; litigation proceedings to which the Regulation clearly applies. This contrasts with proceedings brought before national courts as part of arbitral proceedings, such as an application to challenge an arbitrator in connection with an ongoing arbitration.
The existence of the arbitration clause, the AG argued, constitutes a preliminary issue which the court seised must address when examining whether it has jurisdiction. It does not automatically place a matter outside the scope of the Regulation.
- Whether the considerations regarding the practical reality of arbitration proceedings justify the exclusion of arbitration from the scope of the Regulation
The House of Lords had observed that the nature of arbitration is such that it “requires the English courts to be able to grant anti-suit injunctions in support of arbitration”. The House of Lords also pointed to the competitive disadvantage London (and cities in other Brussels Regulation States) would suffer, as compared to non Member States, if the English courts could no longer issue anti-suit injunctions (a mechanism not available in civil law jurisdictions).
The AG rejected this argument, considering it to be of economic, rather than legal, significance. She noted, however, that “if an arbitration clause is clearly formulated and not open to any doubt as to its validity, the national courts have no reason not to refer the parties to the arbitral body appointed” in accordance with their obligations under the New York Convention. She also argued that, practically speaking, by allowing anti-suit injunctions and denying courts the opportunity to consider jurisdiction, those courts may later refuse to recognise and enforce an award.
The AG recognised that her Opinion may prove controversial. There has already been much divergence in opinion between lawyers of civil and common law backgrounds as to whether the exclusion of arbitration from the Regulation should be understood in its broad sense.
Ultimately, if the ECJ does adopt this view, its effect may be to reduce the competitive advantage that London has as a seat of arbitration. Other common law seats such as Singapore, may gain in favour as a result. However, it is likely that the advantages of a London seat will continue to outweigh any negative impact of this decision.
Its effect may also be mitigated by clear drafting of arbitration clauses. Whilst obstructive parties may bring proceedings in foreign courts, a clear arbitration agreement should reduce any scope that a court has to consider its jurisdiction in relation to the dispute.