In a judgment delivered on 12 June 2013, the Supreme Court unanimously held that the court has jurisdiction to grant a final anti-suit injunction restraining a party from commencing or continuing foreign court proceedings in breach of an arbitration agreement, even where there is no actual, proposed or intended arbitration. The court also confirmed that its power to grant such an injunction is derived from its broad discretion under section 37 the Senior Courts Act 1981, and not section 44 of the Arbitration Act 1996.

In reaching its decision, the Supreme Court upheld the judgment of the Court of Appeal and took a pragmatic approach, which might otherwise have required the claimant to commence arbitration proceedings for the sole purpose of protecting the parties’ agreement to arbitrate.

Background

In Ust-Kamenogorsk Hydropower Plant JSC (“JSC”) v AES Ust-Kamenogorsk Hydropower Plant LLP (“AES”), JSC appealed against the Court of Appeal’s decision that the court had jurisdiction to make a final anti-suit injunction in respect of proceedings brought by JSC, in breach of an arbitration clause.

The background to this matter is set out in our previous Law-Now on this case (link to “Anti-suit injunctions: no arbitration proceedings necessary). In summary, the dispute concerned a concession contract to operate hydroelectric facilities in Kazakhstan between AES and the state of Kazakhstan. The concession contract contained an arbitration agreement governed by English law which specified that arbitration was to be conducted in London. However, JSC issued proceedings in the local Kazakh courts seeking information about the value of the assets held under the concession contract. AES sought and obtained a final anti-suit injunction from the English commercial court, seeking to enforce the arbitration agreement between the parties, even though AES did not intend to start an arbitration.

JSC appealed to the Court of Appeal, challenging the injunction and arguing, amongst other matters, that the court had did not have jurisdiction to intervene because the issue was exclusively governed by the Arbitration Act 1996 (the “AA”), section 44 of which required an actual or intended arbitration. AES argued that the court also had jurisdiction under section 37 of the Senior Courts Act 1981 (the “SCA”), providing a general power to grant an injunction in all cases where the court considered it just and convenient to do so. The Court of Appeal dismissed JSC’s appeal, finding that the court had jurisdiction under section 37 of the SCA and that section 44 of the AA did not apply because no arbitration was in prospect (see “Anti-suit injunctions: no arbitration proceedings necessary”). JSC then appealed that issue to the Supreme Court.

In support of its appeal, JSC submitted that the injunction was contrary to the “terms, scheme, philosophy and parliamentary intention” of the AA and that unless and until one or other party commences an arbitration, the court should keep a distance. JSC argued that the more general power under section 37 of the SCA should no longer be exercised and had been superseded by the AA.

Judgment

The Supreme Court unanimously dismissed JSC’s appeal. In a judgment delivered by Lord Mance, the court held that the AA does not restrict the courts’ broad powers under section 37 of the SCA to issue anti-suit injunctions in support of arbitration agreements. Accordingly, the court held that it had jurisdiction to grant the injunction and there was nothing wrong with the exercise of its power to do so.

The court also clarified the relationship between section 37 of the SCA and section 44 of the AA. In doing so, the court explained that its powers under section 44 are exercisable only for the purposes of and in relation to arbitral proceedings that are on foot or proposed. That alone was sufficient, in the court’s judgment, to conclude that section 44 is not relevant to its jurisdiction where neither party wishes to commence an arbitration.

In terms of the parliamentary intention of the AA, the court held that it would be “astonishing” if Parliament had silently intended to preclude the use of the court’s well-established jurisdiction under section 37 in respect of foreign proceedings commenced in breach of an arbitration agreement, and one would have expected this to have been made very clear in the AA.

Finally, the court took a dim view of JSC’s attempt to benefit by AES’ reliance on an arbitration agreement, while itself denying its existence. The court explained that arbitration agreements have “positive” and “negative” aspects; an undertaking to seek relief in a prescribed forum, together with a usually silent agreement that a party will not attempt to conduct a dispute in a different forum. The court held that the “negative” aspect was just as fundamental as the positive and was not, as JSC had argued, ancilliary to current or intended arbitral proceedings.

Comment

This decision will be welcomed by arbitration practitioners, and parties to arbitration agreements that wish to enforce them without having to commence an arbitration. Although expected, the judgment confirms that it is not necessary for an arbitration to be underway (or intended) in order to enforce an arbitration agreement. Otherwise one would be obliged to commence arbitral proceedings for the sole purpose of providing the court with jurisdiction to grant an anti-suit injunction. This would be an inefficient and expensive way of protecting a party’s right to arbitrate. Accordingly, the Supreme Court’s pragmatic and arbitration-friendly approach should be welcomed by users of arbitration. The judgment shows that, when it is not in an intra-EU context (where anti-suit injunction are now banned by the EJC since the West Tankers case - see our Law-Now) the English courts remain willing to grant anti-suit injunctions either to support existing arbitration proceedings or, even to protect the parties’ agreement to arbitrate as this case illustrates.

Further reading:

Ust-Kamenogorsk Hydropower Plant JSC (“JSC”) v AES Ust-Kamenogorsk Hydropower Plant LLP, [2013] UKSC 35