In a substantial change to the EU rules on jurisdiction and enforcement of judgments, introduced in January 2015 by Regulation 1215/2012 (the Recast Brussels Regulation), parallel actions in breach of a valid exclusive jurisdiction clause are now blocked. Even if another EU court is first seised, it must stay the case until the chosen court has ruled on the validity of the clause and accepted jurisdiction. But there is still no such rule for arbitration clauses. Is a party to an arbitration clause similarly protected from torpedo actions? How can it ensure the dispute is in fact referred to arbitration and prevent an action in an EU national court?
The Gazprom decision
The recent decision of the Court of Justice of the European Union (CJEU) (in Case C-536/13 Gazprom OAO –v- Lithuania) clarifies the old rules in Regulation 44/2001 (Brussels I) and simply confirms that arbitration falls entirely outside the scope of the EU rules on the allocation of jurisdiction and recognition of judgments. The case concerned the validity (under Brussels I) of an arbitral award ordering a party to drop certain claims in parallel court proceedings. But the Recast Brussels Regulation is really no different: it is of no assistance if the other party challenges the validity of the arbitration clause or simply ignores it and does not stop parallel court proceedings.
Commodity traders can breathe a sigh of relief that at least arbitration is recognised as a valid alternative dispute resolution mechanism, unconstrained by the mandatory EU rules (that apply only to court actions). But this leaves a major gap in the law for arbitration clauses. If the other party takes court action, nothing in the Brussels I Regulation or the Recast Brussels Regulation can stop the court giving judgment, which is then automatically recognised in the courts of all 27 other EU states. In the case of arbitration, it is a simple race to the door, getting an arbitration award and getting it enforced under the New York Convention rules and local laws before another EU court has reached the judgment stage and its contrary judgment has been recognised and enforced under the Recast Regulation.
In any case, we already knew that arbitration fell outside the scope of the EU rules, so the Gazprom case is no big surprise. The real question everyone wanted answering was whether, say, an English court can lawfully grant an anti- suit injunction upholding an arbitration agreement or clause and prohibiting a defendant, at risk of contempt of court, from using the courts in other EU countries to subvert the parties’ agreed intentions.
The West Tankers decision
The West Tankers case (Case C-85/07 Allianz, Generali -v- West Tankers (‘The Front Comor’)) notoriously held that court proceedings on the ancillary point whether an arbitration clause was properly incorporated and valid are within the scope of the EU regime and cannot be the target of an anti- suit injunction by another EU member state’s court. Many had criticised this judgment, which seemed to be contrary to the spirit of the carve-out for arbitration and also went against some earlier CJEU cases.
Advocate General’s opinion
There was some excitement when Wathelet AG, the Advocate General in Gazprom, revisited this whole issue and appeared to accept that EU case law on anti-suit injunctions should not apply to arbitration agreements and clauses, especially in the light of the Recast Brussels Regulation.
Wathelet AG considered that the boundary drawn by the CJEU in West Tankers between arbitration and the scope of the Brussels Regulation is more correctly reflected in the Recast version, which, at recital 12, contains new wording that explicitly states ‘[t]his Regulation should not apply to an action or ancillary proceedings relating to, in particular, … the conduct of an arbitration procedure or any other aspects of such a procedure, nor to … the recognition or enforcement of an arbitral award’. He thought this had moved the goalposts and gave scope for arguing that anti-suit injunctions granted to enforce arbitration clauses equally fell outside the EU rules as they are part of an arbitration procedure. He went as far as suggesting that the CJEU’s ruling in West Tankers was wrong. He speculated that if the case arose today, the Italian court could only address the substance of the case from the time that it held that the arbitration agreement was null and void, inoperative or incapable of being performed (as allowed by the New York Convention).
Unfortunately, the CJEU itself did not have to take the bait and we do not have an answer. Gazprom was factually quite different and arose at the time of enforcing an arbitral award. The CJEU said that in deciding whether to give effect to or to refuse that part of the award, the Lithuanian courts should apply their own law (subject to international obligations, including the New York Convention). The Brussels regime simply had nothing to say on the subject.
So the CJEU’s upholding of the ‘sovereignty’ of arbitration clauses is somewhat of a two-edged sword.
Firstly, the complete exclusion of arbitration would probably prevent you relying on the Brussels Regulation to block parallel court actions (contrast exclusive jurisdiction clauses). AG Wathelet’s view that an injunction of the sort that the English court granted in West Tankers would be lawful under the Recast Regulation takes you only so far.
Secondly, while you are free to pursue your arbitration, when you get to an EU court to enforce an award you may still be baulked by overriding local laws or public policy or New York Convention provisions preventing you from enforcing it. There is no automatic recognition within the EU.
Consequently, the party that has chosen arbitration is under pressure to get an award quickly so it can be enforced in an EU court before any parallel legal action has reached the judgment stage. If the other side gets in first with an action in an EU court and manages to persuade that EU court that the arbitration clause is invalid or not properly incorporated into the contract (a rather familiar story), the risk is that the court will deliver its judgment and that then must be recognised and enforced by any other EU court under the Brussels regime.
That could make for a very effective torpedo, although since most of the jurisdictions that are famous for such actions are also famous for the leisurely pace of their justice systems, the torpedo will likely have a slow fuse and this may still give the other party the chance to get in first with an arbitral award.
In conclusion, can anything else lawfully be done to pre-empt such torpedoes? Is the combination of the Gazprom judgment, AG Wathelet’s opinion and the Recast Brussels Regulation of any help?
Gazprom was concerned with the arbitral award itself and not a court judgment relating to the validity of an arbitration clause. A distinction can perhaps be made such that not all court procedures connected with arbitration fall in the ‘arbitration box’.
For instance, s.37 of the Senior Courts Act 1981 allows a party to obtain a declaration from the English court upholding an arbitration clause, provided the party has not yet commenced arbitration and does not intend to do so but merely wishes to enforce a contractual right not to be sued other than in arbitration. It might be possible to obtain a declaration of validity for use as a defence in any foreign torpedo proceedings, should they arise. The court would not be directly restraining any foreign proceedings and the procedure is a generally available judicial remedy, not nominally granted under our Arbitration Act 1996.
However, it would be rather curious to apply for such a declaration where there is no dispute in contemplation; and once arbitration is underway or the party intends to commence arbitration it may be too late. The procedure for obtaining a declaration under ss.32 or 72 of the Arbitration Act is not available pre-emptively, as questions of jurisdiction should properly be heard by the arbitral tribunal and courts may only decide the question with the arbitral tribunal’s consent. And if the declaration is granted under the Arbitration Act, it is more likely to fall in the ‘arbitration box’ and so would not benefit from EU-wide recognition.
That leaves you with one final option, which is to claim damages for breach of the arbitration clause, held by the Supreme Court in the Alexandros T  UKSC 70 to be a legitimate claim that could be brought consistently with the tie-break rules in the Brussels Regulation.