In its judgment handed down yesterday in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust- Kamenogorsk Hydropower Plant LLP, the UK Supreme Court confirmed the jurisdiction of the English courts to grant anti-suit injunctions restraining court proceedings brought in violation of an arbitration agreement in foreign jurisdictions outside the Brussels Regulation/Lugano Convention regimes, even in circumstances where no arbitral proceedings have been commenced or are proposed. The Supreme Court held that the English courts’ general inherent jurisdiction to declare rights and to enforce the “negative obligation” of an arbitration agreement (i.e. the express or implied promise not to commence proceedings other than in the forum specified in the arbitration agreement) is long-standing and well-recognised, independent of the Arbitration Act 1996, and nothing in the 1996 Act has removed that power from the courts.
By contrast, where court proceedings are brought in violation of an arbitration agreement in a foreign jurisdiction that is within the Brussels Regulation/Lugano Convention regimes, the position remains (per the European Court of Justice decision in Allianz SpA, formerly Riunione Adriatica di Sicurta SpA, and Generali Assicurazioni Generali SpA v. West Tankers Inc. “West Tankers”) that English courts cannot enforce contractual rights by injuncting a party within its jurisdiction from commencing or continuing those proceedings.
Consequently, when negotiating and drafting arbitration clauses it is important to consider the jurisdictions in which the parties might foreseeably seek to bring court proceedings (in breach of the arbitration agreement), in particular whether those jurisdictions are within the Brussels Regulation/Lugano Convention regimes, as this will impact on the options available for enforcing the arbitration agreement. A list of Brussels Regulation/Lugano Convention member countries is set out at the end of this note.
The sting of the West Tankers decision has however been mitigated somewhat by two recent developments. Firstly, in an interesting twist, the English Commercial Court held in a subsequent decision involving the parties to the West Tankers case that where a party commences court proceedings in a Brussels Regulation/Lugano Convention regime country in breach of an arbitration agreement, whilst those proceedings cannot be the subject of an anti-suit injunction, a claim for damages or an indemnity may nonetheless be brought before the arbitral tribunal against the party in breach.
Secondly, recent revisions to the Brussels Regulation (in effect from 10 January 2015) have clarified that the courts of each EU country: (1) can consider the validity of an arbitration agreement and are not required to abide by a ruling on the validity of the arbitration agreement by a court of another EU country; (2) can, when seised of an action in a matter in respect of which the parties have entered into an arbitration agreement, refer the parties to arbitration, and/or stay or dismiss the court proceedings; and (3) may, in the event of a conflicting arbitral award and EU court judgment, enforce the arbitral award (if valid) under the New York Convention in preference to the court judgment.
Therefore if a party brings court proceedings in another EU country in breach of an arbitration agreement, the other party may ask the court of the seat of the arbitration to refer the parties to arbitration, alternatively it may simply press on with the arbitration (possibly seeking damages or an indemnity for the breach of the arbitration agreement) and seek to enforce the award under the New York Convention. These options will not provide parties with the same immediate certainty as would injunctive relief restraining the foreign court proceedings, however they will provide some comfort that arbitration proceedings cannot be “torpedoed” by foreign court proceedings.
Countries within the Brussels Regulation/Lugano Convention regimes are: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Iceland, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom.