In the summer of 2014, alleged large-scale fraud involving metals warehoused in Qingdao, China, was discovered. This has spawned multiple claims in different jurisdictions involving traders, banks and warehouses. Impala Warehousing and Logistics (Shanghai) Co Ltd v Wanxiang Resources (Singapore) PTE Ltd (15 January 2015) is a decision from one of several cases set to be heard in the English High Court.
Its progress is an indicator of the hard fought, complex and long-running claims which lie ahead, in which jurisdictional issues are likely to feature prominently. It also illustrates the high threshold an applicant must meet in order to obtain a final anti-suit injunction in support of an exclusive jurisdiction clause from the English Court.
Wanxiang claims to be the owner of a quantity of aluminium stored in a warehouse in Qingdao. Warehouse certificates in respect of the aluminium were issued by Impala to Rabobank International, to whom the goods had been pledged as security. The sums advanced by Rabobank were paid off and, it is said, the warehouse certificates were endorsed to Wanxiang. Wanxiang commenced proceedings against Impala in China seeking delivery of the aluminium. Impala have not delivered the goods to Wanxiang, apparently because of the Chinese proceedings against them.
In September 2014, Impala successfully sought an interim anti-suit injunction from the English Court, restraining Wanxiang from continuing the Chinese proceedings on the basis that the warehouse certificates upon which Wanxiang were suing in China contained an exclusive jurisdiction clause in favour of the English Courts. After discovering that the Chinese proceedings would be advanced by the Chinese court even if Wanxiang complied with the anti-suit injunction, Impala applied for a final anti-suit injunction with a mandatory injunction ordering Wanxiang to discontinue the Chinese proceedings. Alternatively, an interim mandatory injunction to the same effect was sought.
The basis of these applications was that the proceedings in China were (i) vexatious and (ii) in breach of the exclusive jurisdiction clause.
- It did have a claim in China against Impala, even though no evidence in support had been presented.
- The warehouse certificates did not contain an exclusive jurisdiction clause in favour of England. Thegoverning jurisdiction clause was in fact contained in a Collateral Management Agreement (CMA), even though Impala was not a party to the CMA.
Impala contested this:
- No evidence had been adduced by a Chinese lawyer explaining the basis of the claim in China.
- Wanxiang had not challenged the English Court’s jurisdiction at a previous hearing in September 2014.
- The proceedings in China were vexatious because Wanxiang argued before the English Court that its claims against Impala were under the CMA, but its Chinese claims were brought under the warehouse certificates.
Whilst the Court found Impala’s arguments had undoubted force, it held that from an English law perspective, Wanxiang did have a claim against Impala on the terms of the warehouse certificates, in bailment. There was no evidence that Chinese law was different in this respect from English law and the way in which Wanxiang’s Chinese claim was expressed was consistent with the English law position. Therefore, the English Court dismissed the argument that the Chinese proceedings were vexatious.
As to whether the warehouse certificates contained an exclusive jurisdiction clause, the English Court considered that there was a “simple and cogent argument that they do.” The exclusive jurisdiction clause was contained in a set of standard terms on Impala’s website which had been validly incorporated, making a specific reference to dispute resolution.
However, Wanxiang submitted that it would be wrong to determine the application without evidence as to all the facts regarding the making of the relevant agreement, the knowledge which Impala had of the relevant agreement and its appreciation, when issuing the warehouse certificates, that it was doing so as agent for Impala UK pursuant to the terms of the relevant agreement.
The Court decided that it had little, if any, evidence on these matters and could not fairly or properly determine the principal issue between the parties without a clear understanding of them. Referring to the fact that the Court can only issue a mandatory injunction if it has a “high degree of assurance” that the basis on which it does so is correct, it dismissed Impala’s application.
Interestingly, the Court also commented on Wanxiang’s argument that it would suffer prejudice if it had to litigate in England because any judgment of the English Court would not be enforceable in China as there is no reciprocal enforcement arrangement between England and China. It noted that an inability to enforce a judgment is a form of prejudice specifically mentioned in a previous case, concluding that this would be a strong reason for not giving effect to the exclusive jurisdiction clause.
A full hearing regarding the English Court’s jurisdiction is scheduled to take place in March 2015.
This decision illustrates the difficulty an applicant faces in obtaining a final anti-suit injunction where there are outstanding legal or factual issues to be determined. Even though the Court agreed in principle with a number of Impala’s arguments, there was not sufficient evidence to grant the final anti-suit injunction sought. It appears that applications on the basis of an exclusive jurisdiction clause can also be successfully resisted where no reciprocal enforcement arrangement is in place.
It is certainly an indication of the complexity of claims relating to the alleged warehousing fraud in Qingdao and the potential difficulties for claimants in relation to both jurisdiction and enforcement. It is likely to be a considerable time before they reach their conclusion.