The European Court of Justice ("ECJ") has issued a judgment confirming that anti-suit injunctions should not be granted by an EU Member State court in order to restrain proceedings in another EU Member State on the ground that the proceedings would be in breach of an arbitration agreement.

The ECJ's decision followed a request from the House of Lords, in February 2007, for clarification of this issue on which the UK's highest court had acknowledged there were varying views and was a matter of considerable importance. The issue had arisen in an appeal before it from an English court's decision to grant an injunction restraining proceedings brought in Italy (West Tankers Inc v RAS Riunione Adriatica di Sicurta SpA [2007] UKHL 4). The ECJ concluded1 that it would be incompatible with European Law2 for the English court to grant the injunction restraining the proceedings brought in Italy, notwithstanding that those proceedings were apparently in breach of an agreement for arbitration of disputes in London.

Until this decision, when a party to an arbitration agreement specifying England as the chosen seat brought court proceedings in another jurisdiction in apparent breach of that agreement, the aggrieved party could apply to the English courts, in their supervisory capacity in support of arbitration, to grant an anti-suit injunction restraining the first party from pursuing the foreign proceedings. The English courts' attitude to such applications was traditionally robust, and provided a party could show that a valid arbitration agreement existed and that proceedings in breach had been threatened or commenced, an injunction would usually be granted. On the basis that any injunction granted would be enforceable against the offending party, and not against the foreign court seized, concerns as to comity between nations would usually fail to defeat such an application. However, as a result of the ECJ's decision, the procedural tool of an anti-suit injunction will no longer be available to parties in England (or in any EU Member State3) where the parallel court proceedings are brought in another EU jurisdiction.

Practical implications

The judgment does not expressly prohibit an arbitration from continuing or require an arbitral tribunal to stay an arbitration in favour of parallel court proceedings in another EU Member State. However, in practice, one possible effect is that arbitration in England (or any other Member State) might be stalled until the court proceedings have themselves 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 European court in question. It is well known that the Italian courts, for example, can take a long time to determine whether they have jurisdiction, even if they conclude by recognising an arbitration clause.

Furthermore, arbitral tribunals might hesitate to exercise their jurisdiction in circumstances where there is a risk of conflicting decisions and/or uncertainty as to the status of any arbitral award issued while parallel court proceedings are pending, and parties may be reluctant to bear the costs of two sets of proceedings. The ECJ's decision thus gives rise to some difficult case management issues for parties and for arbitrators. It is to be hoped that arbitrators will be robust in their response.

The decision has also attracted criticism as undermining the concept of party autonomy with regards to choice of seat, denying some of the benefit of ‘arbitration-friendly’ jurisdictions in which courts limit any pre-award review to a minimum. There is a fear that parties seeking to frustrate or override an arbitration agreement may take advantage of this decision to bring proceedings in breach of the agreement. It is also viewed as being inconsistent with the concept of "competence-competence": allowing arbitrators primarily to determine their jurisdiction. The underlying rationale of this decision, however, is that each EU Member 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. The ECJ held that to do otherwise "would run counter to the trust which Member States accord to one another's legal systems".

Comment

There are concerns in London that its competitive advantage as an arbitral seat may have been reduced as a result of this decision, and that parties may choose seats such as New York or Singapore instead, where anti-suit relief remains available across the board. However, the better view is that the ECJ's decision only limits the English court's ability to grant anti-suit injunctions to restrain proceedings within the EU, and that anti-suit relief remains available to restrain proceedings brought in breach of an arbitration agreement elsewhere in the world, including in the US. Moreover, the decision is unlikely to reduce London's appeal as an arbitration centre with a modern and sophisticated arbitration law, a supportive judiciary, and an exceptional choice of highly skilled arbitrators, experts and facilities.