This case involved a situation where Court proceedings were commenced in Kazakhstan in breach of an arbitration clause and the defendant sought to enforce the clause in order to restrain the Kazakhstan proceedings. This is a relatively common situation, but what was unusual about this case was that the defendant had no intention of commencing arbitration proceedings itself.
In order to enforce the clause, the defendant issued an application in the English Commercial Court seeking:
- An anti-suit injunction under section 44 of the Arbitration Act 1996 (the “Act”) or section 37 of the Senior Courts Act 1981 (“SCA 1981”) restraining the Kazakhstan proceedings.
- A declaration that the arbitration clause was valid and enforceable.
The court granted both of the above. The Commercial Court held that the defendant was unable to rely on section 44 of the Act as it was clear that there had to be actual or intended arbitration to justify an order under that section. However, the Commercial Court held that its discretion under section 37 SCA 1981 extended to the order sought because the defendant had a “legitimate interest” in making the application.
A legitimate interest occurs where a party is “relying upon a contractual right not to be sued in the foreign country (say because of an exclusive jurisdiction clause or an arbitration clause), then, absent some special circumstance, he has by reason of his contract, a legitimate interest in enforcing that right against the other party to the contract”.
This decision will be welcomed by parties who wish to enforce an arbitration clause to resist other legal proceedings, but who themselves do not wish to commence arbitration proceedings.
AES UST-Kamenogorsk Hydropower Plant LLP v UST-Kamenogorsk Hydropower Plant