Are English Courts Becoming the World’s Arbitral Policeman?
Where England is not the natural forum for the trial of the substantive dispute, the English court should not, as a matter of policy or law, restrain proceedings in one foreign jurisdiction where the purpose of the injunction is to favour proceedings in another jurisdiction. In other words…it is no part of the function of the English courts to act as an international policeman in matters of this kind.
This well-known principle, set out by the House of Lords in Airbus Industrie GIE v Patel, does not apply to arbitration. This is the gist of the judgment of the Court of Appeal (Nugee LJ, Snowden LJ and Falk LJ) of 11 October 2023 in Deutsche Bank AG v RusChemAlliance LLC [2023] EWCA Civ 1144.
The facts are simple. A German bank issued a guarantee in favour of a Russian company, which was governed by English law and provided for arbitration in Paris. The Russian company commenced court proceedings in Russia. The German bank sought an anti-suit injunction (ASI) in England to restrain the Russian proceedings. English courts have the power to issue injunctions under section 37(1) of the Senior Courts Act 1981 ‘in all cases in which it appears to the court to be just and convenient to do so’. No such injunction could be obtained in France. Should the English court grant an ASI under these circumstances?
Allowing the appeal, the Court of Appeal gave a positive answer to this question. The court reasoned as follows. There is a serious issue to be tried on the merits. The claim falls within the gateway in Practice Direction 6B para 3.1(6)(c), namely a claim in respect of a contract governed by English law. ‘It is the policy of English law that parties to contracts should adhere to them, and in particular that parties to an arbitration agreement, who have thereby impliedly agreed not to litigate elsewhere, should not do so.’ ([38]) ‘Hence the Court will usually grant an ASI to enforce an arbitration agreement unless there is good reason not to’. ([39]) Since French courts cannot grant an ASI and French law ‘has no objection in principle to (and will recognise) the grant of an ASI’ in a case like this ([40]), England is the proper forum in which to bring the claim ‘for the interests of all the parties and the ends of justice’ (Spiliada). Consequently, all the conditions for service out were met. From this point, it was plain sailing. The court regarded ‘the application for an interim ASI as quite straightforward’ because the evidence showed that French law had no objection to this course of action ([42]). Just in case the Russian proceedings were not discontinued, the court also granted an anti-enforcement injunction.
Following the UKSC judgment in Enka, the arbitration agreement in Deutsche Bank AG v RusChemAlliance LLC was governed by English law. The authorities on which the Court of Appeal relied to support its argument about the policy of English law (UKSC/UKHL judgments in Ust-Kamenogorsk, West Tankers, Enka; EWCA judgment in The Angelic Grace [1995] 1 Lloyd’s Rep 87) all concerned arbitration agreements governed by English law. The court also relied on the English law of equity concerning the enforcement of contracts governed by English law ([38]-[39], [42]). This indicates that Deutsche Bank AG v RusChemAlliance LLC is most likely confined to arbitration agreements governed by English law (compare the outcomes in two similar cases, which provides support for this statement: Commerzbank AG v RusChemAlliance LLC [2023] EWHC 2510 (Comm) (arbitration agreement governed by English law; ASI granted) and G v R [2023] EWHC 2365 (Comm) (arbitration agreement governed by French law; ASI not granted)).
But the Court of Appeal’s broad statements of principles leave the door open for the argument that upholding all arbitration agreements is a general principle of English law and that, consequently, English courts should restrain foreign court proceedings commenced in breach of arbitration agreements, regardless of their governing law and arbitral seat, as long as the breaching party is present in England or the claim falls within a jurisdictional gateway, ASIs are not available in the courts of the seat, and the country of the seat has no objection in principle to ASIs. This would be a considerable extension of the powers of English courts and an unwelcome development.
Thanks for sharing. This is a frontier issue in English private international law. G v R was the first inter partes decision on whether an English court has jurisdiction to grant an anti-suit injunction in relation to an arbitration with a foreign seat. The Court of Appeal and High Court decisions in the other case were ex parte. Sir Nigel Teare distinguished the Court of Appeal decision on this basis in para 45 of his judgment. Not the last word on the matter by any stretch.
That is a very good point, Mukarrum. Thank you for pointing it out. I agree that this will not the last word on the matter.
As the Court of Appeal in Chubb v Enka had already adopted or approved the approach of the Bermuda Court of Appeal (speaking through Sir Murray Stuart-Smith), to this effect (in each case, in proceedings which had been energetically contested), it is unclear why anyone thought this controversial, still less novel. And in any event, there is no rule of English contract law to the effect that proceedings founded on a breach of contract may not be brought in England unless England is the place where performance was required to be made, so why should there be here ?
But there is also the matter of comity that should be considered. Consider the following scenario. A contract provides for arbitration in country X. The contract is contrary to EU competition law. A party commences proceedings in the EU and the court refuses to enforce the arbitration agreement. The European claimant is subject to the personal jurisdiction of English courts. Arguably, comity points away from granting an ASI, even if country X would not object to the English courts granting it. Consider replacing the EU with the US in this example. If an English court grants an ASI when a US court has refused to enforce an arbitration agreement that is contrary to US antitrust law, the US claimant can obtain an anti-anti-suit injunction. I do not believe the enforcement of contractual promises should be the sole factor to be taken into account in such cases.
If the foreign court, in contested proceedings, has ruled that the agreement to arbitrate is void as a matter of law, one might have thought that issue estoppel would be liable, if its conditions are met, to prevent the losing party asking for a different decision from an English court. The reverse position has just been declared by Cockerill J in the Yukos/Russia award litigation; it’s not much of a stretch to apply it here. No doubt issue estoppel is subject to a long-stop discretion to not apply it, and the general equitable discretion to refrain from ordering specific relief is capable of turning the decision. But if all that has happened is that the foreign court has ruled that the agreement to arbitrate is valid but they will not, for reasons of their own law, grant relief on the basis of it, it’s hard to see why the English court should not be able to accept the ruling on validity and apply its own procedural remedy.