2. Case Background: Events
•Italy
•Erg's insurers
•August 2000
•a vessel owned by West Tankers and
chartered by Erg
•Italinlan oil company •Collision in the Italian port of
•Charterer of vessel Syracuse
which collided
•Charterparty
•Governed by English law
•Clause:provide for arbitration in London •Australia
•Owner of vessel
which collided
3. Case Background: Events
•Erg claimed against its
insurers
•Get paid €15.5million
Anti-suit injunction
proceedings Syracuse proceedings
•Commoercial court in London •submitted its claim to a court
•sought an injunction in Syracuse, Italy
•The Commercial Court issued a •making the Italian
permanent injunction court the “first-seized”
•Upon insurer's appeal, the court court under the Brussels
certified the case to the House of Regulation
Lords
•London
•Arbitration proceedings
•West tankers denied liabilities
4. Case Background: Legal Framework
Anti-suit Injunction
Conflict of laws (or private international law) is a set of
procedural rules that determines which legal system and which
jurisdiction's applies to a given dispute.
In the area of conflict of laws, anti-suit injunction is an order
issued by a court or arbitral tribunal that prevents an opposing
party from commencing or continuing a proceeding in another
jurisdiction or forum.
If the opposing party contravenes such an order issued by a
court, a contempt of court order may be issued by the
domestic court against that party.
5. Case Background: Legal Framework
Brussels Convention: Regulation 44/2001 (Brussels I)
Judgment given by any court in EU to be recognized in entire
EU territory unless recognition is contested
Jurisdiction is to be exercised by the EU country in which the
defendant is domiciled, regardless of his/her nationality
In respect of liability insurance or insurance of immovable
property, the insurer may, in addition, be sued in the courts for
the place where the harmful event occurred.
The regulation does not apply to: - arbitration
Parties to a contract are free to designate a court to rule on
any dispute even though that court might not have jurisdiction
6. Case Background: Legal Framework
United Nations: New York Convention
Recognition of contractual arbitration to resolve international
commercial disputes
Countries are required to give full effect to arbitration
agreements by denying the parties access to litigations in
domestic courts. Instead, such matter should be referred to
arbitration tribunal as agreed upon in agreement.
United Kingdom: Supreme Court Act 1981
High Court can grant injunction in all cases in which it appears
to the court to be just and convenient to do so.
The Arbitration Act 1996, Sec. 44 has allowed courts to
regularly exercise this power to grant injunctions for the
purpose of arbitration proceedings.
7. Did this result into London being favorite seat
of International Arbitration?
Can one EU member state court grant
injunction to litigation proceedings in other
EU member state court?
Why EU should handicap itself by denying
this powerful weapon to seat of arbitration,
while New York, Singapore and Bermuda
provide same?
8. Case Background: Events
House of Lords ECJ
• Is it consistent with the
Jurisdiction Regulation for a
court of a Member State to
make an order to restrain a
person from commencing or
continuing proceedings in
another Member State on the
ground that such proceedings
are in breach of an arbitration
agreement?"
9. House of Lords’ Viewpoint
As in Gasser v MISAT, Member State court having exclusive
jurisdiction can’t issue injunction to restrain litigation before
another Member State court if that court was first seized of
the dispute.
Under Brussels I, Italian court has right to try the dispute.
But, arbitration is excluded from scope of Brussels I.
Question is to protect contractual freedom to have dispute
determined by arbitration. Arbitration can not be self
sustaining. It needs backing of powerful courts of law.
Injunction provides competitive advantage to London
For arbitration cases, Member states should trust arbitrators.
For all other cases falling in ambit of Brussels I, the courts in
EU should trust decisions of other EU courts.
EU competes with rest of world, so why deny EU destination
an opportunity to compete against Singapore and New York?
10. ECJ Advocate General’s viewpoint
Aims of a purely economic nature cannot justify infringements
of Community law (Brussels Convention)
Litigation outside arbitration seat will result only if the parties
disagree on applicability of arbitration clause to the dispute. It
may mean there is no contractual consensus on arbitration.
If national court determines that the arbitration clause is valid
and applicable to the dispute, the New York Convention
requires a reference to arbitration. There is therefore no risk
of circumvention of arbitration.
If other Member States were to follow the English example
and also introduce anti-suit injunctions, reciprocal injunctions
would ensue. Ultimately the jurisdiction which could impose
higher penalties for failure to comply with the injunction
would prevail.
11. Case Background: ECJ Verdict
House of Lords ECJ
• I s it consistent with the • In its Judgment of February 10,
Jurisdiction Regulation for a 2009 the ECJ ruled that an
court of a Member State to anti-suit injunction in support of
make an order to restrain a arbitration restraining person
person from commencing or from commencing or continuing
continuing proceedings in proceedings before the courts of
another Member State on the another Member State was
ground that such proceedings incompatible with the
are in breach of an arbitration Jurisdiction Regulation.
agreement?"
12. ECJ Judgment (1/2)
Court agreed to House of Lords that when viewed from
perspective of English Courts, anti suit relates to
arbitration and hence excluded from Brussels I regulation.
But court found that Syracuse court has exclusive
jurisdiction under regulation to rule on objection to its
own jurisdiction.
Anti suit injunction runs counter to principles of mutual
trust as accorded by EU Member States to others’
legislative system
So, when viewed from perspective of Syracuse Court, the
anti-suit injunction compromises its power to determine
its own jurisdiction. So, anti suit injunction can not be said
to be related only to arbitration.
13. ECJ Judgment (2/2)
So, while main proceedings do not violate Brussels I, they may
have consequences which undermine effectiveness and
objectives of Brussels I.
Due to nature of rights to be protected, the question of
applicability of arbitration (as raised in Syracuse court) comes
under ambit of regulation.
Court agreed with Advocate General and ruled that no court
in one member state is in better position to determine if
court in other state has jurisdiction.
Allowing such injunctions is denying party chance to challenge
applicability of arbitration clause in particular dispute
Therefore, anti suit injunction in case where regulation is
applicable is violation of trust under EU treaties.
The court which is seized of the dispute should refer the case
to arbitration unless it finds that arbitration agreement is not
applicable.
14. Expert Comments on ECJ judgment
ECJ decision not surprising as it readily accords with
underlying principles of Brussels I regulation
Blanket exception in regulation regards to Arbitration has
resulted in complexity. Arbitration always requires
judicial support from national courts in procedures,
appointment of arbitrators, protection and guarantee of
fundamental rights and values, and enforcement of
awards. International dispute arbitrations often refer to
more than one EU jurisdictions. The interface between
regulation and arbitration is missing.
House of Lords concerns are unjustified. ECJ does not
affect power of English courts to issue injunctions outside
EU region.
15. Implications
ECJ affects power of English courts to issue injunctions against
parties commencing litigations in member states of EU. Their
power of issuing injunctions against rest of world remains
unaffected.
From economic point of view, European parties would be
encouraged to choose London as seat of arbitration in
contracts with non-European parties.
European parties negotiating arbitration are unlikely to prefer
New York, Singapore or Bermuda for economic reasons (Cost,
Distance Inconvenience) just for single advantage of ability to
issue counter injunctions.
In parallel proceedings, parties always have protection of New
York Convention in 142 UN Member States
Unlikely to affect competitive advantage of London.
