The use and abuse of English anti-suit injunctions

DISPUTES about where to decide a claim often become more complex and costly than deciding the claim itself. These disputes matter to commercial parties because where you sue may dramatically affect the final outcome of the claim.

Jurisdictional disputes frequently arise when one party commences proceedings in a foreign jurisdiction when it has agreed to refer disputes to arbitration or the high court in London. In such cases an anti-suit injunction restraining the defendant from commencing or continuing proceedings in another jurisdiction is the most effective remedy available. It is a very powerful remedy because the English court is, in practical terms, preventing the foreign proceedings from going ahead. However, most civil law systems have no comparable remedy, and view it with distrust.

Availability of anti-suit injunctions in the English courts

In maritime disputes, anti-suit injunctions are most commonly available where parties have agreed to refer disputes to arbitration or the high court in London but then, in breach of that agreement, one party commences proceedings elsewhere. Motives for such forum shopping vary.

Choice may be based on simple preference for litigating at "home", or in a more favourable limitation regime, or maybe a desire to use "public policy" arguments that might fall on deaf ears before a London tribunal. In recent years the English courts have been quite willing to grant anti-suit injunctions to restrain contract-breakers bringing such proceedings on "the clear and simple ground that the defendant has promised not to bring them". In a case involving New York proceedings, the House of Lords endorsed this approach, saying that the contractual right to enforce a contract should only be displaced by strong reasons being shown why an injunction should not be granted.

Anti-suit injunctions are also available where there has been no breach of an arbitration or jurisdiction agreement. However, in such cases the person applying for the injunction must show that the foreign proceedings are "unconscionable" or "vexatious and oppressive". These are very broad terms but would include situations where a party tried to re-litigate a matter that had already been tried, or commenced proceedings in bad faith solely for the purpose of oppressing another party.

An injunction is an exceptional remedy in English law. However, the English courts have generally taken the view that the remedy is justified in the case of wrongful proceedings since damages will be neither adequate nor appropriate to compensate for the wrong.

Further points to consider if applying for an anti-suit injunction

The power to grant an anti-suit injunction is entirely within the court's discretion. This means that the judge can take into account any relevant factors. An important consideration is delay. In Toepfer v Molino Boschi (1996) a dispute arose out of the sale of soya meal incorporating a London arbitration clause. The buyers made a claim in the Italian courts and sellers disputed the court's jurisdiction, but it was only seven years later that they applied in London for an anti-suit injunction. The court decided that the sellers had left it too long.

The existence of other proceedings and other parties may also be reasons for refusing to grant an injunction. In Bouygues v Caspian Shipping (1998) the Court of Appeal refused to maintain an injunction restraining South African proceedings, even though the proceedings were in breach of an exclusive jurisdiction clause. The main factor influencing the decision was that very similar proceedings would continue in South Africa in any event involving two other parties and the injunction would not ensure that all related disputes would be resolved before a single tribunal.

If the foreign proceedings are already in progress, it will usually be prudent to challenge the court's jurisdiction in that court, typically asking the foreign court to decline jurisdiction on grounds of the presence of an arbitration or jurisdiction clause. However, it is not necessary to make such a challenge in the foreign court before applying for an injunction. Indeed, in The Angelic Grace, the Court of Appeal suggested that it might be preferable to ask for an injunction before the foreign court has ruled on its jurisdiction.

An important limitation on the court's power is that it will not grant an anti-suit injunction unless the defendant is subject to the jurisdiction of the English courts. This will usually be satisfied by establishing that there is a London arbitration or jurisdiction clause or that the contract is governed by English law. In addition, the defendant must be "amenable" to the court's jurisdiction. The precise meaning of this is unclear but in practice it means that the injunction must be enforceable against the defendant. This is an important practical consideration as obtaining an injunction that will be ignored would be a hollow victory.

Anti-suit injunctions and proceedings in EU states

EU rules may have an important impact on the availability of anti-suit injunctions to restrain proceedings commenced in EU member states. All EU states except Denmark are party to the Brussels I Regulation. This is based on the 1968 Brussels Convention, an international treaty under which the member states agreed on uniform rules to allocate jurisdiction in civil and commercial disputes.

An EU regulation takes direct effect within the courts of the EU and can also be amended more easily than an international treaty. The prime objective of the regulation is to facilitate trade within the EU by making it easier to sue parties from other member states. Similar rules are set out in the Lugano Convention between EU member states and Poland, Norway, Switzerland and Iceland. Thus the European rules have a wide application.

Very strong doubts have been raised as to whether the English court's power to grant anti-suit injunctions is compatible with the Brussels Convention scheme for allocating jurisdiction. These have been voiced by the English Court of Appeal and also by lawyers within civil law systems who tend to regard anti-suit injunctions as an unjustified intrusion on another court's jurisdiction.

The principal objection is that anti-suit injunctions conflict with the regulation's aims to achieve highly predictable and uniform rules of jurisdiction throughout the EU. The conflict arises because anti-suit injunctions are discretionary and are only available from an English court.

The further complaint is that the English court is perceived to be interfering with the foreign court's decision on its own jurisdiction, whereas EU rules do not allow one court to review another court's jurisdiction. English judges have tried to answer this by saying that the injunction is only aimed at the wrongful defendant and is not directed at the foreign court. This is too legalistic, as the practical result of the injunction is to prevent the foreign court from deciding whether to assume jurisdiction.

Whether anti-suit injunctions are compatible with the Brussels Convention is due to be decided by the European Court of Justice in a case involving an injunction restraining Spanish proceedings pursued in bad faith. The case is about abusive proceedings and the decision may not directly deal with injunctions to restrain proceedings pursued in breach of an arbitration or jurisdiction clause. However, it certainly raises the question of whether anti-suit injunctions are acceptable in principle under the European regime. Many months may pass before the European Court produces a decision, but it will certainly be of interest.

The question of compatibility of anti-suit injunctions restraining proceedings pursued in breach of an arbitration agreement will certainly require a further ruling from the European Court. This issue raises a separate argument because the convention expressly excludes arbitration from its scope. It can therefore be argued that anti-suit injunctions granted to enforce an arbitration agreement are untouched by the convention, and also the regulation.

Aikens J took this view in a well-reasoned judgment in The Ivan Zagubanski. However, the matter settled before reaching the Court of Appeal. Currently, the English courts continue to grant such injunctions but the question of compatibility can only be conclusively decided by the European Court in Luxembourg.

Conclusion

Anti-suit injunctions are a very useful remedy in jurisdictional disputes because they literally stop the defendant continuing the foreign proceedings. The law in this area is constantly developing, but anti-suit injunctions clearly remain available in cases where a party has commenced proceedings outside the EU in breach of an arbitration or exclusive jurisdiction agreement. Much more difficult issues arise where the proceedings in question are in the EU since the common law remedy may conflict with the European rules on jurisdiction. The question is currently being considered by the European Court of Justice. Watch this space!