English courts consider anti-suit injunctions in aid of Paris-seated arbitrations

Tom Price
Gowling WLG, Birmingham

Patrick Fox
Gowling WLG, London¹

Across a series of anonymised decisions issued within days of one another, the English Commercial Court (on three occasions) and the Court of Appeal (on one occasion, overturning a decision from the Commercial Court) have considered the availability of anti-suit injunctions (ASIs) in support of Paris-seated arbitrations where court proceedings were commenced in Russia.  

Stay of proceedings & anti-suit injunctive relief

Where a party commences court proceedings in England:²

• against a party to an arbitration agreement providing for arbitration seated in England or abroad;³ and
• in respect of a matter falling within the scope of that agreement, 

the party against whom the court proceedings are commenced may apply for a stay of the court proceedings under section 9 of the Arbitration Act 1996. Section 9 is a mandatory provision which embodies Article II(3) of the 1958 New York Convention (NYC). It provides that the English courts must stay proceedings unless they are satisfied that the relevant arbitration agreement 'is null and void, inoperative, or incapable of being performed'.

The position is similar under French law (France being another NYC Contracting State) where Article 1448 of the Code of Civil Procedure provides that:

'When a dispute subject to an arbitration agreement is brought before a court, such court shall decline jurisdiction, except if an arbitral tribunal has not yet been seized of the dispute and if the arbitration agreement is manifestly void or manifestly not applicable.'

However, where a party commences court proceedings in a foreign jurisdiction:

• against a party to an arbitration agreement providing for arbitration seated in England;  and
• in respect of a matter falling within the scope of that agreement,

the party against whom the court proceedings are commenced may apply for an ASI under section 37 of the Senior Courts Act 1981.⁴ An ASI is an order from the court issued to one or more parties to stop them commencing or pursuing proceedings before a foreign court.  As compared with a stay of proceedings, an ASI is perhaps best understood as the opposite side of the same coin.⁵ Section 37 makes clear that injunctive relief (in the form of an ASI or otherwise, and whether interim or final) is a discretionary remedy that may be ordered 'where it appears to the court just and convenient to do so'.

Where an ASI would support arbitration seated in England, English case law suggests that a prompt application for an ASI will be granted as a matter of course unless there are exceptional circumstances.⁶ 

Here the position under French law is different, as French courts notably will not issue ASIs. Nevertheless, arbitral tribunals seated in France have been known to issue ASIs.

What did the English courts decide?

As noted above, the cases recently decided by the English courts did not fit into either category whereby either a stay of English proceedings or an ASI in respect of foreign proceedings (as applicable) would typically be the expected outcome. The novelty of the cases was that they were only the second, third and fourth known occasions⁷ on which a third jurisdiction was brought into the equation. Thus the ASI applications were made to the English courts in circumstances where:

• a party had commenced court proceedings in foreign jurisdiction 'A';
• against a party to an arbitration agreement providing for arbitration seated in a foreign jurisdiction 'B'; and
• the parties' underlying contract was governed by English law (jurisdiction 'C').

In each case, the court proceedings in question were commenced in Russia in contravention of an arbitration agreement providing for Paris-seated ICC arbitration.⁸

Case 1: SQD v QYP [2023] EWHC 2145 (Comm) 

In SQD v QYP, an anonymised judgment delivered on 21 August 2023, Bright J in the Commercial Court refused to grant the claimant's application for an interim ASI on the basis that: 

• England was 'not the proper forum' (para 94), the arbitration proceedings already being underway in France;
• granting the ASI 'would be inconsistent with the approach of the courts of the seat of the arbitration' (para 95), ie because the French courts will not grant ASIs; and
• the English courts should have deference to the parties' objective choice of Paris as the seat of the arbitration.

On 7 September 2023, Bright J's decision was overturned on appeal. As summarised by Essex Court Chambers (who act for the claimant in the appeal), the Court of Appeal found that England was the proper forum in circumstances where the French courts would not themselves grant an ASI, but would nevertheless recognise an ASI ordered by the English courts. The Court of Appeal emphasised that parties must be held to their contractual bargains, in this case, their agreement to arbitrate disputes. QYP's breach of the arbitration agreement by commencing court proceedings in Russia satisfied the court that it was just and convenient to grant the ASI. 

Case 2: G v R (In an Arbitration Claim) [2023] EWHC 2365 (Comm)

In a ruling dated 24 August 2023, as anonymised and summarised by Essex Court Chambers (who act for the claimant), Knowles J granted the German claimant company's application for an interim ASI on the basis that, in accordance with the NYC, there was a 'shared obligation' as between the English, French and Russian courts to hold parties to their arbitration agreements. Distinguishing SQD v QYP (which was subsequently overturned), Knowles J further held that, 'both the English court and the French court are likely to have the same objective of seeking to make the bargain between the parties work where that bargain has been made'. 

However, in a judgment dated 22 September 2023, Teare J in the Commercial Court dismissed the claimant's application for a final ASI on the basis that:

• following the UK Supreme Court's guidance in Enka v Chubb,⁹ the proper law of the arbitration agreement was French law (as an exception to the principle that, absent express provision, the governing law of the contract will also govern the arbitration agreement); and
• England was not the proper forum 'in which to enforce an arbitration agreement' in circumstances where '[s]ubstantial justice can be done in the arbitration in France, notwithstanding that coercive relief is not available in France' (para 47). 

Case 3

In an ex tempore judgment dated 31 August 2023, as anonymised and summarised by Essex Court Chambers (who act for the injunction claimant), Bryan J granted an ASI to prevent the claimant's contractual counterparty from continuing civil proceedings in Russia's Arbitrazh Court. 

Bryan J's decision was reportedly based on, inter alia: 

• the Russian proceedings having been brought in breach of the parties' arbitration agreement;
• the English courts having jurisdiction over the defendant because the contract containing the arbitration agreement is governed by English law; and
• the fact that no other forum could protect the claimant's rights (the French courts being unable to grant an ASI and the Paris-seated arbitral tribunal not being constituted). 

Comment

It is unlikely that the above decisions will conclude the English courts' say on the availability of ASIs in support of foreign-seated arbitration. The position remains relatively unsettled, as of course does the broader position in relation to arbitrations seated other than in Paris, and further development and clarification will be welcomed. For now, the signal from the English courts appears no clearer than this: where English law is found to be the proper law governing the arbitration agreement, ASI relief may be available irrespective of whether arbitration proceedings are on foot, notwithstanding that the seat is not in England, and notwithstanding that such relief may not available from the courts at the seat. 

Insofar as the English courts have been able to reach alignment on this issue, their focus appears to have been on upholding the parties' arbitration agreement as the ground on which it is 'just and convenient' to grant an ASI under section 37 of the Senior Courts Act 1981. Central to that appears to be an NYC Contracting State court's obligation to refer the parties to arbitration unless it finds the arbitration agreement to be, at minimum, 'null and void, inoperative, or incapable of being performed'.¹⁰  Although that is a different test, where a party breaches an English law governed arbitration agreement by commencing court proceedings in a foreign NYC Contracting State and that State fails or refuses to refer the parties to arbitration, the English courts' grant of an ASI is simply 'the opposite side' of the stay that the foreign court ought itself to have granted. In that context, ASIs in support of arbitration are plainly in fellow NYC Contracting States' interests, not least as a matter of international comity.   

For those drafting arbitration agreements, the English courts' decisions underline the importance of:

Specifying the governing law of the arbitration agreement

• In Cases 1 and 3 above, and further to the decision of the UK Supreme Court in Enka v Chubb, English law as the governing law of the contracts was found also to apply as the governing law of the arbitration agreements. However, as Bright J noted at first instance in SQD v QYP, 'a French court might take a different view about the law of the arbitration agreement' (para. 17(ii)). Teare J reached much the same conclusion in G v R, finding that French law governed the arbitration agreement (paras 24-25). Therefore, parties that may ultimately look to the English courts for ASIs or other relief might wish to consider expressly specifying English law as the governing law of their arbitration agreements.  
• Moreover, on 6 September 2023, the Law Commission published its Final report containing its recommendations to reform the Arbitration Act 1996. The Draft Arbitration Bill appended to the Final report proposes that, absent an express choice as to the governing law of the arbitration agreement, the governing law shall be 'the law of the seat of the arbitration in question'. Had this provision been in force at the time of the above decisions, the English courts in Cases 1 and 3 would have been constrained to find that the arbitration agreements were governed by French law, in which case it is difficult to see how any of the ASIs could have been granted.

Ensuring that the governing law of the arbitration agreement allows ASIs 

• This will be of particular concern for those contracting with Russian entities who – notwithstanding a valid arbitration agreement – may nevertheless seek to assert the exclusive jurisdiction of Russian courts as a matter of Russian law, apparently in contravention of the NYC. In the context of this 'striking development',¹¹ a contracting party's rights may be better protected where the governing law of the arbitration agreement invoked to restrain breaches of that agreement permits ASIs. As the final hearing in G v R has shown, those seeking ASIs from the English courts may still need to show that England is the proper forum and that substantial justice cannot be done at the arbitral seat.