Background

In 2017, the defendant bank advanced approximately US$ 500 million to a group of companies of which the claimants formed part, by way of three loan agreements governed by Russian law and subject to the jurisdiction of the Moscow Arbitrazh Court. These loans were secured by share pledge agreements, all of which contained arbitration agreements subject to Cypriot law and providing for LCIA arbitration, seated in London.

However, a number of separate transactions took place in August 2017 which replaced the bank's short-term loans with long-term unsecured bonds, and terminated both the original loan agreements and the entirety of the share pledge agreements. The executed share pledge termination agreements were subject to Cypriot law and each contained an arbitration clause that incorporated the arbitration provisions of the, now (allegedly) terminated, share pledges. The bank alleged the alteration of the new transactions amounted to a fraud against it.

By February 2018 proceedings were on-foot in three jurisdictions: Russia (instituted by the bank), Cyprus (instituted by the bank and the two of the three claimants, respectively) and England & Wales in respect of 10 separate arbitrations commenced by the claimants at the LCIA (one under each of the share pledge agreements and share pledge termination agreements; at the time of the application, the same tribunal had been constituted in each of the arbitrations).

The application

The claimants filed their application in the English Commercial Court in February 2018, seeking an injunction to restrain the further pursuit of proceedings against them in Russia and Cyprus. The claimants asserted that such proceedings were in breach of the arbitration clauses in both the share pledges and the share pledge termination agreements.

In Nori Holding, Mr Justice Males considered three issues:

1. How the court should proceed when an application for similar relief can be made to the arbitrators;

2. The impact of insolvency law issues on the arbitration and the arbitrability of such issues; and

3. The impact of the decision in West Tankers1 on an EU Member State court's ability to issue an anti-suit injunction against proceedings in another Member State.

1. Anti-suit injunctions can be issued after the tribunal has been formed

The bank argued that the court could not issue an anti-suit injunction after a tribunal had been formed. It relied on an extract from the well-known commentary, Merkin & Flannery, The Arbitration Act 1996, which stated that the court ‘should do no more than "hold the ring"’ if 'the tribunal is able in some way to act effectively’,2 in accordance with the English Arbitration Act, 1996, section 44.

The English courts' jurisdiction to issue anti-suit injunctions has long been accepted in English law.3 This jurisdiction is grounded in the court's general power to grant injunctions in the Senior Courts Act 1981 (‘SCA’), section 37(1) which provides that 'the High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so'.

When the 1996 Act entered into force, some argued that the court's jurisdiction to grant such relief in the context of arbitration proceedings was grounded in section 44 of the same, which provides:

Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceeding.4

One of the 'matters below' being 'the granting of an interim injunction'.5

The same section also restricts the court's ability to intervene when a tribunal has been constituted:

In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.6

The bank relied on this argument to assert that, once constituted, it was for the arbitral tribunal to issue anti-suit relief.

While the Court agreed with the bank's analysis that, as a matter of English law, arbitrators can grant anti-suit relief, it disagreed with the conclusion that this precluded it from granting anti-suit relief.

Males J relied on the Supreme Court's judgment in AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC,7in which it was stated that the source of the court's power to grant an injunction restraining foreign proceedings in breach of an arbitration agreement was in fact grounded in SCA 1981 since:

Such an injunction is not "for the purposes of and in relation to arbitral proceedings", but for the purposes of and in relation to the negative promise contained in the arbitration agreement not to bring foreign proceedings, which applies and is enforceable regardless of whether or not arbitral proceedings are on foot or proposed.

Males J held that 'the availability of anti-suit relief from the arbitrators is not a reason for the court to refuse an injunction'.

This decision is perhaps unsurprising since English courts are reluctant to restrict their power to grant anti-suit injunctions. Indeed, the courts see this power as necessary to afford protection to arbitration. As Lord Mance stated in AES, and as Males J cited with approval in Nori Holding:

[A] regime under which the English court could no longer enforce the negative rights of a party to a London arbitration agreement by injunctive relief restraining foreign proceedings would have been, and would have been seen, as a radical diminution of the protection afforded by English law to parties to such an arbitration agreement. It would have aroused considerable interest and, no doubt, concern.8

In considering this statement, it is important to look forward to whether an injunction ordered by a tribunal would be enforced and whether this renders court intervention necessary.

Where the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows for recognition and enforcement of arbitrators' anti-suit relief, the court's intervention should not be necessary. This is the case when the anti-suit injunction is granted in a final or partial award, which is possible as a matter of English law.9 In such a situation, the anti-suit relief will be effective, since the party that obtained it can enforce it in all signatory jurisdictions of the New York Convention. In this context, one could argue that the court's jurisdiction is superfluous.

However, as noted by Males J,10 arbitral tribunals do not always grant such relief on a final basis. If the parties agree that the arbitrators are able to grant such relief on a provisional basis, as they do when they adopt the LCIA rules (without amendment), such a provisional order would not be capable of enforcement under the New York Convention. In such circumstances, the parties must be afforded the opportunity to obtain such relief from national courts.

2. Arbitrability of issues of insolvency

The bank also resisted the application on the basis that the Russian proceedings were not arbitrable, as a matter of Cypriot law and/or Russian law. The bank argued its claims pursued in Russia were made in the context of insolvency and therefore fell within the exclusive jurisdiction of the Moscow Arbitrazh Court.

However, relying on the English Court of Appeal decision in Fulham Football Club (1987) Ltd v Richards,11 Males J considered that there was no ground for restricting the type of dispute that could be subject to arbitration, save where a statutory restriction or public policy required it. The arbitral tribunal was able to rule on the question of whether the transaction alleged to have been procured by fraud was to be avoided. The fact that the bank decided to put a label on it which allegedly brought it within the purview of Russian insolvency made no difference.

3. Reaffirmation of the West Tankers principles

In its judgment, the Court reaffirmed the principles laid down by the European Court of Justice (CJEU) in West Tankers, which held that EU national courts cannot issue anti-suit injunction binding the courts of other EU Member States.

The Brussels I Regulation, under which regime West Tankers was decided, has since been replaced by Brussels I Recast, which removed arbitration from its scope of application.12 The claimants argued that this was an attempt to legislate against the CJEU's decision and allow anti-suit injunctions in support of arbitration within the EU.

The claimants relied on the opinion of Advocate General Wathelet in Gazprom OAO v Lietuvos Respublika, 13 where he expressed the view that Brussels I Recast 'also excludes ancillary proceedings, which in [his] view covers anti-suit injunctions issued by national courts … supporting … the arbitration'. 14

However, Males J determined that there had been no departure from the West Tankers principles, calling Wathelet's opinion 'fundamentally flawed', and noting that the CJEU confirmed its approach to anti-suit injunctions in Gazprom.

Accordingly, Males J refused to grant anti-suit relief in relation to the Cypriot proceedings. This, of course, did not impact the application for an injunction in respect of the Russian proceedings (which was granted).

Concluding comment

Nori Holding clarifies and interprets the arbitration-related provisions of Brussels I Recast. In particular, Males J unequivocally confirmed that the principles set down in West Tankers still apply following Brussels I Recast. The position remains that the courts of EU Member States may not issue intra-EU anti-suit injunctions, but that arbitral tribunals are not similarly caught within its remit. Within England & Wales, at least, in circumstances where arbitrators can issue anti-suit relief on a final basis, Nori Holding makes clear that parties may circumvent the West Tankers principles by seeking relief from the tribunal, rather than the court, and then enforce under the New York Convention regime.15

It remains to be seen whether the courts of other EU Member States will, in fact, choose to follow the alternative view of Brussels I Recast put forward by Advocate General Wathelet (causing a potential mismatch between community judicial systems on the issue of intra-EU anti-suit injunctions). While Brexit may perhaps bring about a change in the position of the English courts to issuing anti-suit injunctions in respect of proceedings within the EU, the position for now is clear.


1
Case C‑185/07, Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc. ECLI:EU:C:2009:69 (West Tankers).

2
Nori Holding, 32.

3
M Breana Obesi & C Nymobi, 'Recognition of antisuit injunctions in civil and common law jurisdictions' (2015) 36 (11) European Competition Law Review 473.

4
The 1996 Act, section 44(1).

5
The 1996 Act, section 44(2).

6
The 1996 Act, section 44(5).

7
[2013] UKSC 35, 48. (AES).

8
AES, at 58.

9
See Cooke's J decision in Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm) at 24 to 30.

10
Ibid, at 35.

11
Fulham Football Club (1987) Ltd v Richards [2011] EWCA Civ 855.

12
See Recital 12, Regulation (Eu) No 1215/2012 Of The European Parliament And Of The Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast), available at https://eur-lex.europa.eu/eli/reg/2012/1215/oj.

13
Case C-536/13, ECLI:EU:C:2015:316 (Gazprom).

14
Gazprom, Opinion of the Advocate General, 138.

15
Nori Holding, 83.