Introduction
Facts
First instance decision
Court of Appeal decision
Supreme Court decision
Comment
The Supreme Court judgment in Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP ([2013] UKSC 35) clarifies the powers of the court to grant anti-suit injunctions against proceedings commenced overseas in breach of an arbitration agreement, as well as the legal basis of such powers.
Under Section 44 of the Arbitration Act 1996, the court may grant interim injunctive relief in certain circumstances. Under Section 37 of the Senior Courts Act 1981, the court also has jurisdiction to grant injunctions where foreign proceedings have been brought in breach of an arbitration agreement. Following the decision of the European Court of Justice in Allianz SpA v West Tankers Inc (Case C-185/07), the English courts cannot grant an anti-suit injunction against foreign proceedings if they were commenced in a jurisdiction within the regime of the EU Brussels Regulation (44/2001) or the Lugano Convention.
The issue that the court had to consider in this appeal was the power of the English court to prevent the commencement or continuation of foreign proceedings brought in a jurisdiction outside the European Union when a valid arbitration agreement exists.
The court held that Section 37 of the Senior Courts Act 1981 was the basis for this power, rather than Section 44 of the Arbitration Act 1996. Significantly, the court also found that an anti-suit injunction is available in support of arbitration where no arbitration is on foot, or even in contemplation.
In 1997 the appellants, Ust-Kamenogorsk Hydropower Plant JSC, and the respondents, AES Ust-Kamenogorsk Hydropower Plant LLP, concluded a concession agreement that entitled AES to operate a hydroelectric plant in Kazakhstan. The concession agreement was governed by Kazakh law, but contained an arbitration agreement that both parties accepted as being governed by English law. The agreement specified that the dispute should be resolved by International Chamber of Commerce arbitration in London.
Relations between the two parties regarding the concession agreement had been unsettled for several years. In 2004 the Kazakh Supreme Court ruled that the arbitration clause within the concession agreement was invalid and in June 2009 JSC brought proceedings against AES in Kazakhstan due to an alleged failure by AES to supply information requested by JSC concerning concession assets.
AES began proceedings in the Commercial Court seeking a declaration that the arbitration agreement was valid and an interim anti-suit injunction restraining JSC from pursuing the proceedings in Kazakhstan. These requests were granted, but AES's attempt to rely on the interim injunction was rejected by the Specialist Inter-district Economic Court of East Kazakhstan Oblast and again by the East Kazakhstan Regional Court on appeal. In August 2009 the interim injunction was made permanent and was amended to specify that JSC would withdraw its request for information in Kazakhstan.
JSC challenged the English court's jurisdiction to grant such an injunction, alleging that because no arbitration proceedings had yet been commenced and AES had no intention of commencing any, the English courts had no power to grant the injunction. JSC submitted that although Section 37 of the Senior Courts Act was available as a basis on which to grant an injunction, the court could use it only in situations where Section 44 of the Arbitration Act could be applied.
The judge dismissed the challenge to the court's jurisdiction and upheld the anti-suit injunction. He accepted that the court could not issue an injunction under Section 44 of the Arbitration Act (which allows an injunction to be granted only if arbitration proceedings have commenced or are intended). However, the judge went on to find that the court had power to grant the injunction under Section 37 of the Senior Courts Act. JSC appealed the judgment.
The Court of Appeal dismissed JSC's appeal. The court recognised the limitations to the English courts' powers to order an anti-suit injunction under Section 44 of the Arbitration Act and stated that Section 37 of the Senior Courts Act should not be used as a way of circumventing these limitations. However, it held that where no arbitration proceedings had yet commenced and there was no intention to commence them, it was open to the court to rely on Section 37 of the Senior Courts Act to protect a party's rights under a valid arbitration agreement.
JSC appealed to the Supreme Court.
In a unanimous judgment, the Supreme Court dismissed JSC's appeal. Lord Mance, giving the lead judgment, placed emphasis on protecting the rights afforded to parties under an arbitration agreement. Both the right to resolve a dispute through arbitration and the right not to be sued through any other forum are created by a valid arbitration agreement, and both should be protected by the law.
The Supreme Court viewed the English courts' power to grant an anti-suit injunction protecting these rights in situations where, despite an arbitration clause, proceedings have been commenced overseas as a counterpart to their power to issue a stay of proceedings when such proceedings have been commenced in England. The court clarified that the power under Section 37 of the Senior Courts Act to injunct the commencement or continuation of overseas proceedings should not be dependent on a condition that arbitration proceedings have commenced or are intended, and that this was not inconsistent with the terms of the Arbitration Act. The Arbitration Act was not intended to provide a comprehensive set of rules for determining all jurisdictional issues in relation to arbitration and nothing in the act affected the court's inherent powers under Section 37 of the Senior Courts Act.
The court acknowledged that in some circumstances, the correct course of action would be to allow the foreign courts to recognise and enforce the arbitration clause when it is breached in their jurisdiction, but that was not the case here.
This decision makes clear that applicants wishing to apply for an anti-suit injunction where an arbitration agreement exists should apply on the basis of Section 37 of the Senior Courts Act, rather than Section 44 of the Arbitration Act.
The decision also makes it clear that in order for an anti-suit injunction to be granted in relation to foreign proceedings outside the Brussels or Lugano regimes, arbitration proceedings do not need to have been commenced, or even be in contemplation. This is of significant practical effect and reflects the importance given by the Supreme Court to the contractual rights conferred on a party when it enters into an arbitration agreement.
For further information on this topic please contact Chris Ross at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).
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