Where foreign proceedings are brought in breach of an arbitration clause, the court will “ordinarily” grant an anti-suit injunction to restrain those proceedings unless there are “strong reasons” not to do so. The burden of proof is on the party in breach of the arbitration clause to show that there are strong reasons why an injunction should not be granted. The court is not obliged to exercise any particular caution before granting the injunction.
Where a defendant is itself seeking (or has obtained) an anti-suit injunction, and thus the court is asked to grant an anti-anti-suit injunction, caution is called for. However, where the foreign proceedings are brought in breach of an exclusive jurisdiction or arbitration clause, anti-anti-suit injunctions are frequently granted.
The ICA arbitration clause
The fight to protect the sanctity of a commodities contract was played out in the Rolls Buildings recently in the Commercial Court before Hamblen J, in Ecom Agroindustrial Corp Ltd v Mosharaf Composite Textile Mill Ltd  EWHC 1276 (Comm);  All ER (D) 294 (May). When a contract between the buyer and seller of raw cotton provided for all disputes to be resolved by arbitration, and the buyer then obtained an anti-suit injunction in Bangladesh preventing the seller from pursuing any claim regarding the contract, the court granted the seller an injunction (the anti-anti suit injunction), preventing the buyer from pursuing those proceedings and made a declaration that the buyer was obliged to arbitrate all disputes relating to the contract.
The claimant, Ecom claimed injunctive and declaratory relief relating to proceedings which the defendant, Mosharaf had issued in Bangladesh. Ecom had contracted for the sale of Brazilian raw cotton to Mosharaf and the “Rules” provision in the contract provided that “All disputes” not settled amicably, would be referred to arbitration under the International Cotton Association (ICA) rules. Clause 12 of the contract provided that “any dispute...shall be” settled according to the ICA rules, which themselves provided that “All disputes relating to the contract will be resolved through arbitration in accordance with the Bylaws of the International Cotton Association Limited.” When the defendant had failed to open a letter of credit as he was supposed to, pursuant to the contract, and settlement was unsuccessful, Ecom commenced arbitration proceedings. Rather than taking part in the arbitration, the defendant issued proceedings in Bangladesh in January 2012. It sought a declaration that the contract was void, had no binding effect and/or that the contract was frustrated as it was impossible to set up a letter of credit. It also sought a permanent injunction preventing the claimant from pursuing any claim in proceedings relating to the contract before the ICA or elsewhere. The defendant also obtained an interim anti-suit injunction to restrain the claimant from pursuing any claim regarding the contract. In June 2012, the claimant filed an appeal in Bangladesh against the interim injunction and took no further steps in the arbitration in the light of that injunction.
In January 2013, when no date was fixed for the appeal, the claimant issued proceedings in the English Commercial Court, seeking an injunction prohibiting the defendant from taking steps in the Bangladeshi proceedings, or commencing further proceedings relating to the contract, and ordering the defendant to discontinue those proceedings. It also sought declarations that the defendant was obliged to arbitrate all disputes relating to the contract, was obliged to bring any challenge to the tribunal’s substantive jurisdiction or to the validity of the arbitration agreement before the tribunal or the English Commercial Court, and that the Bangladeshi proceedings constituted a breach of
High Court declaration
The claimant’s applications were granted and the Commercial Court held that the starting point was the “Rules” provision in the contract. As a matter of the natural and ordinary meaning of the wide words used, the underlying dispute between the parties clearly came within the terms of the arbitration agreement. Further, Mosharaf’s apparent contention, within the Bangladeshi proceedings, that the arbitration clause did not apply because the contract had been frustrated or was otherwise invalid, was wrong as a matter of English law. It was clear that the underlying dispute was subject to the arbitration agreement in the contract, and the commencement of the Bangladeshi proceedings amounted to a breach of contract.
There was no good reason in English law not to grant an injunction; to suggest that the arguments put forward by Mosharaf in Bangladesh raised principles of Bangladeshi law and public policy, where Mosharaf had agreed that all disputes under the contract should be submitted to arbitration, did not suffice. Further, any delay in Ecom’s instant application was explained by it having thought that its appeal of the interim injunction would lead to the matter being dealt with more efficiently in Bangladesh. Ecom had not submitted to the jurisdiction in Bangladesh by filing its appeal because the basis of the appeal was that the injunction should never have been granted, since the dispute was manifestly governed by the arbitration clause. Moreover, where a defendant was bound by such a clause, it was an egregious breach of contract for him not only to commence proceedings in a non-contractual jurisdiction, but to obtain an injunction from that forum to prevent the claimant from vindicating his rights under the arbitration clause, SabahShipyard (Pakistan) Limited v Islamic Republic of Pakistan  All ER (D) 201 (Nov) applied.
The question of whether to grant the declarations was a matter of the court’s discretion. There were good and sufficient reasons to do so and no strong reasons not to grant an anti-suit injunction. The declarations would assist both Ecom, in enforcing any award ultimately obtained, and the Bangladeshi court, should Mosharaf not obey the injunction.
The crisp summary of the law relating to the circumstances in which the Commercial Court will be persuaded to enforce an arbitration clause, by means of an anti-anti suit injunction by Hamlen J, is welcome, and may be of use by practitioners. Furthermore, the willingness of the Commercial Court to grant such relief was an entirely natural and logical result of its deferential approach to arbitral proceedings, and positing of London as the foremost venue for International commercial arbitration. The Commercial Court did not require evidence that Mosharaf’s contentions were correct or otherwise in Bangladeshi law, and was unconcerned with this. It simply held the defendant to the terms of the arbitration clause.
The Commercial Court also confirmed that the ICA arbitration clause is sufficiently widely drawn to cover all disputes, which will bring comfort to those using its standard form contracts. Finally, the Commercial Court again reminded parties that challenges to the validity of arbitration clauses are separate to challenges to the validity of the contract as a whole, and should be raised before the arbitral tribunal as opposed to being ignored by the launch of independent proceedings. This is the doctrine of the separability of an arbitration agreement and enshrined in s 7 of the Arbitration Act 1996.
This article was first published in the New Law Journal. See newlawjournal.co.uk
Andrew Otchie, 12 Old Square