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Anti-suit injunctions: positive news for arbitral tribunals in the EU
Practical Law UK Articles 3-616-6200 (Approx. 4 pages)
Anti-suit injunctions: positive news for arbitral tribunals in the EU
by Julianne Hughes-Jennett and Sarah Baddeley, Hogan Lovells International LLP
| Published on 25 Jun 2015 • European Union, United Kingdom |
The European Court of Justice's eagerly awaited judgment in "Gazprom" OAO has confirmed that the Brussels Regulation (44/2001/EC) does not apply to an arbitral award that prohibits court proceedings in another EU member state. However, this is by no means the end of the story for questions over anti-suit injunctions in the EU.
The European Court of Justice's (ECJ) eagerly awaited judgment in "Gazprom" OAO confirms that the Brussels Regulation (44/2001/EC) does not apply to an arbitral award that prohibits court proceedings in another EU member state (a so-called anti-suit injunction) (C-536/13). Instead, anti-suit injunctions issued by arbitral tribunals are governed by national and international law including, where applicable, the New York Convention.
The decision brings welcome clarity to the specific question of the compatibility with the Brussels Regulation of anti-suit injunctions issued by arbitral tribunals; however it is by no means the end of the story for questions over anti-suit injunctions in the EU.
Some had hoped that the ECJ would use Gazprom as an opportunity to address the effect of the recast Brussels Regulation (1215/2012/EU) on its decision in West Tankers (Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc C-185/07) (see box "West Tankers explained"). However, given the facts at issue in Gazprom, it is perhaps unsurprising that the ECJ was reluctant to do this. Instead, further decisions will be necessary to address the issue of anti-suit injunctions issued by member state courts and to bring true clarity to this important area of law.
The ECJ reference
Gazprom OAO and the Ministry of Energy of Lithuania were party to a shareholders' agreement that contained an arbitration clause providing for arbitration in Stockholm, Sweden. Following a dispute, the Ministry of Energy brought an action in the Lithuanian courts, which Gazprom argued breached the arbitration clause. The arbitral tribunal ordered the Ministry of Energy to withdraw some of its claims.
Gazprom then brought an action before the Lithuanian courts to recognise and enforce the arbitral award. In response, the Ministry of Energy argued that the arbitral award constituted an anti-suit injunction and its recognition would be contrary to the Brussels Regulation as interpreted in West Tankers.
The Lithuanian court asked the ECJ whether a member state court can refuse to recognise an arbitral award or an anti-suit injunction issued by an arbitral tribunal on the basis that it would restrict the court's right to decide on its own jurisdiction under the Brussels Regulation.
The AG's opinion
In his opinion, the Advocate General (AG) acknowledged the strong parallels between West Tankers and Gazprom on the basis that, in Gazprom, the London arbitral award undermined the Lithuanian court's ability to determine its own jurisdiction (see News brief "Anti-suit injunctions: the beginning of the end for West Tankers?").
However, he then went on to consider the recast Brussels Regulation. He said that, even though member state courts were not required to apply the recast Brussels Regulation until 10 January 2015, and then only to proceedings or other relevant matters instituted on or after that date, recital 12 of the recast Brussels Regulation (recital 12) explains how the arbitration exception in Article 1(2)(d) of the Brussels Regulation must be, and always should have been, interpreted (see feature article "The recast Brussels Regulation: implications for commercial parties").
On the basis of the wording in recital 12, the AG considered that if West Tankers had been decided under the recast Brussels Regulation, the anti-suit injunction would not have been held incompatible with that regulation. Therefore, both arbitral tribunals and member state courts should now be able to issue effective anti-suit injunctions within the EU.
Despite his fairly radical approach, the AG said that if the ECJ decided not to take into account the recast Brussels Regulation, or did not agree with his reasoning, Gazprom could instead be distinguished from West Tankers on the basis that it concerned an anti-suit injunction issued by an arbitral tribunal, rather than a member state court.
The ECJ's judgment
The AG's opinion was widely perceived as being an indication that the ECJ might use Gazprom as an opportunity to revisit West Tankers. However, the ECJ has taken a much more cautious approach.
The ECJ declined to take into account the recast Brussels Regulation and instead restricted its reasoning to the Brussels Regulation. It held that, unlike in West Tankers, the issue in Gazprom was not whether an anti-suit injunction issued by a member state court is compatible with the Brussels Regulation but, rather, whether it would be compatible with the Brussels Regulation for a member state court to recognise and enforce an award issued by an arbitral tribunal.
The ECJ concluded that, as arbitration is excluded from the scope of the Brussels Regulation by Article 1(2)(d), the question of whether a member state court is required to recognise and enforce an arbitral award does not fall within its scope. Instead, the recognition and enforcement of an injunction issued by an arbitral tribunal is governed by the national and international law of the member state where enforcement and recognition is sought including, where applicable, the New York Convention.
In support of its conclusion, the ECJ noted the following points:
- The principle of mutual trust, which applies between member state courts and which underpins the Brussels Regulation, does not apply to arbitral tribunals.
- The issue of an injunction by an arbitral tribunal does not bar a party's right to judicial protection where it believes that the arbitration agreement is void, inoperative or incapable of being performed. Instead, it would be for that party to contest the application for recognition and enforcement of the arbitral award in the relevant member state court.
- A party's failure to comply with an arbitral award, such as the one at issue in Gazprom, is not capable of resulting in penalties being imposed by the court of another member state. So the legal effects of an award made by an arbitral tribunal can be distinguished from those of an anti-suit injunction made by a member state court.
Practical implications
The decision brings clarity to the issue of anti-suit injunctions issued by arbitral tribunals. However, many practitioners will be disappointed that the ECJ, unlike the AG, did not address the effect of the recast Brussels Regulation; in particular, the correct interpretation of new recital 12.
This is perhaps unsurprising, given the fact that Gazprom concerned the recognition and enforcement of an arbitral award, which is governed by a distinct legal regime. However, the question of whether the recast Brussels Regulation has reversed West Tankers remains. It therefore seems likely that there will be another reference to the ECJ on this issue in the near future.
Julianne Hughes- Jennett is a partner, and Sarah Baddeley is an associate, at Hogan Lovells International LLP.
West Tankers explained
The case known as West Tankers concerned a dispute between West Tankers, Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) and Generali Assicurazione Generali SpA, following the collision of a vessel chartered by Erg Petroli Spa from West Tankers. The charterparty contained a London arbitration clause and Erg started an arbitration against West Tankers in London. Allianz and Generali brought an action against West Tankers in the Italian courts under Article 5(3) of the Brussels Regulation (44/2001/EC).
The High Court issued an anti-suit injunction restraining the Italian proceedings ([2005] EWHC 454). Allianz appealed, arguing that the anti-suit injunction deprived the Italian courts of their right to determine their own jurisdiction under the Brussels Regulation. The House of Lords made a reference to the European Court of Justice (ECJ) asking whether an anti-suit injunction in support of arbitration was consistent with the Brussels Regulation ([2007] UKHL 4).
The ECJ held that under the so-called arbitration exception in Article 1(2)(d) of the Brussels Regulation, national proceedings in support of arbitration are outside the scope of the Brussels Regulation; however, the effect that those proceedings have on other proceedings that fall within the scope of the Brussels Regulation needs to be considered (C-185/0, www.practicallaw.com/2-385-1001; see also News brief "West Tankers: end of the anti-suit in Europe?").
The ECJ then considered whether the Italian proceedings fell within the scope of the Brussels Regulation. It held that if the subject matter of the dispute comes within the scope of the Brussels Regulation, the fact that there is a preliminary issue concerning the validity of an arbitration agreement does not mean that the proceedings are caught by the arbitration exception. The anti-suit injunction was therefore held to be incompatible with the Brussels Regulation as it prevented the Italian courts from ruling on their own jurisdiction.