Cypriot Case Of NDK KO'D By English Commercial Court: The Fiona Trust Principle Prevails Once Again

• Published date: 04 August 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Contracts and Commercial Law, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Craig Tevendale and Jake Savile-Tucker

In NDK Ltd v HUO Holding Ltd and another [2022] EWHC 1682 (Comm), the English Commercial Court rejected a section 67 challenge brought by NDK in respect of an LCIA award which had granted an anti-suit injunction blocking proceedings commenced in the Cypriot courts.

What was the background?

The dispute arose out of a Russian mining joint venture between three groups of investors including NDK, which held 75% of shares in the Cypriot SPV. The investors were party to a Shareholders' Agreement (the "SHA") (which contained an LCIA arbitration clause), and as shareholders of the Cypriot company, they were also bound by the company's Articles of Association (which had no jurisdiction clause). Both the SHA and Articles of Association gave shareholders pre-emption rights over the other shares. The relationship between the joint venturers broke down and a number of disputes arose. NDK initiated proceedings in Cyprus against the other two investors (the "Defendants") who were alleged to have sold their shares to a third party in breach of the pre-emption rights. The Defendants obtained an award from the LCIA tribunal granting an anti-suit injunction. NDK subsequently applied to set aside the award under s.67 of the Arbitration Act 1996 for want of substantive jurisdiction. The challenge was made on the basis that the proceedings were outside the scope of the arbitration and not arbitrable.

Does an award granting anti-suit relief fall outside of s.67?

The Defendants' first submission was that these matters did not concern the "substantive jurisdiction" of the tribunal and therefore fell outside of the scope of s.67. They argued that as there was no dispute that the parties had entered into an arbitration agreement, or that an LCIA tribunal had jurisdiction to grant relief for breaches of that agreement, the Tribunal's decision to grant anti-suit relief in respect of proceedings in another forum was simply the exercise of its jurisdiction to determine whether there was a breach of the arbitration agreement. Therefore, the decision was not susceptible to jurisdictional challenge. They drew an analogy with a decision by a Tribunal that there had been a breach of a framework contract to which the arbitration agreement was ancillary, in which case the decision would not be reviewable on the merits.

The Commercial Court rejected this argument, noting that a decision as to the scope of the arbitration agreement and whether it extends to a particular dispute, falls within...