Weekly Update: A Summary Of Recent Developments In Insurance, Reinsurance And Litigation Law - 20/11

THIS WEEK'S CASELAW

AES LLP v JSC

Anti-suit injunction where no arbitral proceedings are ongoing or intended/ enforcement of foreign judgment obtained in breach of an arbitration clause

http://www.bailii.org/ew/cases/EWCA/Civ/2011/647.html

See Weekly Update 15/10 for the first instance decision in this case. The parties had entered into an agreement which was to be governed "in accordance with Kazakhstan legislation" but which contained an arbitration clause which was governed by English law. After JSC commenced proceedings against AES in Kazakhstan, AES obtained an anti-suit injunction from the English courts. JSC's challenge to the injunction failed at first instance and JSC appealed. The Court of Appeal has now held as follows (Rix LJ giving the leading judgment which was described by Burnton LJ as "encyclopaedic"):

The English court does have jurisdiction to grant a declaration or an anti-suit injunction to protect a party's rights under an arbitration agreement even if arbitral proceedings are not on foot and none are intended. It was common ground that section 44 of the Arbitration Act 1996 did not provide this jurisdiction. Instead, the jurisdiction is derived from section 37 of the Senior Courts Act 1981 (which provides that the High Court may grant an injunction "in all cases in which it appears to the court to be just and equitable to do so"). Although an arbitral tribunal may rule on its own substantive jurisdiction, there is no obligation for it to do so. In this case, AES was not relying on section 37 to "get round" the limitations in section 44 (which requires current or intended arbitral proceedings). Instead, AES was asking the English court to prevent foreign proceedings being used against it when it is asserted that an arbitration agreement binds the parties. This would not be an interference with arbitration - it would support it. AES had shown a good arguable case for reliance on a gateway for service out of the jurisdiction. At first instance the judge had held that AES was entitled to rely on PD6B para 3.1(20) and CPRr 62.5(1)(c) - in both cases, because AES sought an order/required a question to be decided under section 37. The Court of Appeal agreed with the judge's decision (although Burnton LJ did not agree that section 37 was an enactment falling within para 3.1(20)). It also held that AES was entitled to raise, retrospectively, a new gateway to validate service out (namely, PD6B para 3.1(6)(c) ("contract...governed by English law")), even though AES had not sought to rely on that gateway originally. The judgment of the Kazakhstan court should not be recognised or enforced in this country. Section 32 of the Civil Jurisdiction and Judgments Act 1982 provides that a judgment of a foreign court in proceedings which ought instead to have been brought in arbitration in London shall not be recognised or enforced here. Rix LJ said that "it is clear that the English courts have not hesitated to prefer the parties' choice of English jurisdiction and arbitration clauses to even the public policy requirements of foreign law as expressed in foreign statute and/or applied in the decisions of foreign courts. This court is not bound by the Kazakhstan courts' construction of the English law arbitration agreement (subject to any question of submission) or by its view that it is contrary to Kazakhstan public policy". The general rule stated under section 32 above does not apply where the person against whom the judgment is given has submitted to the jurisdiction of the foreign court. The Court of Appeal held that it would not be right to reverse the judge's decision that there was at least a good arguable case that there had been no submission in this case: "It was obvious from beginning to end that the operator [AES] was presenting and preserving its challenge to the Court's jurisdiction on the ground of the parties' arbitration agreement, if necessary by way of appeal. All that was done was subject to that challenge and in reliance on it. As a Kazakhstan party there was nothing that the operator [AES] could otherwise do to distance itself from the court's domestic jurisdiction". COMMENT: Weekly Update 48/09 reported the Court of Appeal decision in National Navigation v Endesa, where it was held that the English court was bound to recognise the judgment of a...