AG’s opinion: anti-suit injunctions in support of arbitration precluded under EU law

On 4 September, Advocate General Kokott issued her opinion in the House of Lords case of West Tankers Inc. v RAS Riunione Adriatica di Sicurta SpA & Others, one of the most significant arbitration cases to come before the European Court of Justice (ECJ).

In an opinion that can be taken as strongly indicative of the likely ECJ judgment, the Advocate General rejected as inconsistent with EU law the practice of English courts granting injunctions to restrain a party from commencing or continuing proceedings in the court of another Member State in breach of an arbitration agreement. If the ECJ reaches the same conclusion as the Advocate General, whose opinion is not binding on that court, then the outcome of West Tankers may have far reaching consequences for anyone seeking to arbitrate in the EU. Indeed, parties may find themselves forced to conduct lengthy and expensive litigation before a foreign court in circumstances where they have nevertheless negotiated and agreed that any such dispute shall be referred to arbitration at a seat of their choosing.

Background

In West Tankers, the House of Lords was asked to consider an appeal against an anti-suit injunction previously granted in favour of West Tankers to prevent the continuance of proceedings instigated by insurers Allianz and others against it before a court in Syracuse, Sicily. The underlying dispute concerned the collision of a ship with a jetty in Italian waters, and although the charterparty was subject to English law and contained a London arbitration clause, the insurers sought to pursue the ship owner, West Tankers, before a court in Syracuse - the place were the damage occurred and thus the court of jurisdiction pursuant to Article 5 §3 of EC Regulation 44/2001 (Regulation) (relating to the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters between EU member states).

In a judgment delivered on 27 February 2007, their Lordships referred the following question to the ECJ: “Is it consistent with [the Regulation] for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings in another Member State on the ground that such proceedings are in breach of an arbitration agreement?” In doing so, the House of Lords also made clear its own strong view that, in the context of arbitration, the Regulation has no application and that issues of jurisdiction should be deferred to arbitrators and the supervising court, rather than waiting for the court ‘first seised’ (i.e. a different national court) to dismiss the action. Given that the Regulation simply states that it “shall not apply to…arbitration”, their Lordships sought to give effect to the plain and natural meaning of those words.

Opinion of Advocate General

The Advocate General disagreed with the views expressed by the House of Lords. In her opinion, the key issue was not whether the application for an anti-suit injunction fell within the scope of the Regulation, but whether the proceedings against which the anti-suit injunction is directed did so.

The Advocate General sought to apply to arbitration claims the principles that the ECJ had previously considered in Turner v Grovit, a leading authority which established that a court of a Member State could not issue an injunction restraining a party from pursuing proceedings in a court of another Member State, even in circumstances where those proceedings had been commenced in bad faith. In summary, the Advocate General then drew the following conclusions:

• a legal relationship does not fall outside the scope of the Regulation simply because the parties have entered into an arbitration agreement. Rather the Regulation becomes applicable if the substantive subject matter of the dispute is covered by it. Since the subject matter in West Tankers was a claim in tort for damages, this fell within the scope of the Regulation;
• where the subject matter of the dispute falls within the Regulation, a court, which in principle has jurisdiction, is entitled to examine whether the exception to arbitration applies and, if necessary, refer the case to the arbitral body;
• where the law of the arbitral seat has been chosen as the applicable law, this cannot confer on the arbitral body an exclusive right to examine the arbitration clause. The existence and applicability of an arbitration clause merely constitutes a preliminary issue which the court first seised must address when examining whether it has jurisdiction. Preventing the court from ruling on such a preliminary issue could deny an applicant’s fundamental right of access to a court where, for example, that party considers the arbitration agreement to be invalid or inapplicable;
• from a practical perspective, the granting of anti-suit injunctions may impair the effectiveness of Community law and run contrary to the principle of mutual trust and recognition of the administration of justice between courts of Member States as enshrined in the Regulation. Irreconcilable decisions on the merits of a dispute could arise, where both the arbitral body and the national court declare that they have jurisdiction.

Accordingly, the Advocate General answered “no” to the question posed by the House of Lords. In her view, the Regulation precludes a court of a Member State from granting an anti-suit injunction in support of arbitration proceedings.

Comment

The conclusion of the Advocate General in response to the question referred to the ECJ by West Tankers was, to some extent, expected. The ECJ, in contrast to the English court, has previously demonstrated a marked distaste for anti-suit injunctions, albeit only in the context of litigation rather than arbitral proceedings. It is therefore not particularly surprising that the Advocate General is of the view that anti-suit injunctions are incompatible with the notion that all European member courts are equally well-equipped to determine which court or body has jurisdiction to determine a particular case.

In the event that the ECJ follows this non-binding opinion, what are the consequences? Certainly there is likely to be the opportunity for further interference of national courts in the arbitration process. Indeed, the opinion of the Advocate General suggests that national courts should be entitled to conduct a full review of the jurisdiction of an arbitral tribunal. If that approach is endorsed by the ECJ, then it is arguably inconsistent with the current approach taken by many national courts that permit arbitrators (under the doctrine of Kompetenz-Kompetenz) to decide whether the arbitration clause is binding and then enforce that decision by orders which require the parties to arbitrate not litigate.

Most importantly, and from a practical perspective, the opinion does not address the potential delay and disruption to the arbitration process where no anti-suit injunction remedy is available. Although the Advocate General states that ultimately there is no risk of circumventing arbitration, in some cases jurisdictional disputes in some Member States may last years before being resolved, even in clear cases. Several Member States merge the jurisdiction challenge with the case on merits, thereby adding further delay and complexity. This could encourage likely losers in arbitration to play the litigation game, preferably in courts which take years to come to a substantive hearing, in order to derail the arbitration process.

To view the Advocate General’s opinion in full on the Curia website, please click here.

Case references:

Allianz SpA (formerly RAS Riunione Adriatica di Sicurta SpA) & Others v West Tankers Inc.: C-185/07

West Tankers Inc. v RAS Riunione Adriatica di Sicurta SpA & Others [2007] UKHL 4

Turner v Grovit: C-159/02 [2005] 1 AC 101