Anti-enforcement injunctions: a less invasive alternative?

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Introduction

The recent Court of Appeal decision in Bank St Petersburg OJSC v Vitaly Arkhangelsky [2014] EWCA Civ 593 has lent further credence to the notion that anti-enforcement injunctions, which until now have been rarely ordered by the English courts, might offer a less invasive alternative to anti-suit injunctions through non-interference with the jurisdiction of the foreign court.

Anti-suit injunctions

The court has inherent jurisdiction pursuant to section 37(1) of the Senior Courts Act 1981 to grant an injunction preventing a person from starting or continuing foreign proceedings (known as an anti-suit injunction). Such relief is normally sought where the defendant has breached, or has threatened to breach, an arbitration agreement or exclusive jurisdiction clause. Such an injunction may also be sought on the basis that the foreign proceedings commenced are vexatious and oppressive (albeit this is a less common basis for seeking such a remedy).

The English courts have previously justified the use of anti-suit injunctions on the basis that the order is addressed solely to a party and not to a foreign court, thus existing as a remedy to restrain and/or deter the party in actual or potential breach of the arbitration agreement or jurisdiction clause. Although therefore the apparent effect of such an injunction is to restrain the party's actions without directly interfering with the jurisdiction of the foreign court, in practice an anti-suit injunction is an effective restraint of foreign proceedings, which, on any view, is a clear incursion into the foreign court's jurisdiction.

It is primarily for this reason that anti-suit injunctions are controversial, particularly in civil law jurisdictions where the courts are reluctant to grant them. They have found more favour in common law jurisdictions, despite having been held by the European Court of Justice to contravene EU law (Turner v Grovit (Case C-159/02)) and to contradict the rule under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 that the court seised of an action has the right to determine whether or not to refer the parties to arbitration (Allianz SpA v West Tankers Inc (Case C-185/07)).

The European Court of Justice, when examining the legitimacy of anti-suit injunctions in Turner v Grovit, emphasised the importance of "mutual trust" between EU member states. This principle requires the court of one member state to respect the right of another member state's court to determine its own jurisdiction and the result it reaches. The Court of Justice held that anti-suit injunctions were incompatible with this principle irrespective of the circumstances in which they were to be used.

Anti-enforcement injunctions

An anti-enforcement injunction is usually sought once foreign proceedings have already been determined as a means to prevent the defendant from enforcing any judgement or award in England where it is in breach of an exclusive jurisdiction or arbitration agreement.

The effect of the anti-enforcement injunction is to preserve the claimant's rights not to be sued abroad, whilst at the same time not interfering with the process of the foreign court(s). Ellerman Lines Limited v Read [1928] 2 KB 144 established the English court's power to grant an anti-enforcement injunction by analogy to its power to grant an anti-suit injunction. In that case, judgment had already been obtained in a foreign court both in breach of contract and by fraudulent means. The Court of Appeal held that the court clearly had the power to grant an anti-enforcement injunction in such a situation. It emphasised that the English Court could not exercise any power over the foreign court, and that such an injunction did not represent an incursion into the foreign court's jurisdiction, but instead had regard to the personal attitude of the individual who had obtained the foreign judgment.

Bank St Petersburg OJSC v Vitaly Arkhangelsky

Since Ellerman Lines there have been few reported cases concerning the grant of an anti-enforcement injunction. The case of Bank St Petersburg OJSC v Vitaly Arkhangelsky [2014] EWCA Civ 593 is a recent, and rare, example.

The facts

The Bank had obtained Russian judgments against the Arkhangelskys and sought to enforce against those judgments in both France and Bulgaria. The Arkhangelskys then sought to bring claims against the Bank both in the British Virgin Islands ("BVI") and Cyprus under Russian law. Owing to the numerous difficulties inherent in such myriad litigation, the parties decided to "start afresh" and entered into an exclusive jurisdiction agreement pursuant to which the parties agreed that the English Court would have exclusive jurisdiction to determine the "substantive dispute" between them.

The Arkhangelskys had sought an order in terms that, amongst other things, the Bank could not enforce on the Russian judgments. The High Court refused their application on the basis that such an injunction would be a prima facie infringement of those states' sovereignty. The Court of Appeal then considered whether the High Court had been correct in refusing the grant the injunction.

Court of Appeal decision

Lord Justice Longmore considered as a starting point that the enforcement of the Russian judgments would be inconsistent with the terms of the agreement between the parties as to English jurisdiction, and on that basis alone an injunction should be granted. Even though the agreement only referred to staying the proceedings commenced in the BVI and Cyprus, and did not refer to any pending or future enforcement proceedings elsewhere, Lord Justice Longmore found that it would be contrary to the terms and spirit of the agreement for the enforcement of the Russian judgments to continue or for any new enforcement proceedings to commence. The court also found that the granting of an interim injunction was not an unwarranted interference in the jurisdiction of the French or Bulgarian courts; instead, it was personally aimed at the Bank who would be required to temporarily cease continuation of enforcement proceedings.

The court acknowledged that Ellerman Lines was a stronger case, but only to the extent that the English trial had already taken place and had established that the foreign judgment in respect of which the injunction was sought had been procured by fraud. In the Arkhangelsky case the trial had not yet occurred and so the allegations of fraud remained mere allegations. However an interim injunction had also been granted in Ellerman Lines to protect the position pending trial, and the court found that an injunction against continuing enforcement proceedings or commencing new enforcement proceedings should therefore be granted in Arkhangelsky.

Conclusion

The Arkangelsky decision may have paved the way for the further use of anti-enforcement injunctions, particularly given the controversial status of anti-suit injunctions. However, the decision was arguably narrowly drawn, in that the purpose of the substantive proceedings in England was to challenge the Russian judgments, so allowing the Russian judgments to be enforced in the meantime would undermine the principal purpose of the English proceedings. Therefore perhaps anti-enforcement proceedings can only be brought in the face of a foreign judgment having been handed down, as opposed to being sought prospectively as a protective measure. It may be for this reason that Arkhangelsky fails to encourage greater use of anti-enforcement measures and the status quo endures that they are rarely sought.