English Court Has Jurisdiction to Grant Mareva Injunction in Support of Arbitration Proceedings, Where the Parties Submit to 'Exclusive Jurisdiction of Arbitration in London' Unless Excluded by Specific Wording

Background

Court Can Indicate in Principle that it Would be Prepared to Grant Mareva Injunction at Time When Breach of Contract Feared but Cause of Action has not yet Arisen and Grant the Injunction Immediately once the Cause of Action has Arisen.

Re Q's Estate (QBD (Comm Ct)), [1999] All ER (D) 267 Commentary The judgment clarifies that a submission in an arbitration agreement to the 'exclusive' jurisdiction of the arbitral tribunal required the parties to submit all substantive disputes to arbitration but did not prevent the parties from seeking ancillary relief in support of arbitration proceedings in the courts unless there was specific language in the agreement excluding this right. Section 44 is not a mandatory provision and can therefore be excluded by agreement of the parties, but parties wishing to exclude the courts' ancilliary jurisdiction should use clear and express wording to this effect. In practice, however, excluding the court's jurisdiction in ancilliary matters will rarely be desirable, having regard to the facts that the arbitral tribunal's powers to grant interim injunctions are less effective in urgent situations and that ancilliary injunctions may not be available at all where a tribunal has not yet been constituted.

See also our Case Summary on Toepfer International GmbH v Société Cargill France [1998] 1 Lloyd’s Rep 379.

Decision The decision confirms that the courts have jurisdiction under section 44 of the Arbitration Act 1996 to grant ancillary relief in arbitration matters in the same way as they do in relation to legal proceedings, unless the wording of the arbitration clause was wide enough specifically to exclude the obtaining of ancilliary relief in court. Where the parties submitted in their arbitration clause to the exclusive' jurisdiction of the arbitral tribunal, all substantive proceedings had to be by way of arbitration but the wording of the arbitration clause did not deprive the court of jurisdiction to grant ancillary relief in aid of such substantive arbitration proceedings. The court required specific wording if the parties wanted to exclude the right to seek the court's assistance under section 44; the use of the word 'exclusive' in the arbitration clause merely served to underline the general rule that substantive proceedings have to be by way of arbitration and the parties would have had to express their intention by more specific wording. The court also considered the question whether it had the power to grant a Mareva injunction at a time when a breach of contract was anticipated but a cause of action was yet to arise. The court held that it could not grant an injunction quia timet but allowed the somewhat unorthodox method of hearing the plaintiff and considering the evidence in support of the injunction on the day before the cause of action arose and of granting the Mareva injunction immediately upon the plaintiff’s application on the following day after the cause of action had arisen, counsel for the plaintiff having confirmed that there was otherwise no material change in the circumstances outlined in court on the previous day. The court found that this was a valid if unusual procedure but indicated at the same time that the court would ensure that it was used properly and without abuse.

Background The defendant brought proceedings in a foreign country against members of her family in order to challenge the dispositions of her father's estate. She entered into a retainer with a firm of local lawyers, the plaintiffs, who agreed to act for her on the basis of a contingency fee. The agreement contained a London arbitration clause which stated:

"This agreement shall be governed by and construed in accordance with the provisions of English law any disputes deriving [from] or in connection with this agreement will be submitted to the exclusive jurisdiction of arbitration in London under the London Arbitration Act ... The award of the arbitral tribunal shall be final, immediately enforceable and not subject to appeal."

Upon winning the proceedings, the plaintiffs sought to protect their claim to payment of the contingency fee by bringing proceedings in England and applying for a Mareva injunction over the proceeds of the settlement. An injunction was granted ex parte. The defendant then applied to discharge the injunction and to stay the proceedings in favour of arbitration. It was agreed that the merits of the plaintiff's claim for their fee should be stayed for arbitration but the question of the ancillary order for a Mareva was argued in court. It was the defendant's case that the court lacked jurisdiction to grant a Mareva injunction because the parties had submitted all disputes deriving from their agreement to the 'exclusive' jurisdiction of the arbitral tribunal and that this included the dispute relating to any ancillary remedy.

For further information on this topic please contact Neil Aitken,
Charles Spragge or Gregor Kleinknecht at CMS Cameron McKenna
by telephone (+44 171 367 3000) or by fax (+44 171 367 2000) or
by e-mail (nca@cms-cmck.com or chs@cms-cmck.com or gk@cms-cmck.com).