The use of an anti-suit injunction is a longstanding practice where a party wants an order from the English court to direct another party not to commence or continue with proceedings in another jurisdiction. Jacqueline Zalapa, Director, CJC considers the contractual anti-suit injunction - where a party applies to enforce an exclusive forum clause because another party has commenced or threatens to commence proceedings in a foreign jurisdiction in breach of the contractual forum.

Foreign proceedings outside the contractual forum arise for widespread reasons. At its most basic, a party may simply prefer litigating on home turf. The use of an anti-suit injunction is a longstanding practice where a party wants an order from the English court to direct another party not to commence or continue with proceedings in another jurisdiction.

There are serious consequences for ignoring an anti-suit injunction, including contempt of court, sequestration of assets and imprisonment.

Anti-suit injunctions frequently fall into two categories: first, a contractual anti-suit injunction where a party applies to enforce an exclusive forum clause because another party has commenced or threatens to commence proceedings in a foreign jurisdiction in breach of the contractual forum; and second, non-contractual anti-suit injunctions such as alternative forum cases where the subject matter of the foreign proceedings overlaps with matters that are, or can be, litigated in England.

This article considers contractual anti-suit injunctions.

What Are the Relevant Principles?

Contracts governed by an English exclusive jurisdiction clause in the shipping industry generally contain one of two categories: a court jurisdiction clause (an agreement to litigate before a court) or an arbitration clause (an agreement to arbitrate).

A contractual anti-suit injunction is a discretionary remedy to be granted only when the ends of justice require it.[1] An injunction claimant is not entitled to an anti-suit injunction as of right, even where she seeks to enforce an exclusive English court jurisdiction clause or a London arbitration clause.[2] The principles governing the English court’s discretion whether or not to grant an anti-suit injunction are governed by three main authorities: Aggeliki Charis Compania Maritima v. Pagnan (the Angelic Grace), [1995] 1 Lloyd’s Rep 87 (CA) 96; Donohue v. Armco, [2002] 1 Lloyd’s Rep 424 (HL) [24]; and AES Ust-Kamenogorsk Hydropower Plant LLP v. Ust-Kamenogorsk Hydropower Plant JSC, [2013] 1 WLR 1889 (SC) [25], [58].

The general rule governing the exercise of the English court’s discretion is as follows: if the foreign proceedings are in breach of the contract’s exclusive jurisdiction clause (or there is a high probability of breach), an anti-suit injunction will generally be granted unless there are “strong reasons” not to do so.[3] In principle, there is no material difference between an injunction to restrain proceedings in a foreign jurisdiction in breach of an exclusive court jurisdiction clause or an arbitration clause.

Since the Court of Appeal’s decision in The Angelic Grace [1995], there has been a departure from the cautionary approach previously adopted by the English courts:

[T]he time has come to lay aside the ritual incantation that this is a jurisdiction which should only be exercised sparingly and with great caution. There have been many statements of great authority warning of the danger of giving an appearance of undue interference with the proceedings of a foreign Court. Such sensitivity to the feelings of a foreign Court has much to commend it where the injunction is sought on the ground of forum non conveniens or on the general ground that the foreign proceedings are vexatious or oppressive but where no breach of contract is involved …. But in my judgment there is no good reason for diffidence in granting an injunction to restrain foreign proceedings on the clear and simple ground that the defendant has promised not to bring them.[4]

How Is an Application Made?

Procedurally, an application is made to the English court by the injunction claimant for an anti-suit injunction pursuant to the court’s inherent jurisdiction to protect its own proceedings and/or Section 37 of the Senior Courts Act 1981[5] to restrain the injunction defendant from commencing (or more commonly, pursuing) the foreign proceedings. Applications should generally be made on notice although urgency can require that an application is made without notice if there is insufficient time or giving notice would defeat the purpose of the anti-suit injunction by, for example, opening the door for the injunction defendant to take an irreversible step.

The burden of proof rests with the injunction claimant to persuade the English court that the foreign proceedings are, or will be, in breach of the English exclusive court jurisdiction clause or the London arbitration clause. An application will ordinarily address questions of the construction, scope and/or validity of the contract’s exclusive forum clause as well as the nature of the relief sought in the foreign proceedings.

Construing the Jurisdiction Clause in Light of the Transaction as a Whole

Dispute can arise about whether the subject matter of the foreign proceedings falls inside or outside the scope of the wording of the exclusive English court jurisdiction clause or London arbitration clause. The answer to this question requires a careful analysis of the contract’s wording against the relevant facts in which “the essential task is to construe the jurisdiction clause in the light of the transaction as a whole.”[6]

The scope of a London arbitration clause was the subject of debate in The Angelic Grace. A vessel was chartered by Panamanian owners to Italian charterers to carry a cargo of grain from Rio Grande to two safe ports on the Italian Adriatic. The charterparty contained an amended Centrocon arbitration clause that said:

“All disputes from time to time arising out of this contract shall … be referred to the arbitrament of two Arbitrators carrying on business in London …”

During discharge operations, there was a collision between the vessel and another ship owned by the charterers. Owners commenced arbitration in London on 27 January 1993. Charterers commenced litigation in the Court of Venice thirteen days later on 9 February 1993. Owners applied to the English court for an anti-suit injunction to restrain the charterers from continuing with the Italian proceedings upon the basis that the Italian proceedings constituted a breach of the arbitration clause.

The issues for determination were twofold: first, whether the claims and counterclaims made in the London arbitration and Italy fell within the scope of the arbitration clause; and second whether an anti-suit injunction should be granted to restrain the charterers from continuing the Italian proceedings. Charterers said that the claims pending before the Italian court did not fall within the scope of the London arbitration clause because the claims sounded in negligence as tortious claims or collision claims. This position was held to be erroneous. That is because the English law position is as stated in The Playa Larga [1983],[7] essentially a tortious claim does “arise out of” a contract containing an arbitration clause if there is a sufficiently close connection between the facts of the tortious claim and the facts of the contractual claim. In granting the owners an anti-suit injunction to restrain the charterers from pursuing the Italian proceedings, the Court of Appeal agreed with the conclusion reached by the English court at first instance that all the claims and cross claims arose out of the same incident and identical set of facts, in particular the discharge operation which was “an integral part of the contractual adventure.”[8] These principles apply equally to the construction of an exclusive court jurisdiction agreement.

Evidential Issues

If questions cannot be resolved about whether the contract’s exclusive court jurisdiction agreement or London arbitration clause is binding at the interim or final hearing of the application for an anti-suit injunction, the injunction claimant must show a “high degree of probability” that there is a binding exclusive forum clause.[9] This may not always be straightforward where the commercial relationship between parties are governed by numerous contracts that may contain conflicting forum clauses.

If the injunction claimant persuades the English court that the injunction defendant has breached (or there is a high probability that it has breached) the contract’s exclusive forum clause, the burden of proof is shifted to the injunction defendant to persuade the English court that there are ‘strong reasons’[10] not to grant the anti-suit injunction. Questions of whether or not there are, in fact, strong reasons to depart from the general rule will be answered on the evidence. Strong reasons may arise, for example, on the basis of the injunction claimant’s unconscionable conduct, delay in applying for an anti-suit injunction or where the injunction claimant has already submitted to the foreign court’s jurisdiction.

As an anti-suit injunction is an equitable remedy, it is important that an injunction claimant approach the English court with clean hands. In principle, it has been suggested that there is a distinction between the analysis of ‘strong reasons’ and ‘unclean hands’.[11] That suggestion, even if correct, generally matters little in practice. If the English court finds that the injunction claimant has ‘unclean hands’ then this should lead to a finding of ‘strong reasons’ not to grant the anti-suit injunction even if the ‘unclean hands’ defence operates independently to “strong reasons”. Unclean hands does not mean a general impropriety. In short, and to quote from Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4^th ed.) at § 3-130:

[F]or the defence of unclean hands to operate at all, the impropriety complained of must have an immediate and necessary relation to the equity sued for.

An ‘immediate and necessary relation’ has been further defined in Spry: Principles of Equitable Remedies (8^th Ed.) to mean that the injunction claimant “…seeks to derive advantage from his dishonest conduct in so direct a manner that it is considered to be unjust to grant him relief.” Suppression and/or concealment of facts and/or disclosure relevant to the injunction sought will permit the injunction defendant an ‘unclean hands’ defence. For example, misstatement and concealment of facts by an injunction claimant’s key witness in Royal Bank of Scotland v Highland Financial Partners[12] resulted in the refusal of anti-suit injunction. The English court concluded that the injunction claimant’s hands remained “relevantly grimy” so there had “not been any relevant washing of hands”.[13]

Delay in applying for an anti-suit injunction can result in refusal of the anti-suit injunction even where the foreign proceedings constitute a clear breach of the contract’s exclusive forum clause.[14] An injunction claimant is expected to act promptly, in particular before the foreign proceedings are too far advanced.[15] Delay triggers a variety of concerns for the English court, including comity if proceedings before the foreign court have reached an advanced stage. Anti-suit injunctions have been refused when an application has been made just before the final hearing of the foreign proceedings.[16]

Delay attributed to the injunction claimant’s time spent challenging the foreign court’s jurisdiction and/or seeking to stay the foreign proceedings will not generally justify a delay in applying for an anti-suit injunction.[17] In practice, this requires an injunction claimant to mobilise themselves (and their lawyers) quickly in more than one jurisdiction to ensure that attention is not limited to the foreign proceedings at the potential prejudice of relief that may be sought in the contractual forum.

Strong reasons against granting an anti-suit injunction may arise if the injunction claimant has voluntarily submitted to the jurisdiction of the foreign court.[18] Care must be taken in respect of any engagement on the merits in the foreign proceedings. The English court recognises that it may not be procedurally possible in the foreign proceedings for the injunction claimant to simply reserve its position and refrain from making submissions. In short, and to quote from Thomas Rafael QC’s The Anti-Suit Injunction (2^nd ed.) at §§8.22 – 8.23:

A voluntary submission to the jurisdiction of the foreign court may in appropriate circumstances amount to a strong reason why a contractual injunction should not be granted. However, only a submission that would be truly voluntary from the perspective of English law will have a powerful effect, and if the injunction claimant has been doing what he can to resist the foreign court’s assumption of jurisdiction, then any submission is less likely to be held against him …. If the injunction claimant behaves in a way which is inconsistent with the contractual forum being the sole forum for dispute resolution, such as himself starting proceedings in the non-contractual foreign court, this can be a powerful factor against enforcing an exclusive forum clause.

It can be tempting for an injunction claimant to engage on the merits, particularly in response to a spurious claim in foreign proceedings. However, temptation should be resisted wherever possible to avoid submissions prejudicing their position in the contractual forum.

Conclusion

Critics have suggested that the anti-suit injunction offends principles of public international law and international comity because it is an unwarranted interference with the sovereignty of a foreign state and the jurisdiction of a foreign court. That criticism has little force: first, like all injunctions, an anti-suit binds the party (not the foreign court) against which it is made; and second, a contractual injunction is based upon the parties’ promise of a pre-existing contractual obligation. If the parties agreed that a chosen court or tribunal is to have sole jurisdiction over any dispute arising out of or in connection with their contract, respecting that agreement cannot (at least, reasonably) be said to offend the doctrine of international comity. That rationale is consistent with Court of Appeal authority.[19] An injunction claimant should not, as a matter of comity, be prevented from taking steps to restrain the injunction defendant from doing precisely that which she had already promised not to do.

For further information, contact Jaqueline Zalapa, Director, CJC London, Jacqueline@CJCLaw.com