anti suit injunction – The Institute of International Shipping & Trade Law (IISTL) Blog

Delay and discretion with the anti-suit injunction.

The anti-suit injunction is a discretionary remedy. Even when the foreign proceedings are clearly in breach of a High Court jurisdiction clause or a London arbitration clause, you may not get your remedy. The principle reason for the court not issuing the ASI is delay in applying for the remedy and allowing the foreign proceedings to become advanced. Issues of justice and comity coincide here, but what length of delay will incline the court not to grant you the ASI you have set your heart on?

This was the issue in the recent Commercial Court decision of Henshaw J in Daiichi Chuo Kisen Kaisha v Chubb Seguros Brasil SA [2020] EWHC 1223 (Comm) (15 May 2020). A cargo claim arose out of a collision, brought by cargo insurers, Chubb. In March 2016 Chubb started arbitration in London against the owners Fair Wind under the owners’ bill which incorporated a London arbitration clause. In November Chubb commenced proceedings in Brazil against Mizuho the vessel managers, Daiichi, the time charterer, and Noble Resources, an associated company of the voyage charterer, who had Resources used vessel to perform a shipment under a COA with CSN Handel, claiming US$2.7m.

In August 2017 owners and Mizuho issued an arbitration claim form in the Commercial Court seeking an ASI against Chubb in respect of the Brazilian proceedings against Mizuho, and in October Knowles J granted the ASI Mizuho in Brazil. A month later Daiichi’s obtained from Chubb an undertaking mirroring the order of Knowles J. On 26 June 2019 the Brazilian Superior Court of Justice finally rejected Chubb’s amendment claim.

Time charterers, Daiichi, and Chubb then jointly requested a stay of Brazilian proceedings for six months, “ without prejudice to any of their rights (including, in relation to the defendants, the right to challenge the Brazilian court’s jurisdiction, in view of the arbitration clause contained in the Bills of Lading and Charter Party”. In March 2020 Chubb filed substantive defences to the defence and jurisdiction challenges of Noble Resources and then of Daiichi, claiming that the bill of lading arbitration clauses did not apply to them as the subrogated insurer. This was a clear breach of the undertakings previously given to Noble Resources and to Daiichi. A Court order in Brazil of 23 April 2020 gave Daiichi and Noble Resources until 25 May 2020 to respond to Chubb’s latest submissions.

The principles relevant to delay were set out by Bryan J in Qingdao Huiquan Shipping Co v Shanghai Dong He Xin Industry Group Co Ltd [2018] EWHC 3009 (Comm); [2019] 1 Lloyd’s Rep. 520.

“(1) There is no rule as to what will constitute excessive delay in absolute terms. The court will need to assess all the facts of the particular case: see Essar Shipping Ltd v Bank of China Ltd (The Kishore) [2016] 1 Lloyd’s Rep 427 at paras 51 to 52 per Walker J.

(2) The question of delay and the question of comity are linked. The touchstone is likely to be the extent to which delay in applying for anti-suit relief has materially increased the perceived interference with the process of the foreign court or led to a waste of its time or resources: see Ecobank Transnational Inc v Tanoh [2016] 1 Lloyd’s Rep 360 at paras 129 to 135 per Christopher Clarke LJ; The Kishore at para 43; and see also Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2017] 1 HKC 153 at para 21 per Kwan JA.

(3) When considering whether there has been unacceptable delay a relevant consideration is the time at which the applicant’s legal rights had become sufficiently clear to justify applying for anti-suit relief: see, for example, Sabbagh v Khoury [2018] EWHC 1330 (Comm) at paras 33 to 36 per Robin Knowles J.”[29]

Here the relevant period of delay did not start until Chubb’s change of tack in the Brazilian proceedings. Chubb was, from June 2019 until March 2020 actively co-operating with Daiichi to defer any further substantive proceedings in Brazil, and thus could reasonably be regarded by Daiichi as neither breaching nor threatening to breach the Undertaking. Daiichi and Noble Resources were not, in any substantive sense, actively engaging in the proceedings in Brazilian but rather, with Chubb’s express and active support, seeking to defer them. Such positive steps as were taken were taken only out of necessity or on a precautionary basis. It must have been clear to Chubb at all material times that such steps did not indicate that Daiichi or Noble Resources were content to allow the Brazilian court to decide the jurisdiction issues and, if relevant, the merits. Any legal expenses incurred by Chubb in this period would have been limited. This case was not one where a party who simply allows foreign proceedings to take their course, subject to making a jurisdiction challenge, when faced with a claim brought in breach of a jurisdiction or arbitration agreement. There had been no material delay by Daiichi following the revival of Chubb’s position in the Brazilian proceedings.

Nor did considerations of comity towards the Brazilian court weigh against the grant of such relief. Chubb argued that proceedings were now at an advanced stage, with a risk of judgment on the merits very soon, so to grant an anti-suit injunction would in effect be to ‘snatch the pen’ from the Brazilian judge’s hand. However, since June 2019 the only step taken in relation to the substantive merits has been the precautionary filing of Noble Resources’ defence in September 2019 and Chubb’s reply of 2 March 2020. The Brazilian court had not yet assumed jurisdiction over any of the defendants and it could not be said that it was poised to pass judgment on the merits. Although time which elapses during a jurisdiction challenge in the foreign court is still relevant when considering delay, it did not follow, however, that the mere making of a jurisdiction challenge in the foreign court made any subsequent anti-suit injunction inconsistent with considerations of comity. This was not a case of the ‘two bites of the cherry’ strategy of awaiting the foreign court’s outcome before seeking an anti-suit injunction.

A mandatory injunction was ordered as it was necessary to require Chubb to discontinue otherwise there would now be a real risk that the Brazilian court would proceed to judgment on the merits at some stage after 25 May. Daiichi, to whom the undertaking had been given, wished the injunction to extend to proceedings against Noble Resources, because it feared that otherwise Noble Resources would seek to pass any liability ‘up the line’ to Daiichi. Daiichi had shown a sufficient interest in enforcing the injunction as regards claims against Noble Resources. It was not unlikely that some form of contractual arrangement existed under which Noble Resources could pass up to Noble Chartering, and hence to Daiichi, any liabilities which as between owners and charterers would fall on owners.

Anti-suit injunction against non-party to contract

Qingdao Huiquan Shipping Company v Shanghai Dong He Xin Industry Group Co Ltd QBD [2018] EWHC 3009 (Comm) involved a claim for an anti-suit injunction against a non-party to a contract containing a submission to English law and London arbitration. Owners concluded a settlement with cargo receivers whereby the latter paid for the lifting of a lien over cargo which the owners had exercised following time charterers’ default in paying h ire. The agreement was subject to English law and provided for London arbitration. The settlement provided that the receivers authorised agent, SDHX, which was not a party to the agreement, would make the payment. Three years later SDHX sued owners in a Chinese court claiming repayment of those sums. It alleged that there was an oral agreement between itself and the owners. In December 2017 the Qindao Shinan District Court decided that the dispute constituted a maritime dispute, and that the matter should be transferred to the Qingdao Maritime Court to decide on the validity of the London arbitration clause. SDHX’s appeal was dismissed by the Qindao Intermediate Maritime Court which stated that one of the foundations of SDHX’s claim was the settlement agreement between owners and the receivers.

In August 2018 owners applied for an interim anti-suit injunction. Bryan J held that this was an appropriate cased where such an injunction could be obtained against a non-party to the contract. SDHX had sought to rely upon the terms of the Settlement Agreement in advancing its claims in the Chinese proceedings. In doing so, therefore, it had to take the burden of the arbitration clause. For the purpose of the interim relief claim the issue of whether there was an oral agreement with the owners did not need to be considered. SDHX were unable to show that there had been such excessive delay by owners in commencing proceedings that the court should not exercise its discretion. This was not a case involving considerations of comity or where there had been substantive proceedings in China which would lead to the English court second-guessing an existing ruling of a Chinese court. There was also some benefit from the clarity that had been provided by the Chinese appellate court.

P & I clubs and direct actions — again

In March 2014 the laden Turkish container ship Yusuf Cepnioglu grounded on Mykonos and became a total loss, yielding — apart from the odd oil slick — the usual fun for lawyers. The time charterers (Turkish), faced with numerous suits by irate cargo owners to whom they had issued bills of lading, claimed over against the shipowners (Turkish) in London arbitration proceedings for breach of the charterparty. So far so good. Simultaneously, however, the charterers began proceedings in Turkey against the owners’ P&I club to attach directly $13.5 million of its assets in Turkey under a Turkish direct action statute. The club reacted strongly, saying that its contract with the owners, like zillions of other P&I covers, was governed by English law and stipulated for “pay to be paid” and for all claims to be arbitrated in London. It sought an anti-suit injunction. The charterers for their part said that they had a direct action against the club governed by Turkish law, and that English courts had no business telling it how to enforce (or not enforce) its Turkish law rights in Turkish courts. The real point of course was that the charterers wanted to ensure that any claim they had against the club was litigated in Turkey, which would not apply the terms of the P&I cover and would repel any awkward demands for arbitration.

The club won before Teare J and in the CA.

First, the Turkish law was held to give, not a direct claim against the club, but one derivative from the contract between the club and the owners (like the equivalent Spanish and Indian laws: see The Prestige [2015] 2 Lloyd’s Rep 33 and The Hari Bhum [2005] 1 Lloyds Rep 67). It followed that it was governed by English law and any enforcement was subject to the conditions in the club cover.

However, there then came the issue whether this gave the owners a right to an anti-suit injunction. True, their right to arbitration would be stymied if the charterers weren’t stopped in their tracks. On the other hand, the charterers weren’t party to the P & I cover in that they hadn’t promised not to sue in Turkey. On this point there was a pretty clear conflict of authorities: The Hari Bhum [2005] 1 Lloyds Rep 67 said the charterers were right, while The Jay Bola [1997] 2 Lloyd’s Rep 279 was for the owners. The Court of Appeal had no doubt that The Jay Bola showed the correct way forward and should be followed. Where someone took over rights that were clearly conditional on arbitration, etc, this in itself was enough to justify the English courts preventing them having an end-run around the requirement by suing elsewhere. One suspects, with respect, that this must be correct. One suspects also that, though this case dealt with the English direct action under the Third Parties (Rights against Insurers) Act 1930 and not its 2010 replacement, there will be no change as and when the latter — finally — does come into force.

See Shipowners’ Mutual v Containerships Denizcilik Nakliyat ve Ticaret AS [2016] EWCA Civ 386.

Anti-suit injunctions (or rather anti-enforcement injunctions) again

An international high-net-worth employment case decided last week, Ecobank Transnational Inc v Tanoh [2015] EWCA Civ 1309 (accessible on the excellent BAILII website), has a good deal of meat for international transaction lawyers too. The CEO of a Togolese bank had a contract of employment governed by English law and with a provision for arbitration of differences in London under the UNCITRAL Rules. In early 2014, following a textbook exercise in corporate character assassination, he was fired. He immediately sued in Togo for wrongful dismissal, and shortly afterwards in the Ivory Coast for defamation, recovering a cool $11 million-odd in the former, and in the latter about $15 million. Both courts held that under their respective laws the arbitration provision could not deprive them of jurisdiction. The employer claimed arbitration, and in April 2015 sought an anti-enforcement injunction in respect of the Togolese and Ivorian proceedings (i.e. an anti-suit injunction for the time after judgment has been obtained). The CA held an anti-enforcement injunction available on principle, but upheld its refusal on the grounds of delay.

Essentially this judgment makes clear a number of points of very general application. First, s.32 of the Civil Jurisdiction and Judgments Act 1982, dealing with the question of the recognition in England of foreign proceedings brought in breach of jurisdiction or arbitration agreements, is likely to precluded recognition of the relevant proceedings. Despite the exception to non-recognition where the jurisdiction / arbitration agreement is “illegal, void or unenforceable or was incapable of being performed”, it is irrelevant that an arbitration agreement is ineffective under the law of the place where the proceedings are brought or the law of the place where the contract was made. What matters is its enforceability under English law. Secondly, if people agree under a contract governed by English law to arbitrate disputes, the English courts will have little compunction where appropriate in granting anti-suit or anti-enforcement relief. Such relief is not as such a breach of the rules of comity: as Christopher Clarke LJ pertinently pointed out, the preservation of overseas judicial amour propre is not a particularly important aim these days. Thirdly, however, delay in seeking relief continues highly relevant, both on general equitable grounds and also because it is undesirable to render fruitless the expenditure of large amounts of curial time and litigants’ cash on ultimately unproductive proceedings abroad. In short, while anti-enforcement injunctions remain possible, in practice they are likely to be rare, as litigants will normally be expected to act earlier in the judicial process.

Get your skates on for an anti-suit injunction

The English courts may be very willing on principle to give you an anti-suit injunction against someone who sues elsewhere while putting up two fingers to a binding London arbitration clause. But you must play your part and act quickly. You can’t lackadaisically ask the foreign court to decline jurisdiction and then seek to injunct the other guy in London several months later when it’s apparent that it won’t. A hapless shipowner found this out on his unlucky Friday 13. For details see Essar Shipping Ltd v Bank of China Ltd [2015] EWHC 3266 (Comm) (13 November 2015), available on BAILII.