14 October, 2015
Introduction
HK45 welcomed a panel of international arbitration practitioners to the HKIAC on 25 June 2015 to discuss anti-suit injunctions (“ASIs” and each an “ASI”) in Asia. A capacity crowd of practitioners, academics and students listened to, and participated in, the discussion. Moderated by Mr James Kwan (late of Baker & McKenzie), the panel was composed of Messrs Andrew Battisson (Allen & Overy), Antony Crockett (Herbert Smith Freehills), George Lamplough (Holman Fenwick Willan) and Paul Tan (Rajah & Tann).
Providing the impetus for the event was the continued prevalence of court proceedings launched by parties in breach of arbitration agreements in Asia. Indeed, as Mr Kwan noted in his introduction, the topic of the discussion was timely in light of the first ASI granted in support of an arbitration in Hong Kong.
Messrs Lamplough and Tan discussed recent ASI-related jurisprudence in Hong Kong and Singapore, respectively. Mr Battisson discussed ASIs in the context of emergency arbitrator provisions. Mr Crockett discussed ASIs granted by arbitral tribunals.
Recent ASI jurisprudence in Hong Kong
Mr Lamplough discussed a recent Hong Kong High Court case (Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirketi (HCCT 6/2015)).
By way of background, that case involved the transport of cargo by ship from China to Turkey. The bills of lading for the cargo incorporated an arbitration clause referring disputes to arbitration in Hong Kong. The cargo was found to be damaged upon arrival. The cargo owner (“Kroman”) commenced litigation in the Turkish courts against the ship owner (“Ever Judger”). Ever Judger filed a request for arbitration and applied to the Hong Kong courts for and obtained an interim ASI against the Turkish proceedings on an ex parte basis.
Kroman contested the continuing application of the interim ASI in proceedings conducted in the High Court. Mr Lamplough explained how the court found that, absent a significant evidentiary showing by a party resisting an ASI, the court would readily grant an ASI in support of an arbitration where foreign proceedings were brought in breach of an arbitration agreement. The court looked to English jurisprudence, among other authorities, in support of this presumption in favour of granting an ASI upon proof of a valid and binding arbitration agreement.
The court found two circumstances in which it could not grant an ASI: (1) where the claimant had taken too long to apply for the ASI and (2) where the foreign proceedings were too far advanced. In this regard, Mr Lamplough discussed some of the defences against the ASI brought by Kroman. These included an argument that Ever Judger had filed a defence in the Turkish proceedings and thus had submitted to the Turkish court’s jurisdiction. The court dismissed Kroman’s argument and accepted that Ever Judger had to submit a defence under Turkish procedural rules before it could challenge the Turkish court’s jurisdiction.
Mr Kwan asked Mr Lamplough what the source was for the High Court’s power to issue an ASI. Mr Lamplough explained that this was not a contested issue in the case. Nevertheless, the court pointed to two possible sources of its power to grant ASIs: (1) Section 45 of the Arbitration Ordinance (Cap. 609) and (2) Section 21L of the High Court Ordinance (Cap. 4). Both parties argued that the court’s power fell under the former. However, the court suggested that its power in that case derived from the latter. The court considered that Section 45 of the Arbitration Ordinance would apply in relation to ASIs to protect ongoing or contemplated arbitral proceedings, whereas at issue in that case was the protection of an arbitral agreement (i.e., a contractual right that was breached by launching domestic litigation in Turkey) which, in the court’s view, fell under Section 21L of the High Court Ordinance. Mr Lamplough was of the view the court took too narrow an interpretation of the wording “in relation to arbitral proceedings” in Section 45 of the Arbitration Ordinance. Nevertheless, he concluded that on the whole this was a welcome decision both for the development of arbitration and law in Hong Kong.
Recent ASI jurisprudence in Singapore
Mr Kwan asked Mr Tan to explain the position in Singapore compared to the Hong Kong position that there must be strong reasons not to grant an ASI. Mr Tan traced the development of Singaporean jurisprudence on ASIs over a decade back to WSG Nimbus Pte Ltd v Board of Control for Cricket in Sri Lanka [2002] SGHC 104 . Mr Tan described how the same test that the Hong Kong court applied in the Ever Judger case applies in Singapore, and that the test was also borrowed from the same English authority. Effectively, if you persuade a Singapore court that there is an arbitration agreement, an ASI in its support will be granted almost as a matter of course.
Mr Tan explained that following the Nimbus case, there was a dormant period in the jurisprudence concerning ASIs. In 2013, the Singapore Court of Appeal raised the issue of ASIs in obiter dicta in relation to injunctions for the purposes of enjoining a party from actions inconsistent with a contract. (See Maldives Airports Co Ltd and another v GMR Male International Airport Pte Ltd [2013] 2 SLR 449.) The Court of Appeal referred to the court’s power to issue an ASI in support of arbitration as an example of one such injunction to protect contractual rights.
The Court of Appeal revisited ASIs in the case of R1 International Pte Ltd v Lonstroff AG [2014] SGCA 56. In that case, one of the parties launched proceedings in the Swiss courts in breach of an arbitration agreement. The other party initially obtained an interim ASI. The High Court subsequently set aside the interim ASI and rejected an application for a permanent ASI. The Court of Appeal overturned the High Court’s decision on consideration only of the facts. It left intact the High Court’s discussion of the sources of its powers under Singapore law in relation to ASIs. As with the Nimbus and Maldives cases, the court assumed that the power to grant interim ASIs derived from the Singapore International Arbitration Act (Cap. 143A) (“IAA”). The court in the R1 case considered that the IAA applied only to interim injunctions and not to permanent ASIs. Instead, the power to grant permanent ASIs derives from the court’s inherent powers under the Supreme Court of Judicature Act (Cap. 322).
Mr Tan noted the peculiar consequences of this jurisprudence: a court has to look to the IAA for its power for the purposes of granting an interim ASI, whereas the power to grant a permanent ASI derives from the court’s inherent powers. There are practical issues that relate only to interim ASIs under the IAA (which is based on the UNCITRAL Model Law):
i. First, the IAA only permits the courts to grant interim measures to preserve evidence or assets. The courts
have thus stretched the construction of “assets” to include arbitration agreements, which Mr Tan described as a funny way to resolve the tension in the language of the Act.
ii. Second, once an arbitral tribunal is in place, there are restrictions on a party’s right to go to the courts for an interim ASI, namely that, to do so, the party has to obtain either the consent of the tribunal or the agreement of the opposing party.
Neither (i) nor (ii) above arises in connection with the inherent powers of the Singapore courts to grant permanent ASIs. This, in Mr Tan’s view, leaves a slight grey area in Singapore law in the split between interim and permanent ASIs.
ASIs and Emergency Arbitrator provisions
Mr Battisson introduced the topic with a brief history of the relatively new emergency arbitrator (“EA”) provisions. The ICDR promulgated the first EA provision in 2006, and the SCC, SIAC, ICC and HKIAC later followed suit. Around 70 reported EA applications have been made worldwide, about half of which were made at the SIAC. Mr Battisson said that SIAC’s heavy EA application load was possibly attributable to (1) the fact that SIAC’s EA provision has been in place since 2010 and (2) the nature of the parties before the SIAC. He said that while initially it appeared that such decisions were quite persuasive, lately the question of enforcement of such decisions is arising with greater frequency.
Mr Battisson mentioned two recent examples of EA orders:
9 June 2015 – a district court in Kiev enforced the order of an EA enjoining the government of Ukraine from increasing royalties on gas production in relation to a tax dispute under the Energy Charter Treaty. The court had no trouble with the “finality” issue of such order under the New York Convention and found that it was enforceable under Ukrainian law.
17 June 2015 – in a dispute involving an ICC arbitration and a competing arbitration under the Construction Industry Arbitration Commission of the Philippines, the party that launched the ICC arbitration obtained an EA order requiring the Philippines arbitration to be dismissed or withdrawn. That order was ignored, and enforcement of the EA order was sought in Singapore under Section 12(6) of the IAA.
He went on to describe potential issues in relation to obtaining relief from an EA. For example, unlike domestic court proceedings, EA proceedings are generally not ex parte. All institutional rules (except for the SCC) require that notice be given to the other party. This is because ex parte arbitral proceedings could be found to violate certain requirements under the New York Convention and thus render any award or order arising out of such ex parte proceedings unenforceable. Institutions may also take some time to appoint an EA (e.g., due to conflict checks), and thus an interim ASI ordered by an EA could take longer to obtain than one from a domestic court. Further, the effectiveness of an EA order to a large extent is contingent on voluntary compliance by the other side. This is balanced by the practical consequences of non- compliance, including damage to a party’s credibility with the main arbitral tribunal (once appointed) since most institutional rules require compliance with an EA order.
Mr Battisson detailed certain additional issues that arise in the context of enforcement of EA orders. Some jurisdictions, such as Hong Kong and Singapore, have promulgated legislative provisions that clearly provide for enforcement of EA decisions. Other jurisdictions, like the United States, have taken a broad reading of the New York Convention and would enforce EA decisions because they are taken as “final” decisions with respect to the issues before the EA.
ASI rendered by arbitral tribunals
As a matter of context, explained Mr Crockett, an ASI rendered by an arbitral tribunal presupposes that the relevant domestic court has refused to or is not empowered to stay proceedings in favour of arbitration. A classic example is the Indonesian courts. It is common for defaulting parties to an arbitration agreement to go to the Indonesian courts to start a claim to try to pre-empt any arbitration. Under Indonesian law, a party cannot obtain interim relief in the form of an ASI without first filing a civil claim, and that party cannot file a civil claim without breaching its arbitration agreement.
Further issues arise because Indonesian courts cannot stay their own proceedings. Rather, the party in breach of an arbitration agreement must withdraw the Indonesian proceedings. Not only does this affect the wording of a tribunal’s order granting an ASI, it also means that in practice a party likely has to meet a higher standard of proof for a tribunal to be satisfied that it should order a party to withdraw (rather than stay) the foreign proceedings.
While most of the panel’s discussions centred on ASIs to enjoin a party from breaching an arbitration agreement, Mr Crockett also covered ASIs in relation to foreign proceedings that aggravate a dispute, affect enforcement of an award or are vexatious and oppressive. He sets out an example of a case where an Indonesian party threatens to go to the Indonesian courts in breach of a SIAC arbitration clause, and the other party obtains an ASI from the Singapore courts in response to that threat. The Indonesian party then, during the constitution of the tribunal, brings a tort claim in the Indonesian courts against the parent company of the other party. The question is whether the tribunal can ask the Indonesian party to withdraw its case against
a third party.
The English courts have found that they have jurisdiction to protect the contractual bargain of parties to an arbitration agreement even where third parties commence claims in other fora in circumstances where it seems clear that such claims will cause prejudice to the party applying for an ASI. In this regard, Mr Crockett noted a tribunal generally is not empowered to issue orders binding on third parties.
What is required to be shown to obtain an ASI against vexatious foreign proceedings (i.e., where two sets of proceedings will run the risk of inconsistent outcomes) includes the following factors:
- a valid arbitration agreement – the tribunal will consider whether the claims in the foreign proceeding are within the ambit of the arbitration agreement. Authorities on construction of arbitration clauses suggest that a generous approach should be taken in relation to this factor. For example, English and Australian jurisprudence have established a presumption that parties would have wanted all their disputes to be dealt with in a single forum. The challenge in this respect is convincing a tribunal that it has the same power as a national court to issue such an ASI. There are a number of published ICC awards where tribunals have been persuaded to issue such ASIs.
- security for potential prejudice to the party subject to an ASI – in Mr Crockett’s experience, it is difficult for the party subject to an ASI to demonstrate prejudice consequent to an ASI. However, he noted that an undertaking or provision of security as to damages would be standard in domestic courts.
- general procedural economy – in Mr Crockett’s view, this factor has great appeal for tribunals. The argument here is simply that it is not in the interests of procedural economy to have more than one set of proceedings.
Conclusion
The event wrapped up with some follow-up questions for the panel. These centred mainly on compliance with and enforcement of ASIs. In respect of Hong Kong ASIs, as Mr Lamplough noted, it is too early to draw any conclusions given how fresh the Ever Judger decision is. Mr Crockett observed that a party faced with an ASI issued by a tribunal risks angering that tribunal by not complying the ASI with a resultant negative impact on that party’s merits arguments. Mr Battisson added that there is in general only so far that a tribunal can go with a truly recalcitrant party (e.g., to take such recalcitrance into account in an award for costs), given that the tribunal has a duty to discharge its function and settle the dispute fairly. However, he noted one of the advantages of arbitrations seated in Singapore and Hong Kong is the availability of contempt proceedings in the event of non-compliance.
Reported by Vee Vian Thien and Dominic Afzali, Allen & Overy
For further information, please contact:
Hong Kong International Arbitration Centre
adr@hkiac.org
