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Two features that make London-seated arbitration highly attractive to international contracting parties are the robustness of English procedural law and the careful exercise by the English courts of their statutory supervisory powers to support the arbitral process. Among the discretionary tools available to the courts in this pursuit is the power to grant anti-suit injunctive relief.

The power, which derives from s.37 of the Senior Courts Act 1981, provides a remedy that restrains a party from commencing or continuing foreign proceedings in breach of an agreement to arbitrate, on “the simple and clear ground that the defendant has promised not to” (per Lord Mance in AES Ust-Kamenogorsk Hydropower Plant LLP [2013]). A number of recent cases provide welcome reminders of the English courts’ forceful approach towards exercising their supervisory powers under the Arbitration Act 1996, which shows no sign of fading.

Anti-suit relief may be granted against third parties

In XL v Little (May 2019), the High Court granted XL, an insurance company, a final anti-suit injunction preventing Mr. Little from pursuing a D&O claim against XL in the New York courts, on the basis that he was bound by the London arbitration agreement in the relevant insurance policy issued to his former employer by XL. The High Court granted the injunction despite Mr. Little himself not being party to that arbitration agreement, confirming that the English courts recognise the value of determining all disputes arising under one contract in the same jurisdiction. In turn, this highlights a major advantage of nominating London as the arbitral seat, particularly in sectors where claims are likely to be brought by third parties, such as insurance.

However, the English courts will not restrain a third party’s foreign claims unless they are “vexatious and oppressive.” In Evison v Finvision, Orient Express Bank [2019] EWHC 3057 (Comm), the High Court refused to continue an anti-suit injunction against a non-party to an arbitration agreement. The original injunction restrained the third party from pursuing Russian proceedings involving issues overlapping with those in an active London arbitration. Evison argued that the third party had colluded with the respondent to the English arbitration to initiate Russian proceedings that would impede the arbitration, however the Court was unwilling to regard the Russian claims as vexatious or unconscionable in circumstances where they were a party’s own legitimate claims.

The English Courts clarified the “vexatious and oppressive” threshold in Clearlake and Gunvor v Xiang Da [2019] EWHC 2284 (Comm). Here, the High Court granted anti-suit relief restraining third party proceedings in Singapore, on the basis that the claims had been brought in tort in an attempt to circumvent an exclusive jurisdiction clause in favor of the English courts. The third party here was not party to the exclusive jurisdiction clause, but because it expressly extended to “any dispute which might arise out of [the agreement]” it was deemed to apply to the relevant sub-contracts. Accordingly, the third party’s claims in tort were restrained because the Singaporean proceedings were deemed “vexatious or oppressive.”

While the English courts are prepared and equipped to grant anti-suit injunctive relief to restrain third parties’ foreign proceedings, such claims must fall within the scope of the underlying arbitration/jurisdiction agreement. Further, where a party seeks to argue that foreign proceedings are vexatious or oppressive it must be willing to provide compelling evidence that the proceedings were initiated to impede arbitration/litigation.

Clear drafting is key

While it is true that English courts will make every effort to give effect to an arbitration agreement, clear drafting is imperative to minimize the scope for any argument, particularly where one arbitration clause is incorporated by reference in a related contract.

This issue arose in Hiscox v Weyerhaeuser [2019] EWHC 2671 (Comm), in which the High Court considered conflicting dispute resolution clauses in a “coverage tower” of excess liability insurance agreements. The question was whether a “service of suit” clause in a policy entitled the claimant to pursue its substantive claim before the U.S. courts, or whether it was compelled to arbitrate in London in accordance with the express terms of the lead underlying policy. In the end, brief words citing the lead underlying policy alongside the reference to U.S. jurisdiction in the policy were deemed sufficient to incorporate the London arbitration clause. The decision highlights that parties should be mindful of consistency between dispute resolution clauses, particularly within a coverage tower or related agreements, to minimize risks of inconsistent judgments and satellite multi-jurisdictional proceedings.

By its eagerly-awaited and significant judgment in Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, the Supreme Court confirmed the approach to be taken when determining the governing law of an arbitration agreement. The Supreme Court held that where parties specify a contractual governing law, that same law would apply to any arbitration agreement in the absence of an express choice in that regard. However, in the absence of a contractual governing law clause full-stop, the arbitration agreement will be governed by the law most closely connected with the arbitration agreement (often, the law of the seat of arbitration).

That approach meant that the Court upheld an anti-suit injunction restraining Chubb from pursuing proceedings in Russia. In so doing, the Court confirmed that where parties nominate England as the arbitral seat, they choose to submit to the supervisory jurisdiction of the English Court and its powers to grant anti-suit injunctive relief.  The Court also noted that in all cases, in principle, it should make no difference whether the agreement is governed by English, or foreign, law – in both cases the question “is whether there has been a breach of the arbitration agreement and whether it is just and convenient to restrain that breach” by granting an anti-suit injunction. Here, the Court once again showed no hesitation when exercising its powers to prevent parties’ attempts to circumnavigate an agreement to arbitrate.

The decision in Enka underlines the importance of clear drafting, highlighting that counterparties should carefully consider and make express provision for both the governing law of the contract and the law of the arbitration agreement – taking care when drafting these clauses.

Parties must not delay when seeking relief

Successful applications for anti-suit injunctive relief will be made promptly, before foreign proceedings are advanced. In Daiichi Chuo Kisen Kaisha v Chubb Seguros Brasil SA [2020] EWHC 1223 (Comm), the court granted an anti-suit injunction restraining Chubb’s pursuit of Brazilian proceedings in breach of an agreement to arbitrate in London and a later undertaking to that effect. Some eight months following that undertaking (and in breach of the same) Chubb sought to revive its Brazilian proceedings against Daiichi. In England, the High Court disagreed with Chubb’s position that Daiichi had delayed too long before making its application for injunctive relief, and that the Brazilian litigation was too far advanced. Instead, the Court acknowledge that “delay” is a fact-sensitive test and here Daiichi’s delay was not “material” in circumstances where it had relied on Chubb’s undertaking not to pursue its claims in Brazil. The decision follows that in A v B (July 2019, unreported), in which the court granted an anti-suit injunction restraining a party’s pursuit of Israeli proceedings in breach of an exclusive jurisdiction clause mandating London-seated arbitration. In that case, the court held that while the applicants were aware of the overseas proceedings for several months before seeking an injunction, they were entitled to wait until they were actually served with those proceedings, provided that the application had been made before the Israeli proceedings were too far advanced. Both decisions reaffirm the longstanding position that anti-suit relief must be sought promptly, but that whether there has been “delay” will depend on the facts of each particular case.

Nevertheless, it pays to be mindful of the risk that the English court will simply refuse to grant anti-suit relief following any delay, even where there is a clear, valid London arbitration agreement: in Essar v Bank of China [2015] EWHC 3266 (Comm) the lack of promptness alone was enough to thwart the application.

Looking ahead: Brexit

Following West Tankers [2012] EWHC 854 (Comm), EU Member State courts are effectively precluded from granting anti-suit injunctions restraining proceedings in other Member States in breach of an arbitration agreement. However, post-Brexit and while the UK remains party to the Hague Convention, the English courts are no longer bound by this, meaning that English-seated arbitration may become even more popular between international contracting counterparties.