January 15, 2018

Brexit: the return of the EU anti-suit injunction?

When disputes arise parties look to their contracts to see how the dispute should be resolved. Sometimes this is a straight-forward matter and the parties proceed as previously agreed. Sometimes however it is either unclear as to which court or tribunal has jurisdiction over the dispute, or a party sees a strategic advantage in creating a jurisdictional diversion.

The anti-suit injunction

Where a party commences litigation in the English court in breach of an arbitration agreement, a party may apply to the English court for that litigation to be stayed (s9 Arbitration Act 1996). Where the litigation was commenced in a foreign court, the wronged party could apply for an order of the English court to prevent the foreign litigation from continuing (an anti-suit injunction). The remedy was thought to be available as between EU Member States as arbitration is 'carved out' of the Brussels regime on jurisdiction which applies between Member State courts.

However, in 2009 a decision of the European Court of Justice (ECJ, a part of the Court of Justice of the European Union (CJEU)) in the West Tankers dispute determined that the Brussels regime precluded the courts of a Member State making an order restraining a person from commencing or continuing proceedings in another Member State on grounds that such proceedings would be in breach of an arbitration agreement as to do so would be incompatible with EU law.

The rationale on the facts of West Tankers was that both the subject matter of the proceedings commenced in the other Member State (Italy) and the preliminary question as to whether the arbitration agreement was applicable did fall within the scope of the Brussels regime. This decision prevented any EU Member State court from issuing an anti-suit injunction in favour of arbitration against claims brought in breach of a jurisdiction in another Member State. Instead the court would hear the arguments on jurisdiction and make their own determination.

Given the mutual respect and co-operation between EU Member State courts the premise was that the court seized of the proceedings would review the jurisdiction clause and, where appropriate, find that it did not have jurisdiction and that proceedings had been started in breach of the agreement. However, even if this was the case, time and money can be wasted and the tactic of frustrating or stalling proceedings by commencing proceedings in an 'incorrect jurisdiction' remained open.

Does Brexit bring back the anti-suit injunction?

When the UK is no longer a Member of the EU and therefore no longer subject to the Brussels regime will its courts be able to issue an order restraining a person from commencing or continuing proceedings in an EU Member State?

Once the UK has left the EU and without entering into alternative agreements, and most likely subject to a period of transition, UK courts will theoretically no longer be bound by EU law. For those with dispute resolution agreements that provide for dispute resolution in the UK – this anti-suit 'side effect' of Brexit may well be advantageous. English courts may once again be free to grant anti-suit injunctions in respect of court proceedings brought before EU Member State courts. EU Member state courts would however continue to be prohibited from issuing anti-suit injunctions in support of arbitration for other EU court proceedings, but not for proceedings in the UK. 

However, one of the more likely outcome of the Brexit talks is the UK joining the Lugano Convention and, as such, effectively adopting the Brussels regime (though subject to the Lugano Convention not yet having been updated to reflect the Brussels I Recast). If the UK joins the Lugano regime as is anticipated by many then the ECJ's decision in West Tankers will remain applicable to the UK and the rise of the anti-suit will be roundly quashed.

What action should you take?

The unavailability of the anti-suit injunction has not impacted the UK's popularity as an arbitral seat and the potential availability of the remedy is unlikely to lure parties to the seat but it is important in any dispute resolution agreement to understand the options available to you as should a dispute arise.

When reviewing your agreements with EU parties be careful to consider the dispute resolution agreement provided for it suitability for any potential dispute that arises and any ambiguity in that agreement. An exclusive jurisdiction clause or clear arbitration agreement are always going to give the best chance for efficient dispute resolution.